WEBVTT - Avoiding the 'Middle Class Trap' w/ Scott Trench #1148 0:00:00.160 --> 0:00:03.080 Welcome to How to Money. I'm Joel, and today I'm 0:00:03.080 --> 0:00:25.040 talking about avoiding the middle class trap with Scott Trench. Okay, 0:00:25.079 --> 0:00:28.600 so in the song rock in the Suburbs ben Folds, 0:00:28.600 --> 0:00:32.640 he pokes fun at the struggles of middle class life, angsty, 0:00:32.720 --> 0:00:35.720 a little whiny, but also tongue in cheek. It's killer 0:00:35.800 --> 0:00:38.440 piano rock that makes you laugh because deep down it's 0:00:38.600 --> 0:00:42.560 a little too relatable and that tension it's still alive today. 0:00:42.800 --> 0:00:45.120 A lot of Americans and plenty of How to Money 0:00:45.120 --> 0:00:47.720 listeners feel like they're doing all the right things. They're 0:00:47.760 --> 0:00:51.239 saving diligently, they're investing wisely, but at the cost of 0:00:51.440 --> 0:00:54.560 flexibility and maybe even some joy right now. So, how 0:00:54.600 --> 0:00:57.360 do you balance building wealth through the future without squeezing 0:00:57.440 --> 0:00:59.959 the life out of the present. That's what we're dying 0:01:00.120 --> 0:01:03.080 being into today with Scott Trench. He literally wrote the 0:01:03.080 --> 0:01:06.240 book on this set for life. He's helped thousands of 0:01:06.319 --> 0:01:08.120 people and I think the book has sold more than 0:01:08.160 --> 0:01:11.280 one hundred thousand copies chart their path the financial independence. 0:01:11.280 --> 0:01:13.319 So Scott, thank you for taking the time to join 0:01:13.319 --> 0:01:13.679 me today. 0:01:13.720 --> 0:01:16.000 My friend Joel, thank you for the very very kind 0:01:16.040 --> 0:01:17.600 intro your legend. 0:01:17.680 --> 0:01:20.320 Scott trench. You've been in this space, you're still pretty young. 0:01:20.319 --> 0:01:21.920 We're still went in the space for a long time, 0:01:22.160 --> 0:01:23.360 and you've helped a lot of people. You've done a 0:01:23.400 --> 0:01:25.920 lot of great work. So I'm thrilled to have you here. 0:01:26.200 --> 0:01:28.600 First question I ask everybody who comes on, though, is 0:01:28.640 --> 0:01:30.200 what do you like to splurge on? What's your craft 0:01:30.240 --> 0:01:30.880 beer equivalent? 0:01:31.160 --> 0:01:33.080 Okay, so this is this is a pretty embarrassing one 0:01:33.120 --> 0:01:35.880 for somebody who runs a podcast in personal financial responsibility, 0:01:35.920 --> 0:01:40.039 but have a I recently came purchased a golf cart 0:01:40.240 --> 0:01:42.520 which I used to get around the neighborhood and take 0:01:42.560 --> 0:01:45.280 my two little kids to the local park. I will 0:01:45.360 --> 0:01:47.840 use it to take them to school when they start 0:01:47.880 --> 0:01:50.560 attending school, and to the local pool. So that's my 0:01:51.520 --> 0:01:54.360 very big splurge. You know, seven rate grand somewhere in 0:01:54.360 --> 0:01:54.680 that range. 0:01:54.760 --> 0:01:57.120 Oh wow, Okay, it is a fancy golf cart. 0:01:57.200 --> 0:01:59.840 A nice little toy. Yeah that I got to take 0:01:59.840 --> 0:02:00.840 a the neighborhood here. 0:02:00.920 --> 0:02:02.960 Okay, is, so did you buy a brain new? Are 0:02:02.960 --> 0:02:04.040 you buying used on? 0:02:04.280 --> 0:02:06.520 I have bought it used, I should have bought it used, 0:02:06.560 --> 0:02:07.960 but I got it. I got it. I got a 0:02:08.000 --> 0:02:10.720 new one because the company that was selling them, was 0:02:10.760 --> 0:02:13.120 going out of business, so okay, I picked up a 0:02:13.120 --> 0:02:13.639 new one. There. 0:02:13.720 --> 0:02:15.480 I feel like golf carts are all the rage in 0:02:15.520 --> 0:02:17.320 the burbs these days. Is that Is that true? 0:02:17.400 --> 0:02:19.720 You? Is that's it? Yes? I just completely jumped on this, 0:02:19.919 --> 0:02:23.280 like tear you know, very basic trend. And I've really, 0:02:23.360 --> 0:02:25.440 I really enjoyed taking my golf cart to the little 0:02:25.440 --> 0:02:28.040 local coffee shop, yeah, or to the pool. 0:02:28.120 --> 0:02:31.160 See. For me, this was electric bikes, and so I 0:02:31.200 --> 0:02:34.560 have like a rad wagon that I still ride with 0:02:34.720 --> 0:02:36.960 my youngest. My oldest too, they're on their own bikes 0:02:36.960 --> 0:02:38.639 now and they don't wanna, they don't want to ride 0:02:38.680 --> 0:02:41.359 with me anymore. But I have so many fond memories 0:02:41.400 --> 0:02:43.239 and so many great pictures of like sticking them on 0:02:43.280 --> 0:02:45.919 the back of the bike and going wherever around town 0:02:46.000 --> 0:02:47.960 that we wanted to go. So that was my version 0:02:48.000 --> 0:02:50.079 of the golf cart. And I will say, well worth 0:02:50.120 --> 0:02:52.440 the money, You're gonna get a lot of joy out 0:02:52.440 --> 0:02:55.040 of it. Okay, let's let's get onto it. Man. What 0:02:55.200 --> 0:02:58.040 got you interested in the idea of early retirement to 0:02:58.040 --> 0:03:00.440 begin with? Was it the fact that you were working 0:03:00.520 --> 0:03:03.359 at one of America's worst companies and you just had 0:03:03.360 --> 0:03:03.799 to get out. 0:03:04.000 --> 0:03:07.880 Yeah, so that I actually what happened was I got 0:03:08.720 --> 0:03:12.640 before I graduated college, I had an internship at Dish Network, 0:03:12.680 --> 0:03:15.520 which at that year was ranked the worst company to 0:03:15.520 --> 0:03:18.200 work for in America. And I actually really enjoyed the internship. 0:03:18.200 --> 0:03:20.040 They put out a great show. It was a wonderful time. 0:03:20.080 --> 0:03:22.679 I have lifelong friends from that that summer between my 0:03:22.720 --> 0:03:24.239 junior and senior year of college, and then when I 0:03:24.280 --> 0:03:26.600 started in the real world. That's what I began to 0:03:26.680 --> 0:03:29.120 kind of get disillusioned with the idea of climbing the 0:03:29.120 --> 0:03:31.480 corporate ladder when I started the full time job at 0:03:31.520 --> 0:03:34.440 Dish the next year after I moved to Colorado, and 0:03:34.480 --> 0:03:35.600 I was like, you know, I'm going to badge in 0:03:35.600 --> 0:03:37.400 a bitch, badge out for forty years if I do 0:03:37.480 --> 0:03:39.280 this well, and I'll be one day climbing the ranks, 0:03:39.280 --> 0:03:41.080 and I'll make good money if I climbed the ranks. 0:03:41.080 --> 0:03:43.200 But I'll have that office over there instead of this one, 0:03:43.760 --> 0:03:44.920 this cubicle right here. 0:03:44.880 --> 0:03:46.760 The slightly bigger one with a slightly better view. 0:03:46.880 --> 0:03:48.760 Yeah, And that was that was kind of the That 0:03:48.840 --> 0:03:51.000 was that was wearing on me day to day early 0:03:51.040 --> 0:03:53.320 on in the career, and I was fortunate to have 0:03:53.440 --> 0:03:57.760 immediately stumbled across the foundational stuff in the financial independence world, 0:03:57.760 --> 0:04:01.960 like mister money Mustache, the mad Fientists, early retirement, extreme 0:04:02.080 --> 0:04:05.960 those kinds of things there, and having a working in 0:04:06.000 --> 0:04:08.480 finance and having a background in economics and all those 0:04:08.560 --> 0:04:11.960 kinds of things at school that really helped me. I 0:04:12.000 --> 0:04:14.040 resonated with that, and I could model out, Oh, if 0:04:14.040 --> 0:04:17.040 I just keep my expenses very low, I'll automatically become wealthy. 0:04:17.120 --> 0:04:19.840 And the best way to keep my expenses very low 0:04:20.160 --> 0:04:22.719 is to attack this huge line light them into my budget, 0:04:22.720 --> 0:04:25.720 which is housing. And so I got a roommate, live 0:04:25.760 --> 0:04:28.039 with a roommate, then began house hacking. You know. I 0:04:28.080 --> 0:04:31.640 bought a couple of small, multi family properties, moved into them, 0:04:32.000 --> 0:04:35.200 rented them out, used owner occupied occupied financing, and did 0:04:35.200 --> 0:04:37.000 that off and on for ten years, the better part 0:04:37.000 --> 0:04:39.040 of ten years. In a midpoint, like around year six 0:04:39.120 --> 0:04:42.320 or seven, my now wife and I moved into an apartment, 0:04:43.200 --> 0:04:45.119 got married in that apartment, and then moved back into 0:04:45.160 --> 0:04:47.200 one of our rental properties for a year with our 0:04:47.240 --> 0:04:50.680 little one before eventually getting our forever home here with 0:04:50.760 --> 0:04:51.400 the golf cart. 0:04:51.440 --> 0:04:54.440 So you were kind of tackling both and right you 0:04:54.480 --> 0:04:56.520 were saying, listen, we got to dial back on spending, 0:04:56.520 --> 0:04:57.880 we got to be more frugal, and then we got 0:04:57.880 --> 0:05:01.599 to thrust that money into income using assets. So fierce 0:05:01.600 --> 0:05:03.800 frugality was a part of your journey. And at one 0:05:03.800 --> 0:05:06.000 point I think I heard you talk about enduring a 0:05:06.040 --> 0:05:08.320 really cold winter with with no heat. Is that like, 0:05:08.360 --> 0:05:10.920 how how far did you go from a frugality perspective? 0:05:10.960 --> 0:05:12.640 Well, thanks for looking all this up yet, my my, 0:05:13.040 --> 0:05:15.520 what happened was I bought this place and uh, it 0:05:15.560 --> 0:05:17.200 was like April or something like that, and I was like, 0:05:17.320 --> 0:05:20.240 I can go until fall before I install heating my 0:05:20.279 --> 0:05:23.120 portion of the unit here. You know, I'm get by 0:05:23.160 --> 0:05:25.839 with this stuff. And then my my then my now 0:05:25.880 --> 0:05:28.320 wife moved, you know, started dating me around that time, 0:05:28.360 --> 0:05:32.520 and we, uh we eventually started contemplating moving in together. 0:05:32.560 --> 0:05:34.839 And that that only lasted a few weeks. Uh that 0:05:34.839 --> 0:05:36.720 that low heat there was there wasn't like. 0:05:36.640 --> 0:05:39.159 I'm not moving in there unless you get that heater repair. 0:05:39.400 --> 0:05:43.760 Yeah. I will also say that frugality was you know, 0:05:43.960 --> 0:05:46.159 there's a there's a in the world of personal finance. 0:05:46.200 --> 0:05:51.320 I think frugality is sometimes a virtue and to a 0:05:51.320 --> 0:05:53.600 lot of people. And I think that's a mistake, right, 0:05:53.600 --> 0:05:56.520 because I never saw frugality as this virtue, right. I 0:05:56.560 --> 0:05:58.719 saw it as there is there is something to it, 0:05:58.760 --> 0:06:00.479 there is something wonder you know, I good about it, 0:06:00.480 --> 0:06:02.760 and there's pride to be had in living living frugally there. 0:06:03.160 --> 0:06:05.279 But it was the tool that was right for the 0:06:05.400 --> 0:06:09.320 job in those early years, because I was already maximizing 0:06:09.320 --> 0:06:13.000 my income. I was already investing according to way reasonably 0:06:13.000 --> 0:06:15.720 well disciplined approach of cerial house hacking and then putting 0:06:15.760 --> 0:06:18.560 everything else in S and P five hundred index funds, right, 0:06:18.640 --> 0:06:21.520 you know, according to a tax advantaged retirement stack. So 0:06:21.680 --> 0:06:24.719 there wasn't much more to be done on those funds 0:06:24.720 --> 0:06:28.840 and those fronts, and so low spending was the main 0:06:28.960 --> 0:06:31.760 driver of getting ahead financially for me at that point 0:06:31.760 --> 0:06:35.520 in my life. It later transitioned to income generation or 0:06:35.600 --> 0:06:39.560 leading bigger pockets, right, And at that point, being frugal 0:06:39.839 --> 0:06:42.720 was a time and energy suck at that point, right, 0:06:42.800 --> 0:06:46.040 Like if I'm gonna I'm going to pay somebody else 0:06:46.080 --> 0:06:48.320 to mow my lawn, for example, at that point, because 0:06:48.320 --> 0:06:50.480 that's going to take me away from this very high 0:06:50.560 --> 0:06:55.039 paying job where I have a duty to customers, shareholders, 0:06:55.080 --> 0:06:57.960 and those other folks. And so that's been an interesting evolution. 0:06:58.400 --> 0:07:02.159 And now after stepping down, there's yet now, yet again, 0:07:02.400 --> 0:07:05.840 a more emphasis on controlling my expense. I don't have 0:07:05.880 --> 0:07:08.000 to be frugal the way I was at twenty three 0:07:08.040 --> 0:07:10.040 or twenty four, but I have to be back in 0:07:10.080 --> 0:07:12.720 control of those expenses in a way I didn't while 0:07:12.720 --> 0:07:14.840 I was CEO. And I think that's an interesting takeaway 0:07:14.840 --> 0:07:16.840 from this is there's a right tool for the job 0:07:16.880 --> 0:07:19.800 at various moments along the journey, and the mistake is 0:07:19.880 --> 0:07:22.680 using one the whole way through and not adapting or 0:07:22.680 --> 0:07:25.160 evolving as your situation changes. What is the eighty twenty 0:07:25.160 --> 0:07:27.440 of the situation as you move through your financial journey. 0:07:27.560 --> 0:07:29.800 I mean, I'm sure you've seen the headlines of stories 0:07:29.920 --> 0:07:33.800 about the janitor who dies and has eight million dollars 0:07:33.800 --> 0:07:37.240 in his retirement accountant to some people might laud that 0:07:37.320 --> 0:07:40.240 and say, incredible, right on a janitor's salary, that you 0:07:40.320 --> 0:07:42.160 could a masked that much money, And I think of 0:07:42.200 --> 0:07:46.160 it as like incredibly sad, right that someone would invest in, 0:07:46.240 --> 0:07:48.440 say for that long, and never get to enjoy the 0:07:48.440 --> 0:07:50.960 fruits of their labors. And you're right. I think that's 0:07:51.040 --> 0:07:56.080 probably the hyper frugality focus gone wrong, and there's just 0:07:56.160 --> 0:07:58.400 never an ability at least for that person to adjust, 0:07:58.400 --> 0:07:59.840 and you have to make adjustments over time. 0:08:00.080 --> 0:08:02.240 Yeah, I view it. I view finance as almost like 0:08:02.240 --> 0:08:05.080 an engineering problem. Right, here's exactly what I want my 0:08:05.200 --> 0:08:07.120 day to look like, in my life to look like 0:08:07.240 --> 0:08:09.640 in great detail. I can literally I literally have it 0:08:09.680 --> 0:08:11.840 written down on a page and a half. With my wife, 0:08:11.880 --> 0:08:14.240 we updated every quarter, and we did it in our honeymoon. 0:08:14.280 --> 0:08:16.440 That's how mardy I am about this. But I literally 0:08:16.440 --> 0:08:18.760 have that written down. We update it regularly, and we 0:08:19.080 --> 0:08:21.680 engineer for that, and that question is how do we 0:08:21.680 --> 0:08:22.600 do that most efficiently? 0:08:22.800 --> 0:08:26.280 And I think that's what Scott Trench's ideal day look like. 0:08:26.320 --> 0:08:27.880 All right, I pull it up here, you want to 0:08:28.040 --> 0:08:28.440 pull it up? 0:08:28.640 --> 0:08:30.920 Yeah, I'm so curious to know. And I love this 0:08:30.920 --> 0:08:34.040 because because you're right, like if if you have it 0:08:34.120 --> 0:08:36.520 mapped out to that extent, my guess is, my guess 0:08:36.600 --> 0:08:39.840 is before you start rattling things off that most of 0:08:39.880 --> 0:08:42.840 the things that are on there are inexpensive or free. 0:08:43.559 --> 0:08:46.679 No, not not necessarily, many of the things really are. 0:08:46.840 --> 0:08:49.920 But I specifically, like I live in Colorado. I want 0:08:49.960 --> 0:08:52.400 to see the mountains out of my house. I love that. 0:08:52.480 --> 0:08:54.760 I love like the mountain sunset. And that was not 0:08:55.200 --> 0:08:58.640 free or cheap, right, and that was a major investment. 0:08:58.960 --> 0:09:00.520 But I will I will say that, yes, there's a 0:09:00.559 --> 0:09:02.360 good chunk of that. So here, I'll pull this up. 0:09:02.600 --> 0:09:05.640 So here's the latest evolution right of this vision. It's 0:09:05.760 --> 0:09:08.560 not the most recent one. And they don't really move. 0:09:08.600 --> 0:09:10.199 It doesn't really move that much anymore. It used to 0:09:10.240 --> 0:09:11.920 move all the time. Wife and I would be like, Oh, 0:09:11.960 --> 0:09:14.480 we want to live in Hawaii. We want to live here. No, No, 0:09:15.040 --> 0:09:16.800 Now we've kind of settled in of this is what 0:09:16.840 --> 0:09:19.319 we want. But our home is bustling with our two kids, 0:09:19.360 --> 0:09:22.600 Katie and Taylor, and are very handsome Kitty Fred. We 0:09:22.679 --> 0:09:24.920 have an energetic, healthy, day to day lifestyle with lots 0:09:24.920 --> 0:09:26.839 of laughter and fun happening throughout the day. We put 0:09:26.840 --> 0:09:29.840 each other first, demonstrated by both of us making an 0:09:29.840 --> 0:09:31.880 effort every week to make the other person feel loved 0:09:31.880 --> 0:09:34.640 and appreciated during the week. Our work commitments EBB and 0:09:34.679 --> 0:09:37.720 flow according to our interests. We can be very flexible 0:09:37.760 --> 0:09:40.440 and maintain high autonomy over the trajectory of our work days. 0:09:40.440 --> 0:09:42.400 So we can work a ten or twelve hour shift 0:09:42.679 --> 0:09:45.920 on important deep work, or take off for three days 0:09:45.960 --> 0:09:48.720 in a row doing hike, ski and bike days. We 0:09:48.720 --> 0:09:51.880 can also take relaxing recovery days anytime. Virginia writes best 0:09:51.920 --> 0:09:54.800 selling books, and I continue my study of early retirement, 0:09:54.880 --> 0:09:57.360 pioneering ideas to accelerate it or make it more enjoyable. 0:09:57.559 --> 0:10:00.040 Here at Bigger Pockets Money, Taylor and Katie are I 0:10:00.120 --> 0:10:02.360 enrolled in high quality full time daycare. We have several 0:10:02.360 --> 0:10:05.760 wonderful babysitters. We take trips. We have a thriving local 0:10:05.840 --> 0:10:08.160 community of friends. I'm paraphrasing here. I've got a whole 0:10:08.200 --> 0:10:10.520 page and a half of this. We maintain high levels 0:10:10.520 --> 0:10:13.840 of physical fitness. Here's our diet and exercise regimens. Here, 0:10:13.920 --> 0:10:16.720 here's where Scott's competitive outlet is. You have your marathons. 0:10:16.800 --> 0:10:18.320 I need to find that for me. That's like one 0:10:18.320 --> 0:10:19.640 of my projects this year is like what do I 0:10:19.679 --> 0:10:22.679 want to compete in? Certainly not running for four hours straight. 0:10:23.240 --> 0:10:25.160 Or two hours, it is pretty psychotical. 0:10:26.240 --> 0:10:28.000 And then our financial houses in order. We have our 0:10:28.000 --> 0:10:30.559 paid off primary home, one year cash reserve, and a 0:10:30.600 --> 0:10:33.480 conservative primary investment portfolio that generates one hundred and fifty 0:10:33.480 --> 0:10:35.760 percent of our base living expenses. On top of that, 0:10:35.800 --> 0:10:38.480 we have substantial financial upsides with various projects that we're 0:10:38.520 --> 0:10:41.840 working on. And so that's it. And one particular point 0:10:41.840 --> 0:10:44.800 in there that I skipped over here is we see 0:10:44.840 --> 0:10:47.880 the mountains every day from our porch, like we broke 0:10:47.920 --> 0:10:50.400 that down years ago before we bought our house and 0:10:50.480 --> 0:10:53.200 get to watch a western facing sunset on most or 0:10:53.400 --> 0:10:56.080 every evening. And that was really important to us, for example, 0:10:56.120 --> 0:10:58.040 and was not a cheap item. That was something we 0:10:58.040 --> 0:11:02.880 had to work for and income and investment dollars to realize. 0:11:03.320 --> 0:11:06.040 Well, thanks for sharing that, and I know that's you've 0:11:06.040 --> 0:11:09.200 actually posted that on your website of Bigger Pockets, and 0:11:09.240 --> 0:11:11.640 so we'll look to that in the show notes. But 0:11:11.679 --> 0:11:16.920 I think that's like the kind of intentional introspection that 0:11:17.000 --> 0:11:19.800 most people don't do, and they don't get down to 0:11:20.080 --> 0:11:23.880 the nitty gritty of something as simple as like I 0:11:24.000 --> 0:11:26.000 want to be able to see the sunset every night 0:11:26.080 --> 0:11:30.040 right from from my porch, and which then influences I 0:11:30.040 --> 0:11:34.560 would imagine going back cascading. You know, different ways of 0:11:34.760 --> 0:11:38.240 living and ways of saving and ways of investing to 0:11:38.280 --> 0:11:41.680 help you pull that off. I'm curious too, Like you, 0:11:41.679 --> 0:11:43.800 you mentioned bigger pockets in real estate, and I want 0:11:43.800 --> 0:11:45.800 to talk to you about real estate. But index funds 0:11:45.880 --> 0:11:48.000 or traditionally have been seen as like the gospel of 0:11:48.040 --> 0:11:52.080 financial independence. Why did you believe that real estate investing 0:11:52.080 --> 0:11:54.400 would be the best best path for you to achieve it? 0:11:54.559 --> 0:11:57.240 So I think this is really funny because I agree 0:11:57.240 --> 0:11:59.560 with the index fund approach. The reason I got into 0:11:59.559 --> 0:12:01.920 real estate investing is because when I was following mister 0:12:01.960 --> 0:12:05.200 money Mustache in twenty thirteen, I was like, how do 0:12:05.200 --> 0:12:07.160 I become more frugal? And I was like, well, something's 0:12:07.160 --> 0:12:09.400 missing here? What about housing? Like that's that's pretty big 0:12:09.440 --> 0:12:12.240 expense and I want to eliminate that. And something on 0:12:12.320 --> 0:12:15.640 bigger pockets. I think Brandon Turner wrote an article at 0:12:15.640 --> 0:12:17.840 some point or another, one of the podcast hosts at 0:12:17.840 --> 0:12:20.600 the time, and he wrote about house hacking and was like, Oh, 0:12:20.640 --> 0:12:22.560 if you buy a multi unit property and then you 0:12:22.600 --> 0:12:25.200 get a mortgage and then the other side pays that mortgage, 0:12:25.200 --> 0:12:27.040 you can live for free or pretty close to it, 0:12:27.120 --> 0:12:32.520 after reasonable approximations for your maintenance, vacancy, capex, utilities and 0:12:32.559 --> 0:12:34.800 all that kind of good stuff. And so that seemed 0:12:34.840 --> 0:12:37.199 like an obvious way to keep my expenses low. And 0:12:37.280 --> 0:12:40.240 a byproduct of doing that, means of doing that well, 0:12:40.360 --> 0:12:42.199 means that you have to spend the time to research 0:12:42.240 --> 0:12:44.040 how to become a good real estate investor, because you're 0:12:44.040 --> 0:12:47.280 buying a rental property, fundamentally, you're analyzing it for cash flow. 0:12:47.640 --> 0:12:50.320 And so I put in the several hundred hours needed 0:12:50.320 --> 0:12:52.400 to think about how to make a quality real estate 0:12:52.440 --> 0:12:55.240 investment purchase, moved in, fixed it up, and then I 0:12:55.280 --> 0:12:56.839 had the skill. I knew exactly what to do, and 0:12:56.880 --> 0:12:59.360 I could just repeat it several times. And so over 0:12:59.440 --> 0:13:02.200 ten years you become very good at real estate investing, 0:13:02.240 --> 0:13:04.240 and I, of course I'm the CEO. I become the 0:13:04.240 --> 0:13:06.160 CEO of Bigger Pockets during this time. So I had 0:13:06.160 --> 0:13:08.400 lots of repetitions with a lot of real estate investors. 0:13:08.559 --> 0:13:10.280 But I like to think that even if I never 0:13:10.360 --> 0:13:12.120 went down that path and I had just gone down 0:13:12.160 --> 0:13:15.480 some completely different career, if I had serial house hacked 0:13:15.520 --> 0:13:17.600 like that, I would have acquired the skill of being 0:13:17.720 --> 0:13:21.800 a competent landlord over that time period. Anyways, and there 0:13:21.840 --> 0:13:25.200 are if you're willing to pay that price, real advantages 0:13:25.240 --> 0:13:27.120 that you can get, especially in the early days of 0:13:27.120 --> 0:13:30.040 a real estate investment when you're using leverage, which amplifies 0:13:30.080 --> 0:13:32.920 returns and also risk. There are real returns that can 0:13:33.000 --> 0:13:35.640 amplify that beyond what you can see in the in 0:13:35.679 --> 0:13:38.840 a stock market portfolio. And then the other side of 0:13:38.840 --> 0:13:41.360 that is as the years go by and your mortgage 0:13:41.360 --> 0:13:44.400 cost stays. If we stay back, real estate at its 0:13:44.400 --> 0:13:47.760 simplest form is a inflation adjusted store of value. Your 0:13:47.800 --> 0:13:51.600 property is probably going to pace inflation over thirty years. 0:13:51.800 --> 0:13:53.960 It's going to be ups and downs across that time, 0:13:54.000 --> 0:13:55.760 but that's a reasonable bed. If you don't believe that, 0:13:55.760 --> 0:13:58.040 you shouldn't buy real estate. The other thing is is 0:13:58.040 --> 0:14:02.160 it's an inflation adjusted income stream. The rents minus the 0:14:02.200 --> 0:14:05.240 expenses is going to compute to some amount of cash 0:14:05.240 --> 0:14:08.640 flow each year, relatively tax advantage cash flow, and that 0:14:08.679 --> 0:14:11.560 should also keep pace with inflation over very long periods 0:14:11.559 --> 0:14:14.400 of time, and stretches like the last five years, that 0:14:14.400 --> 0:14:16.720 can compress a little bit as rents don't grow much 0:14:16.880 --> 0:14:19.400 and expenses do grow, but over long periods of time 0:14:19.400 --> 0:14:21.160 you can believe it. And so once the property's paid 0:14:21.200 --> 0:14:23.080 off or getting close to being paid off, you have 0:14:23.200 --> 0:14:26.960 more cash flow, but diminishing returns because you're not getting 0:14:26.960 --> 0:14:29.800 the amplification effect of the leverage to the same degree 0:14:29.840 --> 0:14:32.760 at the beginning of it. And that's very appealing towards 0:14:32.760 --> 0:14:35.280 the end of your financial journey because it makes the 0:14:35.320 --> 0:14:37.240 math very simple. You can almost treat it like a 0:14:37.280 --> 0:14:40.200 pension to some degree. If you're conservative with your assumptions, 0:14:40.240 --> 0:14:42.240 you know there would be some volatility, some capecks and 0:14:42.240 --> 0:14:44.600 those types of things, and adding that to your fire number. 0:14:44.680 --> 0:14:46.760 So those are the reasons why I got into real estate. 0:14:46.920 --> 0:14:50.200 But if I hadn't been for house hacking and bigger 0:14:50.240 --> 0:14:52.560 pockets and I had some other very demanding career, I 0:14:52.640 --> 0:14:55.200 may have just gone in with the index fund approach 0:14:55.240 --> 0:14:56.760 the whole time. So I see real estate as a 0:14:56.800 --> 0:14:59.360 tool that's very powerful for certain folks that want to 0:14:59.480 --> 0:15:01.360 use that, that were willing to put in that education 0:15:01.920 --> 0:15:06.000 and take that extra risk, and they can get different returns, 0:15:06.160 --> 0:15:08.680 maybe better in the early days, maybe different styles of 0:15:08.680 --> 0:15:10.680 cash flow that they'll feel more comfortable with at the 0:15:10.760 --> 0:15:13.360 end of it. But it's not better than stocks. Different 0:15:13.360 --> 0:15:14.360 it's just a different approach. 0:15:14.680 --> 0:15:17.680 And I think house hacking in particular is like the 0:15:17.720 --> 0:15:20.600 real estate investing strategy that kind of trumps everything else 0:15:20.840 --> 0:15:24.720 because you can lower your housing costs significantly. There's you're 0:15:24.800 --> 0:15:26.800 kind of when you're comparing investing in the S and P. 0:15:26.920 --> 0:15:29.040 Five hundred to investing in a single family home or 0:15:29.040 --> 0:15:31.920 a duplex. Yes, you're talking about, you know, the use 0:15:31.960 --> 0:15:33.840 of leverage to be able to enhance that investment in 0:15:33.840 --> 0:15:35.880 real estate. And then as the better you get as 0:15:35.920 --> 0:15:38.479 a real estate investry, might be able to find significant 0:15:38.480 --> 0:15:42.280 deals right and and you might be able to get 0:15:42.280 --> 0:15:45.480 better returns overall because of leverage and because of your 0:15:46.440 --> 0:15:51.680 knack for solid real estate investing. But there's just nothing 0:15:51.800 --> 0:15:55.320 that compares to the financial return of house hacking, and 0:15:55.400 --> 0:15:58.280 so few people I think are willing to engage it. 0:15:58.280 --> 0:15:59.880 It's one of the things. Did you feel like you 0:16:00.200 --> 0:16:04.440 giving something up to engage in that act? Were you like, man, 0:16:04.560 --> 0:16:07.520 I'm really sluming it here for for six months, for 0:16:07.600 --> 0:16:10.880 two years or whatever. Some people talk about house hacking 0:16:10.920 --> 0:16:13.480 and it's just it sounds brutal, I guess to the 0:16:13.520 --> 0:16:16.200 average person listening to this podcast, like I've got to 0:16:16.200 --> 0:16:19.160 do that in order to secure financial independence? No way. 0:16:19.240 --> 0:16:20.320 What did it feel like for you? 0:16:21.000 --> 0:16:23.240 If things work out in my life as I hope 0:16:23.240 --> 0:16:26.400 that they will, I will go my entire life never 0:16:26.560 --> 0:16:28.840 living alone. I will have slept in the same bedroom 0:16:28.880 --> 0:16:32.000 as my brother growing up. I will have had roommates 0:16:32.040 --> 0:16:35.280 throughout college. The day I stopped having a roommate was 0:16:35.280 --> 0:16:39.480 the day my wife moved in with me into my house. 0:16:39.520 --> 0:16:42.880 Hack and I hope to go first in old age. Right, 0:16:42.960 --> 0:16:47.560 That's that's the that's it. And and most people, I 0:16:47.600 --> 0:16:51.960 think have time where they live alone, and that's wonderful, right. 0:16:52.560 --> 0:16:55.480 I never had that, and I never missed it. I 0:16:55.520 --> 0:16:57.000 don't know what it was, what it would have been like. 0:16:57.040 --> 0:16:59.400 I never missed it. I don't want it in my life. 0:16:59.440 --> 0:17:01.280 And that was a cheat code for me because I 0:17:01.280 --> 0:17:04.560 had roommates the entire way through and I never had 0:17:04.560 --> 0:17:08.199 the fancies, fancy apartment or house that was all to 0:17:08.240 --> 0:17:11.400 myself in there. And that just is such an extraordinary 0:17:11.440 --> 0:17:16.600 advantage in accumulation of wealth and then and and keeping 0:17:16.600 --> 0:17:19.439 costs slow, using housing to as an accelerant on my 0:17:19.480 --> 0:17:21.720 financial journey. I mean, it's just it's like a cheat code. 0:17:22.280 --> 0:17:24.640 It keeps everything low. And and other people that were 0:17:24.640 --> 0:17:26.600 having trouble. One of the things you wanted to talk about, 0:17:26.600 --> 0:17:29.600 I think was the middle class trap where folks are stuck. 0:17:29.640 --> 0:17:31.800 You know, middle class family has a has a mortgage payment, 0:17:32.080 --> 0:17:36.560 they've got their childcare, food expenses, they're contributing a little 0:17:36.560 --> 0:17:37.760 bit to the four oh one k, or maybe even 0:17:37.760 --> 0:17:39.760 a lot to the four oh one K, but they 0:17:39.840 --> 0:17:41.800 have to make a choice at some point. They cannot 0:17:41.840 --> 0:17:44.639 go through this entire retirement stack, maxing the four oh 0:17:44.680 --> 0:17:49.840 one K, maxing the WROTH, maxing the HSA, and maybe 0:17:49.840 --> 0:17:53.119 putting away some for college and having additional liquidity at 0:17:53.160 --> 0:17:55.560 the end of that stack because they don't save enough. 0:17:55.920 --> 0:17:58.440 But if your house hack when you're you know, young, 0:17:59.000 --> 0:18:00.760 you go through that whole stack, because you can max 0:18:00.800 --> 0:18:03.520 out your four oh one K and have plenty of 0:18:03.520 --> 0:18:07.240 cash left over after that each year to reinvest in 0:18:07.280 --> 0:18:10.600 other opportunities in there that provide that flexibility because your 0:18:10.640 --> 0:18:13.840 core expensive housing is so low that whatever you were saving, 0:18:13.880 --> 0:18:15.719 whatever you would have been saving on top, like you know, 0:18:16.160 --> 0:18:19.879 fifteen to twenty percent without house hacking, is then multiplied 0:18:19.960 --> 0:18:23.199 by that drastic drop off in that core expense. And 0:18:23.240 --> 0:18:24.600 so that's the cheat code that I think it is, 0:18:24.640 --> 0:18:28.080