Let’s Drone Out is a light-hearted and chatty drone focused podcast. Recorded live and interactively every Thursday 8-9 pm UK time on YouTube, come join the interactive chat. Jack and his wife Tony, as well as the rest of the LDO crew are here to bring noobs and pros together. Tune in every Thursday at 8:00PM UK time for the latest on tech, events, news, interviews and a behind the scenes look into the hobby. LEGAL NOTICE: Any views expressed by any guests on this show are personal and may ...
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เนื้อหาจัดทำโดย Mad Fientist เนื้อหาพอดแคสต์ทั้งหมด รวมถึงตอน กราฟิก และคำอธิบายพอดแคสต์ได้รับการอัปโหลดและจัดหาให้โดยตรงจาก Mad Fientist หรือพันธมิตรแพลตฟอร์มพอดแคสต์ของพวกเขา หากคุณเชื่อว่ามีบุคคลอื่นใช้งานที่มีลิขสิทธิ์ของคุณโดยไม่ได้รับอนุญาต คุณสามารถปฏิบัติตามขั้นตอนที่แสดงไว้ที่นี่ https://th.player.fm/legal
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เนื้อหาจัดทำโดย Mad Fientist เนื้อหาพอดแคสต์ทั้งหมด รวมถึงตอน กราฟิก และคำอธิบายพอดแคสต์ได้รับการอัปโหลดและจัดหาให้โดยตรงจาก Mad Fientist หรือพันธมิตรแพลตฟอร์มพอดแคสต์ของพวกเขา หากคุณเชื่อว่ามีบุคคลอื่นใช้งานที่มีลิขสิทธิ์ของคุณโดยไม่ได้รับอนุญาต คุณสามารถปฏิบัติตามขั้นตอนที่แสดงไว้ที่นี่ https://th.player.fm/legal
Financial Independence and Early Retirement
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เนื้อหาจัดทำโดย Mad Fientist เนื้อหาพอดแคสต์ทั้งหมด รวมถึงตอน กราฟิก และคำอธิบายพอดแคสต์ได้รับการอัปโหลดและจัดหาให้โดยตรงจาก Mad Fientist หรือพันธมิตรแพลตฟอร์มพอดแคสต์ของพวกเขา หากคุณเชื่อว่ามีบุคคลอื่นใช้งานที่มีลิขสิทธิ์ของคุณโดยไม่ได้รับอนุญาต คุณสามารถปฏิบัติตามขั้นตอนที่แสดงไว้ที่นี่ https://th.player.fm/legal
Financial Independence and Early Retirement
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×In 2021, I decided to stop doing annual updates . At that time, I thought I had FI figured out and was just living a “normal” life (so no need to talk about it anymore). Well, a lot has changed since then! Turns out, I didn’t have everything figured out :/ I explain more in today’s short podcast episode: Listen Now https://traffic.libsyn.com/secure/madfientist/eighth-year-of-freedom.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Highlights How the pandemic changed my outlook on the future Why my post-FI life is drastically different from what I imagined it would be Learning how to use money for the first time The reason I’m focusing more on other investments (and what those investments are) Why stock picking isn’t great, even when your stock picks outperform Show Links First Year of Freedom Second Year of Freedom Third Year of Freedom Fourth Year of Freedom Fifth Year of Freedom Full Transcript Mad Fientist: Hey, what’s up, everybody. Welcome to the FInancial Independence Podcast. So three years ago in 2021, I decided to stop doing my annual updates. And if you’ve followed the podcast for a while, you know every year since I left my job in 2016, I’ve done an annual update talking about what I learned over that last year. And when it got to 2021, I felt like I was really just living normal life, and I was getting bored making the annual updates because I didn’t really think much had changed. And I didn’t know if I was actually giving any sort of meaningful advice to anybody by just talking about what I had been doing for the past year. So I decided to stop doing them and it’s amazing how much has changed since then. So one, I don’t have it all figured out and I’ve learned a lot over the last three years, so I figured I could share what I’ve learned over those last three years and maybe start doing these annual updates again if I continue to learn things, but I’ve also realized that things are going to get really weird with AI over the next decade, and content is going to be able to be created instantaneously by computers. And really the only thing I have is my human story. And that’s the most important thing. And my unique experiences that I can share and the lessons I learn through actually living this sort of lifestyle. So both of those things combined made me realize that, Hey, I should maybe do another one of these at least. And then maybe continuing to do these in future years if I have some interesting things to share. So anyway, so this is my eighth year of freedom post, and I can’t believe it’s been eight years. That’s absolutely insane, and it was actually August 1st that I left my job, but I’m not really on a good schedule these days, and so this is over a month late. But hey, better late than never. Anyway, I hope you enjoy it, and this is valuable lessons from my eighth year of freedom. So the biggest thing since 2021 is really that I feel like I’m actually using money for the first time. My entire life has been saving money, investing money, hoarding money pretty much. And I don’t think I’ve ever even tried to use it because using it was always the last resort. And if I was using it, that was a mistake because now that money can’t grow anymore. And it’s been a huge mental shift to now try to use it when I’ve just spent my whole life accumulating it. It’s been a lot of fun and I have a article coming out soon, if I can get around to writing it, talking about learning how to spend and actually enjoying it while I’m learning how to do it. And I think that’s been the biggest change. And particularly we bought a house last year. Our last house, I think we sold in 2014 and we’ve just been renting ever since and renting has been great. But now that we have a son and we want to settle down and we don’t want to have to move every year if we don’t want to. I know my wife never wanted to move every year, but I was always keen to try something new. But now that we have a son in the picture just having a stable place that we can put all our stuff, and as parents out there know you have a ton of stuff when you get a kid, because grandparents just keep buying them stuff. So we decided to buy a house and that’s been a great purchase. And this is actually the third house we’ve owned. We owned a house in Scotland back in 2005, and then we bought a house in Vermont in 2011. But this is actually the first house that I’ve enjoyed owning. For anybody on the path to FI out there who is like me and was just like very motivated to get there as quickly as possible, I don’t think I should have owned houses back then, because any unexpected expenses that came up, I would stress about them and yeah, owning a house is nothing but unexpected expenses. So I think yeah, if I was doing it again, I’d probably rent most of the time that I was on the path to FI and then buy after because now I can actually enjoy it and I am enjoying it. It is a luxury. It is a splurge and it’s a great splurge because I’m talking to you from my perfect home studio that I’ve spent months and months designing and building. And I love it so much. And yeah, if I was as tight with money as I was back in my FI days, I wouldn’t have this studio. And I would have been stressing about all the unexpected expenses that have already popped up over the last year and a half. So homeownership has been amazing. And again, if you would have told me this eight years ago that I’d want to be a homeowner again after the horrors of my previous two homeownership stints, I would have said you’re crazy, but that just shows how much changes as you get older and as your priorities change. And the other big thing that I would be surprised about back then that I am loving now is stuff. So even though I just was talking about being overwhelmed by too much kid stuff, buying stuff for the house has been a lot of fun. And it adds to my daily joy. So yeah, I didn’t think stuff actually increased my happiness, but it really does. And I think it’s mainly because I’ve gone so long without any good stuff. So as we were renting, we would always have furnished rentals. And since we moved so often, I hated packing up boxes and moving. So I just limited the amount of stuff I had. So that was, that just meant that we used, all the rental house’s kitchen stuff, and whatever TV was on the wall and sound system was there, we just used that. But, now that we have our own home, and we know we’re staying here for a while, I bought nice things that I really do enjoy. So anything from, the coffee grinder that I’ve talked about many times on this show and other shows, to just like really nice mugs, to a great sound system for the TV and speakers in every room that make music sound so good and I can just turn it on instantly and just have music following me around the house. And then obviously the studio is just kitted out with everything that I’ve ever wanted. Speaking of the studio, I’ve set it up so that I can do a video from here now. So if you want these podcasts to be in video form in the future, go to madfientist.com/youtube and follow me there. And if I get enough YouTube followers, I’ll start to make the efforts to do video, which would require me to actually shower before recording these, which today, that did not happen so I’m glad this one’s audio, but. If I get enough followers on YouTube, then I’ll start doing these in video and I’ll give you a little tour of my home studio, which is incredible. So go to madfientist.com/youtube to follow me on there. So those are two big changes, my love of home ownership and love of stuff. But going back to the initial point where I’m actually using my money for the first time, I realized that’s a big mistake I made on my journey to FI was just disregarding the fact that actually one day you are going to spend your money and if you’re not really practicing how to spend it you’re not going to be that good at it. So this has been like a three year journey of trying to get better at spending money and trying to reframe it as something that does get used and you use it to increase the happiness in your life. And the one thing I keep saying to myself is something that I heard in the Die With Zero podcast that I published a few months ago with Chris Hutchins. And that’s when Bill Perkins said, when’s the party? And I keep saying that to myself in my head, because that’s true. When’s the party? Because even if you don’t spend your money, you’re going to give it away at the end of your life. So there’s a party at some point and somebody who’s going to benefit from it. So you can either use it during your life and give it away during your life or at the end of your life, it’s all going to be given away and somebody is going to have a party and it may be a charity, it may be your heirs, if you want to be a part of that party, then you need to figure out how to spend it or give it away during your life. And that’s something I’m really focused on. So in that same sort of vein as, using money for the first time, I feel like this is the first time I’m appreciating all my past investments. It feels like all my investments are really paying off. So for example, like to buy this house I used my portfolio to do it and that was just eye opening because you’re saving for FI and it’s all just this theoretical thing. It’s not like you all of a sudden take out all your money, give it to the FI person and they give you all the freedom. It’s not like you’re actually using it to buy freedom. You are obviously, but you’re not clicking a button to do it. It’s just a theoretical thing like, okay, yeah, my bank account says I have this much in it, so now I don’t have to work anymore. But it doesn’t really feel like you’re utilizing that money. Whereas when I bought the house, I did just do that, which I clicked a button and pretty much bought a house, which is a crazy transaction that I’m going to write an article about in the future as well. Hopefully next year. Cause it was just the most insane amazing financial transaction I’ve ever completed in my life. So anyway, so that was like the first time I was like, Whoa, okay. So yeah, I did save up a good amount of money and it can be used to buy amazing things like this big stone house in the countryside. But I also feel like, other investments are also paying off. So my focus on health over the last decade and now I’m in my early forties and I still feel like I’m 20 and I’m very thankful for that, especially having a little toddler to chase after and pick up and throw around. So I feel like, yeah, those past decisions are starting to bear fruit and, like my friendships I get to go home to the States and see some great friends that I’ve had for decades. And we pick up exactly where we left off. And it’s we’ve just never stopped hanging out, which is fantastic. My 22 year investment in my relationship with Jill has made it possible. greatest human to ever exist in the entire history of humanity. So that investment is paying off in ways I wouldn’t have even imagined. And so it’s making me think of my future investments. And now the money investment is all on autopilot and locked down, and I’m not worried about that, it’s focusing on those future investments. So again, maintaining health. So that’s a huge focus because I am an older dad, but I don’t want to act like one. So I want to be playing ice hockey and skiing with my son and hopefully doing it for the next 40 years rather than just the next 10 or 20. So health is a huge focus. And I know that investment pays off, but it’s one of the most important ones, so that’s the one I’m focusing on most. I’m trying to think about ways to increase the investment in my friendships that I’ve built over the last few decades and figuring out ways that maybe money can help that by maybe, renting an Airbnb where my friends live for a month and just being there rather than just coming into town for a week and seeing everybody quickly, just like actually living there for a little chunk of time every year so that we can just pick up where we left off and continue to build those relationships that I value so much. And then the biggest investment, investing in my son, which has already paid off in so many ways and has been the biggest gift of FI, being able to be there and spend all this time with him and all this quality time as he’s been growing up and to be there for all the big milestones. So to continue investing in him and enjoying every minute of it along the way. So again, it’s thinking about ways that money can contribute to that and help that. So rather than focusing solely on the money investment, I’m again, trying to reframe it and think about how I can use money to increase these other investments that are far more important at the end of the day and are the ones that really bring a lot of happiness. And the other big thing that I’ve been thinking a lot about over the past few years is something I think the pandemic taught me, and that’s, there’s a risk to putting things off. And I think back pre pandemic, I always just thought yeah, I can save all this money and then in a few years I’ll do this. But the pandemic showed us that, this period of health and peace and free travel, we’ve taken it for granted because it’s all we’ve known and that’s not guaranteed to continue. So when I think about whether we should take a trip to the States this spring, or if we should just put it off to the summer or fall. I’m less inclined to put things off these days. And I think, yeah, the pandemic was the thing that really brought that to the forefront of my mind. We were trapped in Scotland for a couple of years and I couldn’t see my family and friends and I couldn’t do the things that I wanted to do and we couldn’t travel freely. So that’s been another motivation to use my money more now, rather than letting it sit there and accumulate more so that I could use more later. So those are the real big things that have been at the forefront of my mind over the last few years, since my last annual update, and it is a huge mindset shift. But it’s one I needed to have, and I’m glad that I’m having it, and I’m glad I’m in the position that I’m in to enjoy it while it’s happening. So a lot of the future content I have is going to be based around that. So again, I’m going to have a big article about learning how to spend, because I’ve learned, I think my list is up to 14 things that have really been helpful in that regard. So I’m going to publish that soon, hopefully. I’m also going to do a Perfect Life version 2.0. I have a post called The Perfect Life that I wrote even before I reached FI and I haven’t read it because I want to read it right before I write this new post, but it’s going to be funny to go back to that and see how different I’m living life now than I imagined I would have lived it back when I wrote that article and it’s going to be fun to write a new version of it to see what the future perfect life is going to be looking like now that we can build exactly the life we want. And I feel like we’re doing that and we’re getting very close to our ideal lifestyle, but here we are eight years in and still experimenting a lot and still trying to figure it out. So it’s, yeah, it’s definitely not as easy as you assume it would be. So the only other minor thing I wanted to chat about is stock picking because, it’s obvious what the downsides to stock picking are when you’re wrong, you lose money or you make less money than you would have if you weren’t trying to pick individual stocks, but I just wanted to touch on two success stories that are still not ideal. So even if you pick the right stock, there’s two examples I have for you. And the first is I bought Nvidia back in 2012. So for anyone out there who knows what Nvidia stock has done since then, that was very early and that money would have grown to an insane amount of money had I held on to it. But, that’s the problem with picking individual stocks. Back then I was a software developer and I could see that graphics were going to be more important in future years. And I thought, okay, investing in the best graphic processing unit producer would make a lot of sense. So I invested and sure enough, I think it went up maybe 20, 25 percent and I sold it and I thought I was a genius and yeah, looking back on it, yeah, it was a good investment, whatever. But had I not sold it, it would be up thousands of percent. So even though it was a success. There’s still a lot of regret there cause I sold way too early. So that’s one example of stock picking going right, but still feeling like a failure and something that you should have done better. And the second example is probably around the same time, I think. Apple was trading at around its cash value. So ignoring all the intellectual property it had and all the products and everything, it just was pretty much trading for what the cash it had on hand was. So I had some money lying around at that time and I was like okay, I don’t see anything else good to invest in, so I’ll just put it into Apple. And so I’ve just left it there and the dividends have just been reinvested up until recently. I turned that off because I was like, this is just getting too big of a chunk of my portfolio. This was in a taxable account too, which is silly back whenever I did that. So I have this huge unrealized capital gains, so I’d ideally not sell it, because I would pay a lot of tax on it. And yet it’s just becoming an increasingly bigger and bigger part of my portfolio. So even though I want my little fun portfolio size to be 5%, Apple alone is already bigger than that, not even including, Apple’s. Portion of all the index funds I own. So anyway, so that’s another example of stock picking going right, but then ending up in a sort of difficult situation where a single stock is now a bigger percentage of my portfolio than I want it to be, but if I was to pare it down, then I would be hit with a lot of capital gains taxes. So there’s just two examples. Because like I said at the beginning of this, it’s easy to see how stock picking is bad when it goes wrong cause you lose money or you make less money than you could have. But when it goes right, there’s still complications. And that’s why I’m so glad that the majority of my portfolio is index funds that I plan to never sell. And that just makes life so much easier. You just let it keep compounding. It keeps doing its thing. You’re not switching in and out. You’re not watching it. It’s just growing. And it’s just a much easier way to invest. And it’s no doubt it’s going to be more beneficial than me trying to pick stocks, even if I pick winners, which again, I don’t always, those are two examples of winners, but even then it comes with complications. So anyway, that’s what’s been happening with me for the past few years. Expect some more detailed and actionable posts about some of the topics I’ve discussed today coming up. Maybe not this year, maybe early next year. But if you’d prefer these updates to be in video form in the next few years, then just head to madfientist.com/youtube to follow me there. And if I get enough subscribers there, I’ll just start doing them there. But yeah, I hope you’ve been doing well, and one other thing that I’ve been thinking about over the last few years is just how grateful I am for the Mad Fientist and for you. It’s amazing that I can just go months without publishing anything, and then I send out one email and I get all these lovely replies and suggestions and intelligent people to communicate with. And it’s incredible. It’s just another investment that seems to now be paying off. So all those past decisions of putting the reader and listener first and not trying to sell some garbage thing that you don’t need or trying to put ads all over the place, i’m happy I made those decisions because now I feel like I’ve built up this relationship with you guys and I’m so thankful for it. So thank you for listening, thank you for all your feedback and for being kind internet people, because I’m not sure who else out there can send out an email to a hundred thousand plus listeners or readers and then just get all these nice replies and none of the normal internet garbage that I think a lot of people have to deal with. So thanks for listening. I hope you enjoyed it, and I’ll catch you in the next one. Related Post Fifth (and Final) Annual Update It's been five years since I left my full-time job so here's my fifth (and final) annual update on post-FI life! The post Valuable Lessons from My Eighth Year of Freedom appeared first on Mad Fientist .…
Out of all the episodes of the Financial Independence Podcast , this is the one I wish I heard when I was on my journey to financial independence Bill Perkins, author of Die with Zero , joins Chris Hutchins on the All the Hacks podcast to discuss what money is really for – maximizing net fulfillment. This interview is incredible, so I reached out to Chris to ask if I could share it with you all, and thankfully he agreed! Listen Now https://traffic.libsyn.com/secure/madfientist/bill-perkins-interview.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Highlights Why you should maximize for net fulfillment rather than net worth When is the best time to allocate money to get the most fulfillment Why you should time bucket your experiences instead of having a bucket list How to break out of earning-saving-investing autopilot Why you should fear wasting your life more than running out of money Show Links All the Hacks Podcast Chris Hutchins on Twitter Die with Zero Book Bill Perkins on Twitter Related Post Chris Hutchins - Why You Should "Retire" Before You Hit Your Number The founder of Grove shares important lessons he's learned as an entrepreneur and explains why you may want to quit your job before you hit your FI number! The post Bill Perkins – Memory Dividends, Time Buckets, and Maximizing Net Fulfillment appeared first on Mad Fientist .…
To celebrate the release of JL Collins’ new book, Pathfinders , I collected all the best advice from his Financial Independence Podcast interviews! JL has been on the show three times: First, back in 2012 (he was my second guest ever!) Second, when his hit book, The Simple Path to Wealth, was released Third, during the depths of the Coronavirus crash That last interview may be my proudest moment as the Mad Fientist (I explain why during the show). Hope you enjoy this jam-packed episode! Listen Now https://traffic.libsyn.com/secure/madfientist/jl-collins-highlights.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Highlights The power of FU Money and why it may be less money than you think JL’s biggest investing mistake and what he learned from it Why index investing is superior to active investing Are REITs and international funds necessary Why your house may not be a good investment Thoughts on stock picking and actively-managed funds What makes Vanguard unique and why it’s best for investors The three keys to becoming wealthy Lessons learned from Black Monday How to prepare for the next market crash Show Links First Interview: JLCollinsNH – The Importance of F-You Money Second Interview: JL Collins – The Simple Path to Wealth Third Interview: Coronavirus Market Crash – Is This Time Different? JL’s Website – JLCollinsNH.com The Simple Path to Wealth How I Lost Money in Real Estate Before it was Fashionable Pathfinders: Extraordinary Stories of People Like You on the Quest for Financial Independence―And How to Join Them Related Post The Best Advice from Mr. Money Mustache To celebrate the 10-year anniversary of the Financial Independence Podcast, here are the highlights from my first guest - Mr. Money Mustache! The post The Best Advice from JL Collins appeared first on Mad Fientist .…
On today’s episode of the Financial Independence Podcast , I welcome back Chad Carson from CoachCarson.com ! Chad just released a new book called The Small and Mighty Real Estate Investor , and I wanted to get him back on the show to talk about it. I’m not a real-estate investor though. So rather than interview him myself, my real-estate-investor friend, Jillian Johnsrud , did the interview for me! You may know Jillian from Montana Money Adventures, or her new podcast – Retire Often . She did a fantastic job, so I hope you enjoy their conversation as much as I did! Listen Now https://traffic.libsyn.com/secure/madfientist/jillian-and-chad-interview.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Show Links Coach Carson Website | Twitter Jillian Johnsrud Website | Instagram The Small and Mighty Real Estate Investor Amazon | BiggerPockets Full Transcript Coming Soon! Related Post Chad Carson - Retire Early with Real Estate Chad Carson joins me again on the Financial Independence Podcast to talk about the best strategies you can use to retire early with real estate! The post Jillian Johnsrud & Chad Carson – Small and Mighty Real Estate Investing appeared first on Mad Fientist .…
On today’s episode of the Financial Independence Podcast , I welcome back Ramit Sethi from I Will Teach You to Be Rich ! I needed someone to come on the show to provide some tough love and Ramit was the only person for the job. As Ramit mentioned during our last interview , FIRE people are great at knowing what NOT to spend on but we’re not good at knowing what to spend on. Spending is going to be a big focus on the Mad Fientist this year and I can’t think of a better way to kick off this discussion than by getting yelled at by Ramit so hope you enjoy it! Listen Now https://traffic.libsyn.com/secure/madfientist/i-will-teach-you-to-be-rich-interview.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Highlights Why we doubled our annual spending (and was it worth it) What Ramit did to make me get all clammy and uncomfortable Why pay less when you can pay more How to imagine your own rich life Why you should start wasting some money at a certain point Show Links I Will Teach You to Be Rich I Will Teach You to Be Rich Podcast Episode 16 – “We’re worth $8 million but I comparison shop for strawberries” Episode 40 – “We’re worth $5 million, but my wife nearly canceled our trip to save $200” Money Coaching with Ramit Sethi Ramit on Twitter | Instagram | TikTok Full Transcript Mad Fientist: Ramit, thank you so much for being here again. I really appreciate it. Ramit Sethi: Thanks for having me back. Mad Fientist: So, it’s been over three years since our last interview, which is crazy. It seems like yesterday. And you’ve been really busy with some new stuff since then, which I’m excited to talk to you about. But there’s one particular topic that we touched on back in our first interview that I really want to dive into today because I think it’s a huge problem in the FIRE community and it’s a problem that I know I have, and it is the fact that FIRE people aren’t very good at knowing what to spend on. We’re great at knowing what not to spend on, as you mentioned in our interview last time, but we’re not good at knowing what to spend on. And since we talked, I’ve been really working hard at this over the last couple of years and I want to talk through that. But you are the perfect man to push me further and hopefully push everyone in the audience further because I’m sure this is not a unique problem to me. What do you think about that? Ramit Sethi: I think that’s true. I think that a lot of people have been taught well… I think that the world teaches us to save, but nobody teaches us to spend. And if you take that concept of frugality to the logical extreme, then you start to see saving money as a virtue and spending money as a sin. And it’s not, that’s not how it is. In fact, the point of living a rich life is not to save money. It’s not. The point of a rich life, in my opinion, is to design a rich life that excites you and then use your money to live as meaningful of a life as you can. So I’m all for a high savings rate and aggressive investments and earning more. I’m totally for that. But there’s another side of the equation that too many people ignore and that’s what I’ve been very excited about. Mad Fientist: This is interesting because your site is I Will Teach You to Be Rich. Your book is, I Will Teach You to Be Rich. And I’ve always read that as I will teach you to become rich. But it was only recently as I’m getting into your podcast more and I’m getting into the journal you just released, that I realized that it actually is, I will teach you to be rich and that’s very different than becoming rich. Ramit Sethi: That’s right. Mad Fientist: And my question is, was that intentional because obviously you started the site way back in the day. But were you thinking about that way back then? Or were you thinking of it in the same terms as I was as I would teach you to become rich? Ramit Sethi: It is about being rich and I think that we should live a rich life today and an even richer life tomorrow. So I don’t like the idea of I have to wait until I’m 75 years old and maybe just, maybe I can go take that Alaskan cruise or treat my family to a nice dinner. I don’t wanna live that kind of life. And so, yeah, it’s about being rich and being rich can happen even if you have credit card debt, you can still be rich. So the next question that naturally comes up is what is rich? And I think this is where it gets really interesting, this concept of rich for a lot of people, the first images that pop up in their head are you know, being chauffeured around in the back of a limo, wearing some fur coat and eating on some table that holds like 70 people with some butler. I’m like, guys, that’s Hollywood. That’s Richie Rich. That’s not reality. A rich life is so diverse. It could be buying a beautiful coat. It could be traveling two months a year. It could be having the freedom to pick up your kids from school every afternoon. So a rich life is yours. It’s not mine, it’s yours. And you define what it is. And if we start from that premise that you decide what your rich life is and suddenly it becomes a lot more exciting to be able to use money to live that life. Mad Fientist: Absolutely. Okay. And I’m, and that’s why I’m so excited to have you on, and you’re the only person that I could think of to get on for this sort of topic. So over the past couple of years, you’ve released a couple of things that are actually very helpful for this goal. So if you could, since I’m gonna be referencing them so many times, would you just tell the audience who may not be familiar with your podcast and your new journal, what those both are about? And then obviously I’ll be using those a lot as we continue this discussion. Ramit Sethi: Yeah. So initially I wrote my book, I Will Teach You To Be Rich. It came out in 2009. I re-released it the 10 year edition in 2019, and I had added about 80 pages of material. A lot of money psychology new material. Also, things had changed in the world, and things had changed in my life. I had gotten married and I had become much more interested in money and relationships. As I started to talk about this, I realized that I wanted more material on this, and I wanted to help people get more excited about money. I use that word excited intentionally because when you asked the average person what words come to mind when you think of money, they go stress, overwhelm, guilt, am I too late or restriction. I know you FIRE guys love the word restriction. Oh, I love it. They actually love it. I love it. It’s like someone who has a little scab on their arm and they go, Ooh, I’m gonna pick at this scab. It’s like, stop it, man. You know? Okay. You can restrict a little bit, but it’s not the point of money. So, a couple of things that I did. First I created a podcast, and the podcast is called I Will Teach You Be Rich. And on this podcast you can actually hear me talking to real couples. I’ll just share one example of a couple who has $825,000 in debt and they’re worried that they can’t afford to have children. On the other hand, you have a couple who has over $10 million of net worth and they still agonize over the price of blueberries, and they still, they can’t go on a vacation that they want to, they only go where the points will allow them. And I go, at what point do you get to actually enjoy your money? $10 million and can’t even choose the country you wanna go visit. So here’s the thing about this podcast. Most of us have never actually heard a couple sharing real numbers and the fights that they’ve had for 25 years. The tears, the joys and actually getting on the same page. You may have seen a blog post, but you’ve never actually heard a real couple doing it. And so, because of our reach, we can find these people and they trust us enough to know that they’re willing to come on the show and share it. So that’s the podcast along with a new journal that I released. Mad Fientist: Yeah, before we move on to the journal, I just wanna say the podcast is incredible. I would say it’s sort of like being in a psychiatrist’s office and the couple are on the couch and you’re there like assessing it and you’re just eavesdropping on this really personal conversation. And yes, some of the higher net worth episodes have been really, really useful to me, which we’re gonna talk about. But yeah, the entertainment value and just feeling like you’re sort of eavesdropping on this very private conversation because you have a, you have a psych background a little bit, don’t you? Ramit Sethi: I do, I do. Although this isn’t therapy. But yes. When I talk about the money with these couples, we will often end up at, you know, what were the words that they remember their mom and dad saying about money? And oh my gosh, there was a recent episode, there was a couple that lives in the Midwest and they make a very good salary. They make $130,000 and they cannot figure out why they are constantly behind and in debt. And at one point the dad tells me about his daughter coming home from school. And her school had given her like one of those baskets of food that you would give a child who doesn’t have enough food at home, who’s food insecure. And he was like, full of rage. He was angry. How could they give her that we are not poor. We make $130,000 a year. And so I started talking to him. I said, how’d you grow up with money? He tells me, well, when I grew up, we didn’t have a lot and there were the haves and the have nots. The haves we’re on the other side of the park. They were the doctors, the lawyers, the people with the big house. We didn’t have anything. Now as he’s grown up, he makes a very good income. The way he talks about money, he still believes he doesn’t have enough. He still acts as if he doesn’t have enough. And there’s a lot of peculiar behaviors that people without money carry into their adulthood. And when his daughter asks him about spending money, he says, we can’t afford it. So it’s no surprise that when his daughter goes to school and the teachers ask, how are things going? She says, we can’t afford it. And finally, this was the most haunting moment. I asked him, would you talk to your daughter about money? And he looked startled. He essentially said, why would I talk about money with her? Essentially, I am protecting her from money. Just think about that. In his view, money is a bad thing. It’s evil. It causes problems and stress, and therefore I’m gonna protect my innocent daughter from having to deal with it. But that’s not how wealthy people treat money. That’s not how someone who’s living a rich life treats money. Think about somebody who’s like very good with food. They love to eat healthy food. They’re gonna talk about food with their kids. Oh, come on, let’s cut this garlic together, we eat this because it tastes good and it mixes well with that. How come we don’t do that with money? And so when I suggested to him that there are a lot of people who talk to their kids about money, he was bewildered. Why would you talk to your kids about money? Because in his view, money is something to protect kids from. Mad Fientist: Wow. Yeah. You see people acting how they act with money and even, you know, how I act with money and how some other FIRE people act with money and you don’t really think about what had gone into making them act that way with money and what they’re still carrying around. And it seems like most of our money views and how we deal with having money or having no money all stem from how money was when we were children. Ramit Sethi: Yeah, it definitely does. And it’s a funny wrinkle in human psychology that even if we are acting in a way that is not serving us, our mind will create a narrative where we end up being virtuous. So take someone who has 10 million, just as an extreme example, and they are driving all over town to compare the price of gas. And I go, Hmm, what do you think of that? And they’ll say something like this, well, you know, I don’t like to waste money. Or, it’s not that I drive around for everything, I’m just selective. So we come up with these words that make us seem virtuous when in reality, as a third party, I’m going… you’re nuts! You made more in interest by lunchtime than you would save over the course of five months of driving around to save 10 cents on gas. Why are we doing this? And more importantly, what are you not allowing yourself to do by focusing on these $3 questions instead of the $30,000 questions? And it’s comfortable because you know, all that one gas station on Main Street always has a good deal and it’s comfortable and you have mastery of it. But actually at a certain point, you have won that game. You’ve won it, and maybe it’s time to turn the page and go onto a new chapter in life. Mad Fientist: And that’s where your journal comes in. So please talk about that because that is just recently released and it is pretty much the ideal workbook for coming up with that. So if you could just tell the audience, who may not be familiar with it, what you just released with the IWT Journal. Ramit Sethi: So, believe it or not, FIRE people, some people actually are never gonna buy a book and compare the difference between a Roth IRA and a Traditional IRA. I know, it’s crazy. I know. But I learned this myself. I’m like, why don’t you guys just buy this book , and in fact, get it from the library. You’ll solve all your money problems. And there are a lot of people that are just like, mm, I’m not gonna do that. I go, all right, I get it. We have to remember that most people are not buying any book, much less a money book. And it seems a little ironic because by the time people are 40, pretty much their number one worry in life is money. So you go, well, why don’t you just read this book or listen to that podcast, YouTube. And there’s a variety of reasons people don’t, but I don’t want to sit here and berate people. Well, that’s not true. I do a little bit. But what I wanna do is help them start to live their rich life. And so I created this journal, and it’s called a no-numbers journal. So you get it and I want you to imagine giving yourself the gift of 15 minutes, your favorite cup of coffee, a quiet room, and you get to sit down and dream. You get to dream about how you wanna use your money. It’s not about your savings rate, it’s not about the Trinity study, it’s none of that. It’s about, if I could spend more on something that would make my life easier, what would it be? It’s about pulling a pen out and sketching out what your ideal day would be, or even your ideal house. And yes, there is parts about what should I not spend on, or how should I navigate money in relationships? It’s tactile. And I wanted people to start connecting their money with their lives. I can tell you that most people don’t get motivated by seeing a higher figure in their checking account. I know some people do. Personally, I love it. Okay. I like it. So that’s why I don’t hate the FIRE community, but I understand a lot of it because I like a high savings rate. I like seeing compound interest. And I get that, but most people are not like that. Most people are like, I actually wanna go out to this really nice restaurant and know that I can pay for it without worrying. Okay, great. Well let’s start there. And when people start to engage with this journal, it’s just a much more relatable way of clarifying what a rich life is to you. And then for some people they decide, Hey, I wanna start optimizing my money and make it work for me. Mad Fientist: Yeah, and I have a copy and we actually got some good weather here in Scotland over the summer and I really enjoyed just sitting out there with a cup of coffee in the sun, going through it with my wife, Jill, and trying to really think about it because it is way harder to figure that out especially when, you know, we’re so lucky we’ve reached financial independence we can spend on these things. But yeah, as a frugal person, naturally frugal just my entire life. It is way more difficult to sort of push myself in those areas, but it has been helpful and that’s why the podcast and the journal have been really helpful so definitely just wanted to set those up because I’m going to be referencing them a lot. But I think before we dive in, maybe just give you a quick update of what’s changed since 2019? Ramit Sethi: Tell me. Mad Fientist: Yeah, so we talked in 2019, and I think for the prior 10 years to 2019, I, we averaged the same amount of annual spend. And you will be happy to know that over 2021 and 2022, it looks like we’re doubling that value for our annual spend. So I’ve heard you on other podcasts where you’re like, you know, people who say they want to change and like, get better at spending, they don’t really mean it, but I, I actually do mean it. And we’ve actually worked pretty hard at doing that. 2021, we traveled a lot more and spent a lot more than we would’ve on that travel. We experimented, like we did Premium Economy to the States, and then we did Business Class on the way home just to try those both out and compared them. And then 2022, we just moved into a new house and I’ve been kitting it out. And even my wife one day, another Amazon box arrived and Jill was like, what is happening? And I was like, this spending thing is incredible. I don’t know what I’ve been missing for the last 40 years of my life, so I’ve been really enjoying it and I feel like I’ve made a lot of progress but there’s still a ways to go because even though we’ve doubled our annual spend, we’re still not even spending what the portfolio could generate at a very conservative withdrawal rate and it doesn’t account for any sort of income that’s coming in. So I am still trying to push myself, but I just wanted to let you know that thanks to our conversation in 2019, I have been making progress and it’s been so fun and way way more enjoyable than I expected. So thank you for that. Ramit Sethi: Wow. Well thank you. And thank you for giving me the update. And what makes me happiest to hear that is that you’re having fun doing it, which is the point money is supposed to be fun and that you’re doing it together with your wife. That is amazing. That is the culmination. You know, when it comes to money, I’ve learned at the very beginning levels, it’s all about the what… I made a little money, what do I get to buy or what do I want to do with it? And that’s totally cool. I have no problem. You wanna buy a beautiful coat or take a trip? Amazing. I love it. But at the highest levels of personal finance, it is always about the who. Who do I get to bring with me? Who do I get to surprise or delight, and to hear that you’re doing it with your family is just the culmination of what a rich life really should be. So, congratulations. Mad Fientist: Thanks man. Yeah, it’s been great. And before we dive into some of the, the newer stuff I’ve learned from your podcast and your journal, I want to revisit something you said in our first interview, and it was something that made me think you were a lunatic at the time, but I get it now. And that was why pay less when you could pay more? Ramit Sethi: That’s right. Mad Fientist: And I was like, yeah, you gotta have to explain that. And still didn’t, I don’t think I really got it. And it was only recently that we just moved into this new place and I love pour-over coffee. That’s like my morning ritual. I love making it. I love drinking it. I love buying the beans, I love everything about it. And I’ve been waiting until we moved into a place where I could get a proper grinder, because I thought that was the coffee grounds were the only thing that were holding me back because I couldn’t get a really consistent grind. So I bought this thing that is probably the nicest you can get without going commercial. And it is amazing. It is the nicest thing to look at, the nicest thing to touch. Like I just love pressing the button. I love pulling out the tray. I love everything about it. And I don’t think I really understood that before. I would’ve just picked the cheapest thing that does the job. And this has shown me that there’s a whole other level that it’s just like brings you so much joy that doesn’t even relate to the actual functionality of the thing, just the actual beauty of it and the design. And so I get that now and my question to you is, I wanna find more of that, but for me, it’s hard to distinguish between quality and status. Like, is a Rolex that sort of experience or is it just the status that makes that price so high? So I don’t know if you have any experience with that, but I would like to find more of that, just like pure quality. And something else you said in our last episode was like, focus more on value than cost. So I do wanna get better at that, but for me, I struggle, I think to sort of distinguish between the two because I couldn’t care less about status, but I do really love that quality. So any insight into that? Yeah. Well, first of all, awesome to hear. I love, I just love hearing your voice and I love hearing anyone’s voice when they get excited about their primary money dial in their rich life. So coffee and the way you talk about it, the ingredients and the tools, you can tell this is a passion of yours. I think first of all, that quote you know, why spend less when you can spend more? That’s a Dan Kennedy quote, and it is profound. All of us intuitively get this. Especially if you’re a parent, there are certain things you are going to spend anything on. It could be the right type of diapers. It could be a car with certain safety features. We all intuitively get it when it’s about our kids or our dogs. My goal is to normalize spending as much on yourself as you do on your kids and your dogs. Okay? Everyone looking around right now at their little golden retriever at their side, like, yeah you give your dog the best food. How come you think 10 times about how much you spend on yourself? It doesn’t make any sense. So the fact that you have tasted that is awesome. Now distinguishing between higher quality. Well, first of all, my fantasy has always been to take one of my friends who made some money and I just go, Hey, come visit me in New York and I’m gonna take you out for three days and show you how to spend your money. I’m literally gonna show you the skill of how to spend money. You’re not gonna like all of it. Some of it you’re going to be like, okay, that was not worth it for me. But some of it, you’re going to go, oh my God, now I get it. For example, there are certain things that you can only understand once you experience or touch them. A certain type of sweater, a picture doesn’t do it justice. A certain type of food. When you see it being made in front of you and you understand where the ingredients came from and how it was sourced. Oh my God, I never knew that much work went into this, and how it tastes is incredible. On the other hand, I’ve eaten certain meals where I go, okay, I mean, that was fine. It’s not my taste. I’m probably not gonna come back here. But anyway, that’s my fantasy. Unfortunately, no one ever takes me up on it, no one. Maybe the key is that I go, well, there’s just one catch. You have to have an unlimited budget and they go, what do you mean unlimited? They get really scared I’m going to like make ’em spend like $500,000 in three days. I’m like, I’m not gonna do that, but it is gonna be more than you thought, and they’re not ready for it, which is totally fine. I’m not gonna force anyone into spending it. Here’s what I would say as a real answer to your question, which is most people have spent decades viewing the world through the money lens of cost. That is their primary and sole money lens. When they go to eat somewhere, they look at how much it costs. When they go to book a flight, they look to the right of the screen to find the lowest cost. They sort by cost, cost, cost, cost. And so there’s a couple of isolated things in people’s lives where they’ll spend more. Okay. But it is very difficult to extend that to other parts of their life. But the way you’re doing it is the right way, which is you find something you’re passionate about and you start to explore. If I were gonna encourage that, what I would do is I would look at your finances with you and I would say, okay, let’s pick a number that you have to spend every single month on this hobby of yours, coffee. And let’s just, what would be the number that you’d spend every month to make this like a serious hobby for you? I feel like I, I feel like I’m spending it because the beans, I get high quality beans shipped in from around Scotland. And, and that was the last piece of kit. Maybe there’s something I could do where I could actually like go and learn the espresso stuff and the barista stuff that I don’t do. I just do a pour over, a V60. Ramit Sethi: So how much? Mad Fientist: Whew. Maybe another a hundred pounds a month. Not even that much, I guess. Ramit Sethi: Mmm. Try again. Don’t you have a lot of money, like, oh, I’m not even spending what I should be in my model. And we’re debating over a hundred pounds. I don’t think so. Try it again. Mad Fientist: Geez. I don’t even know what I would spend a hundred pounds on. That was like… Ramit Sethi: Well, we’re gonna get to that . Okay. Just pick a number. Mad Fientist: 250 pounds. Ramit Sethi: Okay, fine. 250 pounds. Okay. Alright. I know you can afford it. Okay. Cuz I saw you send over some numbers before. So, cool. Now we have a number that’s quite aggressive for what you’re currently spending and, and I love your comment, I don’t even know what I would spend on . Okay. Well let’s take a second to dream. Coffee is one of the things that makes you passionate. You love it and you wanna get more experience with it. So how would you discover how to go deeper into that hobby of yours? Mad Fientist: So Edinburgh is a really big coffee city actually, and they have great cafes who have lots of people that are passionate and lots of roasters. So I’d maybe go down there and chat to them about potentially learning more from them in some way or if they had any recommendations for what to do for somebody in my situation, I guess. Ramit Sethi: How would you use money to make what you just said easier and better? Mad Fientist: Oh boy. I’m not used to using money for anything, so… Ramit Sethi: Hold on. Everybody in the FIRE community, just listen, I’m not used to using money for anything. Just except to keep me warm at night as I wrap myself in my Excel model. Yeah. Oh, I love my 52% savings rate. So good. All right, well, we’re gonna learn that skill right now. Okay. So you just said I might talk to some of the baristas and learn from them, get some recommendations. How could you use money to make that easier and better? Mad Fientist: I guess I hire somebody to do that? Ramit Sethi: Yes. That’s a, that’s one thing. Mm-hmm. great. What else? Mad Fientist: The only other, the only other thing after I said the 250 was like maybe just a weekend in Italy with Jill and you know, compare the Italian coffee and then go to France a couple months later and try their coffee. I don’t know. I’m struggling. Ramit Sethi: That sounds pretty awesome. . Okay. That’s amazing. So there’s so many things we could do. First of all, yeah, you could hire some researcher to schedule a bunch of meetings with you and baristas. Second, let’s say you met a barista, you really like him, him or her and they’re like, oh yeah, you know, next time you try to make your morning brew, do it this way. Do it that way. Try this, do. And you’re like, oh, that sounds really good. And you don’t really feel that confident about it you could say, you know what, can I hire you for two hours to walk me through how I make my morning coffee? Mad Fientist: You know what that’s a fantastic idea because sometimes it just doesn’t turn out and I don’t know why. And I’m like, how am I gonna figure this out because it’s not something I can YouTube or something. Because I don’t really know why that’s not as good as it should be. That’s an incredible idea. Ramit Sethi: That’s what money’s for! You use it to get help, to do things easier and better and more joyfully. And all of us intuitively understand hiring a personal trainer or whatever or we pay somebody to cook food for us if you go to a restaurant. How come we don’t just take the thing we’re interested in and say, I’m gonna go find somebody who’s pretty good at this, can you come to my house and help me understand this for two hours? Of course. And then your idea to go to Italy with your wife is amazing. And while you’re there, you can do a coffee tour. And you can go behind the scenes and you can do your own brew and all kinds of stuff. That is how you start to use your money to really experience what is important to you. That’s a rich life. Mad Fientist: Now, I’ve heard you do this sort of thing with people on your podcast a lot, but I did not expect this sort of like clammy reaction that I just experienced. So this isn’t even a question on my list because I wasn’t expecting this sort of reaction to those pressing questions. Why do you think that is? Why do some people just like sort of get all weird when they think of spending 250 pounds on coffee when they have absolutely no idea to do it. Like, it was a really physical reaction I just had, which I was not expecting. Ramit Sethi: I know. I love it. I wish we could be in the same room right now. It’s quite striking when you see how people physically react to conversations about money, they shrink. I’ll see someone who’s extremely confident and the minute we start talking about money, they physically shrink into the couch . It’s quite interesting. But you know what, I have a lot of empathy for that cuz I shrink when we talk about a couple things in my life that I know I need to do and I’m not. So for you I think that it is fascinating that most of us have lost the ability to dream about money. That’s really the crux of why I wrote the journal because think about it, day-to-day, again, I’m speaking generally about most people, you get a paycheck, you pay your bills, maybe you have a little bit left over and then you repeat for the next 45 years, or if you’re a little bit savvier, you take your money, you read all the FIRE blogs, and you do your investments and you do another Monte Carlo simulation and then you just repeat that. But there’s a skill that most of us have atrophied at, which is learning how to spend meaningfully. I’m not saying you go out there and just drop money everywhere and stuff you don’t care about. I don’t do that. I have a very old car, my computer, my phone, they’re not particularly new. Those things are not that important to me. But there are things that are really important to me, and so I actively seek out how to go deeper and make my life easier. And so I’m not surprised that you had that reaction and that you almost kind of seem to go blank when I asked you how would you do it? But that’s okay. It takes a little bit of coaching. That’s why I started the podcast and the journal. I want people to see that you can be inspired to spend money even if you haven’t really done it meaningfully in a long time. Mad Fientist: Right. And this sort of made me think about one of your episodes, episode 40. I loved it. It was someone in a similar situation, they just couldn’t spend their money. It didn’t seem real to them. Which actually is something that a couple of your episodes had that sort of same experience where you’re talking to them and you’re saying, what would a rich person do in this situation? And they can easily explain that. And then you’re like, well, that’s you. That’s, you are that rich person. Why aren’t you doing that? And it’s a disconnect between, what you have in the bank, because that’s just some number on a computer screen. It’s meaningless. It feels meaningless to me. And I was listening to these episodes like dreaming with them and being like, wow, what an amazing position they’re in. They could just dream and they can do all these things. And then I kept having to snap out of it and be like, I’m in that position too. Ramit Sethi: That’s me. Mad Fientist: It was amazing to hear because, it was more than one episode. And they’re able to give advice to a rich person, but they don’t believe it themselves that they have anything in the bank really. Have you come across that a lot? Ramit Sethi: It’s frequent in a couple of different ways. First, for people who are not very savvy with money or not connected to money, it, whatever they have anywhere besides their checking account does not feel real. So people who are fairly rudimentary with money or new to money, the way that they define how much money they have is literally how much is in my checking account. Okay. And one of the things I try to do is dissuade people from thinking like that. There’s a few little beliefs that people who don’t have a lot of money really follow. One of them is however much is in my checking account, tells me if I have enough money. That’s not how you should be thinking about money. Another way is I should buy something based on the monthly payment. You know, car dealers know this and they prey on people. We don’t want to think like that either. We wanna do tco, total cost of ownership. So some of the things that I do on the podcast and in my work is simply showing people a different way to think about money, such as that dad who thought money was bad and he should never talk to his daughter about it. Well, actually, money can be really good. And a simple way to do it would be to sit your daughter down if they’re really young, you say. Daddy’s gonna log in and pay our bills so we can keep the lights on. Would you like to help me? Don’t you like light? Oh, do you wanna push the button with me? Go ahead, push it and make it like, oh, let’s celebrate. That was so cool. And then as you get older, it can be things like you know, we’re gonna stay for one night in this town. Can you help us pick a hotel? Here’s the criteria and here’s the budget. And of course, by the time they’re teenagers, if you’re taking a trip, they should be planning an entire day on that vacation. Mad Fientist: So we’re going to get into some some of the stuff that’s really been useful from your podcast and journal for helping me and then some of the other things that over the last couple years that have been really helpful. But before we do, I want to pick out something that’s in your journal. It says your prime spending years are from ages 40 to 60. So this was a big slap in the face in two ways to me, because one, it made me actually realize that I’m 40 because in my brain I’m still 20. And it was only when I read that and thought about it again that I was like, I am 40. This is my prime spending years. And two, it was like, all right, I really do need to get serious about this because yes, I feel like I’m 20, so I should just keep saving, but this is my prime spending years. Ramit Sethi: It’s deeply counterintuitive and uncomfortable to acknowledge that you do have prime spending years. So let’s talk about this concept because I like that it’s uncomfortable. I like that it makes you think about your vision for spending. So in your twenties, you have a lot of time, probably not as much money. And so, I remember for example, we took a backpacking trip with two of my college buddies one summer, and we stayed at the cheapest places. And we were about to sleep in the train station and our guidebook said, don’t do that. You’ll be robbed. And I just remember that trip. It was amazing. It was full of adventure and sure we didn’t have a lot of money, but it was great. Then in your thirties, you know, again, following a general pattern, people start to earn a little bit more. They do start to spend a little bit more. Forties tends to be focused around family, but in forties people start to have higher incomes. And in fact, their incomes will peak in a few years after that. But we should also acknowledge that it’s not just about money, it’s also about time. And it’s also about ability or mobility. So you may have a lot more money when you’re 75, but it’s unlikely you’re gonna be going to Everest. It’s even unlikely that you may even be traveling abroad depending on health. And these are the kind of conversations that people don’t really wanna have. We have a deeply puritanical society, but interesting society that says, save, save, save until someday, but no one ever really talks about that someday. It kind of reminds me of Indian culture, which is don’t date, don’t date, don’t date. Okay. It’s time to get married today. And everyone kind of rolls their eyes at that in the Indian culture, but how come we do exactly the same thing in America with money? It’s actually preposterous when you think about it. So 40 to 60, in my opinion, is the prime spending years. You have money, you have health, and you do have time. Now, if you accept that, listen, you could disagree with me. You could say, I don’t believe that. I think it’s gonna be 65, or, I’m really healthy. Okay, fine. First off, I wanna say it’s not just about you. I know plenty of people who are healthy, but they have a sick parent or a, a partner who can’t travel for whatever reason, or can’t do the things they wanna do. So sometimes life is not just about you. We have to keep that in mind. But second, what I want you to do using the journal is to create a list of things that you want to do now, in the next decade, et cetera. So when you do that, you can start to actually visualize what’s meaningful to you and you can start to do ’em. I just don’t want people to live a life of, I will do that someday. And then, I mean, what a tragedy to live a smaller life than you have to. What an even greater tragedy to end up 70, 80, 90, with millions of dollars in the bank if you follow the FIRE community, never actually having done the things you want to do. Mad Fientist: Yeah, I completely agree. And we’re gonna hopefully help all the FIRE people out there that are like me and who are probably really uncomfortable with this conversation already. Ramit Sethi: They already turned this podcast off, by the way. This is gonna be your worst listen to podcast of all. They see Ramit Sethi, they’re like no thanks Or the minute I start making a joke about, you know, their Monte Carlo simulation. Yeah, it cuts too, it cuts too close, doesn’t it, FIRE people? Mad Fientist: Ah, that’s what we needed. I need the tough love today. That’s what I brought you on. I knew you’re the only one that could do this. So yeah, the journal definitely there’s a lot I want to touch on in there, but before we do the podcast, episode 40 was really helpful in the sense that, like you said, we can spend on our kids or spend on our dog or spend on somebody else. And in this episode, there’s a woman who really struggled to spend any money on herself and she was worth millions and millions, but would really rarely ever spend on herself And she went to New York with her husband, which that was a whole ordeal trying to even get her there because she had to spend $300 one night on a hotel. And anyway, they wanted to go see a Broadway show. So she went down to the Times Square Broadway Ticket Office for like the last minute tickets or whatever, the half price tickets. And she went there because she’s just so used to spending money and you flipped it around on her and said, you know what, you’ve taken tickets from a family that really does need to only pay half price and that’s all they can afford. Ramit Sethi: I love this story. So Rachel and Jack, episode 40, they’re one of my favorite couples. He had invited her. He was taking a work trip to New York, and he’s like, come along. She goes, cool. They were gonna stay at the Moxy Hotel in the East Village, which is a pretty affordable hotel. And she looked at the price and it was $297, which is, for Manhattan, fairly reasonable. And she goes, that is outrageous. I’m not coming. She was just gonna cancel the trip. And he goes, no, come on. I want you to come. And so she made them stay at a different hotel in Chelsea. And then when the price lowered, the next day, they moved all their suitcases back to the Moxy Hotel. Remember, work was paying for part of this anyway. So I asked, Rachel how much are you worth? And she said, $5 million, I said, could you say that a little louder for the mic, please? $5 million. Okay, now everyone listening goes, oh my gosh. That’s, that’s so weird. Why? Why doesn’t she just enjoy it? But most of us do exactly the same thing. We do the same thing, whether it’s with a restaurant or a hotel. The way that we act with our money is often rooted when we didn’t have any in our childhood, teen years, or early twenties. In fact, if I ask people like, how do you decide how much to spend on a vacation? And we really get into it, they, the answer really emerges that they basically have a number in mind. That number was born when they were basically 20, because that’s what they remember about how to plan a vacation. And they have not adjusted that number as they have made more money. So then she tells us about this Time Square thing and she goes, we actually have no problem spending money on restaurants. We ate out, we ate well. We went to see a show. I said, tell me about that show. So she waited in the line for last minute tickets. This is basically way cheaper discount tickets. And at this point, I’m like, oh my God, Rachel, you have $5 million and you waited in that line. You didn’t just go to the box office and buy the ticket you wanted. And she goes, no, I needed a deal. So then, you know what I realized? I’m a master of Indian mom guilt . Okay? And so I had to bust it out. Anyone who grew up with a Indian mom, Asian mom, many types of moms or dads, they go, you know what, it’s my time. I’m gonna leverage this. I’m gonna weaponize this. So I, I did it. I was like, I’m about to become a guilt driven Indian mom. So I was like, Rachel, you realize that there was a family in New York for the first and only time with their kids and as they saw you getting that last Lion King ticket, they saw this multimillionaire woman snatch the tickets outta their kids’ hand. How do you think those kids felt? And she looked like she was gonna cry. And I was just like, I had the biggest grin on my face. Cause I’m like, gotcha. Mad Fientist: It was absolutely perfect. Ramit Sethi: So you know, listen, we have a little fun on this podcast, but the point is I told her, Rachel, you make too much money to do that. And I said, Rachel, you cannot afford to do that anymore. If you have $5 million, you’re not allowed to be shopping or standing in line for the discount tickets and taking away that scarce commodity from someone else. Now people get a little mad when I say, how dare you Ramit this America? We could do whatever we want with our money. Okay, you can, but first of all, is it right? And second of all, is it actually serving you? At what point do you get to walk up to the box office and pick the ticket you want? At what point? Or in episode 16 when Amy and Chris are choosing their vacations based on where they have Marriott points, I go, at what point do you get to choose where you wanna go just based on where you wanna go? Mad Fientist: That was really good because he said, let’s go to Italy. She started looking into everything she wanted to do in Italy. They have $8 million in the bank. And then I guess last minute he realized that his points weren’t gonna work or something. So they ended up going to Greece and the poor wife was like, I just got my heart set on Italy and here we are in Greece. And yeah, just ruined the whole experience. And I feel for her, because I think I’ve, I’m sure I’ve done that to my wife, numerous times. Ramit Sethi: Should we get your wife on this call? Is this about to turn into my podcast? This is gonna be amazing. Mad Fientist: Well, we’ve moved hotel rooms mid trip many times and she hates that so much. Ramit Sethi: Why do you do that? Mad Fientist: So, yeah. She would be great to chat to because she would be echoing a lot of the same things that have been echoed in episode 40 and 60. Ramit Sethi: Here’s the thing, I think that sometimes there’s absolutely virtue in using cost as your money lens, right? Like, if I’m going to buy some commodity, I don’t know, nails or something, well, I don’t go to Home Depot, but if I ever did in a like alternate reality, which is my hell, and I walk into Home Depot, yeah, I want the cheapest nails. What do I care? It’s a commodity. But I think that sometimes there are higher or different money lenses you can use. If you’re going on a trip and it’s something special, maybe the extra 50 bucks or a hundred bucks actually doesn’t make a difference. In fact, maybe it’s not even about not making a difference. Maybe it’s something you can turn into an amazing experience. You could turn to your partner and say, you know what? For this trip, I really wanna do something special. I know that you’ve always wanted to get a massage at a hotel. I wanna arrange it. So the day we arrive after that long trip, I’ll take care of all the bags, and you just go and get that massage. And when you come back, we don’t have anything scheduled for the rest of the night. You just take a nap and we can just relax. Wow. So notice the difference, not only in spending, but in positioning. To yourself and to your partner. I’m not going there and saying, hey it’s, it’s no big deal. Instead I’m saying, this is going to be amazing and I’m gonna do it for you. And for Rachel, sometimes what I wanted her to do in Times Square was to be generous to herself. Rachel and Jack had done an incredible job saving money. The classic I Will Teach You to be Rich, way, low cost, long-term investments over a long period of time. They had made it. And so we find it much easier to be generous to other people than to ourselves. But Rachel and Jack won the game. And so they need to take their winnings and in their case, their winnings might be seeing The Lion King or whatever show with better seats, with more ease to walk in and say, we don’t have to spend two hours of our valuable time in New York waiting in line. And that’s really what I want people to imagine is the possibilities of using money and actually embracing money as a good thing, not an evil thing that we need to minimize and avoid or hoard. Mad Fientist: No, definitely. And, since listening to that episode… I have this stack of old t-shirts that I’ve been carting around the country for the last, who knows, 20 years. Because I’m like, maybe one day I’ll need a rag and you know what I mean? And now, after listening to episode 40, I was like, well, you know, somebody could actually wear this shirt and actually provides a lot of utility here I am storing it for the last 20 years because I think I need a rag. And it’s like, I can buy a $2 rag if I need a rag. You know? So it’s like, I think that’s really helpful for people that aren’t used to focusing on themselves to sort of like get a little gateway into that and be like, well actually, you know, yeah, this will benefit me because that stack of shirts is finally out of my life and I don’t have to keep carting them around. But then also it’s like, okay, somebody else is going to benefit a lot more from these shirts than I will. Ramit Sethi: Yeah, that’s a great example. It includes so many elements of some of my philosophies, you know, one of them is $3 questions versus $30,000 questions. You know, a stack of old shirts, what should I do? That’s a $3 question. Just stop. Let’s not deal with these anymore. The next thing is generosity. Could someone else benefit from these more than I could? Yeah. And the third is being decisive. So many times when I talk to people who have money and struggle to spend it, there’s a lack of being decisive. And in fact, I think much of what guides the frugality world is a sense of fear. There’s this idea that I’m not gonna go eat at that nice restaurant. That’s not the kind of person I am. And anyway, if I did go eat there, deep down now, I’m afraid I would like it so much that I would trip and fall and have to eat at that nice restaurant every night for the rest of my life. And I don’t believe that. I think you can have a nice experience and you can also trust yourself enough to know what is enough. And that is really important in a rich life. I’m not saying everyone here just twirl around three times, repeat rich life and then go buy a private jet. That’s not how it works. You need to be able to afford it. I talk about the numbers. I’m not just out here doing some woo-woo life-coach BS. But I also think that you can trust yourself enough to experience something amazing and know that I will never let myself spend more than within our margin of safety. Mad Fientist: Yeah, absolutely. And that leads nicely to the money rules because actually one of my money rules that I developed after going through your journal is to not limit spending on one-off experiments. Because like I mentioned before, we flew premium economy to the States and then we flew business class home. And now one of my money rules is to fly premium economy on all flights over five hours because that was well worth the double the price of economy. But then business wasn’t really worth it to me for three times the price of premium economy. Maybe one day it will, and maybe, you know, I’ll do another experiment once we travel with our new son, which that may change everything. But that’s one of my money rules now because yes, I know I’m not gonna go crazy and just start living this lavish lifestyle that then bankrupts me. And those one-off experiments are really important for pushing my boundaries and finding what it is that it is worth spending on. Ramit Sethi: Yeah. I love that. It is an experiment. I think we shouldn’t be so worried about getting all of our spending decisions right. I had a program where I talked about the psychology of money and I cover this now, we have a new money coaching program. And one of the principles I shared is that it’s okay to waste money. Let me explain what I mean. I’m not saying just go out and just throw money around. That’s not what I’m saying. But I’m saying that when you’re in your early twenties, you don’t have a lot of money. You have to make sure that you are being extremely careful. So you might be looking at menus before you go out. You might be declining invitations because you just can’t afford it. Okay, great. That makes perfect sense. But as you make more, certainly in your case, as you have made more and you have a handle on how much you can afford, once in a while you’re gonna spend money on something and it’s going to be a waste. And that might involve, you got some late fee on some account, and as much as I hate late fees, you discover that it might take you like six hours to get that thing reversed. In your twenties, you’re like, yeah, I’m gonna spend it. I have nothing else to do, and I’m gonna make this company pay. At your stage, you might go, you know what? It sucks and it’s not fair, but it’s not worth my time. Or you might try a certain restaurant or a certain product and it’s just not for you. And so instead of letting the tail wag the dog and saying, wow, I spent a hundred dollars on this thing, I’m going to make it work for me. I’m going to, for example, carry those things around with me to every country, you go, you know what, it’s just not for me. I’m done with it. I’m selling it or donating it. So the more money you make, the more money you will waste. That is natural if you are not wasting a little bit of money, that means you’re probably not thinking about the possibilities of how you could actually be spending it. So again, just to reiterate, I’m not encouraging anyone to go out and waste money. I am saying that at a certain point it is okay if you incidentally waste a little bit of money because you have a bigger purpose than eliminating all waste of your personal finances. Mad Fientist: That’s a great point. Because efficiency and lack of waste is what drives a lot of people like me, I would imagine. But you’re right, I’ve wasted far too many hours that I can’t get back on things that obviously don’t matter now in the scheme of money at least. Ramit Sethi: The efficiency thing always gets me because you’re right, there’s a lot of crossover with efficiency and FIRE, and people they’re like, how dare you not be efficient? And I just go, are you efficient when you give your husband or your wife or mom or dad a hug? Like do you literally measure how long it’s going to produce the maximum happiness? And they’re just like, no, that would be psycho. I’m like, you’re a psycho by looking at everything through the lens of efficiency. Maybe sometimes it’s actually not meant to be efficient. There are other virtues besides efficiency… safety, security, a lot of things and so I want people to be more adaptable. If you’re playing the game of life with money, you don’t only have one money lens – cost. You have others, and you use them in the right situations. To do that, you need to be well practiced with all of them. Mad Fientist: That’s fantastic advice. And I can’t believe it, we’re already coming up to an hour that has gone so quickly. So I don’t want to keep you too long. I can’t thank you enough. Like I knew you were the only person for this chat and I’m so glad we were able to make it happen. Obviously I’ll link to your new podcast and the journal and iwt.com. Anything else I should put in the show notes just so people can find you? Ramit Sethi: For anyone who has questions and wants to stay focused on their money. We have a money coaching program as well. We do a coaching call every month and we have this amazing community. We’ll send you the link for that. Mad Fientist: Nice. Ramit Sethi: Maybe you can post it. We’d love to welcome more people into that program too. Mad Fientist: Excellent. Well thank you so much, Ramit. Really appreciate it. And yeah, hopefully I’ll touch base with you in another three or four years and I’ll have made even more progress. Ramit Sethi: That sounds great. I always love coming on your show. I love talking to you. Thank you for having me back. Mad Fientist: All right, buddy. Talk to you soon. Thanks, bye. Ramit Sethi: All right, bye. Related Post Ramit Sethi - I Will Teach You to Be Rich For the first time, Ramit Sethi from I Will Teach You to Be Rich shares his thoughts on FIRE (Financial Independence, Retire Early)! The post Ramit Sethi – How to Spend (and Actually Enjoy It) appeared first on Mad Fientist .…
Over the last few years, I interviewed members of my family to find out two things: How I became the Mad Fientist (i.e. where did I get my extreme ideas about money) What advice they’d give to parents hoping to raise money-smart children This is a short but sweet holiday episode to end the year and I hope you enjoy it! Listen Now https://traffic.libsyn.com/secure/madfientist/my-family-interview.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Full Transcript Coming soon Related Post My Brother - Using the Power of Money to Pursue Your Passion Join me for an interview with my little brother that we recorded live in Venice! We talk about growing up, extreme frugality, and how you don't need to wait until FI to use the power money gives you to pursue your passions. The post My Family – Raising Money-Smart Kids appeared first on Mad Fientist .…
Exactly 10 years ago, I released the first episode of the Financial Independence Podcast ! To celebrate this big birthday, I’ve collected all the best advice from my interviews with my very first podcast guest – Mr. Money Mustache! Listen Now https://traffic.libsyn.com/secure/madfientist/mr-money-mustache-highlights.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Highlights Mr. Money Mustache’s investing strategy Thoughts on real-estate investing vs. stock-market investing How to invest in a raging bull market The benefits of hitting FI before having kids Why you’ll likely make money after retiring early Mr. Money Mustache’s biggest splurge How to decide whether to pay off your mortgage early The best part of financial independence How to find meaning after early retirement Most challenging part of post-FI life The impact of financial independence on personal relationships Show Links Financial Independence Podcast Episode #01 – Mr. Money Mustache – Early Retirement Made Easy Episode #24 – Camp Mustache – Q&A with Mr. Money Mustache, Afford Anything, & Military Guide Mr. Money Mustache Related Post Mr. Money Mustache - Early Retirement Made Easy Mr. Money Mustache shares his financial independence and early retirement secrets in an interview for the Financial Independence Podcast! The post The Best Advice from Mr. Money Mustache appeared first on Mad Fientist .…
On today’s episode of the Financial Independence Podcast , I speak to Patrick Aime from Aime to Invest ! Patrick’s journey to FI is an incredible one. He… Moved from his home in Rwanda to attend high school in Europe and college in America Stayed in America after college and started working in the feast-or-famine world of sales Started his own company and grew it to $5 million in revenue in four years Used his success in business to invest in rental properties and live a lavish lifestyle Lost everything during the 2008 global financial crisis and had to declare bankruptcy Found FIRE and drastically reduced his expenses and started saving for the long term Rebuilt a smaller business and started investing in short-term rental properties in Mexico Utilized geographic arbitrage to lower his expenses even further Hit FI 8 years after declaring bankruptcy and became a millionaire 2 years after FI Patrick shares everything he learned during his rollercoaster financial journey so hope you enjoy the interview! Listen Now https://traffic.libsyn.com/secure/madfientist/aime-to-invest-interview.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Show Links Aime to Invest YouTube Channel Frugal Safari Website Patrick on Twitter Mad Fientist’s FI Laboratory Full Transcript Mad Fientist: Hey, what’s up, everybody. Welcome to the Financial Independence Podcast, the podcast where I talked to some of the best and brightest in personal finance to find out how they achieved financial independence. I’m really excited about today’s show. I’m talking to a buddy of mine named Patrick, who I met way back in 2016 at FinCon San Diego, which is a financial conference. And he was a Mad Fientist listener at the time. And just came up and talked to me and my wife. And I quickly realized one, he’s a really fun guy to talk to, but also he had a really interesting story to tell. So I’m excited to share it with you today. Patrick’s story is a bit of a rags to riches, to rags, to riches story. And there’s lots of stuff that he learned along the way, and I’m excited to dive into some of it, but a brief summary… he built up a multi-million dollar business over the years, and he was living the multimillion dollar entrepreneur lifestyle a bit. And sadly it all came crashing down during the global financial crisis. So he had to eventually declare bankruptcy and start from scratch again. And when he was rebuilding up his life and his business, he realized he needed to get his personal finances in order. And that’s how he ended up finding the financial independence world. And that led to him completely changing his outlook on spending. And he ended up trimming his expenses to less than 50% of before the financial crisis. And he was able to build up his business and his investments, and he was able to reach financial independence in just eight years after declaring bankruptcy. So it’s an incredible story with lots of lessons learned, no doubt. So without further delay, Patrick, thank you so much for being here. I really appreciate it! Patrick: Thank you for having me on, Mad Fientist. This is an honor to be on your podcast. Mad Fientist: So we go way back. We met back in 2016 at FinCon San Diego. And I have to say out of my entire decade of being the Mad Fientist, I think when I met you, that was the coolest I ever felt. And it just so happened to be, my wife was there and she got to experience it too. So yeah, if we just go back to 2016 and we were just milling around in some big convention hall and you came up to me and you just said some very kind things in front of my wife, and I could just tell by her face, she’s like, what is going on here? This guy is like, he looks like a really nice normal guy smart. And he’s saying all these really nice things about, you know, just weird financial writing on the internet. And yeah. So I have to say thank you for that. That was a highlight of being the Mad Fientist. Patrick: That was crazy. I remember that too. I was talking about how I first met you. I actually was, I met JD Roth first, and then I was like "Do you know the Mad Fientist?" He was like, of course, you know, because I knew I had listened to your podcast when you interviewing him. And I know, is that, can you introduce me to him and was like, Hey yeah, sure. You know, so, and then when I met you, I was, I was star struck, dude. I remember when I asked you to get to take a picture with you and your wife was looking at us, like what’s going to picture him here. Mad Fientist: Exactly Patrick: Yeah, and for me, I I’m the sports marketing industry. So we do a lot of big corporate events or we know the big sporting events. So I get to meet a lot of celebrities you know, Hollywood and sports celebrities. And but I don’t get as star struck as, as well as when I met the Mad Fientist, that was like, I gotta get a picture. Mad Fientist: That’s what you said that, yeah, that, that reminded me. You said something about like, yeah, like you had met some famous basketball player or something and and yeah, you’re more excited to meet me. And like, I was just as dumbfounded as my wife, because I’ve just been writing some weird financial stuff into the internet and never expected any sort of a response like that. And and yeah, it was, it was pretty special. So I, I appreciate all the kind words and it was good to meet you all those years ago and hear some of your story, which I’m so excited to get into today, obviously. And so yeah, thanks for taking the time. Patrick: Being on your show is definitely a highlight of my FI experience because you’re the reason why I started this whole FII journey and to be on your show after all these years is basically a bucket list type of opportunity for me. So thank you again. Mad Fientist: Oh, no, my pleasure. And yeah, like I meant to do it a long time ago because when we met in 2016, I was like, wow, Patrick has such an interesting story. I need to get them on the podcast, but then completely forgot all about it after that. And then it wasn’t until recently, just a few months ago, you had tagged me on a YouTube video that you had published. And I watched it and was like, oh yeah, this is why I was to have Patrick on all those years ago. So I’m so excited. We’re getting to do it today. So for my audience who is not familiar with you, could you maybe just tell a little bit about yourself and how this whole FIRE thing came about for you? Patrick: Definitely. So I’m originally from Africa, east Africa, the small country called Rwanda, and we’re best known for having a mountain gorillas that you can actually visit in the mountains in the wild, which is one of those experience that you have to to do if you have a chance. And so I grew up in Africa, very modest lifestyle, single mom. And when I was 14, I had a chance to go to high school in Belgium and and I took it. And then so I went to high school in Belgium. I was playing basketball. And then a few buddies of mine, teammates, were playing in the US and so had a chance to go to college in the US. And of course that took it because being from Africa, having a chance to live in America, it’s too big of a dream. You know, because for us going to Europe is somewhat an achievable dream because it’s not that far and a lot of people have done it. And so for a kid out of Africa, especially my country Rwanda, a lot of people go to Europe or even South Africa, which is a modern African country to really experience I guess the first world living. And then when I got a chance to come to the US I took it and my plan was to come here do the whole collegiate experience and then go back to Europe and play at a pro level, like a lot of my friends were doing, but I hurt myself my second year. And then it wasn’t the same anymore. So that dream was was done. And then I decided to stay in the US, which was the best decision of my life. And then got a job, started working in a sports marketing, as we talked about. Saw these ads saying sales make a lot of money as I can do that. So I got the job. And after four years of like a telemarketing type of a telesales, telemarketing, what you have to call these top CEOs of big companies and pitch them, kind of like that movie, Glengarry Glen Ross, or the boiler room basically, you know, yeah. You learn quick. I love those kind of movies because they remind me of my start in working, basically hitting the phone, it’s kind of like a stockbroker in a way, where you got to make a hundred calls a day and hope that you talked to 10 people and out of the 10 people, maybe a sign up one person. Mad Fientist: And this commission- only sales. Is that right? So you didn’t have any sort of base salary and you just earned solely off the commissions of what you sold. Is that right? Patrick: Yes. So, it was a commission only sales, and that if you sold a package, which is hard to do, but if you sell a package, you make a lot of money, thousands of dollars per package. And so we knew that I was feast or famine basically. You sell something, you make a lot of money, you sell nothing and you’re dead broke for that month, basically. So it was a high turnover job because it’s not made for everybody because you have to accept rejection every single day. And in the toughest thing with a commission only sales job too, is the fact that you have to reinvent yourself every month because… I have a buddy of mine who was my CPA, and he always tells me how his job, at the beginning of each year, he already knows how many clients he’s going to doing taxes for. So he already has a book of business that he knows, we will come back every year, so he doesn’t have to go fetch a new business. Whereas for me, I can have a huge month. Then the first of the next month, I have to start from scratch. I don’t know where I’m going to get my next deal. So it’s kind of like you have to reinvent yourself every single month. Mad Fientist: Wow. So, so you’re, you’re just basically cold calling and hoping for the best. And you’re not really taking any warm leads into the next month. Is that right? Patrick: Exactly. I’ve been doing this since 1998. And. It’s still as hard as it was on day one. You know, of course now I have a book of business. Because you can do a great job to a customer who said, once they get their clients to let’s say, super bowl and the super bowl happens to be in your hometown, then it makes sense for you to invite a few of your top accounts and then take them to a super bowl for a nice weekend of a fun and party. So you can get to meet your clients at a personal level and generate more revenue in the future because now you know… so if there’s a relationship type of packages that we sell, where you get to spend time with your client outside of a boardroom, where you get to really know him at a personal level and that usually helps your bottom line. Say the Super Bowl was just in LA and you do a big junket and you invited your clients. It doesn’t mean that you’re going to do next year when the super bowl is in Phoenix so that’s why you have to find another client who is in Phoenix, who wants to do the same thing. So that’s why you have to always, always, always get new leads and new clients . Mad Fientist: So it sounds like what the job like that you would need some serious money management skills to be able to smooth out those highs and lows so that you can sustain yourself for every month, no matter what’s happening. It sounds like you did that, but it was just because you were so good at sales that you’re able to maintain a really lavish lifestyle. Can you talk about adjusting to that sort of income and then how you actually used that to inflate your lifestyle quite a bit. Patrick: Yeah. So I get my job and then I become the king of of cold calling and then four years into it, I had learned the sales aspect of it, I learned the the operational sides of it. And then I was like, you know what? I think I can do this for myself. I’d have to work with somebody. So that was one of my biggest accomplishment in life because four years after college, I just jumped in and started my own company in the same industry. Mad Fientist: Oh, wow. Patrick: Yes. So I wasn’t married. I had no kids. So there was nothing to lose really and everything to gain. So I jumped in and then I started my new company and the idea behind that whole thing was like, I was telling my current customers that I was starting a new company and all excited for me. And I thought I was going to get everybody to join me. But then they didn’t really join me as I thought they would. Because when I did my my business plan, I counted for a certain number of accounts that would come with me. And then nobody showed. So I had to really dig deep and find new accounts to start my company. So it was tough the first six months, I thought I was going to be a bust. And then after month six, I just blew up and got a bunch of deals. And the Super Bowl was in San Diego that year 2003. And I was basically sold that in a month. I like 200 people going to the Super Bowl. And I was like, wow, this is ridiculous. And then the following year I kept growing the business. I went from basically $0 to $5 million in four years. Mad Fientist: Wow. Patrick: Yes. In revenue. And I had a whole sales team at that point. I had 10 people working for me. I had a whole event planning team on site. I had two event planners. I had an accounting team onsite. So we had a bunch of accounts at that point and everything was rolling. And of course, with money coming in and I hadn’t seen that much money in my lifetime. So I started spending all the money as well. Mad Fientist: Let’s just recap real quick. Did you graduate college in 98? Is that right? Patrick: Yes. Mad Fientist: And then you worked for somebody else until about 2002 and then 2002, you started your own company and then it took six months to a year to get ramped up. And then 2003 you’re really cooking. Is that, is that about right? Patrick: Yes. Mad Fientist: Nice. Okay. So you got all this money coming in and yeah, talk about how that changed how you spent. Patrick: I guess rewind a little bit, when I finished college, I started my job. A lot of people in the office talking about investing in stocks and this and that and stocks splits and all of that. So I started kind of of studying up on that a little bit. And then in 2000, early 2000, I jumped in and invested $5,000 in the tech mutual fund. So it was basically all the .coms were in this fund. And then and you know, what happened that year? The whole .com bubble burst. And then my $5,000 basically turned into $1,800 in like six months. So at that point, I was like, okay, I don’t believe in the stock market, I’m never going to invest in this thing again. And so I did not touch the stock market. And then in 2003, when when the money started flowing in, for me, I bought a house. I bought a townhouse in downtown in a really ritzy area. And then of course when you have a new house, you have to get a new car too. At that point, I was driving an infinity FX 35. And at that point my monthly payment was about $400 or $500. So I just bought a house and then I was like, okay, now just get a nice car to park in front of this house. So I went and bought a Mercedes, like the most expensive Mercedes out there where my monthly payment…I leased it, it was a three-year lease. And I was spending $1,100 a month. And, Mad Fientist, I got to tell you, one thing about me was, I had a spreadsheet. So I was spending out of control, but it was always on my spreadsheet. So if it made sense of my spreadsheet, I spent it. So the way I did it for the car, as an example, I was like, okay, so I’m paying $500 for this car right here. This one is going to cost me $1,100. So it’s only $600 extra. Do I have $600 extra? Yes, I do. Okay. So you know, trips, bottle service. I remember one of my birthdays was epic where we had a Cristal, think we had like 10 bottles of Cristal. So I was just spending thousands of dollars in a stupid manner. Mad Fientist: As someone who has never had Cristal, how is it? Is it really that much better than any other champagnes or… because I want to have had Krug champagne on a business class flight that I booked with miles on Qatar Airlines and that the Krug was amazing. Like I’m not a champagne fan, but I could drink that Krug all day. Is Cristal the same sort of quality then? Patrick: Yes, it goes down smooth, like you can tell it’s a little different than the Corbel. Mad Fientist: Yeah. Patrick: But it’s not worth the money you’re spending on that one bottle though. You’re trying to get drunk and they all taste the same really. Mad Fientist: That’s true. We were up in Islay, Scotland, which is where they produce all the peaty whiskies, and this completely wasted guy came up to the bar next to us and ordered a dram of whiskey for 95 pounds. So that’s like pretty much one shot of booze for 95 pounds. And we were sitting there drinking our four pound dram of something good but not 95 pounds. And it took everything I had not to just swap mine for his cause I was like, there’s no way he’s going to notice. He can’t even stand up. Like, this is all going to taste the same to him and it took everything I had not to just swap that over and see what 95 pound dram actually tasted like. Patrick: Yeah, exactly. So basically I was spending out of control, I was not saving anything, but one thing I did that was great though. At that time, I bought a bunch of rental properties in Arizona and I bought four properties in the same month. That was when the real estate was booming in the U S and I remember that time in Arizona and Phoenix area, there were saying, like, finding a house at $200,000 is going to be a thing of the past, you know, like these homes are going to $500,000. So I was like, yeah, let me just go in. Because, as I said before, I didn’t believe in the stock market. So I was like, okay, this real estate thing. When I bought that townhouse, it appreciated real quick, within a year. And then by ’05, appreciated like a couple of hundred grand on my townhouse in downtown San Diego. And then I was like, okay, now I’m a believer in real estate. And then of course at that time, everybody was saying real estate never goes down. It only goes up. And when I bought those homes in Arizona as rental properties it was going great too. I hired a property manager in Phoenix and they were doing everything for me and getting an 8% cut on the rent. So I didn’t have to do anything. I was just collect the checks every month. Yeah, it was just fantastic. And at that point I was like, okay, I have to ramp it up and get more properties because this real estate thing is ridiculous, you know? I’m going to be a multimillonaire in no time. So as I was spending money, money was still flowing in, you know, we’re growing real fast. And my wife always makes fun of me because I had a personal shopper at Nordstrom. And so she would call me every time they had a new arrival and it put them clothes out for me. I was really living it up, but I don’t regret it because I really had a great time. And then in 2008, it all came to a screeching halt when the recession hit. I still remember September 2008, when the Lehman brothers went belly up then everything just stopped in my industry because this is a discretionary spending that really is not necessary for companies, no marketing dollars to spend on their clients. So when the going gets tough, that’s the first thing they cut. Mad Fientist: Yeah. Patrick: So I don’t know if you remember in ’08, they were laying off thousands of people, and my biggest accounts were like AIG and all these other companies that were spending stupid money on these corporate junkets and so everybody now from September until December, they all wanted their money back or canceling events and then not spending anything on corporate events. So we didn’t sell anything in three months. We actually just reimbursing people. And at that point I knew, okay, this is not going well. And in December of ’08, I I made a decision to basically close shop. Mad Fientist: Wow. So at that point, you’re used to this lavish lifestyle, I guess you have some fixed expenses that are going to be not changing no matter what’s happening in the market. So you still got that $1,100 a month Benz payment, and then you got your condo that you own in San Diego that you live in, but then you got the four rental properties in Phoenix. So all those bills are still coming due. Did did you maintain your tenants throughout that time? Patrick: No, not at all. So all the tenants started not paying and so we’re doing eviction and it was tough to try and get somebody out to get somebody in and were trashing the places. So my monthly expenses at the time were probably like about $12,000-$15,000 on my personal expenses. Company expenses, I was probably spending like $70,000 a month just to break even. So that’s when I was like, there’s no way I can continue because the money’s not flowing anymore. And I still am paying that $70,000. To pay my team and as well as all the other fixed expenses that I had to pay. So I made a decision to basically close shop and I had to file for bankruptcy. So I really hit rock bottom at that time. Mad Fientist: Obviously that must’ve been a really trying time personally. Where do you go from that? Especially when you know, the economy wasn’t really picking back up very quickly at that stage. Patrick: It was really, really rough because I had no plan B, so this was my plan A, B, C, D all of them been combined in one, and then now I just lost it. And the reason why I had to file for bankruptcy was because. I had a bunch of loans that I had personally guaranteed. And, there was no way I could have survived it. So I let my properties go in Arizona. And filing for bankruptcy is it’s, I’m not saying it’s a great thing, but it gives you a fresh start. Mad Fientist: Right. Patrick: Did you know that when you file for bankruptcy, they expunge all your debt, but they don’t expunge your student loans. So those you pay, they don’t expunge those, but if you have money invested in the 401k or any other retirement accounts, they do not touch that. Mad Fientist: Oh, wow. I had no idea. Patrick: Yes. So let’s say instead of buying homes in Arizona, I had a SEP IRA or invested in a 401k and I had a few hundred thousand dollars in that, in that account, they would not have touched it. Mad Fientist: Wow. Patrick: I’m not saying it’s a good thing, you know, because you had a bunch of debt that you don’t have to pay any more, but at the same time, you know, like if you were invested in the retirement account, you at least have a starting point. You’re not from zero. Mad Fientist: Right. Patrick: So when I hit rock bottom in ’09 and filed for bankruptcy. When you file for bankruptcy, you have to take a little online class, because they don’t want you to come back. Cause a lot of people either you get it or you don’t get it, you know? And then you’re going to be back 10 years later, as far as filing for bankruptcy. But that hit me really hard because I was like, wow, you know, like, this is ridiculous. I mean, you can’t go any lower than I am right now because I lost everything. And so that class really hit me hard. And that’s when I started doing some research on personal finance and then I found Dave Ramsey first and you know how he also had a bunch of real estate and went bankrupt also. And then he always preaches cash is king. I mean, I couldn’t finance a pen anywhere at that point. You know, my credit score was, I think it was like 450 in ’09 and so I was using just cash for everything. And so I was like, okay, I gotta figure out my life and I started listening to him and then doing some research a few years later, then I found the Mad Fientist. And, and when I find the Mad Fientist podcast that really, really opened up my life and gave me a new lifeline. Because you had Mr. Money Mustache. Mad Fientist: Yeah, first guest. Patrick: Yes. First guest. So I listened to what he said, and I was like, wow, that’s possible? I had no idea. This was possible. And then you had JL Collins and you had JD Roth. And so all of these other FI influencers. So I started just basically just listened to your shows all the time. And then I started investing in the stock market again, because everybody was talking about index fund investing. And so I started putting some money aside, investing in the stock market. And then I also knew that I had to lower my expenses because everybody was, was was talking about that on your show as well. You know, you have to us to find a way to lower your expenses. So that’s what I did. Also I forgot to tell you, I’ll also start a new company, but in the same industry, but at a smaller scale instead set of having a whole team. Now, it was just me. And I was outsourcing the event planning. I was outsourcing everything else. So it was just me on the phone and just creating a smaller company in the same industry, which I knew. And this time around, I was like, okay, I have to make sure that I get something out of this industry because the first time around, I got a lot of fun, but I got nothing to show for it after. So this time round, okay, I have to really now learn how to save. I learn how to invest. So any money that I make now is going towards my savings. Mad Fientist: Right. And, so talk a little bit about decreasing your expenses. Cause I think in your video you maybe had mentioned that you decreased them by 50% over that period. Was it painful, was there things that you really missed that you’ve since added back to your life? Just talk about taking such a drastic expense cut. Patrick: At that time I was paying about about $7,000 a month in all my expenses. And I knew I could do better. And so the first thing that we did was we sold our house and so my wife had a nice condo that we lived in and we sold it and by selling and then started renting, we basically shaved off a thousand dollars from the mortgage to renting. And then we continued by finding ways to shave off expense that we didn’t really need. And so I went to 6,000, 5,000, 4,000. And and then in 2013, we did something really crazy, Mad Fientist, we had about $250,000 saved up at that point. And and we’re like, okay what are we going to do with this? And it was in index funds and brokerage accounts. So we decided to take down a whole chunk, which was a hundred percent of our liquid assets. When I think about it, I cringe because we took all that money and bought a condo in Cabo San Lucas, Mexico. Mad Fientist: Oh, wow. Patrick: And the thinking behind the whole thing was okay well, if you buy a condo in Mexico, then we can really lower expenses because living in Mexico is basically 50% off of living in San Diego. So if we can go to Mexico, then we can really shave off even more money. And the fact that my company, I could make calls from anywhere. I don’t have to be in the US. And so the idea behind buying a property in Mexico was okay, let’s rent it out now. And I didn’t even know Airbnb existed in 2013. I knew VRBO, I didn’t know Airbnb. I think they were still at the infancy stage or they were not as big as VRBO for renting your house. So we’re thinking we’re going to rent it out and then use it as well. And then a few years later, I think we had a five-year plan of actually moving to Mexico and really shaving off, going from like $7,000 to probably go into that $2,000. And when you buy a place in Mexico, I don’t know if you’re familiar with buying a property in Mexico, you cannot get a loan from Mexico, so you have to buy cash. So a lot of Americans who buy homes in Mexico, they have to either use cash or take a an equity loan out of their home and then use that to buy the place in Mexico. So it was really, really risky because Mexico, you know, when you go to Mexico for a weekend, you having a good time. But it’s not a first world country. So you don’t really know when you buy a place in Mexico, if the place is actually yours, because there’s this thing called, which is a trust. So they don’t want to allow Americans to actually own a property in Mexico. So you have to put it in a trust that you open with a Mexican bank, and then that trust is renewable, every year. It costs like $400 a year. So the title of the house is in that trust, which is under my name and I can gift it to somebody. I can sell that property. I can do whatever I want, it’s my property, but it has to be in the trust. So a lot of different rules that happen where you don’t really know. So what happened is the bank goes belly up, then what happened? You start to think about all these things, Mad Fientist: Yeah. Patrick: But we were like, you know what, let’s just give it a try and see. So we really put all of our chips in that one basket. And then with Airbnb, the place exploded as far as renting. And so we were netting probably about $2,000 a month in rental income, after all expenses. And the following year in 2014, we bought another place in Playa Del Carmen on the east coast, the Caribbean side of Mexico. And the reason why it was we’re trying to hedge kind of saying, okay, instead of buying another place in Cabo, how about we bought another place in a whole different area of Mexico? So if Cabo goes bust, at least we have another place so we can kind of hedge. And so we bought that one and then it went also unbelievable as far as renting our Airbnb. So now we’re netting over $3,000 a month on just those two properties. In my head I was like, okay, so we net netting $3,000. So all I need to do now is get below $3000 in expenses and then I’m free. Mad Fientist: Yeah. Patrick: So we kept moving every year. It seemed like we were moving just to shave off money from our rental. And our family members were making fun of us because we wouldn’t hire a moving company because I was so cheap at that point. So I did a lot of moving of a big furniture. And every time we moved, we shaved off $500. That’s why we moved. And so in 2017 we had accumulated enough or we’re making enough money and had lowered our expenses to a level where we actually hit FI and you know how I found out I hit FI? I went on the MadFientist Lab and then I was like, I don’t know what kind of a mumbo-jumbo algorithm you use here, but let me try this. I put all the numbers. Okay. This is just, my expenses is how much I have invested and then click results. And then the Mad Fientist told me, well, you have hit FI, my friend. Mad Fientist: Oh, that’s great. Patrick: And at that time, my monthly expenses were about $2,800. Mad Fientist: Wow. Patrick: So I had lowered my monthly expenses to $2,800. And this is kind of crazy when you think about it too, because I live in San Diego. Mad Fientist: Right. Yeah, exactly. Patrick: San Diego is not a cheap place to live. So that’s when I knew in 2017 that I had hit FI. And then in 2019 that’s when another huge milestone of mine, I hit that millionaire mark. Yes. So it was crazy though for, you know, a kid from Africa, who grew up with nothing. Because when you’re in Africa, when you dream about being a millionaire… being a millionaire in Russian rubles, means nothing. Mad Fientist: Yeah. Patrick: Or Cuban pesos, or even you know, Rwandan Francs that, okay. You have a million Rawandan Francs, but being a millionaire in the US is a big deal. Mad Fientist: Oh, yeah, definitely. Patrick: And especially because in ’09 I had nothing. It is my best accomplishment ever because especially where I came from, you know, and also my spending habits, pre recession. Mad Fientist: Yeah, so obviously, I guess during this time you’re building up the smaller business that you had started in 2009. Is that right? Is that what produced the income besides the rental properties? Patrick: Yes, so every money I was making, I was basically saving it and I became a saving machine at that point. Because in sales, you always think about you always trying to measure yourself with the next sales guy. Because I remember when I started, you know, I was like, okay, I made a hundred grand. How much did you make? So it’s kind of a competition amongst sales people. But after ’09, I didn’t really care how much I made. The biggest thing that was important for me is how much I saved. So I don’t care I made 200 grand. If I don’t save anything, it means nothing. But if I save a hundred grand, then that’s a huge accomplishment because not many people can do that. And it became an obsession of mine, basically, trying to find a way to save as much as I could and invested. And at that point I believed in the index investing, I believed in real estate. So my portfolio is half and half right now. Where it’s half real estate, half index fund. Mad Fientist: So I’ve had the pleasure of meeting your lovely wife. When in the story, did she come into the picture and was she on board with this crazy FIRE idea slash cutting expenses to 50% of what they were before? Patrick: My wife is my ride or die because I met her in 2007. So she got to experience the spending Patrick. I always tell her I got you because of my Mercedes. But she she’s frugal by nature. So she, she wasn’t really wowed by all the flash and the bling. And so when everything hit rock bottom, she was actually my rock because it was still early in our dating life. And if I was her, the way everything was hemorrhaging around me, I would have cut my losses and be like, okay guy’s not worth it. You’re supposed to marry up not married down, right? So she stood by me and she was all in. Like every time we come up with our crazy ideas she’s always all in and always gave some great advice and when we took that big risk of buying our place in Cabo, she was the driving force. Mad Fientist: I wanted to quickly go back and ask you about that transition from spending as much as you were pre-2008 to then spending what you spend now or in 2017 when you hit FI. And it’s sort of a selfish question because I’ve always been naturally frugal and now that I don’t need to be as frugal, I’m trying to see what kind of spending actually moves the needle for happiness. Is there anything you miss that you cut out or was there anything that you’ve added back into your life after drastically cutting your expenses or anything interesting that you learned in those two sort of mindsets? Patrick: You have to change that mindset. And that was the biggest thing for me in ’09 was to change my mindset, I became a saver instead of a spender. And to do that though, you have to have a why, and if you don’t have a why it’s going to be tough. So me, I spend money on experience. I love traveling. So my wife and I, we’re trying to take at least two months a year going places. So what we do, we just go eight days at a time, eight days to Hawaii and then come back home. And then the next month we take eight days, go to Jamaica and then come back home. And we usually do that for about two months every year. And that’s where we spend our money just to go have those memories of going to these festivals and concerts and things like that. And so it’s personal again though. So I don’t knock anyone for doing what they doing. You know, if you have the money and can buy yourself a new car, go ahead and do it because you have to enjoy life, but enjoying life for me is not buying material stuff anymore. So that’s why personal finance is personal. A lot of my friends, they’ll always ask me how come you always on vacation? That’s why I started my YouTube channel, because I was like, maybe I should share how I did it. You know, my journey. Mad Fientist: That’s awesome. And so speaking of your YouTube channel, where can people find you if they want to learn more about you, your story, or get in touch? Where can people go? Patrick: So I’m active on Twitter. And my Twitter handle is @frugalsafari. I have frugalsafari.com as well, where I started blogging after I met you in 2016. But then I realized I’m not a big writer, so there’s a few articles there, but maybe I should go back and write a few more, but also have a YouTube channel now called the Aime to Invest, cause my name is Patrick Aime. Mad Fientist: A I M E Patrick: Yes. So my YouTube channel is called Aime to Invest. Mad Fientist: Nice. Okay, I’ll link to a link to Twitter, I’ll link to the website, and I’ll definitely link to the YouTube channel as well. And you’ve heard this show before, so, you know, I always end every interview with what’s one piece of advice you’d give to somebody on the path to financial independence? Patrick: The biggest piece of advice I would give is know your expenses. Because a lot of people, I feel like the majority of Americans and everybody in the world, they don’t know how much they spend on things. So if you ask them how much you spend on your expenses every month, they don’t know. And if you don’t know how much you spend, then you’re going to have a hard time controlling your finances, because it’s controlling you at that point. You have to know how much you spend every month, because once you know that, then you can have a game plan on how to achieve financial independence. So know your expenses. Itemize your expenses on a spreadsheet so you know how bad or how good it is so you can have control of your finances. Mad Fientist: Couldn’t agree more, Patrick, thank you so much for joining me. And everyone out there go give Patrick some love on YouTube because I accidentally woke him up early on a Sunday. He had to set an alarm for the first time in years because I’m in Scotland, so that’s usually eight hours difference. But it was even worse because the clocks changed last night in America and they didn’t change year. So we only figured that out today. So he had to wake up super early on a Sunday. So Patrick, thank you for doing that. This has been fantastic. Really enjoyed chatting with you and yeah, you’re welcome back anytime. Patrick: Mad Fientist, this is definitely a bucket list moment for me. We went from taking that selfie together in 2016 to now being on your show and the fact that I hit financial independence was because of you, because you showed me the way with all your interviews. So thank you so much. And this is definitely a memory that I will not forget. Mad Fientist: Oh, that’s great to hear, Patrick. And I’ll use that picture of us as the main picture for this episode. Patrick: And that’s what started the whole journey for me, basically San Diego meeting the Mad Fientist. And now I’m on the Mad Fientist show. It doesn’t get any better. This is basically what you call Hollywood ending, man, Hollywood ending. Mad Fientist: Well, it’s awesome, man. Thank you so much. I enjoyed it and I know the audience will too. So I really appreciate you taking the time and waking up early on a Sunday morning and hopefully I’ll see you somewhere in the world. Patrick: Let’s do it and say hi to your lovely wife from me. Mad Fientist: You do the same. Alright. Thanks buddy. Bye. Related Post JD Roth - Get Rich Slowly J.D. Roth, creator of GetRichSlowly.org, joined me for the Financial Independence Podcast to talk about finding personal and financial freedom! The post Aime to Invest – From Bankruptcy to FI in 8 Years appeared first on Mad Fientist .…
I have some big news… I am now a British citizen! In honor of finally getting my UK passport, and therefore completing this long journey to citizenship, I am releasing my UK FIRE episode. Barney, from The Escape Artist , joined me in my Edinburgh apartment (before the pandemic) to discuss all things related to financial independence and early retirement in the UK. Hope you enjoy it! Listen Now https://traffic.libsyn.com/secure/madfientist/escape-artist-interview.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Highlights The cultural differences between US/UK that affect pursuing FI How to escape from the prison we create for ourselves Translating US investing terminology to the UK (e.g. 401k→pension, IRA→ISA, etc.) Is it easier to reach FI in the US or UK Class structure in UK and how pursuing FI forces you to traverse all classes Why FIRE isn’t bigger in the UK Difference between the different types of ISAs Is tax hacking possible in the UK Real-estate investing in the United Kingdom and the fantastic Rent-a-Room scheme How to use geographic arbitrage to reach FI sooner Show Links The Escape Artist Full Transcript Mad Fientist: Hey, what’s up, everybody. Welcome to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence. Today’s episode is a long time coming. I actually interviewed my guest two years ago, which because of the coronavirus pandemic seems like a lifetime ago. But the reason I haven’t published the episode yet is because I’ve been waiting for something really special to happen…and that just happened last month. I’m excited to tell you that I am now British, which is something I never expected to be in my life, but I’m so happy that I am at this stage because over the last six plus years, I’ve been sending in lots of money and applications and spending lots of time trying to get my British citizenship so that I can just come and go as I please. And thankfully that finally was successful and now I’m a dual US/UK citizen, and I couldn’t be happier. So to celebrate, I’m finally releasing the UK episode and I’m excited to introduce my guest, who is Barney from The Escape Artist. And those of you in the UK will know Barney cause he’s probably one of the biggest FIRE blogs in the country. So when Barney was up in Edinburgh for the Edinburgh festival in 2019, he stopped by my flat and we sat down for an hour and just chatted about FIRE in the UK. And we dove into a lot of, you know, UK-specific stuff, but we also compared it to how people in the US pursue FI and the differences between the two countries that make some things easier and some things more difficult. So without further delay… Barney, thank you so much for being here. I really appreciate it. Escape Artist: Hey man, it’s great to be here at last. Mad Fientist: So this is actually a real weird one for me. You are actually sitting in my living room, which I don’t think I’ve ever done one at home before. But you came up from London. We were going to do it in a pub or somewhere cool, since this is the UK episode, but I realized I don’t have my traveling mic. So you had to come to my apartment and use the one that’s attached to my desk. So welcome to my flat. Escape Artist: Edinburgh is just beautiful. It’s just such a cool city. And it’s great to be here while the Fringe is on. Mad Fientist: Yeah, the Fringe is the world’s largest arts festival. Well, it’s part of the world’s largest arts festival and it’s the whole month and it’s just one big party in the city. So you’ve definitely come on the right day. So, so yeah, this is the long awaited UK episode. I’ve gotten so many emails from UK readers asking, you know, what’s the differences between the US and the UK and you know, how do you pursue FI in the UK and all these things, and you’re going to be the man to help with that. But before we get into all that, can you maybe just give my audience a little bit of details about yourself and give a little background story about how you achieve financial independence? Escape Artist: Sure. I think that for a lot of people that are financially successful, if you kind of scratch the surface, there’s often a trauma kind of in their earlier life that got them started on that path. And for me when my parents, when my parents moved house when I was 11 years old back in 1981, they did the classic British thing. They bought the biggest house they could, they took out as much debt as they possibly could. And their timing was awful because this was 1981. And interest rates went to 17% and my parents kind of had this realization that they’d overstretched themselves. And so they had then to do a kind of period of belt tightening and the newspaper got canceled. My dad stopped buying beers, started brewing his own beer. The holiday got canceled that that year. And I think I took away from that was that debt was a kind of very scary thing. And ultimately the bank could kind of take the house away from you. And so kind of from that point on, you know, I made choices in my, in my education and in my career that would put me on that path to kind of having money. And so, you know, when I went to college, I studied economics. When I graduated, I chose like a, really a profession where I could earn safe money. So I trained as a chartered accountant and qualified, and then worked in corporate finance for 20 years. And really for the last 10 of those years, I was very focused on just putting away as much money as I could, because I’d had an experience at one of my jobs where I realized that kind of I was trapped. I had I had a mortgage at that point. We had children on the way. My wife had given up her job and so the whole kind of burden of providing for the family was on my shoulders. And I, I took a job that I hated. And from that point onwards, I saved at least half of my income every month. Fast forward to 2013 and I realized that I had enough. Mad Fientist: Yeah, you said you were trapped, which maybe leads into the whole theme behind your blog so maybe you do want to tell the story about the escaping from the prison camp. Escape Artist: Yeah, so the prison camp is my kind of analogy or my metaphor for the situation that a lot of us kind of put ourselves into where we kind of create our own prison. We trap ourselves through our spending choices by taking on debt, by kind of societal expectations. And that can lead you to a point where you’re no longer happy doing that, you know, doing a job, but you feel you have no choice, but to carry on doing that. And, and I, I certainly felt trapped at that time in my life. And I just couldn’t see a way out of the prison camp other than to kind of slowly dig my way out stone by stone, rock by rock, but by saving money. And that the prison camp analogy is based on a kind of World War Two story of, you know, The Great Escape, the film, The Great Escape, where the prisoners literally kind of dug their way out to the prison camp in this amazingly kind of painstaking, slow, laborious process. And that, that kind of amused me that analogy. Mad Fientist: That’s great. And I want to go back to something you said, you mentioned, what was it? 17% interest. Escape Artist: Yeah, yeah, absolutely. One day there’ll be 17% again. And you kind of wonder what the world will look like at that point. Mad Fientist: It will look very different. No doubt. Yeah. That’s I just released a post not too long ago about whether you should pay off your mortgage early or something. And I’m definitely in the camp where I’m just looking to buy a house just so I can lock in some of these low, low interest rates. Cause they may potentially be, you know, once in a lifetime interest rates and yeah, it would feel pretty good to have a 30 year mortgage at 3% or something. If, if interest rates do go up to what they were before. Escape Artist: Well, everything in finances is cyclical. The problem is, you know, history never quite repeats itself in the same way. So you kind of know things are going to change, but you don’t know exactly how and you don’t know exactly where. Mad Fientist: So obviously based on your history and your background in economics and your accent obviously proves that you are a Brit, you’re going to know a lot more about the UK side of things than I am, even though I live here. A lot of my focus is still on the U S because that’s where most of my money is. So before we dive into some of the nitty gritty details about, you know, pursuing FI in the UK versus the US maybe, could we talk about, are there any like broad cultural differences that sort of change the change of the game in any way? Escape Artist: Yeah. The first thing to say is that when I was, I mean, I got serious that, that career crisis that I mentioned that really put me on the path to aggressively saving 50 plus percent that happened in 2002, 2003. And so you have to remember at that time in the UK, there was no financial independence movement. There was no awareness of the U S financial independence movement. So, I mean, the book, Your Money or Your Life, I think came out in 1990, but when I was going through my journey, I had, no, I hadn’t read that book. I had no awareness of all of it. And you just didn’t have the, the tools, the resources, the blogs, the podcasts that we have today. And that, that is just a massive help. And, and the fact now is that, you know, we in the UK benefit from that accumulated body of knowledge that’s been built up, you know, mostly in the US not, not completely, but mostly in the US we benefit from that massively. And it’s pretty easy to convert most of that content over to a, to a UK actionable plan. You know, the differences in terminology are relatively simple to, to translate, you know, it’s not hard to convert our IRA to workplace pension. It’s not, it’s not that hard to convert VTSAX to VWRL et cetera. So, so, you know, we have this kind of huge advantage of the internet now, and the body of knowledge, you know, in 2013, the thing that kind of triggered the realization that I had enough was stumbling across Mr. Money Mustache’s site. And it, it just kind of blew my mind. And so I guess, you know, since then I’ve been kind of observing the differences between the US blogs and the, the kind of the UK content on financial independence and trying to create some, some UK content on financial independence, on The Escape Artist. And. What I, you know, what you realize is that you’re doing that in a slightly different historical context and a slightly different cultural context. And I think one of the reasons that the the American movement kind of took off quicker earlier, faster…partly there’s a historical tradition to draw on there that goes all the way back to kind of Henry David Thoreau and Walden, all the way to kind of blogs like Early Retirement Extreme and then Mr. Money Mustache. So there’s that historical strand of frugality and self-reliance and rugged individualism in, in, in American culture and a focus on freedom. And in some ways there’s more of a burning platform in the US because I think the pressure of marketing, advertising, and consumerism is even greater in the US than it is in the UK. I mean, certainly as a Brit, when I went to America and you kind of, you went from four TV channels of which one or two had adverts to cable to seeing cable TV, and just flicking through 70 channels that were running 24/7, just with this, these infomercials and these adverts kind of beamed at you, you kind of realize that the pressure of commercialism is greater in the U S and so I think one of the things that’s meant we’ve been slower in the UK to stumble across some of the secrets of financial independence is in some ways there was less of a burning platform for us, there was perhaps a greater focus on tradition, culture, community than in some parts of America, which, you know, some parts of America can seem pretty kind of brutally commercial. Mad Fientist: Yeah. I absolutely agree. Having lived in both places and, you know, having lived in the UK for probably 10 years in total by now, I can definitely see that. And I agree that there’s…obviously, yes, there’s a focus on freedom in the States that may be more pronounced. And also, yeah, you’re just being bombarded with things all the time. And like, I couldn’t believe it. I went back to my parents’ house for Christmas just last year, I think. And the commercials on TV out lasted the program. So I was going crazy after a while, so I literally timed it and it was six minutes and 20 seconds of advertisements to six minutes in like six seconds of actual program. People are paying like a hundred dollars a month for this privilege of getting just bombarded with all the stuff that they don’t have. Escape Artist: Yeah. So just the existence of the BBC, I think is a kind of moderating factor. You know, the, you just don’t have that constant constant stream of adverts. There is this kind of tradition of public sector broadcasting, which, which kind of includes the concept of entertaining, but also educating as well. So we have all these kind of great, we benefit from, you know, from these great nature documentaries on the BBC produced it know great cost, great expense. And so that’s kind of part of the, the upside, I think of the British culture. But it may be one of the reasons why FIRE was kind of slower to take off over here. The other, the other thing I do think we have to touch on actually is, is the kind of legacy of the class structure in the UK. It’s definitely a relevant part of our history. So if you kind of think back in you know, a couple of hundred years ago, you had this kind of post feudal society where you’ve got the aristocracy at the top of the pile and they’re living off passive income. So, you know, they own the stocks in the stock market. They own that most of the land that they own rental properties. And then you’ve got a you’ve got a middle class that, that the kind of the doctors and the lawyers, et cetera, who have good incomes and are kind of saving steadily. And then you traditionally had a kind of a working class who live paycheck to paycheck and that class structure, it leaves a legacy because kind of one of the ways I think about getting to financial independence in the UK today is you have to change your mindset. Kind of starting off from a working class mindset where you’re living paycheck to paycheck, and you kind of have to learn those middle-class habits of kind of thrift you know, caution, prudence learning to put aside some money, but even then, that’s not enough. You can’t just have a middle-class mindset if that prevents you from kind of exposing your money to risk and exposing your money to the volatility of you know, owning real assets like the stock market or like rental property. And so in some ways, you know, an individual’s journey from kind of starting out to quitting their job means going from a kind of working class mindset to a middle-class mindset and ultimately throwing that off and becoming your own boss and your own kind of if you like the CEO of your own of your own life which, which means kind of you know, being, being your own Lord of the Manor as it were. Mad Fientist: And that appears to be a very difficult to do because as you’ve seen, you know, this whole thing has not grown as quickly or or as broadly as it has in the States. And I think that’s probably because it’s such a big identity shift for people in the UK who,ou know, have always considered themselves working class. And just always imagine they would be working class because that’s what their parents were and that’s where their grandparents were. And, you know, obviously in America, like the American dream, everybody is born and think they they’re going to be the richest person in the country. And obviously that doesn’t happen to everyone but I see that difference there too. It’s like people do feel like they can move up and they all think that they will. Now, that’s great because that drives people and gives them, you know, motivation to work hard and do things like that. But also, I worry that that’s sorta some of the discontent and unhappiness in the States, especially these days with social media, where you can see the people that have made it and you haven’t quite made it there yet because you, and you may not because not everybody will. And so in Scotland, at least, like I find that it looks like more people are broadly happier just on day-to-day life and they’re happier with their position and make the best life that they can at that level. Do you agree with that? And if so, do you think it’s more of a benefit or more of a hinderance? Escape Artist: That’s a great kind of insight. I mean, I am a great believer in meritocracy. I’m a great believer in social mobility. I’m a great believer in that idea that anyone should be able to kind of rise to be the CEO. The downside of that is that if you create a truly meritocratic society and then individuals fail, they’ve kind of got no one to blame other than themselves. And it’s, it’s like, It’s like you’ve unleashed a set of expectations there that if people are unable to meet through whatever reason, you know, maybe, maybe it’s there it’s, it’s something that they did wrong, maybe it’s just bad luck. You know, luck plays a huge part in life, in money, and investing, as we all know. And so if you live in a culture that is meritocratic and socially mobile, such as the US that’s great for a mindset of, I can do anything, but that the kind of the flip side of that is failure hurts more. And you know, you could, you can make a very good argument for, you know, that there’s, there’s, there’s almost this comfort in kind of staying in your, in your world and what you know, and so. You know, meritocracy has a cost. It’s if you look at kind of suicide rates, for example, suicide rates, suicide is not a problem in feudal societies because everyone knows their place and even people at the bottom of the pile, they don’t beat themselves up about that. Cause it’s just, that’s just the hand that they were dealt. So one of the kind of downsides of meritocracy is it just feels harder when you fail. Mad Fientist: That’s a good time to bring up what we were talking about just before we started the interview and how you were saying how you’re focusing more on, you know, talking about enjoying that journey to financial independence, rather than that end goal. Can you maybe talk about that focus and what made you shift to that. Escape Artist: Yeah this is a theme that I’ve been exploring more and more in recent blog posts, because I think that the, the carrot of early retirement is so kind of powerful as a, as an image as a kind of an attention grabber as, as a hook for a lot of people and particularly a lot of media coverage of financial independence just focuses on that. Here are the people that retired in their thirties or here are the people that retired in their forties, but that crowds out the kind of more subtle benefits of this way of life, of this way of thinking about the world. And so, I’ve been kind of exploring that in recent blog posts. I wrote a blog post recently called "Here’s what’s in it for you right now". Just looking at the benefits from pursuing financial independence you know, the benefits, things like, you know, having a mission, having a goal, having a clear idea of where you want to get to, kind of forcing yourself to take action, forcing yourself to exercise your frugality muscle, forcing yourself to exercise your actual muscles and start kind of walking rather than just getting ferried around in cabs. These are the kind of immediate benefits of pursuing financial independence because ultimately, I think that if the way that you’re thinking about this is I will accept 15 or 20 years of misery and deprivation in order to get to the promised land, that’s a bad trade. Mad Fientist: Yeah. Couldn’t agree more. And, what you said, highlights that, even if you are uncomfortable with the idea of maybe moving up to another level that you hadn’t even thought about, or if you are very comfortable and happy in the current level that you’re at, which is great, like, this is all at the end of the day about happiness and living a fulfilling life. So if you’re already there. Yes, that carrot of early retirement is probably not going to be too motivating. But as you said, there are so many other benefits and I will link to that post in the show notes, so anybody can check that out if they want to dive in more. But yeah, I couldn’t agree more. So we’ve, we’ve covered sort of this cultural, societal differences, but also, you know, the government here is very different. The social nets in place are different. And so surely that plays into it. One on a tax perspective, you’re going to be paying more taxes, but then you also have, you know, less distance to fall if things do go wrong. Could you maybe talk about those differences? Escape Artist: Yeah, so I think it’s absolutely right that it’s harder to get to financial independence in the UK in the sense that post-tax incomes are typically lower than in the US for two reasons. One is, the tax burden is higher in the UK, and secondly, it’s just not quite as rich an economy. And so you’re trying to save 50 plus percent of your income out of post-tax income, which is lower in the UK than the US, so that let’s make no bones about it…that makes it harder. No doubt. The counter balance to that is that you hopefully do not have to pay for health insurance from your post tax income. But again, that’s an interesting one because when I was in my corporate job, I had private health insurance through my job. And so for me to walk away from that, I kind of had to get over the mental hurdle of what if the NHS isn’t there to fix me in a reasonable period of time, because, as we all know, there are waiting lists for a number of operations in the UK. And so part of the equation is what if I needed one of those operations and I wasn’t prepared to wait one or two years for it. So again, that’s kind of thinking about, am I mentally prepared to self insure? Because the truth is, the NHS is excellent for very urgent conditions. You know, life-threatening, urgent, acute conditions, but you always have the option to buy in private medical treatment at short notice, if that’s what you want to do. And actually, when I’ve looked at the kind of cost benefit analysis of that, some of the kind of general health insurance premiums are so high, I just think, look, I’ll keep myself healthy and hopefully I won’t need it, but if I just need to buy in an operation at some point, I can afford to do that. Mad Fientist: That’s really interesting. That’s a good way to think about it. Because I had heard that lots of people had private health insurance, but I didn’t think you could self-insure in that way. So you’ve been just relying on the NHS since then? Escape Artist: Yeah. I mean, touch wood. I haven’t had great call to kind of visit the NHS for myself too much since then. But, I take comfort from the fact that having looked at some of the kind of costs of operations, it’s actually not much more to buy it in than it is to pay the annual insurance premium. So it’s relatively affordable if you have kind of FI levels of net worth. Mad Fientist: That’s fantastic. As someone who is an American living in the UK the NHS just is, I love it. And we’re a bit spoiled in Scotland because the population is lower and I think there’s more coverage with doctors per person in the population so we don’t have to deal with a lot of the things that you may have to deal with down in England. But I just absolutely love the feeling of going into a doctor’s office and them just asking all these questions, trying to get to the bottom of why you don’t feel well, and then them referring you to anyone that they think could help better without thinking about costs or how much is it going to be to see a specialist or how much is this prescription going to be? It just boils down to, how do you feel? How can we make you feel better? And we’re going to do all these things because we think those are the things that are gonna make you feel better. And it just, it’s very refreshing for peace of mind and for someone who’s a relatively healthy person, I have really enjoyed just the security of it and just knowing that it’s there. And, as you said, you always have the option to go private to, which is no doubt, a lower cost than going private in the States would be. And in Scotland, there’s also free education. So free higher education, which is something that people in England may not have the same sort of privilege of having. Is that correct? Escape Artist: That is absolutely correct. And that’s something that’s changed since I went to university. Back then it was kind of a no brainer in the sense that only perhaps 10% of the population went to university and you got free tuition fees. And that has changed. And this is very fresh in my mind right now because my daughter’s just about to go off to university in the next few weeks. And so I’m very well aware of the cost. The cost has gone up and it’s cost is now born by the by the student. And. In some ways the returns to a college education have decreased because if 50% of the population are going to college education, then ultimately you’ve just got a much broader pool of people competing for the same jobs that you used to have, the 10% of the population competing for. So, back in the day, university was an absolute no brainer in the UK. Now, I think it’s a more kind of balanced cost benefit decision to be made. Mad Fientist: So eliminating potentially big student loan debt, if you’re in Scotland or I believe even in England, the costs of higher education are lower and then taking away the burden of paying for your own health insurance or finding a job that provides you health insurance so that you can cover healthcare costs. Those two things seem like a huge leg up on someone’s journey to financial independence. Do you think that those benefits outweigh the lower wages or do you think in general it is still more difficult? Escape Artist: I think it’s a whole range of factors. And I think the fact that college tuition is free in Scotland or was free in England for me. That’s a huge advantage in the column for the UK. I still think that when you kind of add everything up, it’s somewhat easier to get to financial independence in the US than the UK, but that includes a very broad range of factors. You know, part of which is behavioral, as well as the kind of pure economics of it. Mad Fientist: Yeah, based on what I’ve seen, I would agree with you. I think the higher incomes that you can potentially achieve in the States are obviously a big benefit to someone pursuing FI. To move on to some of the more nitty gritty details. The first thing I wanted to talk to you about is pensions because I have a pension from my very first job in my career. And it is the most annoying thing because if you have foreign accounts over 10,000 dollars, you have to tell the government that you have them every single year. So I have this pension from, I think it was 2004 was probably when I started the job and I worked there for three or four years so I have exceeded that amount, but not by much. So I have this annoying account that I can’t transfer the money to the States, because all my other money I’ve just transferred to the States, and this thing is locked down and I was even considering like giving it to my wife, Jill, just so it wasn’t mine anymore and I wouldn’t get into trouble with the government if I forgot to tell them about it one year. And I’ve thought about giving it to charity. All these things and I have not found a way to get rid of it. So maybe just talk about the prevalence of pensions here. If they are similar to a 401k, in some ways, if they’re different. And, is there any way I can get that money out of my name? Escape Artist: Is that a UK pension? Mad Fientist: It is, yes. Escape Artist: Okay, so I divide UK pensions into two, broadly. So there’s the pension scheme that your probably in with your workplace pension, but that relates to your current employment. And then there’s SIPS, self invested personal pensions and normally the way that your workplace pension works in the UK is that there is some form of matching going on. So maybe you’re asked to put in 5% and if you put in up to 5%, then your employer may put in up to 10%. So maybe they kind of double what you put in it. If that’s the case, if there’s any sort of matching, then you never leave free money on the table. You always put in the most that you can to get your employer match at a hundred percent. So that’s kind of step one. Step two is people’s current workplace pension. Most people have no idea what’s going on with it. And so. I say to people just dig out the paperwork. What happens time and time again is people join a job, they get sent a stack of papers to look at, they never kind of get around to reading it all. It’s all very lengthy, boring, confusing. And so people kind of bury their head in the sand. The problem with that is that you will get defaulted into an automatic kind of default fund choice where someone else has made the decision for you and it’s probably a suboptimal asset allocation. So if you don’t make a conscious choice with your workplace pension, you’re probably being put into something like a 60/40, 60% equities, 40% fixed income. And if you’re 25 that’s a disaster, or if you’re 30, that’s a disaster because 40% of your pot is earning not enough to keep up with inflation and only 60% of it is doing the heavy lifting that equities do over the long term. So the first thing most people need to do is just understand what fund their contributions are going into. You know, normally you can just make a choice to go 100% equities in a global equity tracker tracker fund. Now often Vanguard is not on the option for a workplace pension, but there’s almost always a kind of Vanguard lookalike. In other words, a low-cost global equity index tracker fund, where that’s a hundred percent equities. So that’s, that’s the next thing to look at. And then, if you want to get more kind of hands-on and more clever, you have the option of what’s called partial transfers, where you can take money out of your workplace pension and move it across to a self-invested personal pension to benefit potentially from lower fees and the ability to access Vanguard’s product range. And so you often have to stay in your workplace pension to carry on getting the contributions, but that doesn’t mean you can’t shift money out of it and get control over that money by, by what’s called a partial transfer. Mad Fientist: That is great to hear because I did not realize that and I think that’s what I’m going to do. So yeah, exactly as you said, I did all the right things. I was 22 and that was starting my career. And I was like, oh, I know I need to get this match so I’m going to do this. And then I actually looked into the investment, so I’m invested in better things than whatever the default was, that’s for sure. But now if I can transfer that into my own thing, and have lower fees and then maybe put all my riskiest investments in there. And then that way, if it does get to zero, then at least I don’t have to deal with the account anymore. And if it grows to something even more impressive, then at least then it’s worth the hassle of dealing with it with the IRS every year. So that could be a potentially really good choice to make. Escape Artist: You raise a great point about risk there. In your pension, you’ve got time on your side. You’re not going to be able to access that until you’re 55 or 57 or whatever the age may change to be in the future. So for anyone that’s five or 10 years plus away from that point, you should be taking as much risk as possible in that workplace pension. Why would you not be 100% in a global equities index tracker fund? Mad Fientist: You said tracker fund. So this is a good time to maybe match up some terminology. So in the UK, a tracker is an index fund and that’s the common word for it. Could you maybe go through the list of common US terms that I use a lot on my blog and some of the other bloggers use as well, like 401k, IRA, and maybe try to match it up with the UK equivalent? Escape Artist: So a lot of UK readers read the US blogs and they see people talking about VTSAX and they see people talking about VTI, which are two of the popular Vanguard total market funds in the US. And I just say to people in the UK, we have great equivalence for that in the Vanguard UK product lineup. So if you convert VTSAX or VTI into VWRL which is the Vanguard all-world equities ETF, or there’s a mutual fund called the Vanguard global all-cap index fund. Those are great kind of replacements for those popular US funds and VWRL and the Vanguard global all-cap index on are truly global funds. So they include the US at its full weighting. They include the UK, Japan and the whole of the rest of the world. So it’s a kind of easy win just to convert VTSAX to VWRL or and so. So that’s an easy one. In terms of IRAs, individual retirement accounts, are analogous to self-invested pension plans. 401ks are analogous to our workplace pension schemes. Other things that people read about on US blogs are, travel hacking and credit card credit card rewards, which there’s less of an opportunity for that in the UK. And so I just say to people, you know, that’s nice if you can get yourself an Amex Platinum card and you might get 1% cash back and like 1 percent is worth having, right. But you’re probably not going to be able to fly around the world on your credit card rewards in the same way that our American friends seem to be able to do. Mad Fientist: Yeah, my brother-in-law who is Scottish, he just can’t stand the amount of things that I get through credit card points. And he is just always desperate to try to get into the same sort of things. The signup bonusesare usually a quarter or less of what you could get in the States and then the ongoing earning is like you said, max, maybe 1% cash back. So yeah, the people in the States do have it really good. Escape Artist: Yeah. And there’s a couple of other kind of aspects in terms of the tax sheltering that are different. So in the UK, money that’s locked up in a pension is locked up in a pension. There is no concept of you can access it, but you pay a discount, which I understand is possible in the US so when you’re thinking in the UK about how much is enough, you can take the great kind of guidance that’s on many of the US blogs and the concept of the safe withdrawal rate and the 25 times rule of thumb. That is, I would argue as applicable in the UK as it is in the US. Because, you know, we can from the UK, invest globally. So I just don’t buy the argument that says, the safe withdrawal rate, maybe 4% in the US but the UK stock market is less dynamic and has delivered less growth. You know, we have the ability to invest into the US stock market. We have the ability to invest globally, as I said before, from the UK. So that’s no reason for the safe withdrawal rate to be lower in the UK. But it’s a kind of two-fold calculation. So calculation number one is, do I have 25 times my annual spending in my invested net worth. And then the second question to ask yourself is, do I have enough to bridge the gap? In other words, do I have enough outside of my pensions to take me from age, let’s say 45 to age 55. You need 10 years outside of your SIPP or outside of your workplace pension to bridge that gap. Mad Fientist: That’s something I actually calculated when I was on the path to FI, even though I didn’t know that there were ways to get the money out. And so if you’re interested, you can go to madfientist.com/spreadsheet. And that spreadsheet actually does divide it out and it has an after retirement age, before retirement age calculation, just so you can see, how much of your money is free to use now and how much of it in the States is going to be a little bit harder to use potentially and then in the UK, it’s going to be impossible to use. You mentioned ISAs which I think is the equivalent to the IRA. I just recently discovered the lifetime ISA, which seems like a pretty sweet account. And I just convinced my wife to set one up for herself because I believe you have to set it up before you’re 40, but then you could keep contributing to it until you’re 50 and it’s an account where every year you can put 4,000 pounds into it and then the government will give you a thousand pounds on top of that for that same contribution. So you’re effectively getting a 25% return instantly. Are there any other sweet accounts like that, that I may not be familiar with? Or what are the types of accounts that you sort of recommend to your readers to take advantage of? Escape Artist: Okay. So in, in terms of pure tax efficiency, the most tax efficient way to save in the UK is via a pension at your workplace pension or a self invested personal pension. So the way that that works is if, for example, you’re 40% taxpayer, if you put in 60 pounds into your pension, the government groceries that up to 100 within the space of a year. And so you’re getting a 40 pounds return on a 60 pound investment, free of risk, essentially, and guaranteed by HM government. And so there’s not many deals that are better than that available, plus the fact that when you get to access your pension, you can take 25% of it as a tax-free lump sum. So that’s a great deal. The problem with that though is the loss of liquidity, the loss of access, the lockup until you’re 55 or 57 or whatever that may change to in the future. The beauty though of ISAs, individual savings accounts, is that there’s no lockup. So let’s say you’re kind of in your twenties and you’re going full bore for financial independence. It would be a mistake for someone like that to use their pension as their sole savings vehicle. They need to they need to use their ISA. You have a 20,000 pounds limit every year, if you’re married, that means you effectively as a couple, you have 40,000 of tax-free savings ability and that is use it or lose it. So it absolutely makes sense to use it. And so that kind of conventional ISA, I would suggest you use first because that shelters the money effectively from income tax and capital gains tax and there’s no liquidity lock up to it at all. Then in addition to that, you have the lifetime ISA that you mentioned. The problem with the lifetime ISA is that if you don’t use it to buy a house and you want it back before retirement age, you pay a penalty, which essentially means that you’re slightly worse off for having done that. So lifetime ISAs work for people under 40 who know that they’re going to use the pot to buy a house, or they know that they can wait until retirement age. But if you’re not sure that you’re gonna buy a house and you might want to get your hands on it, then it’s not as advantageous as just a conventional ISA. Mad Fientist: Yeah. Luckily for my wife, this will be after retirement age. So she’s comfortable with it being locked up. Or she’s not very comfortable with it, but she was able to be convinced that she should do that. And so the lifetime, I say, you mentioned that you could get that money out early for home purchase. That’s a first time home buyer purchase, is that correct? Escape Artist: Yes, I think so. Yeah. Mad Fientist: Okay. So this brings us nicely into real estate. So there’s something I had just learned from a Mad Fientist reader. Actually, it was meeting up with somebody for a beer a couple of weeks ago, and he told me about the fact that you could potentially Airbnb out one of your rooms in your residence and earn up to 7,500 pounds without paying taxes on it. Is that something that you’ve come across? Escape Artist: Yeah, the government has a rent-a-room scheme where you can, as you say first 7,500 pounds is free of tax. And I just don’t know why more people don’t do this. To me, if you read the newspapers, which I don’t recommend actually in most cases, you’ll read about the pensions crisis, whereby many people don’t have enough in their pension to sustain them. And you’ll also read about something about the housing crisis. Housing is expensive in the UK, there is a shortage of decent quality rooms to rent that give you kind of a lower cost option than buying your own home or renting a whole house out. And the rent-a-room scheme is the answer to both. So people with spare rooms and not enough in their pension get income and younger people that want cheap accommodation, they get cheap accommodation. So to me, we have this crazy situation where there’s a housing crisis at a time where I think there’s something like 19 million spare rooms in England not being occupied. Mad Fientist: Speaking of real estate, how do you feel that plays into somebody’s FIRE journey? Is it as lucrative, potentially, as it is in the States are the differences? What is your take on real estate investing? Escape Artist: So my take on real estate investing. There’s two traditional classes of assets that have worked for wealth building, wealth accumulation, and getting to financial independence. You know, one is equities/stock market and the other is real estate. And in some ways, if you really want to get there quickly, one way to speed up the journey is to kind of go extreme on the property side. So if I’d wanted to have got to financial independence ,quicker one of the options that we could have done is rather than buying a house and kind of settling down in it, we could have like buy a house, do it up, flip it, and just keep flipping, keep moving up the property ladder because there’s no capital gains tax on your primary principal residence. And so with the stock market outside of a tax sheltered account, there’s income tax and capital gains tax, and the equivalent in property is that for buy-to-let properties, you are subject to capital gains tax, but for your own home you can escape those capital gains. And so it’s a tax efficient way to accumulate wealth and kind of roll up value in your house. What say to people though, is if you own a house in the UK, you probably have a big chunk of your net worth in UK real estate. Just because housing is so expensive here and therefore I don’t personally think it makes a lot of sense to then add to that exposure to UK real estate in terms of then building up a buy-to-let portfolio, because you’ve kind of got all your eggs in one basket and essentially, Brexit has been a reminder to people who have a lot of money in the property basket that things can happen and the situation can change and that assets that they thought were kind of uncorrelated are in fact correlated. So the way that I’ve done it is to buy a house, to own that house, to pay the mortgage off, but then to use stock market as my kind of primary source of wealth building for that kind of risk reason. Also if you look at the data in the UK, if you look at last a hundred years or so, it wa it would seem to indicate that an unleveraged real estate and the stock market perform pretty similarly in terms of total returns, but the beauty of the stock market versus buy-to-let landlording is it’s a truly passive investment. So there’s no boilers breaking. There’s no phone calls late at night from your agent or from the tenants. So the beauty of stock market investing is it can be made essentially free of hassle. Mad Fientist: So we’re getting to the end of the interview here and there’s possibly questions that I didn’t even know to ask. And there may be things that I don’t even know about in the UK that you would recommend to somebody on the path to FI. Is there anything we haven’t touched on yet that’s worth speaking about or is there anything so different that I just don’t even know? Escape Artist: So I think it’s worth talking about in the UK context, kind of geographic arbitrage, just in the sense that a lot of people who are on this path to financial independence are based in a high cost of living area, you know, London or the Southeast and they’re living there now and they’re on the property ladder and they have a lot of money tied up in expensive London housing, or expensive Southeast housing and one option to kind of massively accelerate your journey is to sell up in London at some point and just move somewhere much cheaper. So that the kind of example that I give it’s somewhat of an extreme example, but it does kind of make the point. If you’re slaving away as a professional in London, in a small terrace house, life can feel like a bit of a grind and yet, a short plane ride away in the south of France, the real estate is amazing in the sense that you had modern two bedroom apartments that you could buy on the beach front for 50-60,000 euros. And just imagine how many people there are in London sitting in their half a million or 1 million pound semi-detached house or terraced house who at a stroke could just sell up, go and live on the beach in the south of France. And look, I’m not suggesting that everyone do that because it’s a really important part of financial independence is working out what you do when you get there and what that looks like and how do you build a kind of meaningful life with a community and you don’t just kind of take yourself off to the beach and live isolated. But it does show you the power of being prepared to be flexible. It does show you that the power kind of thinking outside the box and it does show you how much money we in the UK kind of sink into our houses and that they can end up kind of being an anchor in the sense that they tie you to one place and they kind of trap you in one place. So I do say to people in the UK, if you don’t know that you’re going to be living somewhere for ideally 10 years, then you’ve really got no business buying there because the costs are so high, not just the kind of purchase price, but the stamp duty, et cetera, you’re better to stay flexible at this point in the cycle. And you know, at some point, conditions will change and maybe there’ll be a housing bust and some great bargains will be available. I mean, imagine the bargains that would be available if we went back to those 17% interest rates. So the wheel will turn and at some point there will be bargains to be had. But, but right now, to me, it makes no sense to tie yourself to one place if you don’t know that you’re going to be there long term, when, when housing costs are so high in the UK. Mad Fientist: And just like with all geographic arbitrage, it doesn’t necessarily have to even be international. You could, move an hour and a half outside of London, still be close to your family and friends and maybe cut that house price in half. Or even move up to Edinburgh… Don’t inflate our house prices, but yeah, somewhere like Edinburgh, that’s beautiful and still a city with all the amenities that you enjoy in London, but maybe a quarter of the cost, which is maybe what property prices are up here. Escape Artist: Well, I don’t want to give away your personal location, brandon, but we are sat here in a beautiful kind of crescent of Georgian and housing, which in London would just be insanely expensive. So the quality of life here is amazing. Mad Fientist: I completely agree. Yeah, this is like a very reasonably priced, flat, fully furnished that we rent and it’s in the center of the city and it’s a capital city in Europe, and yet we pay not much compared to what they pay down in London, which is really good. We’re we’re getting to the end of the interview and this has been incredible so I really appreciate you taking the time to talk with me. Obviously people can find you at theescapeartist.me. Is there anywhere else I should point them to? Escape Artist: No, the blog is the place to find me. I am on social media, but you can kind of find that through the blog. Mad Fientist: Great. Well, I can’t let you go without asking the question that I’ve asked all my guests so what’s one piece of advice you’d give to somebody on the path to financial independence? Escape Artist: My piece of advice would be to start and to start as early as you can. And just get on with it, right. There are no downsides to getting on this path. It is not binary in the sense that it’s not like you’re having to commit to a path that you can’t change as you go along. So I often see people kind of procrastinating, kind of agonizing over you know, what’s the best fund or what’s the best strategy. The best thing that you can just do is think 80/20, get started, take some action, and get on the path and you will figure out the rest as you go along, you don’t have to figure it all out upfront. Mad Fientist: That’s great advice. And this has been an absolute pleasure. So thank you so much for joining me. This is a long time coming. I think sometime last year we were trying to meet up in a pub somewhere because I thought the UK episode should take place in a London pub. But that didn’t happen so this has been a long time coming. So I really appreciate you joining me. Escape Artist: I just wanted to say thank you, Brandon, because your podcast was one of the things that gave me the confidence to quit my corporate job. In 2013, I’d stumbled across the Mr. Money, Mustache website, and that was just amazing, but it’s one thing to read information kind of cold on the internet that doesn’t necessarily give you enough comfort to kind of change your life. It’s kind of terrifying to quit a job that is going well, that you’re successful in, and that forms part of your identity. And to make that transition, I just needed to hear other people that had been there, done that, and walked that path and your podcast just brought that to life for me. So I honestly don’t think I would have got up the courage to quit my corporate job if it hadn’t been for your podcast. Mad Fientist: That’s absolutely incredible to hear and I did not realize that. So congrats for being able to take the leap and it’s amazing that I played a little bit of a part in that. So thanks for saying those kind words and thanks for joining me. And it’s 2:45 PM now. So I think that’s a late enough to warrant a celebratory pint for all our hard work today. So let’s let’s close this up. Thanks again, Barney. And I’ll hopefully speak to you again soon. Escape Artist: Thank you. No, we’re late to the pub now. Mad Fientist: Onward to the pub. All right. Thanks again. 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Last year, I published a podcast with one of my favorite financial writers, Morgan Housel . You may remember that the episode was a recording of a Bogleheads meeting and the interview was actually conducted by my buddy, Gouri. Well, Gouri recently invited me to join the Bogleheads to talk about life after FIRE and today’s podcast episode is a recording of that discussion! Big thanks to Gouri and the Bogleheads for making this happen and hope you enjoy it! Listen Now https://traffic.libsyn.com/secure/madfientist/bogleheads-interview.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Highlights How your views on spending change after you retire Why you should treat FI as a spectrum rather than a finish line How to plan for all aspects of post-FI life The unexpected benefits and challenges of early retirement Show Links Bogleheads.org The Album Atomic Habits Ultralearning Music Habits e-Book Fifth Annual Update Ramit Sethi on the Financial Independence Podcast How I Found Freedom in an Unfree World Early Retirement Extreme My Wife’s Guest Post My Wife’s Podcast Interview Full Transcript Mad Fientist: Hey, what’s up, everybody. Welcome to the Financial Independence Podcast, the podcast that gets inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence. You may remember last year, I had an episode with Morgan Housel, and Morgan’s one of my favorite financial writers, and it was a great episode. And you may remember that I actually didn’t do the interview. It was my buddy Gouri who interviewed Morgan as part of a Bogleheads meeting. And Gouri’s big is big in the Bogleheads. And he actually invited me to join that same sort of discussion for the Bogleheads group that he was running. So that’s what today’s episode is. And if you don’t know who the Bogleheads are, they’re a group that are dedicated to Jack Bogle, the founder of Vanguard. All the index fund investing and everything that talked about on the Mad Fientist, that’s a group that really goes in depth in that philosophy of investing. So they have a fantastic and very active forum. They have these local meetups that, you know, Gouri is part of and it’s a really great organization all around. So if you’re interested, definitely head over to bogleheads.org to check it out. And obviously I’ll put links to that in the show notes. So I sat down with Gouri and a bunch of other Bogleheads on a zoom call and we had a great chat for a couple hours. What you’re going to hear today is the interview portion of that. And the interview is fantastic because as always Gouri did a ton of research beforehand and asked great questions. So without further ado, this is my chat with Gouri for the Bogleheads. Gouri: We’ll begin with something that you often end with on your podcasts, which is you ask your guests who, you know, are leaders in the FI space, or often the self-improvement space. You ask them what’s one piece of financial advice you would give towards financial independence. So I asked you that question. Mad Fientist: Yeah, that’s a question I love to ask because there’s so many different answers I’ve gotten over the years, but for me, I would say experiment, which, you know, in the Mad Fientist, I probably wouldn’t have said that when I started the Mad Fientist. So it’s not me just saying that because it fits with my science theme or anything. But it’s really the truth because if I’ve learned anything over the past 10 years of doing this and like really thinking about it hard, it’s that we’re really bad at knowing what we really, really want. And the only way to find out is to try things, hopefully them at a low cost, low commitment sort of situation so that you don’t, you know, get yourself into a situation where you can’t reverse that choice. But it’s really about experimenting because especially like for me I’m naturally frugal guy. Spending has been a big focus of mine recently. And you know, after post-FI to figure out like, what is the best use of money? And now that it’s not as tight anymore you know what, what’s actually going to make me happier and what’s not really going to move the needle and things like that. So, yeah, experimenting and just realizing that you don’t have to be right, right away, because you are probably pretty bad at actually figuring out what you really want to do or what you want to be here, what you want to spend your money on. Gouri: Excellent. Yeah, it’s so great to hear. And there’s so much there that I’d like for us to follow up on. One is when, you know, you say experiment, try it out there. There are tons of people that we hear about who, whether they’re planning for financial independence, early retirement, or just retirement in general, they dream about this next phase of life. They plan, they plan the savings part of it, but then when they get there, they’re kind of absent the social structure or interaction or meaning. How do you, how do you suggest people, you know, building on what you said about experimenting? How do you suggest people fill that void in advance? Mad Fientist: So like, I’m sure a lot of people out there are probably similar to what I was, where I blamed my job for the reason I wasn’t living the life that I thought would make me happiest and wasn’t doing the things that I thought I really wanted to do with my life. Like it was such an easy scapegoat and only after leaving the job and then trying to do all those things that I thought I wanted to do, I realized it wasn’t my job holding me back. I was very lucky. I was a software developer and the technologies I used allowed me to be very productive, very quickly so I could get my work done in, you know, a quarter of the time that some other teams that I worked amongst were able to do it. So my time scales were never tight and I had plenty of free time. So it was only once that I removed that easy scapegoat did I realize that actually I could have been doing all of these things with the job and, you know, I would have been not had to also try to figure out all these crazy post-FI things that come up that you never even expect because I would have still been working. So, yeah, I would say one just try to remove the easy scapegoat of your job and start trying to do these things that you really think you’re going to do post-FI, because one, some things aren’t big enough to really get you out of the bed in the morning. Like I remember I thought like, oh, I’ll learn a new language and then that way, when we traveled to wherever in the world, I’ll be able to know this new language…it’s going to be amazing, but you know, like when you don’t have anyone forcing you to get out of bed in the morning to conjugate verbs it’s hard, it’s hard to, to force yourself to do that. And you’re not exactly leaping out of bed to do that either. So the more you can get started on these things while you’re still in the grind, the daily grind, I think. The way better off, you’re going to be, because one, you’re going to have momentum. You’re going to sorta like come across these challenges that have nothing to do with your job earlier and start to work through them and realize, hey, actually, it’s not my job that’s holding me back. It’s for me, like personally, it was my self doubts and some of the artistic things I wanted to do. And yeah, if you, if you just start early and don’t think of like, I think the other problem is like, it’s like for me back then, it was a finish line. Everything was going to be great after that finish line and everything wasn’t working prior to that finish line. And I think that was definitely the wrong way to do it. I think the more you can view it as just a spectrum where every dollar you’re saving is adding to that power that you have to, you know, to take more time off or follow that passion project to another level and things like that, I think the better off you’ll be, and then the less crazy FIRE or post-FI life would be after, because it’s not going to be just like flipping a switch. It’s just going to be this gradual progression into, oh, actually now I have the power to have unlimited free time. And now I know how to deal with that and use it properly because I’ve practiced along the way as I’ve incrementally got more free time. So that’s, that’s how I would view it just as a spectrum, not as a goal line. Gouri: Excellent. Yeah, that makes a lot of sense. It reminds me of someone interviewed Michael Phelps and in, I think one of the Olympic runs, his goggles failed and water got in his eyes and he had to do the whole thing with eyes closed. And they interviewed him after and said, how was he able to perform at such a high level? And he said he did that in his head. Over and over again. So it reminds me of how you’re saying prepare. So I’m following up on a few of the things you mentioned. So you mentioned passion project. I think your followers will know that you pursued FI to record and release your own music and you were able to do that. So huge, congrats again there. And you know, I know. You’re modest. So I’ll let folks know that the release went really well and had success on the charts. Why don’t you tell us a bit more about that, how it was to pursue this lifelong goal and, you know, how’s it been since? Mad Fientist: Yeah. So you mentioned the charts and I’d love that to be because the music was so amazing and it just got played on radio everywhere. Actually, it was just the Mad Fientist audience had grown so big over 10 years and I’d never asked them to do anything. And I asked them to buy the album and, and thousands of them did. And yeah, it was ridiculous. A ridiculous one week on the charts. And then it was done. But yeah, that wasn’t the main goal. That was again, like I’ve, I’ve mentioned a bit earlier. I blame my job for holding me back on that for so long. But it was only once I quit my job and had all the time in the world to pursue it, that I realized it was way more than that. It was, it was really just a ton of self doubt. I never thought I could actually do it. So I was not even trying to do it because I thought if I tried and then failed, I’d lose the dream forever. And I never wanted to do that. Cause I was like, I really need to write and release an album one day. So I didn’t want to lose the dream, but trying every time I tried it just made it so much more evident that I would never actually be able to do it. So that’s why I just put off doing it. So I never made progress and it took me till three and a half years after I left my job before, you know, I’ve I finally got fed up and I was like, look, this is the whole reason I was wanting to have all this free time. And in the first years after leaving my job, I filled it with, you know, Mad Fientist stuff. I filled it with fun stuff. I was saying yes to everything. Cause I could have all this time. And I was like, I need to just really get serious about this. And it was brutal. But it was actually Atomic Habits by James Clear…I read his book, got to speak to him on my podcast, which was amazing. And it was that coupled with another book called Ultralearning. And then there was a music specific one that was just an ebook, but it was actually phenomenal. So if any musicians out there care, Gouri, I’ll send you a link to that. Cause it’s not a very big book, but it was it was very instrumental in me actually making progress. At the end of the day, just boiled down to like putting in the time. So sitting in the chair and being uncomfortable and just forcing yourself to do that and trying to not focus on what you produce by the end of that day, just focusing on okay…put five hours into the chair and it was all mostly productive. You know, like I would lose confidence, I would lose willpower and by the end of the day, I was like watching YouTube tutorials, which, you know, it was not really productive, but I could sort of make it seem productive for my five hours at least. So anyway, it took all of that and then the pandemic hit and, and then I just locked myself inside for 15 months. Scotland was very locked down. My wife’s Scottish and we lived in Edinburgh, or we did at that time, and just locked myself inside and never truly believed that I would do it. And until it came out. I still don’t really believe it, but I listened to it and I’m like I’m really proud of it. It was definitely, yeah, the most challenging thing I’ve ever tried to do. And it meant so much to me. So yeah, you’ll listen to it. It’s not like Grammy award-winning stuff. It’s like my weird it’s like synthesizer like experimental synth-pop stuff that I loved growing up. So it’s a really weird genre of music, but it’s yeah. My only goal line was that I was comfortable enough with it to release it. And I did. So that it’s that was the whole reason I wanted to pursue FIRE in the first place. And like I said before, I didn’t actually need to be FI to do it, but I sorta did as well, because that took away all my excuses. Gouri: Well, congrats again on achieving that it’s tremendous and I’m not a typically a synth pop listener, but absolutely enjoyed your music. So thanks again for getting it out there. So a few things, one is a lot of folks in the FI space. You know, will talk about, of course, saving and investing and reducing your living expenses and increasing your savings rate. And I think folks, you know, interest in pursuing it, having a lot of access to that information more common underlying message that surfaces is a lot of this is about happiness, right? So. Can you, can you elaborate on what happiness is, you know, like for you or what success means to you and for this audience, the Bogleheads famously are not defined by a fancy house or fancy car, even though many of them could easily afford that sometimes many times over. So yeah. What does, what does success mean to you and, and how, how has it been in early retirement? Mad Fientist: Yeah, well, so success is to me, those personal wins, like I can think back over the last 10 years and the things I’m most proud of or things that, you know, I haven’t shouted about or told anybody about really. And it’s just those, like knowing how hard I worked on that album and all of the hurdles that I had to overcome. Like, that’s what I’m super proud of and yeah. Getting on the billboard charts for a week, is funny, and just adds to the ridiculousness of my life in a great way. Like, it’s, it’s so funny to think about every time I think about it, but that, that was, that’s nothing that it’s thinking back at all those things that I had to overcome. And yeah, happiness is a tricky one because I had a great comment on my last post and. It was sort of talking about happiness and like finding new sources of motivation after FI. Because for people like me, if you think about money since I was a, you know, a kid…my parents were throwing quarters in the deep end of the pool and I would spend all day like finding money and I just loved it. So for somebody is where money has been so important for so long…for now that to not matter anymore. Cause I don’t want the fancy house or the fancy cars or I don’t want to waste money in any way and things like that. So that’s been, that’s been really interesting to try to come to grips with that and find new sources of motivation because now I don’t have to do anything. And as I said, in my most recent posts, it’s like a lot of the really fun things have a lot of discomfort upfront. But now that I don’t have…I don’t have money driving me through that initial discomfort, I worry that I’m missing out on some, like longer-term fun in some areas just because, you know, I’m like, well, I don’t want to do that. I don’t have to do that because I don’t need to earn another dollar or whatever. So, so yeah, happiness is a tricky one. And in that, so this goes back to the comment I was going to mention. So it was, I thought was really insightful. The guy had said, I think as humans, we always need something to be uncomfortable with or unhappy about or striving for something better. And he brought up the fact that like, you know, there’s a lot of, maybe I’m not too big in the the rest of the FI community anymore, just cause I’ve been working on the music stuff, but apparently in the FI community, there’s lots of divorces happening and things and people reach FI and then, you know, they need that unhappiness. So they find it in their partner or things like that. And I can see how that I could see how that happens. Cause you, you know, I could, I could throw everything at my job and be like, that’s why my boss is making me mad and my colleagues are making me mad and that’s why I’m unhappy. But then when you, when you can control everything and do whatever you want. Then you either have to come to accept that. Oh, it’s just you, that’s finding those things to be unhappy about or angry about or. You know, sometimes the, sadly maybe put it on the person closest to you or the people around you. So, yeah. So it’s still one that I haven’t figured out yet. And I’m like, that’s not to say, like, I feel so lucky and I’m definitely happier now having been able to pursue all these things that I’ve always wanted to, and, you know, not have the stresses of money or worrying about, you know, if the markets are tanking or anything like that. But yeah, it’s not a golden ticket to a happiness and rainbows, which I think early me when I was pursuing it, I put that on, on FIRE. I was like, well, yeah, I’ll be happy when I’m FI. So I’ll just be miserable now and just grind it out. And again, going back to the advice that I was given earlier is like, yeah, don’t put off happiness until the finish line either. Don’t put off, you know, pursuing your things that you want to do. Don’t put off, you think you’re thinking about what post-FI, life’s going to look like, because yeah when you cross the finish line, that’s just at the end of the day a slightly higher number on a screen. And it really maybe it was more anticlimactic than you may expect it to be. Gouri: Got it. Yeah. Very insightful stuff. So two, two particular things. So let’s say a two-part question one building on your comments. One is this concept of enough, right? You and I know people in the FI space in life in general, who had earned a lot, can still learn a lot and really. Adjusted this mindset to just say, you know, any additional money has very little marginal value. Why, am I needing to work or seeking work? But there are also people who either enjoy what they do, maybe they’re entrepreneurs, or some people are paid really well dislike the rat race. But enjoy accumulating, enjoy watching their portfolios grow and you know, within the FI community, there’s this one more year syndrome, right? People don’t feel comfortable. Can you elaborate on how you achieve this? I’ll call it a zen-like state of you have enough. Right. We know someone who, who says any additional money he gets, he gives to charity. And I just feel like. That’s such an enlightened state, right? Like we’re socialized, like apart from societal’s influence on the importance of money, there’s a practical importance. So that’s one. And then the second you spoke about relationships and specifically in the FI community, can you elaborate on yours to the extent you’re comfortable, what it’s like being, because you mentioned publicly, Jill still works. She loves what she does. You guys converged in this journey and what has that been like to be…and I’ll talk about like gender roles or societal pressures or influences to be the spouse who’s not working and to be a guy, you know, not working and in our society. Mad Fientist: Oh yeah. Ireally don’t feel like I’ve reached a Zen like state sadly, but I’m working towards it. Like I think the big thing for me was never feeling I needed to impress anyone with money. And I think that just gives you such a huge advantage where like I would rather people think I was poorer than I am, because I just had a, you know, a middle-class upbringing, like like times are always tight. And I, my identity is so tied to that. So to then either go into the next societal bracket you know, upper class or something would just be a total identity…I don’t think my brain could handle it. So I’m always, so I’m lucky in that sense where I’ve never felt the need to impress people with, with flashy, anything. I wouldn’t say I’m Zen yet because because you mentioned charity, like I still can’t give money away. I’m not wasting it and that’s why I have such trouble spending it because I don’t want to waste it. And I know one day, I’m going to be at that stage where I can make better use of it. So in this meantime where I still have this psychological hangup. Yeah. I just I’m protecting it so that I don’t waste it away and have some sort of lifestyle inflation that caused me to not to be able to give it away. But there’s still a part of me that I guess just has this scarcity mindset like, oh, like I gotta keep it all just in case something really bad happens or. I don’t know where that comes from. Like I said, maybe it was because times were so tight growing up and I never felt like we were deprived of anything, but, you know, there was, you know, every penny was accounted for and I still feel that in my mindset hasn’t caught up with the actual situation yet. So, yeah. So a long way to go in the zen part. To get to the spouse part. Yes. My wife was complete opposite end of the spectrum from me. She wasn’t, she never spent money to like impress other people. So I don’t think it was like that far, but she never, she just didn’t care about money. If it was in her account, she would spend it. And if it wasn’t you, she wouldn’t. Whereas I was like, you know, spreadsheets for everything and go into, you know, knowing what I bought at this store versus the store and all that stuff. So yeah, thankfully we’ve come together and she’s a lot more conscious of spending money and I’m not as crazy about it, which has worked out great. And as you said, she’s, she loves her job. She’s an optometrist. She can’t think of anything else you’d want to do, but she’s also. Seeing the benefits of having savings. So to go to COVID at the beginning of the pandemic in Scotland. People weren’t taking it as seriously as we felt needed to be, you know, things needed to be taken care of. So she was able to just say, look, I’m not, I’m just not coming in. And then she, she was off for the first three or four months of the pandemic because she was worried about giving us her elderly patients. And she didn’t think the PPE was all in the right state. And then once that came back, she was able to go back. And then for the past, like six months, we’ve been traveling to the States since we were finally able to, and we’ve been able to see friends and family. So she’s obviously not worked that time. So she’s seen the benefits of that. And obviously I’ve seen the benefits of not being so crazy with money. So, thankfully we have met in the middle and I think we both made each other better with our relationships with money. But as far as her working in me, not, like this is going to sound crazy. Cause you know, I’ve been writing about financial independence on the internet since 2012, but I really don’t like talking about to people I know in real life. So I still will just say I’m a software developer that works from home, which is technically true because I write software for the Mad Fientist website. But yeah, I feel really weird talking about that in person. So yeah, I’m at home, but I was at home before, before we provided me the hit FI and again, I don’t think, I don’t think it bothers me that even if, even if that wasn’t the case and that was, if all of our friends that I was just unemployed and she was working yeah, I don’t know how I would feel about that. I don’t think I, I would hope I wouldn’t care that much. Because again, like the things that drive me are the personal things that I accomplished that, you know, I still don’t, I don’t tell anybody anybody about anyway. So I think I had hoped that I would be okay with that. But, you know, like I said, it’s harder to, reality’s often way different than you imagined it would be. So, yeah, but so far I haven’t had any issue because again, I just mostly tell people I’m a I work from home for myself as a software developer. Gouri: Excellent. Great to hear within the, you know, the actual FI experience, if you could talk more about the highs and lows of it. So what surprised you were you blindsided by anything? Were there some disappointing surprises and then some like phenomenal surprises you didn’t even consider? Mad Fientist: Yeah. One is losing money as a source of motivation. That wasn’t what I expected. I always thought. Yeah. I always, always thought, wow, just, yeah, just do fun stuff with it. But as part of that experimentation, I told you about earlier, like we experimented one year and we traveled the whole year and we ate out like four or five nights a week. And we tried all that stuff and realized like, it’s actually way more fun when it’s special and you get to look forward to it over a few months and you plan for it. And same with eating out. It’s like, well, if it’s a Friday night thing, then you’re looking forward to Friday nights. So we’ve tried a lot of that stuff. So, so I thought, you know, so I guess pre-FI, would’ve thought that, you know, Ooh, if we had extra money, this is going to be great. We could go do even more fun stuff. But through experimentation, I feel like we’ve got the, got the sweet spot and more’s not necessarily better in a lot of cases. It’s worse. So, so that was a big surprise. And that’s, you know, that’s still something that I’m trying to come to grips with. And I don’t only, I haven’t even talked to you about this story, but like I realized now that my cheapness was the only thing, keeping my eating and check when we’re traveling. So like when we go somewhere, like sightseeing is just the stuff I do in between eating and drinking and tasting all the foods and trying all the different stuff. And on these, on these past trips ever since we’ve been able to travel since COVID. I’ve just gone crazy. And I realized that the only thing that was keeping that in check was my frugality and my cheapness. And now that that’s not there, it’s like, well, I need it. I need some self control, I guess, when it comes to food. So yeah, it’s, it’s things like that you don’t really think about. So that was a surprise. I think the, just the peace of mind has been fantastic. Like I still, like I said, I, I still feel like a teenager. So like the thought of like my car breaking down. Still gives me some stress and anxiety, but you know, having enough and then having more than enough as sort of eased that and been like, okay, we can handle, you know, the car breaking or an unexpected repair and things like that, that I think has really drastically improved my just like baseline, at ease-ness, I guess. So that’s been fantastic. Those are the big ones. And then, yeah, just realizing that all your excuses before. All the blame I was placing on my job was just totally misplaced and it was more, it was all the internal stuff and stuff that I still had to deal with. Yeah, just the self-doubts and the motivation and the procrastination, all that stuff. Yeah, it wasn’t my job. So those are the big ones. Gouri: Got it. So thanks for sharing, especially, you know, some of these vulnerable topics, like. You know what you’re opening up about a lot of it’s personal. So some of the things I think it’s funny, you know, to hear your comments about Ramit for a lot of folks in the space you know, there are diehard mustachians folks who read Mr. Money Mustache, and whose blog changed their lives. And then Ramit, you know, I would joke to myself, I really value his content as well. But in my head, I think of him as somewhat of an anti Mustacian. So I understand that, you know, you felt liberated to some extent I’d love to hear more about what you’ve grown to enjoy spending on. You mentioned food, and then I’d also love to hear about the evolution of travel. Like it sounds like. You know, we all want to travel. It’s a very common primary goal. And then some people travel a lot. So when it sounds like your, your ambition for travel has kind of perhaps changed. So I’d love to hear more about that. And then on the topic of travel and living abroad, how did, how has being financially independent living abroad? How did, how do you feel that would differ from living in the States? Like a lot of people in the FI space consider moving abroad and they try to optimize, you know, where they’re going to live either travel around or settle. So your thoughts on those? Mad Fientist: Yeah, sure. Yeah. I’ll address the anti-Mustacian Ramit, which I, I thought too. And that’s why I was so excited to get them on my show because I was like, yeah. You are, you are opposite ends of the spectrum. I think they say a lot of the same things and just different ways, but I think having both in your ears is great and that’s I was lucky to talk to both of them and that’s, and again, I I’m going to be going back to Ramit because I feel like I’m naturally like Mr. Money Mustache. Like that’s, that’s my natural inclination, I guess. So having Ramit there challenging all that stuff…listening to MMM is like an echo chamber. But Ramit, challenges me in as far as some of the stuff that has helped me not be so crazy with the spending, it was reframing things. So one of the things that’s helped is like, $10 to me is just as valuable as it was when I was a college student. In my mind, it’s the same. It’s like that’s 10 bucks. I’m not going to waste 10 bucks or I’m going to save 10 bucks if I can. So the trick that I’ve been doing recently is anytime I’m like freaking out about an expense that I think I really shouldn’t be freaking out about. I calculate what that expense is like in my college years. Cause that’s what, that’s where my brain, I feels like still is with money. So, you know, taking my net worth back in 2000 and dividing it by my net worth now. And then multiplying it by the expense that I’m worried about. And then it’ll be like, oh, that’s a nickel. You’re actually stressing out about a nickel in, you know, college times. So that’s been helpful. And then forcing myself to spend with the portfolio is it should allow me to spend, has been really nice because it’s. It’s made me a lot more generous, which is something I’ve always wanted to be. But I always was, like I said before, I’m always like, oh, every penny…I need to squeeze it tight in case anything happens. Whereas now, this year, it’s like, you know, going out to dinner with my family, it’s like, hurry up and try to pay before anybody else even has a chance and same with drinks with friends and things like that. So that’s been really nice because well, I got to spend it this year. I’m forcing myself to spend that much and there’s no way I’m going to do that naturally, because like I said, I feel like we’ve dialed in our spending quite well. So anything more is just going to be, you know maybe not as, maybe not as useful or not bring as much happiness. So it’s like, so then yeah, doing those things day to day has been really nice. Just. Before I would have maybe stressed about that. Like you got to dinner with friends and like somebody orders the fancy cocktail and your drink of water. And then you’re like, oh, and that’s like, that’s the mindset. I wasn’t when I was a student, I want to get out of that. And now the times have changed forcing myself to spend that this year. And again, it’s not, I’m not wasting any money. Cause like I said, I don’t want to waste money. I want to protect it in case one day I definitely will be giving it away. And the third thing that’s helped with that is also. Allowing myself to enjoy investments. So rather than just dump all my money into Vanguard index funds, which is what I’ve done for the last 20 years instead, it’s, I’m thinking about buying a house, for example. So to me that’s an ultimate luxury. It’s not really a great investment, but I think it’s a luxury that I’m really looking forward to right now. And my wife is as well. So, in my mind, as I think about it as an investment, rather than me spending on myself, which that makes it a lot easier to, to, you know, accept. And so I think that’s something we’re going to do over the next few months is buy a house in Scotland and hopefully, you know, make it really comfortable and nice and all of that. And then, and then for the music stuff, it’s like, instead of buying the cheapest synthesizer, that’ll let me make the sound. I buy the one that’s going to hold its value the best. And it’s going to maybe be a future classic that is going to maybe even go up in value. So that’s helping me spend a bit more in the near term, but then hopefully getting a lot of enjoyment out of it. And then, you know, maybe even, you know, making it an investment where if, if not making money, at least not losing money and that’s been, that’s been helpful. And, and, you know, mentally being able to spend on myself a little bit more. And I’m sorry, but I forgot the second question? Gouri: question. Living abroad versus being FI in the States. Mad Fientist: Yeah. Well, luckily, so that was one thing I never skimped on when we were in our twenties and I’m thankful for that. We did travel. I was really good at travel hacking and that’s like, I love doing stuff like that. That’s like having spreadsheets and plans and that’s, that’s like how my brain loves to be all the time. So travel hacking was just right in my wheelhouse. So we got to, we visited, I think, 50 countries over our lifetime so far, and we had great, great trips and it didn’t break the bank. But obviously, yeah, especially since now, COVID has made travel a bit less fun where I’m so glad I didn’t skimp on that when we were younger. But now I don’t know if it’s because I’m older, I’m turning 40 this year. I don’t know….I feel like I’ve done my fair share. Like I’ve got that out of my system. I feel like it’s out of my system and now we just flip flop back between Scotland and America. Cause my wife’s family is in Scotland and my family’s in America and luckily those are two great, beautiful rich places that have so much to offer that you can, you know, continue to explore for a lifetime and not get bored with them. So we’re always so excited to do that, but now I think our travels more based around people. So it’s not all right, which, which country could we go to to see these things or eat these foods or whatever it’s now like, where to go to see these people and have fun with them. So that’s been a huge shift. So I think travel is going to decrease for us in the future as well. It’s just going to be mainly just bouncing between those two places. As far as like how that impacts FI, I know travel in my twenties was very impactful and showing me that, you know, what I thought was normal in America was actually extremely extravagant and there’s a lot of really unfortunate situations out there where people are really struggling to get by. And that allowed me to keep my spending in check, I think, and never, you know, feel like I deserved nicer things or anything like that. So that was huge in just giving me the mindset to save so much money over those years. You know now I just became a British citizen on July 1st, which was really exciting after so long, so many applications trying to get it. So now we don’t have to worry about visas and stuff, but obviously the healthcare thing, that’s a huge weight off my chest now…the National Health Service is fantastic in Scotland. So there are benefits in places, you know, it’s probably more difficult to pursue FI there just because of the higher taxes and things like that and there’s less loopholes, which is what my whole site was built on back in the earlier days…just finding interesting loopholes for early retirees or future early retirees. So there’s a lot less of that, but then there’s a bigger social safety net. So, you know, you have a lot more stuff covered as well. So. Yeah. I don’t know if that exactly answers your question, but hopefully it’s helpful. Gouri: Yeah, that was very helpful. Thanks. So a few things in what you said, one is that you’re considering buying a house. I’m certain that the Boglehead audience would like to hear more about, especially given how analytical you are and how, you know, you commented, it’s not necessarily a good investment or it’s often not a good investment, but also if you could talk about, on top of that, share your thoughts previously, you mentioned you were considering buying real estate as a part-time investment. So you mentioned, you know like a unit near a ski resort that you could, you could use personally when you in ski season and then you could rent it out when you’re not using it, and then COVID happened. So obviously that changed, but how are your, your thoughts going forward on that? Does it still interest you? And then can you elaborate on your purchase analysis and how you decide where are you currently leaning? Mad Fientist: Sure. So that plan is pretty much out the window. And again, that’s always me coming back to my default, which is like, how could I optimize this for the numbers as perfectly as possible? And that, that whole plan of having two places, one in Scotland, one in America, and the thought was that we buy in places that the peak tourist season was pretty much opposite. So we could live in the non-high-peak tourist place while we rent out the peak tourist place and then use that money to pay for the other one and then vice versa. And it was all a numbers thing and that’s, again, it’s just old habits die hard. I’m trying to get out of making numbers-only decisions, which is where Ramit comes in, where he’s like, there’s more than a spreadsheets and you have to live outside the spreadsheet. And you know, sometimes decisions should be more than just optimizing numbers. So I realized like all the stress that could come from renting things out and at least I know myself well enough to know that that would just cause a huge amount of stress. Cause yeah, I’m an introverted guy and I do enjoy interacting with people, but conflict with people that I just know that if I’m a landlord, I’m not going to be too happy. And I’ll probably be a lot more stressed, so it would just add a lot of negative things and yeah, the numbers may be great, but I don’t think would actually benefit. So now the idea is to just buy a base in Scotland finally get to enjoy some of our stuff that has been…we just literally today, Jill and I were in the closet at my dad’s house going through the closet because there’s boxes in there that we haven’t seen since we moved out of Vermont, like six years ago or something. So yeah. Being reunited with all that stuff is going to be nice. And then we can just store it all in Scotland. And then when we come to the State, if we want to go skiing, we can just rent an Airbnb. Or if we want to come to Pittsburgh and see all of my family here, we can just rent a apartment in the city. I think it’ll allow us to be a lot more flexible in the States. And then in Scotland, we’ll have a home base to go back to. The idea is, Scotland will be the place where we can get stuff done and see Jill’s family and just really spend time with them and Jill can work if she wants to pick up some shifts and things like that. And then the States, we can just use that time to see people here and have fun and do things like skiing and visiting friends. So yeah, it’s changed quite a lot. And then as far as the the analysis for buying a place in Scotland, not really looking at it numbers based, trying not to at least. We know where we want to be. We know that the type of property we want. Thankfully it hasn’t popped up yet because we’re in the States and we’re not going to be back in Scotland till mid-October. So hopefully we can deal with that when we get back. But yeah, I think it’s hopefully just going to be the property that decides it and not any crazy number analysis from me. I have some money set aside for that. And yeah, hopefully we just find a property that, that works and then try to be homeowners again after renting for so long Gouri: That sounds fantastic. It’s another example of optimizing for happiness. You’ve commented that you’re, you’re not in this FI space to be evangelical. You started the blog to kind of keep yourself accountable, right, with an external motivator and. It helps people who are ready, interested in the journey. So this question is really like for a lot of Bogleheads, they’re the beacon in their community, whether it’s a social circle or family, people come to them for guidance and advice. What have you seen in the space? Because there’s so much advice out there, right? And certain things resonate with some people more than others. Obviously. What have you seen be most effective for the folks that want to improve. They want to save better. They want to invest better, but they find it so incredibly challenged. Mad Fientist: Yeah. That’s yeah, that’s, that’s tough. It’s a tough one for me just because it has come so naturally, like I said before, it’s just been such a focus in my life for some reason, for so long, I guess it would have to just go back to tracking. And really, so this is a, this is probably a good actual example. So I have a, I have another personal spreadsheet where just one column will have like all the things, all the big purchases I made that year. And then another column will have…all the spreadsheet purists are going to be like, “You don’t need a spreadsheet for that!”, but I just love working with cells. So then I have another column that’s the highlights of the year. And I think like, obviously if I was struggling with that, I think that would be really beneficial to keep those lists, you know, your big purchases and then your highlights and then revisit it in future years and, you know, tracking your spending is obviously huge. And I think like, yeah, tracking your spending and then tracking these big purchases, I think would be the first step, because I feel like a lot of people maybe are just buying what other people think, or they see other people doing that and they’re buying and it’s certainly not adding to their happiness in any way. So I think writing those things down and then looking back on it and be like, oh, actually those things weren’t really that important or that trip wasn’t that great or eating out wasn’t that great. So, yeah, but again like I said, I’m so naturally focused on this stuff that it’s a bit harder for me to think about what would be really beneficial. But I think even now, as I’m trying to come to grips with my new spending patterns, it’s been helpful for me. And it’s something that I still do. So it’s just a recording, all the, all the big purchases, all the highlights, and then trying to figure out, Hmm. What does that mean for what I actually enjoy or get value? Gouri: Yeah, that’s, it’s definitely helpful to hear. And for folks who, who don’t know the Mad Fientist compiled a PDF of the one piece of advice, answers that he got from his podcast guests. So that’s available at madfientist.com/advice. I believe you go to that, enter your email and you’ll get that. So in closing, before we turn it over to audience questions, you mentioned James Clear’s Atomic Habits. I think that’s a universal favorite. Everyone. I know that’s read it just kind of swears by it on top of the other habit books out there that proceeded. It very practical. And you mentioned Ultralearning, any other books you recommend or documentaries? Especially for the Boglehead crowd. Doesn’t need to be finance-related could be, you know, spanning life? Mad Fientist: Yeah. So JL Collins, the author of The Simple Path to Wealth, was my second podcast guests, way back in 2012, way before The Simple Path to Wealth and he had recommended How to Obtain Freedom in an Unfree World by Harry Browne. And there’s a lot in that book that I definitely don’t agree with…my wife particularly had big issues with some of it. But it did make you think a little bit differently about the boxes you put yourself in and the constraints that are all self-imposed pretty much. And back then 2012, you know, FIRE wasn’t as big of a thing and definitely wasn’t anywhere near mainstream, like it got to be in 2018. So that helped just with my mindset at like, oh, actually society doesn’t know best. And these other people don’t know best. And the things that I think I’m restricted by are actually your restrictions. They’re just my own mental restrictions and I can actually do anything that I really want. So I would say that was a pretty impactful non-financial book. Early Retirement Extreme. That was what got me into this in the first place. I saw in 2011, I think it was, that JD Roth at Get Rich Slowly had interviewed or had written a book review of Early Retirement Extreme and that, that reads like a academic book, but there’s a lot of great stuff in there. I’ve read it at least three times and finally got to speak to Jacob just last year, which was it was a big thrill for me cause he was the guy that made the light bulb go off in my head. So yeah, Early Retirement Extreme is still one of my favorites. So those two, I would read them with an open mind and yeah, they’re not Bibles, they hopefully get you thinking. Gouri: Fantastic. Well, thanks again. I meant to mention earlier when we were talking about relationships that your wife, Jill has a guest post on your blog and also a podcast a conversation that if folks haven’t listened to, I highly recommend those…very engaging, very, just warm and enjoyable. So with that Brandon, thanks again. Mad Fientist: Thanks a lot, Gouri. It’s always a pleasure to chat with you and hopefully we’ll see you back in Edinburgh soon. Gouri: I’d love that. And likewise. Related Post Morgan Housel - The Psychology of Money One of my favorite writers, Morgan Housel, shares the investing lessons he's learned from COVID-19, history, and other academic fields! The post Bogleheads – Life After FIRE appeared first on Mad Fientist .…
If you’ve followed me for a while, you’ll know that I’ve released an annual update every year since I quit my job . It’s now been five years since I stopped working so this is my fifth (and final) annual update. Why is it my final one? I explain in today’s short episode… Listen Now https://traffic.libsyn.com/secure/madfientist/fifth-year-of-freedom.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Highlights How the pandemic highlighted the power of having savings Why FI is the ultimate shock absorber and cheat code The reasons this annual update will be my last What to do when money is no longer a source of motivation Why “Lean FIRE” may be a bad idea Warren Buffet’s plan for leaving money to his kids (and why it may change your FI target) Show Links First Year of Freedom Second Year of Freedom Third Year of Freedom Fourth Year of Freedom The Album 8 Key Lessons from the Ultralearning Experiment Episode with Ramit Sethi Full Transcript Mad Fientist: Hey what’s up everybody, it’s the Mad Fientist. Welcome to the Financial Independence Podcast. Sorry it’s been a while since my last episode but after being trapped in Scotland for 15 months because of the pandemic, I was finally able to make it back to the States and I just decided to take a few months off so I could focus on spending a lot of quality time with the family that I had been missing over the past year. So since it’s been a while, I just have a short episode today to get back into the swing of things. If you’ve listened to the show before you know that every year on my anniversary of leaving work I’ve posted either a podcast or an article about some of the things that I’ve learned over the past year and this is actually my fifth one so that means five years ago, on August 1st, was the last day I went into a normal job and I really can’t believe it’s been five years but it has so this is my five year update and I actually think it’s gonna be my last and I’ll explain more as this episode continues on but yeah, I really don’t feel like I’m gonna do any more of these annual updates so rather than ramble on let’s just dive into everything that I learned over the past year of post-FI life! So let’s start with the good stuff…so the pandemic has just highlighted how valuable having savings is and yeah, FI savings is obviously great because you don’t have to work at all but even some amount of savings just to give you the power to do other things is so important. So many times over the last year, it’s been apparent that just how valuable that is…from Jill not having to work when she felt like it was unsafe to do so, to not really having to go inside anywhere for any reason at all and being able to just isolate properly when necessary, to just coming back from our travels to the States and having to quarantine for 10 days in the UK…that would have been extremely stressful if we were juggling full-time jobs or had some places we needed to be but we were able to just roll with it and be like, okay we just have to stay hunkered down for 10 days and it’s not fun but it’s not a huge deal. So this past year, more than any other, just really highlighted how valuable that is and I actually just came across a quote that perfectly sums it up and it was on the Planing our Pennies’ blog, and it was Mrs. PoP’s last article, and in it she said, “There’s no downside to having a high net worth…it acts like a giant shock absorber that smooths over life’s bumps and after a while it feels like life is a game and you’ve discovered the mother of all cheat codes.” That quote to me is just perfect because the giant shock absorber that smooths over life’s bumps, I think is the perfect way to describe that feeling of having a nice chunk of savings in the bank over the last year. As you know, the world has been so uncertain and everything’s a bit weird and scary and just having that financial peace of mind to know that you can roll with the punches and you can get over some of these hurdles that are unexpected and it just takes so much stress and anxiety away that…you know, when I was a teenager, what if my car breaks down? I don’t want to spend $500…that would use up all my money if I had to fix a car problem or if anything else broke that I wasn’t expecting and the more you build up the less stressed you get about these unexpected things that do happen in life and this past year just highlighted how important that is for my mental well-being…just to know that there’s there’s enough there and you can deal with things that happen and life’s bumps are going to be a lot more smoothed out because, as Mrs. PoP said, you have this giant shock absorber that can make any bumps you do face a lot smoother and easier to deal with. Moving on to the absolute best thing that happened over the past year is that I finally released the album that I had been wanting to write my entire adult life. And this was the whole reason I wanted to achieve FI in the first place, actually. I thought it was my job that was getting in the way of me doing this and I thought I’d have to save up enough so that I would never have to work again in order to devote the proper time to actually achieve this big goal of mine and it turned out that I didn’t actually need to do that because the thing that was holding me back all these years of trying to achieve this is wasn’t my job, because I had plenty of spare time that I could have used towards working towards it. It was actually a lot of mental hang-ups I had about trying to pursue it, because I was worried I’d fail, and so I probably could have actually done it when I had a job, but it did take achieving FI, and then a global pandemic to lock me inside for a year, to do it. But I actually did it and it is by far the thing that I’m most proud of and if you’ve listened to it, you know it’s not going to win a Grammy or be on the radio or anything like that but it was the thing that I really wanted to accomplish more than any other and it was definitely the most difficult thing that I’ve tried to do so the fact that I was able to actually do it after all these years of not being able to, and not really believing I’d ever be able to was just a huge personal accomplishment for me and is something that i’m really proud of and I look forward to writing the next one because I’ll hopefully be in a completely different mindset than I was leading up to this one and now that I know I can do it, then i’m expecting this next one’s going to be a lot more fun to make. So I’m really looking forward to that but since this was the whole reason I wanted to achieve FI in the first place, that’s why I don’t think I’m going to do any more of these annual updates because every other annual update that I’ve given has sort of been revolving around me trying to get to this goal because that was like the end of my FI journey so now that I’ve done that, it doesn’t make sense to do any more annual updates because now it’s just a case of just living life as anyone is living life. And the money equation is solved, and I was able to accomplish the thing that I wanted FI to lead to so any other future updates…I just don’t see the point of them really because it doesn’t have much to do with achieving FI in my eyes. So it makes sense to just end on this high note and this will be the the final annual update. Since I’m talking about the album, I just want to thank all of you guys out there who pre-ordered it and made the release week of the album even more exciting and that is because you guys helped me actually get onto the Billboard charts, which is ridiculous, especially considering the type of music it is and has no business being anywhere near the charts, so just want to thank you so much for that because it made it even more exciting than it was to begin with. And even though nothing really came from being on the charts for one week, it just adds to the ridiculousness of my adult life so far. I still smile anytime that I think about it so thank you for the support, it really meant a lot to me. And if you haven’t checked out the album yet then you can go to madfientist.com/album and there’s a Spotify QR code that you can open up Spotify on your phone and do the search-by-image feature and then it’ll just pop up the album or you can just enter your email address and I will send you an email with all the links to the album and also tell you where I did end up on the chart for that amazing week way back in February. And while you’re there in Spotify or Apple Music or wherever you listen to music, if you could follow me there, that would be great because that’s hopefully where a lot more activity is going to be happening over the next couple years. So those were the really positive things over the last years that are FIRE related. One of the things that still is a challenge for me that i’m working through is losing money as a motivating factor. I’ve written about this in the past, and I’ve maybe even talked about it on podcast, but for someone like me who has been focused on money for as long as I can remember and has been trying to you know reach FI and do all these saving goals, money has been a huge motivating factor in my decisions. So from studying hard in high school, to what I majored in in college to what jobs I chose and everything. And now, when money isn’t as important or more money isn’t as important…losing that as a source of motivation has been really interesting and I’m still not exactly sure I’ve come to grips with it and it’s almost made me rethink what I recommend for other people because I think being motivated by earning money is a positive thing and…I just came across a quote from Warren Buffett recently and it’s actually a quote about how he intends to leave money to his children and the quote is, he plans to leave them enough money so that they can do anything but not so much that they could do nothing and one I think that’s a great way to think about how much money you leave your kids but it also made me reflect on where I’m at now and, like I said, there’s no really motivation to earn more money and even though I’m incredibly lucky to be in that position, it still comes with complications because technically, yeah I don’t have to do anything but a lot of things in life come when you’re being forced to do something maybe you don’t exactly want to do, like for instance, going into work…yeah, it’s not great but you get this forced socialization that you may not have had and you’re interacting with people that are outside your social circle that may be difficult at times but it is also really rewarding and…to go back to the album, right now I could potentially promote it a lot more, which would then maybe get me signed to an indie label, which would then open up a lot of doors for fun music festivals to perform at, and things like that. But since I don’t have money motivating me to reach out to the labels or get myself out there on social media or do any of these not-fun things in the short term, then I’m potentially missing out on a lot more fun in the long term so so that Buffett quote really made me think about FIRE in a new light and it made me think maybe the ideal savings goal to save enough so that all your essential expenses are covered and then continue working to fund your discretionary expenses. So to go back to the Buffett quote, that would allow you to do anything, because you could technically survive by leaving your job and doing whatever you wanted to at that stage, so you could do anything at that point but it’s not really enough to allow you to do nothing. Because you could get by and survive but there would be absolutely no fun in your life, which you wouldn’t want to continue for very long, so maybe that’s a good sweet spot…to save up enough so that all your essential expenses are covered so you can eat and you can have shelter and you can be warm and all the things that are essential for survival, so that then frees you up to do anything you want with your life but it’s not enough that you get comfortable and you do nothing. And that may be a good sweet spot for motivation but on the flip side, most of the really great benefits that I talked about at the beginning of the episode…feeling like you can handle anything that comes to you and not having the stress and anxiety about future bumps in the road and all those things…those only really started to come into effect when we felt like we had more than enough. So i’m not exactly sure what my conclusion is on this because on one hand, I feel like Fat FIRE is the way to go in in the sense that having more than enough and knowing that you’re gonna be okay no matter what comes around in the next few years or whatever, I think that is really valuable. But then on the other hand, losing money as a motivation is difficult because then you don’t have to do things and I think maybe you miss out on things just because in the short term, they may be a little uncomfortable and since you don’t have to do these uncomfortable things, you don’t but then you’re potentially missing out on some long-term benefits. So I’m not exactly sure where I fall on this but I think that maybe Lean FIRE is something to avoid because you don’t get either in that sense so you’re you’re not feeling like you have so much extra that you can handle whatever comes at you in the future years but you have enough that you don’t really have that money motivation to continue doing things. So I’d be interested to hear your thoughts on this but at least in my really early days thinking about this topic, I’m thinking maybe Lean FIRE is probably not the way to go and maybe one of those other two bookends is a better goal for your FI savings. But again, this is really early days in my thinking on this so i’d be interested to hear your opinions on it so head to madfientist.com/episode61 and leave a comment because i’d be interested to hear what you think about it. Continuing on from the having more than enough idea, I’m trying to also think about my spending and trying to deprogram my frugality in a sense, because as I discussed with Ramit Sethi on the podcast interview I had with him, I know that I’m a bit too extreme in that sense. And now that the market has recovered and finances are looking good, I know that I don’t need to be that frugal with things and I know that there’s potentially ways I can increase my spending that are not wasteful, because i’ll never be wasteful with money, but at least I can start thinking about ways to use my money in a positive and beneficial way, so that’s definitely something I plan to either write about more or maybe get Ramit back on the show to talk about more because I i feel like that’s a common problem with people like me, who are naturally frugal or have a frugal upbringing, sort of trying to deprogram some of that when it’s no longer necessary to be that extreme in your frugality. So stay tuned for a deeper dive into that topic and if that’s something that you’re interested in, subscribe to the email list, which is definitely the best way to stay up to date with this stuff now because i’m posting even more sporadically than I used to in the past because i’m obviously working a lot more on the music project. So if you’re wanting to just get updated whenever a new post or podcast comes out, just head to madfientist.com/advice and you can put your email address in there and you’ll get a pdf of all the great advice I’ve received on the Financial Independence Podcast from my guests over the years. And if you want to check out the past four years of my annual updates I will link to all of those in the show notes of this episode so you can go to madfientist.com/episode61 and from there you’ll find all the other episodes and articles about everything that I learned in my previous four years of FI. So that was a short but sweet one today. I have some other interviews coming up that I’ll be publishing soon but I hope you’re all doing well out there hopefully you’ve been able to meet up with your friends and family that you hadn’t seen for a while. Anyway, thanks a lot for listening and I’ll see in the next one! Related Post Valuable Lessons from My Fourth Year of Freedom It's been 4 years since I left my job and what a crazy year it's been! Here's what I learned from the last year of post-FI life (and the COVID crisis) The post Fifth (and Final) Annual Update appeared first on Mad Fientist .…
On today’s episode of the Financial Independence Podcast , I finally got to interview the person who introduced me to the concept of financial independence and early retirement in the first place… Jacob Lund Fisker from Early Retirement Extreme ! To my mind, Jacob is the founder of the modern-day “FIRE movement” so hope you enjoy the interview! Listen Now https://traffic.libsyn.com/secure/madfientist/early-retirement-extreme-interview.mp3 Listen on Spotify or Apple Podcasts Download MP3 by right-clicking here Highlights What Jacob has been up to since stepping away from ERE His experience being a financial quant and how it impacted his personal investing The problem with set-it-and-forget-it index investing The importance of staying flexible with your investing strategy Predictions for the next decade and the post-COVID world A systems approach to lifestyle design and why it’s beneficial Jacob’s thoughts on early retirement how they’ve changed since publishing Early Retirement Extreme His current projects and his plans for the future Show Links Early Retirement Extreme Website | Book | Forum | Wiki | Audio Book Early Retirement Extreme on Twitter | Facebook ERE 10-Year Update on Get Rich Slowly The Post that Started the Mad Fientist’s FI Journey Full Transcript Mad Fientist: Hey, what’s up everybody? Welcome to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence. I can’t believe it, but I am finally interviewing the person that introduced me to this whole idea of financial independence in the first place. And that is Jacob Lund Fisker from EarlyRetirementExtreme.com. I came across Jacob way back in 2011, I was reading GetRichSlowly.org, which I’ve interviewed the writer behind that blog, JD Roth, on a previous episode of the podcast. So I was reading his site, and he did a review of a book called Early Retirement Extreme, and it just blew my mind. And that was when I realized that early financial independence was possible. If you saved enough money, you could then live on it and not have to rely on work anymore. So I’d say that was probably the most influential article I’ve ever read in my life, because it completely changed everything. And over the years, I’ve heard lots of stories from people about who introduced them to the idea of FIRE. And, you know, Mr. Money Mustache is a big one. And even this podcast has introduced some people to the concept, which is amazing to me. But Jacob and ERE is what did it for me. So it’s an honor to be able to talk to the guy that changed my life in so many ways. So rather than ramble on here, I just want to dive into it… Jacob, thank you so much for being here. I really appreciate it. This is a long time coming. So I started this podcast way back in May of 2012. And you were going to be my first guest, because you were the entire reason I knew about this whole thing called financial independence in the first place. But I chickened out and ended up asking a guy named Mr. Money Mustache, who was also a software developer like myself. And thankfully, I didn’t know how big he was at the time and how big he would go on to become but yeah, this is, this is a huge treat to be able to talk to you after all these years. And to thank you for the huge impact you’ve had on my life. Because I was trying to think about it before this call and I can’t think of anyone other than maybe my parents and my wife who have had a bigger impact on my financial life than you have. And it was all from an article on Get Rich Slowly. And I think it was maybe when JD was reviewing your book back in 2011. Jacob Lund Fisker: Yeah, I mean, I think that was the one. I recently did a 10 year update and Get Rich Slowly as well. But I think that like only only two of them. But like, at that time I was I was I was mostly sort of like fading out of existence, like right when you started is when I more or less ended. Mad Fientist: Yeah, it was crazy. You just passed the torch to Mr. Money Mustache and that’s why I was like, well, I could talk to him because he’s a software developer. That would be fun. And yeah, it was just around that time. Maybe that’s where we can kick off because I’m interested to hear what you’ve been up to. So you had you had written the book. And it’s a fantastic book. I’ve read it at least three times. And you finished up what you were trying to say with the website. And you were moving on and you passed the torch to MMM and I believe at the time you were becoming a quant trader. Is that right? Jacob: Yeah, something I never quite sure what my title was actually supposed to be. But it was me staring at financial data…a giant screen setup and trying to see some patterns there. Mad Fientist: What was that experience like? And how long did you end up doing it for? Jacob: I was there three and a half years until 2015. Essentially, my experience…when I was sort of like a young physicist, so to speak, I was very dismissing of anything financing business. But as I sort of like, matured a little bit more and got into sort of like the postdoc era of my life, I began to sort of kind of get acquainted with the whole financial independence thing, I started reading into finance and economics and actually thought working in the business and Wall Street could be could be really fun. And but that was that unfortunately happened sort of like around 2007-2008. And then the great credit crisis essentially happened then there was like, tons of layoffs and all hiring essentially froze. And then I thought, Well, okay, that’s kind of like it for me. Just kind of forget about that. And so I basically did that. And when I was sort of writing on the blog, instead and I was always making these kind of comments about like, if there had been more physicists on Wall Street, maybe this wouldn’t have happened. Like total physicist arrogance, we can fix everything. And then one of one of my readers actually commented back and said if I’m still interested, maybe he could make that happen. So I was like, Yes. Okay, let’s try this, right, because my sort of philosophy is to try as many different things as you possibly can so essentially, sort of like self actualize to the fullest. By doing many different things, I’m learning many different things. So he essentially got me into the company in Chicago. So we left California in 2011-12. So basically, just before you started podcasting. So same time, I sort of took that as an opportunity to stop blogging because I really felt that I but said everything there was to say, in the blog, I finished the book, which was sort of like the canonical textbook of both FI and also sort of like the extended theory part of it, I mean, to be FIREd, it’s just like a small aspect of what, when I was sort of like going on about so so I did that for a few years. Yeah, I think the greatest takeaway…is how big a difference there was between, like the academic side, sort of like the internet armchair expert, and then the actual practitioners. Because in other fields, like science and engineering, you’re used to having one line of insight, sort of like goes from not knowing anything to maybe being like a hobbyist to being like a serious amateur. And then you have people working in the business. And then at the very top, you have like professors who understand everything. That, you would agree, is typically how it goes. I don’t know if that goes away in computing these days. But that’s how it would go in and like for example, physics, whereas in, in finance, or high finance, or like Wall Street stuff (Wall Street does not mean the physical location essentially means everything that has to do with trading and making deals that are outside the retail level), it has essentially forked. So they’re like two different communities that almost have like a wall between them. So you have, you have the academic side of it. And then you have the practical side. And what’s weird is that like the practical side is way bigger, way more well-financed, and in a sense more advanced. Whereas the academic side, they have essentially access to worse data, because data is expensive. So it will be something like end of day closing prices, you can get a subscription to that. On the actual practitioner side, you will have everything tick by tick from multiple different exchanges. There’s not just the market in the US. I mean, when I when I quit in 15, there were like 40 different I think, exchanges and dark pools just in the US. So way more data, and that sort of like leads to sort of like different interpretation, different behaviors in those separate groups. And yeah, so that was my biggest surprise. My biggest insight from it was probably how agnostic or how neutral people were, in practitioners are in terms of like, what’s the best strategy is more sort of like, Well, I mean, this strategy might be good for this. And this might be good for that. But all sort of like look at what works and and just go with that. It’s not like as a theoretical academic level, where it’s all an improvement and stuff we already know and Nobel Prize winners have shown that and therefore everything must cite back to something, some previous work. I sort of like the more dogmatic so I mean, I think that sort of like spilled over into the rest of my life. So these days, I’m so far less to sort of like fly off a tangent because someone is wrong on the internet. So I think that is sort of like the biggest life lesson in that. Mad Fientist: That’s a great takeaway. Did it affect how you view your own personal investments at all? I know back in the day, when I was reading you, you were one of the people that wasn’t on board with the whole buy and hold index investing, just set it and forget it sort of thing, which I want to dive into a little bit more. But first, did did your time in the industry on that practitioner side of Wall Street? Did that influence how you invested as an individual or a family? Jacob: Not really. I mean, first of all, it’s like what I was was doing was like completely different than what I can do as a retail investor. So no, that’s not really been any change, I will actually say I’m probably better as a retail investor than I was as a professional. I tend to be more risk adverse, and this is not optimal for the industry. Let’s put it that way. Like one of the fun things, where every everybody I work absolutely enjoyed playing poker. And I hate poker. I mean, that was interesting. I think in terms of the whole sort of like the index investing thing. I think the my reputation has been somewhat exaggerated in the FIRE movement. I mean, I wrote a few posts and asked some questions about the systemic effects mass adoption of index investing could have on the markets as such. And that sort of eventually turned into, “this Jacob guy who just hates index investing”. I think my bigger concern was the whole fire-and-forget attitude. Let’s, just hand everything over to an app. Let’s, you know, you want to want something quick and easy, something simple. So just do that. And then you can forget about it. Mad Fientist: I’d be interested to hear what you think of the FIRE movement? Especially, I think maybe 2017-2018 just seemed like it was going crazy. What were your thoughts on it at that stage? Because this is, you know, seven years after you felt like, you’ve pretty much said everything you wanted to say about it? Jacob: Yeah, I mean, it’s kind of like doing the podcast today. It’s like, well, man, I just like the 10 years ago, I’d forgotten all about it right now. And I need to revisit my notes, essentially. Yeah, I mean, it definitely hit the mainstream at that at that point. And, you start getting contacted by various journalists, because I mean, I’m sort of still known as one of the progenitors of it. And so of course, they want my opinion on it. And I think what happened, essentially, you get, like a different kind of different kind of exposure. I mean, if you started if you go like, way back, way back, if you go back to sort of like this, the present iteration, which I think kind of started with me, we were only like, at least I was sort of like the loudest loud mouth bunch, right? I mean, I remember sort of, I mean, back then FIRE was not a thing, that sort of financial independence was not a thing in the personal finance world. I mean, when I was starting up, I was like, you know, these like, blogging awards, and I was I was getting them for, for something like “Best in Senior Living”. Like “Best Entrepreneurial Blog”, like I hadn’t started into business, but that was sort of like the sort of the framework of sort of like the mid late 2000s that financial independence could fit into. And so I started out at this very extreme kind of thing, way out of the left field, you know, like, let’s try not buying anything for a year. So that was completely unusual to do that. And when this has now become sort of like a “Buy Nothing Year”. Back then was David Bach thing where it was like the latte effect, where if you just save $2 a day, you become a millionaire in like 100 years, or whatever, and the idea of retiring was that you would save up a million dollars, it was always a million dollars, so that he was to become a millionaire. Investing, I think, like the 4% rule…that was the thing. But it wasn’t really that wide widespread. I mean, it came out of the Trinity study but back then the Trinity study was only like 10 years old or something. So it was not the foundation of any way to sort of invest for retirement. It was more like I want to retire on this day and I have the $700,000 and I want to spend $40,000 a year, and then they would go back way around and then compute like a return of investment of 6% and so given those 6% what should the allocation investment be like. So that was sort of like pre 4% rule as a as a rule of thumb and a lot of people retired and invested accordingly. Right. And that kind of goes back to that warning about not adapting or sort of like integrating a very simple understanding of how to invest for the next 60 years, because some of these guys, you know, like, who retired in the 90s. And it was sort of like a mental model that sort of crashed and burned, because investing in some something aggressive at 8%, which was perfectly possible in the 90s, did not work very well between 2000 and 2007. Mad Fientist: So, would you be willing to share like sort of what your thinking is, as far as personal investment now, and like, you don’t have to obviously share any numbers or any actual strategies, but maybe just give a sort of an idea of what you’re thinking as far as how you invest your own FI portfolio? Jacob: Having invested for almost 20 years, now, I can definitely say that it changes, I mean, it changes, you change, depending on where I make money, I don’t make money. Depends on how big the network has become. I mean, if you are like starting in the beginning, then index funds, for example, makes like great sense. Because you’re not you don’t have to think very much think very hard about and you can concentrate on your salary instead, I mean, and sort of like a we agree way to identify that demographic is when they plot you know, your net-worth graphic, and it’s just a straight line up, right? Because stuff, you know, your dollar cost averaging is completely and utterly dominating the sort of market impact of whatever your net worth is like, maybe you’re, you probably have sort of like less than 10 to 15 annual spend so that’s essentially how we calculate net worth these days, like how many years of spending have saved. So if you’re below 15, then you know that the net worth curve always tend to be a straight line, because it’s dominated by salary. But then once you sort of get into get into the 25 Plus, and if you get even higher, I mean, my problem is, essentially, I spend so little that whenever people pay me money, I don’t know what to use it for. So this like, just keeps going, going up and up and up. I mean, right now, it’s like 130. And from that perspective, you know, like, volatility, or risk…risk for me is no longer volatility risk, for me is a permanent loss. Right? Maybe that’s another sort of like practitioner takeaway. These guys don’t care about volatility, they care about money that never comes back, right? Because volatility is only really relevant if you’re like, if you’re doing research, then volatility is sort of like, sort of like a very easy way to define risk, because you can calculate, you know, it’s the standard deviation, essentially. And it’s useful if you’re, if you’re a bank, and you’re sitting in the middle between a customer and a big pool of money, because I’m here to sort of like bridge between and you have like slippage losses. But for practical people, that’s the risk of permanent loss. So my personal strategy has tended towards becoming like a lot safer, you know, like belt and suspenders kind of stuff. My interest in investing, investing is also kind of going down. So I actually might end up just like, putting everything into a Global Fund, or something I think I worry most about are the cases where someone comes in and says, I don’t care anything about investing or finance or anything, I just want sort of like a one stop solution for my post-FIRE life. I don’t know what what to call that risk…like an ignorant risk or paradigm risk? Because I mean, paradigms change. I mean, they change every 10 years. I mean, you only have to go back 10 years, look at the real estate bubble, and see how that was sort of like, in many ways in the US, not in Canada, where it didn’t pop. But here, it was many ways driven by by sort of the same dogmatic slogan based understanding that you tend to see in sort of, like, I wouldn’t say it’s like the entire FIRE movement, but there are many, many in the, in the fire movement that have had sort of like the same thing like, well, they’re not making any more land, just by the biggest house, you can, because you’ll never get this chance again. They’re not making any more often. Just paint the walls essentially. And you can, you can go back and see these kinds of ideas like fail over and over and over again. Because people change their mind. I think it’s like a twofold I mean, you can sort of feel the two ways you can have the paradigm shift under you, and then essentially like miss the terrain. Or worse, you can keep insisting that that one strategy you learned when you’re 25 is still valid when you’re 50, right? So like, so the dominant paradigms are essentially been index investing since the 2010s is like when that exploded, and part of the reason it exploded was, of course, because interest rates were both dropped and then you had all these quantitative easing things, both in the US and in Europe. And you could actually plot like the stock market index with bands when when you have quantitative easing, the market goes up, when the easing stops, it goes flat. When it started again, it goes up again, you know, that’s not that’s, that’s not really a booming economy. That’s like, an economy, on heroin or something. I mean, that’s just bad. And then you can’t keep doing that forever. What I mean, so far, so good, right? And if you if you sort of, if you said like this is what’s actually happening in, in sort of, like the practical world, and on Wall Street, I mean, I knew a bunch of like, value investors. That’s not what I was doing, but people doing value investing, and sort of like getting depressed. Because everything was like completely overvalued. There was like nothing to buy that made some sense, right? So they’re just sitting on piles of cash waiting and waiting and waiting. And if you’ve been waiting for 10 years, right? You can’t keep insisting that you are right and the market is wrong. I mean, you can only do that so long. So that’s the tricky part. Going back, so you had like real estate in the 2000s. And a little bit again after it recovered, people got into it again, and now it’s called house hacking. It’s always a new new word. You had .coms in the 90s but obviously, not anymore, right? A little bit again…the five biggest companies in the s&p 500, that’s 20% of the index, right? They call the giants like Facebook, Microsoft, Apple, Google, and I totally forgot one. And they’re like, 40% of the NASDAQ. How’s that for diversification? Anyway, go back again…So in the 80s, it was commodities and CDs, like bank CDs, because the interest rates were so high. You can’t get anything out of that anymore. So like a safe CD investment from the 80s would completely bomb, right. 70s, gold. My uncle collected stamps. Essentially because the market flatlined, and bonds were not doing anything so people were just buying collectibles, thinking that that would sort of be the thing. In the 60s, it was like blue chips. I just want to buy the big companies, and you’ll be safe forever. And as a result of that the multiple expansion was immense. So similar to what you see today, in internet stocks, you know, we had like PE ratios above 50. So like, that would take decades for these people to actually like return a decent amount of sort of like economic profit, as opposed to just like greater-fool profit of people like buying higher and so on. So I mean, the thing is, the biggest mistake one can make is to believe that you, you know everything there is to know about investing. But sort of like you have this kind of like dogmatic mind. I’m not kind of like super insist that everybody become an expert on this. But I do think that I think the least people can do or should do is sort of like pay attention from time to time, like is index investing still a thing? And if it is, cool…just keep doing that. But if everybody around you have sort of like moved on to something else, whatever that is, maybe it’s time to start questioning whether you are still the genius you think you are right. Mad Fientist: I think that’s great advice. And it seems like right now is potentially a paradigm shifting event COVID and then all the money being pumped into the economy. What are your thoughts on that? Have you have you spent any time thinking about what this means for the next decade? And what’s going to be the big thing for that? Because it does seem like this is a turning point, potentially, in how people think of investments and what the government’s ability to get involved is. Jacob: Oh, well, investment wise, I haven’t really done much. I was already like a belt and suspenders. I mean, it was kind of shocking to see things dip that fast, right? That was crazy fast compared to say 2008. 2008 was sort of more like a slow grind. I lost 1% today, tomorrow I lost another percent. And after 30 days, you know, you’re just sort of getting punished every every day until you’re sick of it. And then when when the maximum number of people were sufficiently sick, it flipped, because there were no more that were willing to sell and it went up again. Here, it was more like slam slam, and then suddenly way up again…it was crazy volatile. So there was like a lot of people in the futures market that just had like a field day with that. So for them it was good but for buy-and-holders, it must have been very interesting. But of course, the government immediately practically guaranteed all their corporate bonds, right. So they were dropping. So you have like AA rated bonds, that should normally be almost like treasuries losing, I don’t know, 20-30% like over a week. I mean, that’s insane. And then they gain it just as fast, as the government comes in and backstops the whole thing. What’s more interesting to report on COVID from the ERE perspective, because ERE was originally not intended to be some FIRE thing. It was certainly more intended to be be sort of like a resilient lifestyle, like a low resource intensive lifestyle. So if we were to run into limits to growth in the environment, would it still be possible to live live well. And so for me, it has always been about, highly efficient living, and how to make it resilient and not become financially independent, as much as becoming like economically dependent, like independent of the economy. And so that, essentially is like ERE at the higher level. And if you do that, then FIRE just become a nice side effect. You know, if you have a job, people pay you money, but you don’t have anything to use it for so you just park it in a savings account, which is actually what I did myself for, like the first five years until I found that there was something called investing and the crazy idea, like using money to make more money. I mean, that was just bizarre to me. I mean, I’m an immigrant. I’m from Denmark, where like, stock investing was not a thing, and really wasn’t. Put money in bricks in housing, but owning stocks and bonds, that was just weird. So with COVID, you know, being independent of the economy already, there was like practically no change in the way we live here. And on the forum, we had sort of like a slight tension between what you would call like the traditional FIRE people sort of like high incomes and total belief and like comparative advantage…it’s kind of like the, I’m not gonna spend my time fixing a flat on my bicycle for $15 when I’m making like $50 an hour. So you see that attitude a lot, especially the more people earned, the less they are willing to deal with the little things. And they suddenly realize, it doesn’t really matter I have all this money when everything is on lockdown and I can’t do anything. Whereas for sort of like the resilient system I build up and then some of the other guys that build up instead it was like wow, this is what we’ve been prepared for practically. And so there was actually a lot of shifts in sort of like the one dimensional money only consumer/producer kind of thing, towards the sort of like more systems theoretical way of integrating your production and your consumption in your personal life so you’re no longer just having money coming from this side, so you earn it here and then you buy stuff here to solve the problem. It was more like the total solution. Mad Fientist: That’s one of my favorite parts of the actual book. And ERE is one of my favorite finance books and it’s not even really a finance book, as you said. It’s more a philosophy book about overall life strategy and systems and yeah, the the financial independence part is a byproduct of that life but it’s the systems approach to lifestyle lifestyle design that I really enjoyed and I still think about it a lot. Like when Mr. Money Mustache bought that piece of property on Main Street and had this like community thing. I thought, that’s a such an amazing idea because I’m an introverted guy but I do enjoy meeting people in my community and socializing. I was like, that’s a great idea. And now he has this place that just sort of, like promotes that. And at the time somebody was talking about maybe starting a brewery. And I thought, oh, that would be ideal because you get the forced socialization, you’re building something, you’re building a business, which is always fun and challenging. But on the health side of things, which in your book, you talk about how the second order effects of some decisions and how it could be negative positive. And for something like a brewery, it’d be great for the community, the socialization, the challenge, the creation/creativity, things like that. But it’d be terrible for the health side of things, because I would find myself drinking more beer. So it’s definitely something that I’ve kept in mind over the years. And it really does help me make decisions. And it’s like, okay, this seems good at first but what’s the knock-on effect? So yeah, I was wondering if you could maybe talk about how you’ve used that thinking in designing your life and how that has made you really resilient for a pandemic? Jacob: Yeah, I mean, so like, I almost feel like sort of like, describing the whole thing. Like, the book is very much about like, contrasting and comparing what we grew up with taking for granted, which is essentially the idea that you specialize in a job, you get an education, you specialize in a job that gives you earning power, and then you potentially measure how successful you are in terms of how high your earning power is. I mean, in the English language, we even have like expression, how much are you worth? I mean, when, when we ask that question, we want to know, like, you know, it’s the money question, practically. It’s not like how nice a person are you or what did you do for your community. I mean, it’s really, are you making lots of money. And along the same dimension, happiness equals spending. And I mean, I don’t know if I’m, like, projecting too much, but you can see how, how FIRE kind of developed into lean FIRE and fat FIRE. I’m obviously somewhat even more extreme than lean FIRE, but fat FIRE often sort of accuses us on the other side of like living a life without happiness because we are sacrificing so much, because spending is happiness. So I mean, it’s not surprising, from even like, from you’re like 10 years old, from the time you’re old enough to watch ads, right? I wonder when that when that happens by age three? You do get sort of like continually reinforced that if you buy something, that increases your happiness, you get a shot of dopamine. Or if you had a problem, you pay someone, so all you need to do is earn and then you buy. So you’re in this kind of cycle. Personal Finance when when I started with it sort of tried to step out a little bit of that. I mean, if you’re sort of into the spending equals happiness, it’s no surprise that like half of Americans end up not having any more than $400 for one emergency. Right? Which is tragic, crazy. I mean, it shouldn’t be that way, right? So like, initial personal finance then becomes about like prioritizing your spending and not just like blowing your money left and right and then trying to keep everything together with credit cards. And people started learning how to budget you know, that’s a basic skill. I don’t know if they teach this in schools today. They didn’t when I was young. To a large degree, people are not taught sort of like the fundamentals of the society they live in it’s kind of like fish swimming in water, right? I mean, they’ve not discussed the water ever. So to them the water does not exist. And to a similar degree, the whole idea of earning and buying as a lifestyle is not something people see from the outside. It’s something that they can’t see because they’re inside of it. So, in the blogging world, it’s almost like getting an education, when you get into this, from sort of being blind to the water and then getting out. So you learn to budget and prioritize. And then if you’re a little bit more advanced, you start optimizing your budgets. Where is my money spent best or how do I get the best deal out of this. But it’s still sort looked at in isolation. Like, what is the best car here? Does this car make me happy? You know, are we getting the maximum return of my money in terms of like, my choice of driving, how do I make the best food. So it’s all sort of like seen as individual things to optimize. You want to spend money well so you have all these like Consumer Reports review. And the underpinning of all this is of course, specialization and comparative advantage, people are distinctly sort of like pushed back towards, you just got to earn more money, because you’re wasting your time if you try to learn other things. You can suspect that half of the economy is just in the, in the business of like creating problems for the other half of the economy to solve. I mean, this kind of like with the brewery. So you drink beer to become happy, but then you also become unhealthy. And then you have to take some other drug that makes you healthy again, but that drug has side effects. And now you have to take a drug to remove those side effects and perhaps pay someone to administrate that whole business. So this is kind of where the ERE book, where that philosophy comes in, because first of all, it kind of describes this screwed up system we’re living in. So it kind of like takes the fish out of the water. Look fish, you’re swimming in this pool of water. So I introduced the concept of the Renaissance man or Renaissance person, which was sort of like an early idea of the Enlightenment. Today, it’s more like a general polymath, I think would be the right word. But essentially, the idea that humans have potential to become many different things, and you should strive to develop in that way. You can kind of contrast it with today where any kind of education development practically stops after college. But you should also development in many other directions, like you should be healthy, should to be able to sing, dance, play an instrument, create art, all kinds of things. So essentially, in the Renaissance idea was the view that a person should be skilled in many things, which is like completely different than the industrial idea that you should be like skilled, very skilled but in only one thing. So once you’re skilled in many things, then that essentially implies that now you can start doing many things, you can do different things, instead of paying someone else to do for you. That’s kind of what you described with MMM’s mainstreet operation or the brewery. Everything you do has some outcomes, and it always has more than one outcome. There’s always a side effect, some where you got to sort of ask yourself, is that a productive thing or a bad thing. I refer to those as goals. So like, for instance, like if you had a brewery and you make beer, drink beer, then that has the goal of like making you drunk or whatever. But it also has the goal of making you unhealthy. So goal does not imply anything positive…it is simply an outcome. And so the systems theory comes in when you start connecting these goals. So instead of just optimizing single points, like which is the best electric car, you begin to consider which side effects does this have. Are there side effects to the side effects? And do I do something that’s productive, but also counterproductive. And so everything is then arranged and it’s almost kind of like…so a system is essentially like a network. That’s probably the best way to describe that. So in a network you have like nodes and connections. You have computers and cables between them. So it’s like a network and systems thinking essentially means looking beyond the given node or the given action to see what impact does this have on the system itself? And so systems it’s not no longer the money flowing around like it would be on sort of like the one dimensional linear earn-spend thing. It’s also like happiness, health, meaning, skills. So I call it the web of goals, essentially, but could also call it the net of goals but the reason I call it a web is that if you look at it almost like if a fisherman’s net or web for catching something. Actually a spider’s web is probably a better example. If it breaks in some part, like you fail to reach a goal, like seeing back when I was trying to become like a quant in 2007. And I was reading all these like high finance, like complicated finance, how to price options and all that kind of stuff. But I failed at doing that. So that goal was essentially eliminated. But because it was aligned up with other productive goals, it meant that I could still use that knowledge to invest for myself and not like, you know, do harm to my own financial well being. So in that sense, the web of goals is extremely resilient. You can cut parts out of it, and it still works. Whereas if you’re sort of like a specialist, who consumes…if you lose your ability to consume, then suddenly you have nothing, right? That was like the COVID experience, right? Oh, my God, suddenly, I have to learn how to cook my own food, because I can no longer go out seven days a week. That happened to a lot of people, right? I mean, there are people who eat out every single day, they literally cannot fry an egg. I’m not exaggerating. And the other completely different perspective in the book is, of course, going back to the idea where spending equals happiness…to me spending money is bad in that sense because that implies a poorly designed system. For me, spending money is resolving friction in the system. It’s because something is not moving naturally. It’s not well thought out. So I mean, I’m not impressed when people say, “Well, I spend $100,000 a year.” It’s like, wow, you must have a lot of problems with your system! And that’s essentially the book in a nutshell. And then there’s like, maybe 20 pages on the math in case you want to declare financial independence. And that’s mainly because I got a lot of pushback, “You can’t become financially independent in five years if you don’t have a million dollars.” Mad Fientist: So to go back to the system, the web of goals, and the systems you have in place…your systems must have been so dialed in, even back in 2011, just because of the amount that you guys were able to spend per year means that you had removed all the inefficiencies and were able to really just not spend that much. Because I think back in the day, I think it was when you were in San Francisco, which is thought of as a very expensive city. And yet you guys were only spending something like $7,000 a year. Have you felt like your system has improved even since then? And I’m sure it’s a constant thing that you’re working on and adjusting. And has your spending increased at all over the years or it has it actually decreased since 2011? Jacob: It has changed. Compared to like a normal consumer, our budget looks completely different. And, like we spent like 60% of our money on unavoidable stuff like real estate or health insurance. We cannot we cannot eliminate it. So if we move like west of the Mississippi, where real estate taxes are a lot lower, we will be spending even less than $7,000 per person. So like two adults $14,000. The problem also when you go back for 25 years, inflation becomes a factor. If I spent like $6,000 in 2000, I would not be spending $6,000 today. I’m getting old enough where this seems to become a factor. But on an absolute level, yeah, about $7,000. We were not in San Francisco, we were on on the other side of the bay. We were on the East Bay. But we had to rent a house there, until we got the RV, and that exceeded $7,000. But otherwise, since I moved away from home, it’s always been about that low. So I’d essentially kept my student stipend budget ever since then, which is, which is a lot easier than if you got used to living at $50,000 a year, $100,000 a year, then going the other way is a lot harder than not going up in the first place. What has changed is the system. So the web of goals changed as well. I mean, we’ve tried many different ways to live on $7,000 at this point. Mad Fientist: So what does life look like since you stopped working as a quant? What have been some of the things that you’ve been interested in learning? Like you mentioned, the Renaissance man idea where you’re constantly learning new things and developing new skills…What’s been keeping you busy since the quant days finished? Jacob: Yeah, so we bought a light fixer upper. So I mean, that’s another thing where sort of like growing up with a wide assortment of skills. Can they take down a wall and put it up again? And in my case, I came in with absolutely nothing. I mean, I can just about like, drill a hole in the wall. That’s my childhood education. So there was a lot of figuring this stuff out. I renovated our bathroom, I built new cabinets. So I’ve been into furniture making for quite a while. So we fixed up the entire bathroom for 50 bucks, I think. So it’s a learning all these little things. And then recently, I’ve started like building clocks out of plywood. Mad Fientist: Rereading the book recently, to prepare for this interview…I read it way back when it got released and then I read it again, when I was gonna ask you to be on the podcast five years ago, and then I wimped out and didn’t ask you. So then I read it again, in anticipation for this. And you predict a lot of things and they seem to have been coming true in lots of different ways. So my two questions…is there anything that’s changed that you wish you had written in the book? Has your thinking changed in any ways that you think, “I actually should have changed that”? And also, where do you think these ideas go in the future? Jacob: Yeah, so it kind of goes back to that thing about working in finance, becoming sort of more neutral in attitude or seeing more perspectives..Definitely when I wrote it, I had one perspective, which was my perspective. And if I wrote it today, it would be less edgy, it would be more understanding of other perspectives. So it’s not just like, these guys are crazy. I think there was there’s definitely been some growing up in that sense. Also, from interacting with different people, I’ve become lot more cognizant of different perspectives and limits and more understanding in terms of…I mean, back then I was like, “Well, here’s the book, you just read it, and then you change your life”. Now I realize it’s a long process. And it’s not from here to here…it’s more like sort of like a step. And sometimes people might be sitting on the same level for a long time and be fine with it and then suddenly have some kind of epiphany. But that is not necessarily an epiphany that goes all the way to sort of like what I consider the full ERE. It might just be a next step. So we’ve sort of like mapped out the pedagogical challenges of this stuff. In terms of the technical stuff, I’m sometimes amazed at how smart that book was. I don’t know if I can write it again like that. Since you go back and you read some things like oh, this is really good. So it’s kind of sounds a little stupid because I think I should be able to write a better book now but I really doubt myself that I can do that. I think being more understanding of different perspective kind of tends to clutter the mind. Instead of just presenting one perspective, there’s a lot more, “But what if?” and “What about this case?” and “What about that case?” sort of like taking up my mind space these days. I wouldn’t say I have particularly more I experience and sort of like the pure technical sense but I have talked to a lot more people since then. So I have their perspective. And of course, one of the huge problems back then was that there will not be many examples to draw on. So it all fell on me, right? I kind of realized that I’m a somewhat unusual or weird person compared to…if you pick some someone at random, right? I mean, for example, we don’t have children. So a lot of people will say, “Well, I mean, that’s easy for him, because he doesn’t have children”. But that’s not the best way to learn…to just try to copy someone and try to be like them. I mean, it’s better to understand why they’re doing what they’re doing, rather than who they are, what they’re doing, and then try to do the exact same thing. Mad Fientist: Exactly. And that’s why that’s why the book is so good. And I think maybe why it’s so timeless, and why it was just as enjoyable reading over the past few months as it was, you know, way back in the in the day, in 2011, because it’s more like…I think even mentioned in the book, it’s not a to-do list or a guide, or even a map, it’s more a philosophy that you can use to make better decisions, to make your own map and figure out your own to-do lists based on that. Jacob: I was I was very deliberate, trying to make it as timeless as possible. Or as non-timely as possible. This is also why there’s no sort of deep investment – deep is a very terrible word, it is actually quite deep in terms of investment insights – But there’s no details. So there’s no 10 step to it, just buy this fund and that fund and that fund, and then then you’re good to go. One of one of my quirky hobbies is to go into a thrift store and then like pick out popular investment books from like the 90s. And the 80s. And the 70s, if I can find them. Something like from the 80s… how to get rich with CDs. And I didn’t want to have written a book like that. Give someone some advice, and then turns out to be terrible like 10-20 years later. Mad Fientist: Well, we’re coming up to over an hour already, which is crazy. So I don’t want to take up too much of your time, but if people want to get in touch for any reason, is the forum, still probably the best way to post questions and get answers? Jacob: Yeah, the forum is where the action is. I mean, it’s, at least some people have figured out the blog has been on like, auto rotation for like, eight, nine years now. I don’t really write anything, but it’s still presenting new stuff. But I mean, the forum is kind of like the grad school of financial independence, if you want to put it that way. It’s not really a place where you go and ask, How do I how do I set up a brokerage account or something like that? Mad Fientist: Well, this has been fantastic, Jacob. Like I said at the beginning, you’ve you’ve impacted my life in more ways than I would have even imagined it would have impacted me when I read that article way back in the day. So, thanks for taking the time to do this. Thanks for writing. And writing the book. I usually ask all my guests this final question…what’s one piece of advice you’d give to somebody who wants to achieve financial independence? And it could be about anything. So I’d be interested to hear what you say. Jacob: I’m the worst person to ask that question. I would say just find someone who motivates you. You can only learn from someone who’s slightly ahead of you and not someone who’s far ahead of you. But once you’re no longer learning anything from a given teacher, then it’s time to move on to the next teacher. I think the best advice is to find the right teacher. Mad Fientist: And it’s a good time for that. That’s one big benefit of this explosion in people writing and talking about FIRE…you can find that next step. Well, thank you so much, Jacob. This has been an absolute honor to speak to you after all these years. So thanks again for coming on the show. And yeah, hopefully meet up with you in real life one day and we can chat about more stuff Jacob: Once the pandemic is over. Mad Fientist: Absolutely. Thanks again, I’ll talk to you soon. Take care. Related Post Mr. Money Mustache - Early Retirement Made Easy Mr. Money Mustache shares his financial independence and early retirement secrets in an interview for the Financial Independence Podcast! The post Early Retirement Extreme – A Systems Approach to Lifestyle Design appeared first on Mad Fientist .…
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