The Only Financial Plan You'll Ever Need

welcome to the BiggerPockets money podcast where we discuss how to create an investment philosophy that's what we're trying to do here is get something simple that can take your um the philosophies or the key things that you want to carry across many years in your in your investment plan uh on a piece of paper you can align on it with your spouse for example or hold yourself accountable and not do things that are crazy uh one two three four five years from now because you've already aligned on with yourself with your spouse on what you want to do long term hello hello hello my name is Mindy Denson and with me as always is my investment philosophy plan creating co-host Scott Church wow thank you Mindy here with me as always is my financial planning and super master of Finance Mindy Jensen I like that super master of Finance I'll take it Scott and I are here to make Financial Independence less scary less just for somebody else to introduce you to every money story because we truly believe Financial of freedom is attainable for everyone no matter when or where you're starting so long as you have a plan that's right whether you want to retire early and travel the world go on to make Big Time Investments in assets like real estate start your own business or build a financial Empire we'll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams ooh I like that build a financial Empire before we jump into today I am going to say the contents of this podcast are informational and they future and are not legal or tax advice and neither Scott nor I nor Bigger Pockets is engaged in the provision of legal tax or any other advice you should seek your own advice from professional advisors including lawyers and accountants regarding the legal tax and financial implications of any financial decisions you contemplate and the reason I do that is because today we're going to talk about creating a financial investment philosophy and I think that it's really important to have an investment philosophy before you start investing so you're not just investing in this and investing in that and willy-nilly and you're kind of all over the place in scatterbrained so Scott you created a lovely document called investment philosophy one pager template very clever we talked about this on a recent episode with Zoe and we're going to go through it step by step because I think that if you are just getting started in your investment philosophy you might need a little bit of help sounds great I'm always happy to talk about this and and this is something I found is very powerful for myself all right we have a link in the show notes which can be found at biggerpockets.com money show362 to a link which is a download from the BiggerPockets website which is Scott's document uh that he created the investment philosophy one pager template uh it's actually more than one page because it's a fill in the blank Scott why should someone create a financial plan or an investment philosophy this this did not start out as a fancy schmancy document that was well this is like two columns and Microsoft Word for me when I when I put it together and a little header with all that it sounds like uh the Bigger Pockets team is is making it fancy which is you know uh flattering but you know you could you could do this on a piece of paper a piece of of of a notebook paper uh with pen and paper you could do it in a Microsoft Word I like forcing a philosophy into a single piece of paper because it's easier to digest if your investment plan is 40 pages you're never going to review it you're never going to stick with it saying it forces simplification and Clarity so I like the fact that it's one page or something simple uh there's a book called the index card that's a great thing to do right but you put your entire financial plan on a single index card that's what we're trying to do here is get something simple that can take your on the philosophies or the key things that you want to carry across many years in your in your investment plan on a piece of paper you can align on it with your spouse for example or hold yourself accountable and not do things that are crazy uh one two three four five years from now because you've already aligned on with yourself with your spouse on what you want to do long term so I I find this is a helpful tool it's a very simple tool yes we provide a template I'll be happy to share the things that are in mine but this has got to work for you it's Gotta realize the goal that you want to achieve with your financial plan okay I think that's really really important Scott the the one page versus the 40 pages like you said you're not going to stick to it you're not going to review it if it's 40 pages long your document is one page and we are going to go through it I like how you've got different options in your well we're going to go through it right now um what I the reason that I wanted to do this episode is because we speak to people every week about their finances and their Investments and their their financial situation and what I see is that people don't have an investment philosophy they're investing but they're just investing because they should as opposed to because they want to specifically um so your investment philosophy in my opinion is your rational calm thinking self thinking about what you truly want in your investing and for your future the plan that you stick to that can guide you through those chaotic frantic times when you're second guessing yourself I know I want to put in a thousand dollars a month into the stock market so then that means that you put a thousand dollars in the stock market every month regardless of what's going on in the stock market if it's up if it's down you're continuing per your investment plan your investment philosophy or I want to be 60 40 in real estate versus stocks then you need to look at where you're allocating your funds if you're putting everything into the real estate market then you're not putting 40 into the stock market you need to frequently come back and review your investment plan how frequently do you in review your investment philosophy rarely right I mean it's it's there and I execute against it right so you know what I review much more frequently are my goals from a quarter to quarter basis um and what I want my life to look like in a few years the investment philosophy is intended to be a philosophy that I maintain throughout my life so I don't have to review it very often the power comes I mean how many Finance Fridays have we had Mindy on the show where someone comes on and they're like what should I do with my money and we're like well what do you want in a general sense in life and from your future financial position right it's it's almost impossible to answer those questions with that so one practical application of this for example is is let's take let's take an ordinary middle class American making somewhere between 80 and 120 000 a year in household income right they're paying down their mortgage they're paying they're contributing to their 401K they have a small emergency Reserve where are they going to end up in 10 years they're 30 years old right they're going to end up with 500 000 in net worth let's say 200 250 in their home equity 215 retirement accounts 3 000 in the bank and seven thousand dollars in credit card debt living essentially month to month paycheck doing all of the right things and maxing out their their retirement accounts and paying paying their mortgage down right they're just not going to have any freedom until they're 65 right and to stop attempt to move for example that's hard you're gonna really you're gonna move your whole house and your whole life in order for Financial Freedom are you gonna are you gonna stop contributing to your 401k no but if you have a clear picture of like no here are my investment philosophies I thought about this and in five years I want my portfolio to look like this or seven years or ten years now we can begin making large life decisions and say no no that's consistent with My Philosophy it's consistent with the way I think about things and I can actually make these fairly dramatic changes that will compound in a meaningful way over time in alignment with something that makes sense to me that I can actually back but most people I just I don't think think about it they don't even they're not even like there's not even a concept of oh in 10 years my portfolio can look like this or like this and it's dependent on where I allocate my cash my time and where I rest my head at night for example okay so how frequently would you recommend somebody who is just starting out with an investment philosophy to review it so that they continue to stay on the path I think you gotta you have to create it and then you have to iterate on it a few times and you and then you you review it as frequently as you need to to believe it and internalize it right maybe we practice helpful if we went through some of it for example so I could I could I could illustrate those points okay let's start off with goals great so the goal so the the like that that we have to start with the end in mind what do I want that portfolio to look like in the future and I like to start the goal with a statement right so my goal is to maintain and fortify a financial position that sustains permanent Financial abundance with Diversified income streams across multiple asset classes right that's an abstract statement that's a that's what I want to do maintain and sustain I want to build a large financial position lots of passive cash flow coming from different sources so that might so that I can live the life I want without significant dependence or risk on a single asset or asset class with that so that's that's an abstract statement another part of the portfolio though begin or the the philosophy maintains a Target state so in 2025 for example three years from now I want to have a specific uh uh Financial goal I want to have a large cash Reserve I want a certain amount of my position to be in equities a stock portfolio I want a certain amount on my position my net worth to be in real estate I want a certain amount of my net worth to be in this business Bigger Pockets that I that I lead I want a portfolio of books which for me are part of my financial plan and and and and have and have assets I want to paid off primary residence or an income producing house hack I want no Consumer Debt and I want a lifestyle that costs less than about ten thousand dollars per month those are that's my so that I have a goal at the highest level and I have a Target state in three years that I want to back into that's a very clear picture that I can begin making large-scale asset allocations decisions um in order to to realize that Scott I love that I have that as step one your create a goal for your investing in step two determine your target State and you have suggestions in here but this is this is something that you're going to have to determine on your own uh you The Listener because your investment philosophy isn't going to look the same as Scots no two people are the same and that's okay your your investment philosophy doesn't have to be anything like Scott you don't have to have any of the assets that he has you can have a whole different set you just have to have a reason for making your Investments the way that you are making them uh let's look at how to not second guess yourself when creating a plan and executing yeah so so that comes down to what I what I call Core tenants like what are the the things that are never going to change about your philosophy that you can that you can feel really confident in over a lifetime for example that's hard um I have seven core tenants for my my investment philosophy that are almost certainly not going to change across the course of my life so the first one is never spend the principle when I invest a dollar ten thousand dollars or a hundred thousand dollars I assume I'm never gonna spend that in that part of the investment only gonna spend the returns generated by that portfolio that's the only that's the only dollars from that investment that I can use to fund my lifestyle um because the principal is what com is what is is what it is it's what I'm investing and what I what I want to harvest over a long period of time I don't want to kill a Golden Goose right so the second one takes that my second tenant takes that to another level it says I'm going to reinvest most of the returns that my investments produce so not only am I not going to spend the original ten thousand dollars I invest but if that generates a thousand dollars I'm actually gonna uh invest more than five hundred dollars of that investment of the returns generated right of that thousand that's more than fifty percent of that that allows me to continually build the position over time that feels like a very a super strong um Financial Foundation now these are tenants by the way that are in the acquisition or the the um wealth building phase in a retirement State I would change some of that and I'd Harvest a greater percentage of the returns of my portfolio um so so I guess the tenants can change once once the the philosophy is achieved the the future state is fully achieved there third to invest one must have capital right so what does that mean that means that I need to be if I'm if I'm an investor I'm putting dollars into something right now a great what is it what does that mean well at Bigger Pockets part of my interest is capital interest in the business right uh I'm the CEO of the business and so I have interest in that so I I'm sort of an investor in Bigger Pockets but I don't consider those necessarily Investments that's that's a form of compensation for example I'm a manager of the business more than an investor in a lot of ways I want to think like an investor in those types of things but you know a lot of investors are going to go out and raise a bunch of capital uh for an apartment complex that's great you're doing a job and managing a pool of capital to run that business it's not investing so I want to make sure that my portfolios my portfolio the future state is truly investment income and I'm going to separate that mentally from income that I'm the manager or or uh wealth that I am the steward of right as a CEO for example or or a business manager so fourth I believe that investment returns and related do not correlate with effort instead they can they fifth are impacted by knowledge so I'm gonna I'm not going to build a portfolio that requires me to work it over time I'm going to build a portfolio that bring where the advantages to that portfolio the wealth I'm going to produce is impacted by my my the choices I make at the highest level um around a capital allocation which properties I purchase those types of things sixth my my this tenant is do not confuse volatility with risk I maintain a long-term Focus right the stock market is going to go up some years by in a lot um and in 2022 it's going to come down 20 25 right that's volatility over 30 40 50 years because I never spend the principle however I can understand that that that investment in stocks is likely to produce that eight to ten percent return and feel very comfortable with that I'm very comfortable with the concept of volatility and I separated my mind from risk risk to me is having less wealth over time or delaying that that position in which I achieve um permanent Financial abundance with Diversified income streams right risk is not the stock market might go down 25 next year risk instead is I invested in bonds at three percent a few years ago made very little and had a huge opportunity cost to investing in stocks that's a higher risk decision for me and then my last tenant is the best investments are specific to my situation I have a specific set of skills I am a real estate investor I was willing to house hack for a very long period of time I may do that again at some point I am an author um I host this podcast there are specific and Investments or things that I can do that are going to produce a better return for me if I'm willing to take the time to learn about those things and invest in in getting them started or or going over a period of time and I believe that many people have those types of opportunities if they're willing to look at them and harvest them and I'm going to spend every 90 days or so make another bet that is high quality that um that will that that is specific to my situation that could help me advance towards the achievement of this philosophy how did you come up with these tenants this doesn't sound like something you sat down and banged out in like five minutes interesting question they kind of have developed over time um and and really I think that they you know it comes from writing I'm I'm I I like to write to collect my thoughts on a lot of things and so I think when I was you know I think I really honed in on them and identified them in the context of a blog post I was producing for Bigger Pockets and I was like this is it this is how this is how I'm going to invest for the rest of my life um in a in a fundamental sense and I think that could probably be a powerful tool right this is not overnight stuff this is stuff that like again you have to iterate on you ask me how often you look at this well I probably obsessed over it for many many hours in a long-term context to get to something like this and then I don't have to look at it anymore because it's internalized right uh at least not that not that frequently but like you need to have these things done because if you don't believe if you don't if your philosophy is is something other than never spend the principle people it's going to be really hard to invest in stocks over a with a 30-year time Horizon Outlook and watch that thing go up and down 50 percent um 70 90 in the Great Depression right um you know these things are going to happen over the next 30 50 years but if you haven't internalized them with things that you're you're very comfortable with and over a long period of time Parts your philosophy needs to adapt to those things okay that's a great that's a great Point uh let's look at bonus considerations you have several bonus considerations here how did you come up with these yeah so these are things that I've added to those tenants and these are probably going to change for me over times these are not as these are more fluid uh and these are again these are personal to me they're just examples here but as if you're using a document like this you need to come up with your own core tenants and considerations that that you want for your portfolio so a couple of things that that I would add on to those core tenants are I believe that great Returns come from concentration not diversification now that's juxtaposed with the fact that I eventually want Diversified income streams right and and I'm comfortable having conflicting ideas in my head with this right to get to where I want to go fast I need to be concentrated right think about think about when I'm when I'm starting out my journey um my first investment was a house hack I was making 50 Grand a year I had twenty thousand dollars in cash essentially and nothing else um after the first year I saved it the twenty thousand dollars I put it all into real estate that's not a diversified position it's a concentrated one I I put I bought a 240 000 property it's five times my annual income um for that that property it's an all in bet highly concentrated and for me that was the right decision and I believe that that isn't except what accelerated my returns much more than if I had bought an index fund a diversified you know well-diversified Index Fund for example today much of my my wealth is in one asset which is the company of Bigger Pockets right and so that's also a concentrated position right I believe that concentration is necessary in getting to where you want to go but the end goal is diversification if that makes any sense so anyways that's one bonus consideration for me um second I want to invest for after tax liquidity and lifestyle flexibility not the largest possible tax advantage net worth what does that mean that means I want to spend my I want to be able to spend my wealth and I feel like there's a lot of ways to play games where you can trap wealth in places you can't access it into your 50 60 70 years old right so you know this would be for example building an enormous Roth position it's possible you can you can do these backdoor roths um you can you can uh convert uh pre-tax things and put and put them in there you can play games to shelter a lot of things uh and those type and and play those games it's not the game I want to play I want to have access to my wealth in a meaningful sense throughout my my life Journey rather than optimize the tax situation to have the biggest possible net worth number be able to borrow against those types of things so that's a personal philosophy thing some people may disagree with that my goal is to comfortably fund any desired lifestyle so the portfolio must generate consistent spendable and therefore taxable incomes this is directly related to the above it's the portfolio has to generate income that income needs to be taxable because if it's not taxable it's generally not spendable and so again I just I've acknowledged that that allows me it frees me from having to play a ton of tax games to preserve my wealth when you talk to CPAs when you talk to attorneys when you talk to financial planners they're going to give you a lot of advice on how to avoid taxes and for a while I was building my portfolio with some of that in mind this frees me from that I can say I'm going to pay more taxes and it's not going to be efficient it's going to be freeing and then last once my portfolio generates a satisfactory income for example like two times my conservative estimate of the lifestyle expenses I want to have adjusted for inflation forever um all of the proceeds then can go towards the best long-term investment so once I achieve my Target Financial State then I will begin playing the tax advantage game I will begin putting that my my money into Investments that produce less cash flow or that have long great that have that are optimized for long-term wealth creation because that's adding to the pile rather than establishing my Baseline so again these are these are freeing statements for me that are likely to change over time uh and are but are not core tenants in my portfolio but having them written in My Philosophy says okay great I'm I'm going to do this investment even though it's not really tax efficient like for example I'll give you a great example I want to start getting into more private lending at some point private lending is terribly inefficient for me I earn a high income I'm gonna when I when I lend to somebody that's going to be interest income um I'm going to pay taxes on it I'm going to pay to hack High tax bracket I used to think I'm going to only put that in my 401k or my my Roth IRA that's that's good tax planning but because of my goal here it frees me and says oh no I can actually have a significant portion of my wealth in after tax loans that I'm I'm providing to people and I'm just going to pay interest on that because that's directly that's directly related to the goals that I've stated here and what I want out of my financial position you're doing that now or you're doing that down the road once the portfolio generates satisfactory income I'm saying that in the near term the next three years three to five years I will likely I will be implementing these things that I just said in order to get to my target Financial State I'm specifically talking about the private lending private lending is not some not a current part of my portfolio it's something I intend to explore heavily in 2023 I think there are great opportunities there and I think that it's it's it's a part of my portfolio uh my future portfolio um that has not been a consideration in the past I saw no I was I was not interested in investing in debt when mortgage rates were three percent I thought the equity side is way better alternative I think that's beginning to shift and I want more of my portfolio to be in the debt side because interest rates are rising okay before we dive into this a little bit further I just want to reiterate this is a conscious decision this is this is Scott thinking about his future his short-term future his long-term future he's thinking about how he wants his money to work for him and how he wants to put his money to work this isn't just I sat down and decided in one day I'm gonna do this this is a a many weeks knowing Scott it was probably several months worth of intense thought periodically over the course of several months coming back to doing research coming back and doing more research to arrive at this so while Scott is able to very quickly rattle this off now this isn't something that he just sat down and banged out in one day so I want I want anybody who is like oh I don't know what I want yet you don't have to know what you want this is a time to start thinking about it but it's hard to advise yourself or even harder to get advice from somebody else on what to do if you don't know what you want yes yes like I know what I want I think I think I know what I want right now I could articulate it I can tell you I could tell you it may change you know um this is that's why it's written on a piece of paper you can erase it you can type retype it out or whatever but like this is how I feel and this is what I'm I'm doing I'm taking actions based on the tenants and considerations I just shared with you in pursue that future the future state that I've articulated okay so Scott somebody listening to this show and opening up this document and wanting to do their own document what should they work on first is step one the goal up at the top maintain and fortify a financial position the core tenants or the target state what would be the first step that you would encourage people to do I think you start with the goal and you then you work toward the target State um those are much those are very easy things relatively to just put down on a piece of paper you don't really have to have say I'm I'm the type of person who's going to put my money into an index fund and never look at it again except to expend the one two percent dividends that are generated by it over over time in decades like that's something I can do that may not be something you can do um or or that you're comfortable with or that's practical in your life so you might say no no I I need to have a rental property that generates cash flow and I'm comfortable with that or I want to have horses yeah I think that the the target state is one of the most important parts of this document although I mean everything's important that the target State and then from the target State we go over to the uh the asset classes and I want to say right now you do not have to be in everything make a list of what you do and do not want in your portfolio and it doesn't matter what Scott's doing it doesn't matter what I'm doing it doesn't matter what everybody else is doing we're Bigger Pockets we talk about real estate real estate is kind of our thing but if you don't want to invest in real estate don't feel obligated to invest in real estate if you don't want to invest in crypto guess what you don't have to you can simply do index funds and set it and forget it which will make your investment philosophy super super simple but if you want to be Diversified if you want to have all of these other things write out your individual philosophy on index funds and individual stocks and real estate and private business and side hustles and all the other things that come with Investments you don't have to limit yourself to these that Scott has I do like that you keep a cash management section in here Scott maintain a cash Reserve we were just talking on another show about how Scott has a an emergency fund which I was a little shocked at because I do not have an emergency fund yeah I I I think so so you know I have two columns on this just one piece of paper right one has the core tenants those considerations I just shared with you in my target State and the right hand side of it is where I talk about each of the asset classes that I want my that I want on my balance sheet in the future state right and yeah so for me and again all this is gonna it completely depends per person right but you got to be able to State what you want and once you can confidently do that you can begin working toward it with with confidence um with that so my my cash philosophy is I want to maintain a substantial cash Reserve my cash Reserve is over a year of expenses um with that and that's how I feel comfortable uh in my personal life and Mindy what's what's your philosophy again I have enough buckets that I can pull from that I don't currently keep an emergency fund but that doesn't mean that I don't have money it means that I have put it to you someplace else and I'm putting I'm continuing to invest in the stock market even though it's down right now I'm continuing to buy real estate when it makes sense I'm continuing to invest in individual stocks and in index funds when it makes sense to me and I don't keep any cash on hand and I have a job so I have a steady paycheck I have credit cards I have access to like that's kind of my emergency fund is I have a credit card and then I have access to a bunch of buckets that I can pull from to pay off the credit card every month I'm certainly not racking up a ton of points or a ton of charges on my my credit card that I don't ever pay off I have I just have a lot of options I don't keep cash I love it I think that's great I think that you know if that's how you want to do it write it down align with your spouse and do it that's great like there's no there's no right answer to any of this stuff yes there is there are some wrong answers there's a lot of wrong answers but think about it the right answer is for you to think about it and have a plan the right answer is not for you to just wing it and see what happens and that is that is exactly not what we have done is we don't just wing it and hope that we don't have an emergency we don't just not have an emergency fund and you know fingers crossed everything works remember in January when I had to replace that blower on my furnace because it broke when it was 13 degrees outside that was awesome and I didn't have 700 in cash but I have a credit card and then I have you know a paycheck coming on the 15th so that covered that and it's an unexpected expense but it isn't an uncoverable expense and I don't think that there are any expenses coming my way that I can't cover which is why I don't carry or have any cash um but yes there are right ways to do it and it's it's thinking about it it's making a plan and you just said something Scott speak with your spouse and get on the same page I cannot stress that enough your spouse having you and your spouse on the same Financial page is so freeing not fighting about money is the best ever absolutely there you go that's the right way to do it getting on the same page as your spouse and if you are not on the same page as your page as your spouse you should have a money date is that episode 157 Scott of the BiggerPockets money podcast that's right is how to have a money date what you should and definitely should not do to align your finances as a couple because really when you're not fighting about money your relationship is so much better absolutely okay so Scott you have several asset classes along the right side of this document cash management index funds real estate private business side hustles miscellaneous private Investments do you want to go through these yeah sure so the pillars of my personal financial position are index funds and real estate located in Denver Colorado I got a portfolio here that I own with a partner that I continue to invest in on a regular basis and I will I purchased in 2022 I will purchase again in 2023 maybe a little bit more aggressively because I think there's some opportunities that are starting to materialize and then uh I dump essentially all cash in excess of my emergency fund um into index funds that's not allocated for Real Estate in addition to those two things I also have a couple of other assets first is yeah I mentioned this earlier Bigger Pockets um you know big Bigger Pockets has grown substantially and I joined as an early employee and this is a big part of my my personal wealth is is the ownership stake again I try to separate that as management versus investment here and again this is an asset class that I've invested in it's a big part of my position yet my core tenants tell me I'm not really an investor I'm I'm a manager this is my job but it's still a it's enough it's a significant part of my position that I I describe I call it out as a part of my asset allocation in my investment philosophy then we have books and royalty income I've authored two books set for life and then first time home buyer uh co-authored with uh I forget who the co-author was actually it doesn't matter no that's with with Mindy Jensen of course um and and so those are part of my position I don't know how I'm not exactly clear on how to Value those but I know I want to write more books and my wife is all also an author and so we count her books as part of that and so that's that's a part of our position that uh we want to call out specifically because those are assets and their profession um uh that come into our financial portfolio unique to us some other people have horses um you know uh and then last I wanted to call this out because this is an evolving piece for me and this is again completely going to vary from Individual to individual but you know from time I call miscellaneous private investments from time to time I think that opportunities are going to present themselves and these could include things like syndication and real estate syndications that I'd invest in or private companies I I'm really curious about um private investments in local businesses I think there's a lot of uh baby boomers that are selling services based in businesses in a local area businesses that produce two three hundred thousand dollars in cash flow could I invest in one of those and partner with somebody who runs that and help them from time to time I'm really curious about those things I'm curious about angel Investments I'm curious about private Equity opportunities and those types of things so I call this out in my personal Port my my personal document as as a miscellaneous private Investments and I'm and the way I finance this is I'm willing to leverage against my real estate portfolio or stock portfolio from time to time I lately leverage those things so that if an opportunity in this area comes up I would be willing to pull some cash out do a margin loan for example and make that investment paid off of course first before I was other Investments and go into these areas because I think that over the course of a lifetime 10 15 20 such opportunities maybe great ones great shots to take and so that will be a larger part of my portfolio in future years it's not something I've done a lot of meaningful investment in previously so that's an aspirational one okay a lot of different assets classes that you and it's it's all personal Finance is personal and your investment philosophy is the most personal thing that you can do for your personal finances so your investment philosophy is probably not going to look a whole lot like Scots and that doesn't mean that your investment philosophy is wrong in any way my investment philosophy looks a little bit like Scott's I have a lot more individual stocks in my investment philosophy I have a lot less private business in my investment philosophy although I guess I still do have some I have more side hustle because I'm a real estate agent I have you know just different things I do more private Investments than Scott does and it's actually I think that's kind of a lot like yours now that I'm saying it's different it's my allocations are different but I'm actually doing a lot of the same things that Scott's doing but again it's a thoughtful process it's it's not something that I jumped into with both feet um when they had those meme stocks and the what was it GameStop and the movie theater ones I didn't invest a dime into those things I am zero dollars in crypto I'm not anything in Gold there's a lot of things that I'm not investing in because I don't want to invest in that stuff and that's okay Scott has dabbled in some of these things more than I have and that's okay too it's a personal thing but what both Scott and I have in common is that we have a well thought out investment philosophy yeah and and you're comfortable with it and you can live with it I am comfortable with it I can live with it you know what where you're going to get yourself into trouble is if you don't have something to this effect is oh gosh I think the Market's gonna go down should I pull out everything and sit on cash should I do that like if if you're having those types of considerations that's probably an indication that you don't have a strong internalized philosophy about how you're going to manage your money and what assets what assets or asset classes you're going to trust that's a good point and it could just be flexible like like let's say let's say like there's nothing wrong Bill bengan one of the you know the founders of the the guy who founded the concept of the four percent rule this is a guy who sold this entire position at the beginning of 2022 and moved into Cash and that might be a present move right um but I you know if if that's what you want to do I just encourage you to write it out my one of the philosophies I am when I feel that asset classes that I've invested in are overvalued I'm gonna exit those positions hold on to cash and enter other asset classes that I think are undervalued at that point that's totally fine make that a core tenant um of this and then you'll be feel comfortable when you make those moves it's not how I would run manage my money I don't think I can I don't think I can make those determinations that I think that's too close to timing the market but you got to be able to live with your own decisions yep and this this will help you make those based on a framework that you've committed to writing and feel comfortable with a framework that you have thought about and committed in writing okay Scott let's recap the top three steps that our listeners can take from this episode step number one is create a goal for your investing and your investment philosophy step number two is determine your target state and step number three is Define your core tenants again we're going to have this document available in our show notes which can be found at biggerpockets.com money show 362 and it's a Google document that you can edit as you choose make comments on and continue to iterate as you update your investment philosophy over time but it is a we'll have Scott's examples and then uh fill in the blanks for your own core tenants bonus considerations Target State and goals and I would just say to put it to put a bow on it if you're asking the question what should I do with my money if that's a question you have currently or are comfortable with then this exercise we'll solve that for you yep absolutely it will answer that question Scott thank you not only for creating this document but for sharing it and walking us through it today thank you for for asking about it again I I again I'm I was like we get the question what should I do with my money what should what you know help me out all that kind of stuff this this is a it for me is just a word document that's typed out of one piece of paper with some bullet points on it it's not a a fancy smanchy thing here although I think we formatted nicely uh to put it on there so again I'm I'm just it's you know don't this is not we don't have to give over mystical weight to this type of thing it's just a very useful tool if if uh if you're not sure what you should be doing with your money or you don't you don't feel like you're marching clearly in the direction of a a goal that's articulated well all right Scott thank you for your time today thank you for joining me on the last 362 episodes of the BiggerPockets money podcast actually I think it's 360. you missed a couple uh but I appreciate you so much and I know our listeners do too well Mindy thank you so much for for uh allowing me to talk about this document and my personal Philosophy for the last uh 45 minutes here really appreciate it it's it's one of my favorite subjects if for those listening um if you are getting value out of this if you feel like it's five star content please leave us a five-star review on whatever app you listen to the podcast on uh Spotify apple or wherever you get uh that wherever you get your information and wherever you're listening um if you don't think it's five star content please keep it to yourself Indy should we get out of here episode of the BiggerPockets money podcast he is Scott Trent and I am Mindy Jensen saying may your investment philosophy planning session be smooth [Applause] [Music] [Music]

Channel: BiggerPockets Money

Views: 23,911

Keywords: financial plan, financial planning, personal finance, personal finances, retirement planning, retirement plan, early retirement plan, early retirement planning, one page financial plan, stock market, market crash, market crashes, stock market crash, how to invest, how to start investing, start investing, how to get rich, how to build wealth, build wealth, building wealth, financial plan template, real estate investing, biggerpockets, biggerpockets money, podcast

Id: 71C3NlGGUOo

Length: 43min 17sec (2597 seconds)

Published: Mon Dec 12 2022