Why “Early Retirement” ISN’T What You Think

welcome to the BiggerPockets money podcast Finance Friday edition where we interview Phil and talk about minimizing hours at a stressful job and overcoming the mental block to find hello hello hello my name is Mindy Jensen and with me as always Is My Rock Solid co-host Scott chench all right Mindy I'm so glad you get Bolder and Bolder with these intros I'll never take them for granted that said I think you'll still find that this episode is an absolute gem Mindy 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 Freedom is attainable for everyone no matter when or where you're starting that's right whether you want to retire early and travel the world going to make Big Time Investments in assets like real estate start your own business or leave no stone unturned in your financial position we'll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams the contents of this podcast or informational nature 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 decision you contemplate alright Scott I am excited to talk to Phil today I think that he has a great financial situation but he is embarking upon the same decisions the same problems that all early retirees have when do I leave and he's actually got a unique situation because he likes his job well guess what if you are pursuing Financial Independence once you get there you don't have to quit how do I know this because I am a shining example I am financially independent and I still have a job so be like me be like Phil you don't have to quit if you don't want to you could still like your job and still be financially independent love it shall we bring him in Mindy no we still have to do our money moments Scott we have a new segment of the show called money moment where we share a money hack tip or trick to help you on your financial Journey today's money moment is are you an Impulse Shopper Scott one way to avoid overspending is the 30-day rule If an item catches your eye save it to your wish list for 30 days if you're still thinking about it in 30 days go ahead and purchase it if you're too impatient for that timeline try 20 48 Hours Phil is a father of two with a good job and a high salary he has a great cash flow from a small rental portfolio and strong Investments however his job is stressful and requires many hours he would like to Pivot his financial decision so he can work less and spend more time at home Phil welcome to the BiggerPockets money podcast I am really excited to talk to you today because I think you have a decision to make that a lot of people listening to the show have to make as well thank you so much let's jump into your numbers I see a salary of twenty thousand dollars a month that is awesome and uh are you hiring we are uh with it but that's not all I see fifty to sixty thousand dollars additional from short-term rentals I see monthly expenses of sixty four hundred dollars so clearly this is not the issue as I'm looking at your expenses what I note is normal even low for what you are for your income twenty seven hundred dollars a month for your primary mortgage five hundred dollars for groceries 150 for restaurants 300 for house supplies the only thing that I would note is that everything is in round numbers I'm assuming that's just for convenience I would make sure that all of these numbers are accurate but since you're on the show they probably are so you're essentially making three months of expenses for every month that you work your spending is not the problem we don't need to continue on there Investments well here's where you don't have a problem either we have an Investment Portfolio that totals 1.15 million dollars not including the rentals you have four additional rental properties we've got a hundred and forty thousand dollars in a 403 b approximately a million dollars in past 401ks and IRAs sixty thousand dollars in an after tax brokerage 140 in 529 plans 90 in cash and 25 000 in crypto which I won't discuss because even if that went to zero that would not hurt you debts what are those debts just mortgages we don't care about those because they are tied to an asset that is producing income producing quite a bit of income uh I don't really see a problem what are you here for well I think they're the main thing I'm trying to figure out is how can I work Less in my W-2 and be home more with the family um and just have some more free time just quit money story what does your money life look like yeah I think I grew up you know in an average middle class house um you know paid my way through college with student loans and working uh during school and eventually went on and got some Advanced degrees uh and try to get those loans paid off as soon as I could and to be honest I wasn't really tracking our finances and net worth until just a few years ago when um started really diving into Bigger Pockets and some other podcasts and you know I had accounts all over from all different employers and then I brought them together and that's when we started to realize that you know we did have some savings but also that maybe we should take that leap and get a rental property which we did in 2019 as our first investment and you know so far that has gone well and we've been able to acquire a few more and now we're starting to realize that as they're growing could it offset some of my W-2 income so I can try to be home more because I've always been one to pick up extra shifts and just work as many hours as I could and I think lately we've come to the understanding that well maybe there's other avenues that we could pursue and figure out if we can get to the end faster let me going back to your financial position for a minute here we said one 1.15 million but I counted well over that like between the the to after tax brokerage the I mean between Just Between the after tax brokerage your 401k and your 403 b that's 1.2 million we've got 90 000 you know in in cash and 25 000 in crypto and while the crypto probably used to be 75 000 you're still doing really well overall with your vision there and this doesn't count the real estate I count it I'm counting 250k in your home equity and how much Equity widgets estimate is in the rental property portfolio um I think they're let me do the math real quick I think we probably have over half a million if not maybe a little more in the rental properties okay so we have a million in rental properties 250 in primary and then 1.3 1.4 so you're give you're right around 2 million bucks in total net worth is that does that sound do I feel pretty right like maybe just a hair under that I think that's yeah awesome and what do you do I'm a physician assistant in an emergency room awesome and does this does this job uh give you the option you said extra shifts can you can you reduce shifts is that an option that's available to you yeah so years ago I was looking at just trying to slowly kind of eliminate a shift maybe every year or every two years to free up some time uh I can always work more of course but I've been working probably on average about 55 hours a week for the last 10 plus years and I enjoy what I do but at the same time my kids are growing fast and I want to be home as much as I can and how old are your kids 11 and 9. do you want to continue to work I do or do you want to work zero like so how many hours a week feels good because if they're 11 and 9 are you homeschooling or do they go to school they go to school okay so they're in school 35 hours a week and you know that's a little bit different because if you're in the ER uh here let me tell you how the ER Works um they don't schedule their emergencies and it's like busy nights and weekends so I'm I'm wondering do you work more during the day or during the evenings uh we do 12-hour shifts so um most of the time you know I go in kind of mid-morning and then I get home you know late at night and that also includes some nights and holidays and weekends and things so it's a very uh sporadic as far as I don't have a set schedule um so one week I could do seven shifts in a row and then have some time off or you know work three or four shifts what would need to be true for you to feel comfortable with stopping entirely from your from your job um what what does that look like for you right now if you were to guess at a financial position is there a number from a net worth perspective or cash flow I think if it to walk away entirely I think I would have to have somewhere around 150 annually um is is what I'm thinking that because I trying to purchase health insurance and other things I think that would change that number depending on on those costs what I'm I don't know if I could ever stop working completely um you know I'm I'm always doing something on my days off or or looking for the next project so which I enjoy being busy with those things but I think I guess I don't know I I I can't see myself just sitting around so so from a physician perspective how much time do you have to work to stay active and up to date on everything that's going on I was talking to the physician on fire and I asked him I think a month or so after he left you know could you still be an anesthesiologist and he said I could right now but in another month or so I'm not going to feel comfortable doing that anymore because I have Let It Go for so long if you worked once a week like you worked every Tuesday for 12 hours would that be enough to keep up your skills probably not um okay but I could do I could do eight shifts a month and still get the option for benefits through my employer and I think that would be a I mean that would be terrific if I could Phil could you be comfortable working eight shifts a month I could it's just I I think there's an unknown and and it's you know I went from doing 18 to 20 shifts a month and the thought of going down to eight just seems uncomfortable in a way oh this is what we really need to explore because my husband went through this when he was leaving his job you pursue Financial Independence then when you get there you're like oh do I really want it yes you really do because he's busier than he's ever been and he doesn't have a job I like to introduce him as this is my husband he's unemployed and most people are fine with it every once in a while somebody will know this and be like or not know this and be like oh she's got a problem with that and it's you know it's not an issue but why is it uncomfortable for you to not work 18 to 20 shifts if you worked 15 would that feel okay if you worked 10 would that feel okay like how how few could you work and still feel good about yourself well since I submitted the information I actually went I've cut down to 15 as a trial so the last couple months I've been doing that and I figured I'd give that a period of time and see how it goes and reassess things later this year and then maybe make a decision and try to cut back a little more or in the months that we are busier and we have a trip then I feel like I don't have to work so much leading up to that and then also work a whole lot when I get back so I'm I'm trying to to figure out that balance uh but it's it's just something I haven't done for years I've just always worked worked worked well yes and that's how you get burnt out uh how does it feel working 15 shifts a month how how long have you been doing that been doing that about the last two months okay and it it's been great yes I've been able to take a week off every month and um it just allows you to recharge and uh you know have a have a break from things and also just again be home more um being able to eat dinner with the kids and and go to their events it's been worth it how much that income does 15 shifts a month bring in is that still the 20 000 that we're talking about no probably bring in about 15 000 a month gross awesome so so you need if if we if you feel confident in your expending yeah sixty four hundred dollars a month uh and and total spending really including everything and that's a pretty hefty mortgage too um with that so you have you have that under control um so that annualized to seventy eight seven thousand dollars your short-term rentals bring in um 20 or sorry 50 to 60 000 a year is that right from your rental portfolio and do you feel pretty comfortable in that is that a pretty conservative projection that is you know the one number that we don't have yet is that we bought a property at the end of last year that is we're trying to make a you know another short-term rental out of and I think it'll depend on how the summer season goes to see you know where we end up with that um but so far we've been very fortunate with the other properties and what they've generated for us so do you think that that number will go up once you stabilize this this next property I think it will um I I think we have from looking at other properties in the area and I think we were underpriced so I think this year we've tried to increase our our rates a little bit and you know so far it looks like our bookings are are doing well awesome so so you mean you're you're essentially there just with your short-term rental portfolio and covering your living expenses you all have a nice cushion so you probably wouldn't be comfortable with that you won't be Building Wealth and you probably should still be having some positive Surplus um and margin of safety there but you're really close and I think the reason why you're feeling good about the drop and shifts is because you've gone from working way more than 40 hours a week to I just calculated it 42 hours a week with 15 shifts a month um on a 30 30 day month that's how specific I got in that particular little quick math so working 40 hours a week is way better than working 50 to 65 50 55 to 60 uh hours a month especially in 12 hour shifts so I bet that feels great I I would keep just cutting down for the next six months just cutting a shift every quarter or two shifts every quarter and gradually kind of unwinding here until you find like the the magic place for your your your happiness and keep doing what you're doing on the rental property stuff I mean if you if you just keep doing what you're doing you're gonna accumulate ten thousand dollars a month um from yours income alone plus another five or six thousand dollars a month from the short-term rentals in cash is what I'm calculating here back of the napkin um so that's 150 to 180 000 per year in Straight Cash accumulation and I'm assuming that much of that is after your 401k contributions and after your um other Investments is that an accurate assumption yeah so I mean yeah you just keep doing what you're doing with the later load and you're still you're going to continue to shoot way past Phi and be able to be able to spend that for if you if you got to a point where you just matched your household spending um from your shifts that would be one way to think about this as well and then your short-term rental is all of your wealth building that could be another yet another way to think through this you know it sounds great it's just harder to imagine that and um because it's just something I've never done and um it I don't know it it on the numbers it looks good and but then it's a matter of of just doing it well it's super for Scott to sit there in his cushy chair and say oh just don't work anymore it's really easy to run the numbers on your paper and be like yep I buy but it's really hard to walk away from your life from your like you're not your life your your like you've worked hard to become a physician assistant that you just don't go to college for five minutes and they're like here you go go diagnose people like there's a lot of work involved in that have you read the book taking stock by doc G okay that is this book right here I went and grabbed it off of my uh cabinet before we started the show because I wanted to recommend this book he's a doctor he talks about taking it's not just for doctors it's for anybody who is at a Crossroads in their life what do you want your legacy to be who are you and what is it that you identify with and being a doctor is awesome it doesn't sound like you'd want to stop being a physician's assistant and it doesn't sound like you have to if you can step down over the course of a quarter you're at 15 shifts now stepping down one shift every quarter it'll take you a year and a half a year and three quarters to get to eight shifts a month what does your company say about HS and maybe you decide that 10 feels better you're okay with Ted because your kids will turn into teenagers and you'll be like hey I don't necessarily need to be home every minute of them yelling at me all the time looking at you girls my kids uh but yeah sometimes you can find a balance that's that's maybe different than what you thought but eight shifts a month I mean that's what is that two a week it could be really advantageous especially if you're willing to pick up a shift when they're running short or somebody calls off um you know there's there's a lot of flexibility and I think your employer is willing to work with you when you're willing to work with them hey this is what I want and then I can pick up you know up to three shifts a month in a pinch I I think you know that's that's where I'm trying to get to and and it's just a matter of probably me having to let go a little bit but also you know one of the things that I just always respect with listening to your show is is having you guys look at it from a different kind of perspective instead of eyes and say you know is there anything else that I should be doing or uh that you would recommend that's going to make this transition over the next couple years easier from a math perspective so I think for first is like I I always started from the math and Mindy rightfully so is starting from a different place because you don't have a math problem here but because I because I can't help myself I'm still going to go over the the math problem uh you've got you like I I I'm trying to back into the mat the the math on this but I think it looks like about a thousand dollars a shift is essentially what we're what we're looking at is that is that about is that a reasonable yeah uh approximation yeah so eight shifts a month easily covers essentially all of your household spending right and again is that after tax for a thousand dollars a shift yet close to that I think okay so you're pretty close to covering your expenses with each with eight probably with some cushion and again those expenses include a thousand dollar a month allocation for vacations which is awesome I love that right you you certainly have a a skill set and defendant in a financial position that can support that very responsibly that includes your twenty seven hundred dollar a month a month mortgage uh payment and and uh 215 utilities to 3000 for housing so you're you're in great shape from a financial perspective from that but more than that you've got about a two million dollar net worth if you assume that that's going to grow at a 10 rate maybe you can knock it down a few points but 10 is 200 Grand a year so you're at this and you're at this mathematical inflection point where the returns in your portfolio are beginning to outweigh the returns you can get from your active labor at your job from a financial and mathematical standpoint and that's a kind of I bet a weird feeling uh at this point because it's it's that inflection point sneaks up on you if you've been grinding for five six seven years financially to accumulate cash and invest but when you pop out at the Strategic level and think through that it's like oh wow um by you know allocating this to another short-term rental I'm actually generating more real wealth and optimizing that portfolio than I am or even at a certain point just stocking more money in your in your index funds and your retirement accounts will be generating more wealth than what you'll be making at your job and that's again that's just that's a fun place to be it's what you work so hard for so long and grind and hustle and uh consume Financial podcasts instead of Nickelback on the car each way to work um for years that's that's the this is the reward that we reap uh uh uh from from that activity and I think that's that's what you're probably struggling with in the mathematical perspective but it's probably even more than the math it's probably more the stuff that Mindy's talking about and shifting away from your identity of having gone to school for five six seven years uh maybe more to become a physician's assistant and you also have a skill set that's helping save lives so all those things I don't know how people person can feel all those things at once but perhaps that's uh something in the ballpark there um a couple of observations now that I've said all that if you were to for example say I'm gonna forget the math part of this and investing and I'm just going to pay off that mortgage what would that do to the decision that you're making here I mean I think it would take a lot of stress away knowing that we have that cushion um and that the house is taken care of I struggle with do I pay that off because our mortgage rate is low and use that money to put towards an investment somewhere else um but at the same time I feel like right now also our Pro our rentals we've been able to manage ourselves and if we grow bigger then we may have to take on some help so um so I feel like yeah it's what what where do we go from here do we continue to try to find some short-term rentals do we pay down either one of the rentals or the primary house or do we leave it as it is and cut back my work and and see how things go um I I don't know it's the honest answer I think you've got a subjective problem to figure out there where I I think I think I would throw out the math in in your situation and say what what feels right in that circumstance because um again again you're you're there regardless of which way you slice it if you keep doing what you're doing the pile is going to grow and grow and grow and grow and grow ten years from now if you keep doing what you're doing you're gonna have you're going to accumulated another one and a half to two million dollars and it's just straight up cash before you even get the investing Returns on that on that on that cash um and that's going to give you a really good circumstance and that's where I think like and you're you know and I break out the journey to financial Independence into three phases there's kind of this aha moment oh I discovered this I'm gonna now begin optimizing my position around Financial Independence uh then there's a grind which is five seven ten just various per person uh which I think you've just you've kind of completed the grind and then there's uh the transition to Phi which I think is the part that I understand the least well but that Mindy and Carl have gone through uh and I think that's the part that I'm still kind of learning about and interested and that's that's what you're going through right now is how does that transition actually transpire and I I've I have the hypothesis that it's not a math problem right it's it because to be actually become Phi you actually have to start generating cash flow from your portfolio and harvesting it or reducing expenses in a way that you can actually spend against and that always goes against the actual rules of investing right paying down your mortgage is not a good Financial return but it frees up your cash flow if you take Rule of 72 and apply apply you get approximately eight nine percent return rate which means that your money will double approximately every eight seven eight years this is based on past performance it's not an established fact you are 45 now almost okay so you have in the stock market 1.4 million at age 52 you will have 2.8 million at age 59 you will have 5.6 million and at age 66 you will have 11.2 million these numbers are not guaranteed please don't come back to me in 20 years and say you said I would have 11.2 million when I turned 66 but those numbers are um going to cause a different problem in that then you will have to have uh required minimum distributions and start taking money out of your accounts even though you won't need it because you'll have all this cash flow from your short-term rentals so you are now going to have another you're like creating a problem for yourself down the road by continuing to work so you should quit your job right now um you know it the whole transition to leaving your job is difficult and you don't have to leave your job I think this is something that the fire movement gets wrong is that people are like oh I can't wait to quit it's not about quitting it's about living your best life if you like being a physician assistant if you like that fast-paced ER lifestyle you don't have to give it up you can still do that and go and get your adrenaline rush and you know excitement for figuring out a problem and helping somebody and saving a life and then go home and spend time with your kids your kids want your time they also don't want your time so if you're gone one day a week or two days a week and they don't see you on Tuesday and Wednesday but they know they're gonna get you Thursday through the next Monday they'll be okay with that you will also be okay with that because come Monday you're like really looking forward to getting into that blood soaked ER room again but it's you know you have to be comfortable with it have you had a conversation with your wife about this yes I mean obviously she would love if I were home or because up until this point I mean I've always just kind of worked and then you know a few years ago I think is when we really started it look at all of this and try to figure out okay where you know where do we want to be down the road and another thing you know that happened to me is you know my father passed away and and spending time with him when he was sick the one thing he said was you know that he wished he was just around more or could share more experiences and it wasn't about you know the things um and the items it was about time and I think that's when you know you realize and you looked up and your kids are growing and you you just want to be there and it it has really I think kind of set us down this path to say you know how can we get more of my time to be home because I know that they're not going to be here you know at home forever and once they're you know out of the house after high school the bulk of of the time that we spend with them is is really taken up so yeah and I don't think it has to be in either or either I work or I quit my job it can be a really stepped down process and you know going from 20 shifts a month to eight shifts a month might feel like a complete slam for you but stepping back like it was 20 now it's 18 now it's 15. stay at 15 and see how that feels and then next month ask for 14. oh that doesn't feel good okay then go back up to 15 or hey that feels great go and chop down to 13. like step it back until it feels like a good fit or maybe you pulled back too much and then ask for more and your HR department is desperate for people so they will be happy to be able to keep you instead of losing you completely you're on the cusp of finding the right balance but that's something that you and your wife need to talk about and see like does you know does eight feel right for your mental space with your doctoring stuff uh that's an official term by the way and does that feel right income wise um have you run your fi number based on the four percent rule in your spending and all of that like have you run because I did a down and dirty fine number for you and I see 1.9 based on your uh portfolio not including your rental properties so if you're at 1.45 or something 1.5 just in the stock market you're 500 000 away and I don't know how to amend the four percent rule based on rental property income but I would guess that that 50 000 a year would make up for that so you could be Phi now but it doesn't sound like you want to walk away from that either well I guess it part of me feels that that money is not accessible I mean I know you can do conversions and and all these things but it just feels like to pull that out and not let it grow yeah like that I guess I I don't think in that money so much as as being accessible right now I know it will down the road that is a good point I saw you nodding when I was going through the three phases did you have an aha moment for financial Independence in the last few years yeah I would say I didn't even know this was an option you know I think I watched my parents they worked their whole life um yeah they they lived in one house and I always thought that that's what I was going to do it just kind of grind until I was 65 and then you retire and then about five years ago I got into Bigger Pockets and some other podcasts and then it just opened up a whole completely new world and mindset because you hear stories of of you know other people and what they do and then that's what's taking me down this path to say you know can we accelerate that and uh and What would life look like and I feel like you know I've been in that I I guess I still feel like I'm in that grind phase that you talk about um just trying to continue to grow and and invest and I know I guess you know taking that next step is where I feel like well what do we do now um and it just feels like a big leap so so what I'm noticing about your position is you know you've got 300 250k in your house and one point two in your retirement accounts out of a two million dollar portfolio and that component of your portfolio is what I call the the middle class trap for the reasons you've you've kind of self-identified there of yeah I'm not am I going to really pull out my 401k and start spending that down to fund my current lifestyle that's see that's just very hard concept to wrap your mind around and very hard to kind of endorse to you as as someone trying to look out for your interest right on on the show like I wouldn't I wouldn't say to do that even though there are strategies where you can do that but what it does allow us to say is your retirement is probably set right so that Mindy's math there of 11 million that does that with a with a doubling every seven years seven and a half years 7.2 um that assumes you don't put anything else into the plans which is surely not going to happen right you're surely going to have some excess on an annual basis regardless which path you choose that's going to go in there um so you know even if those returns don't come true the fact that you're adding more will probably make those numbers reasonable now they're going to need to adjust for inflation all this other kind of stuff but it's still a big pile of money like you are uh what we would easily call baristify if not totally fine at this point you don't have to contribute anything more to your retirement accounts or anything like that most likely and you're set all you got to do is make enough to to cover your housing expenses um and and you're good to go but again you're going to want a a cushion here um and I I like the idea of just going to a smaller number of shifts um and gradually winding down like we've discussed you you're going to be really comfortable with that one tip I'd have for this would be you spend a good amount on vacations appropriately so I think that I would encourage you what do you think about this going to one of these places that has a lot of sunshine or whatever it is that gets you feeling good maybe you're a mountain guy what what's your favorite vacation spot well and we like to go to the beach but we also like to ski in the winter so a little bit of both okay well it's getting close to beach time so you know this is a long season here but maybe go to the beach and what's the best part of your day is it after a cup of coffee or a workout or when do you feel them kind of like you're you're peppiest uh usually after some coffee in the morning so that would be like go there grab you know I have a meeting with with your wife let your boys do whatever they're doing and sit down once you've had your cup of coffee at the beach at your next vacation and say my ideal life my ideal day or week looks like this I and and I don't have to worry about money at all um what is that going to look like I bet you you have something that involves a shift or two at your work saving lives uh and I bet you you have other days that are doing uh uh different things if you can back into that maybe some of the answers will become clear and the second part of that challenge that I do maybe the next day after you've kind of noodled on that is I would sit down and say if I gave you two million dollars in cash which is approximately what you have or what you will have at the end of this year if you keep what you up what you're doing um unless the market crashes course but if I give you two million dollars in cash how would you deploy it from scratch to build the lifestyle that you want that Maps the first part of that right and you won't be able to transition your portfolio to the ideal one but if you came up and said I want 500 maybe you reconstruct exactly what you have maybe you start with something completely different maybe you have three options that you're not sure of but if you can start from that premise I think that will be very freeing and my big encouragement in that process is treat this less like a optimized portfolio problem because you got an optimized portfolio treat it like a what's freedom to me what makes what makes the the decision to pursue the life that I wanted in that first part very easy and again that's where I think that the paid off mortgage suddenly becomes attractive even though it's terrible Financial advice to tell you to pay off your mortgage probably at two percent or something right three and three and a quarter three and an eighth it looks like um but maybe that's what makes you feel super comfortable with eight shifts a month if you just spend the next year or two hey I'm just gonna knock that out I'm gonna refinance something else to knock it out then I only need to make 3 700 a month and I'm good to go kids colleges are funded uh everything is set I've got cash flow I work on a short-term rental every other year because I like it and the wealth continues to build I don't know that's an example but what do you think about those two approaches yeah so I think that's you know what we're what we're trying to figure out um and you know I like the idea of just sitting down and and just trying to design this and then figure out okay well how do we get there um and you know Mindy we talked about the the book taken stock you know last summer I read that and while we were on the beach and and it I think either I was just in the right place for that book um and it just really I think opened up my eyes to to a lot of things and it's a good it's a good book to make you think about life and some of these questions and you know try to work through that yeah it's not a light read at all but it's a really good book as you come to the end of your work life the end of you or like you know big Crossroads what are you what are you looking for and what are you going what are you going to uh what Legacy are you going to leave behind I think it's a really great great book it's called taking stock by Jordan grummett a hospice doctor's advice on financial Independence Building Wealth and living a regret-free life Phil this was a great show I had a lot of fun with your situation when I first read your numbers I'm like what does he need help with but this this transition is really difficult and I think you have some homework to do and number one is talking to your wife like Scott said what does your ideal portfolio look like what does your ideal life look like I think you're on the right track just by starting to step back your shifts naturally anyway um but you are in a fantastic financial position you've done a great job um you know it's really easy to just spend every dime that comes in so you've done an excellent job not doing that congratulations and thank you and my parting thought will be your position is optimized right now right still you're working full time at a high paying gig you're highly leveraged in your real estate portfolio doesn't see appear to be irresponsibly leveraged but you're leveraged right your maximized returns so that includes with your primary mortgage you are in essentially in all all stock portfolio Downstream that is optimized your math is perfect you can't argue with any of it right that may be your problem you may have to sacrifice that optimization in order for the very simple reality of the fact that you are wealthy and have all the options in the world to begin hitting home and feel for you to be able to feel the actual impact of that position again you know if you had only two of these properties but they were paid off you'd have way more cash flow essentially right even though it would not be the same irr and I think that grappling with that and forgetting what you've not what you've learned all this time to build your portfolio and starting from like a clean piece of paper could be very freeing for you um and that's that's going to be the the challenge can you can you as a math as clearly a mathematical Optimizer uh who's who has really internalized a lot of the best practices in investing and managing your money can you break out of that and actually build a portfolio that will allow you to live the life you want um so that's that's that's a hard question yeah well I appreciate everything that that you guys do with in the whole Bigger Pockets Community it's it's truly life-changing um so thank you thank you Phil thank you and we will talk to you soon all right Scott that was Phil and that was fun that was uh I did a little bit of reliving when Carl was trying to come up with the idea that he wanted to quit his job he well he had it for a while but then once you get to the actual do I want to quit I don't know am I ready to go Carl ended up stepping down to three days a week and then he ended up leaving completely and maybe Phil will decide that eight shifts a month really fits him and continues to do that for many many years or maybe he decides you know what I really like the time that I am not working and decides to pursue the re part of fire but I think he's I think he's hit the FI part pretty handily how about you I think um you know I I was going back to that framework I I'm not sure it's it's right for all the stories in the in the in in Phi it's certainly not right for all the stories in five but I think it's I'm becoming more and more convinced that those are kind of like oh that is a good way to break down the journey to financial Independence right the aha moment when someone discovers Financial Independence they can do that from a position of being really heavily in debt or in perhaps a position of of a couple hundred thousand dollars a net worth but most of that in their 401k or home equity The Grind to rebuild a financial position that can actually establish Financial Independence perhaps through real estate perhaps through after tax stock portfolios side hustles or whatever and then this transition to actually whoa I'm I'm worth close to two million dollars I have tens of thousands of dollars in passive cash flow I'm I'm there I can make these decisions about my life what do I do and how does that impact my identity as a physician's assistant in this case and how does that end again I come back to this concept of once you've built that position and so an optimize the portfolio for so long with Index Fund investing all these best practices that are really well validated and I believe fundamentally I still think that most people who are truly financially independent and actually can make that leap have an Ace in the Hole and that Ace in the Hole typically has to do with uh well it doesn't there is no typical a military pension uh I'm gonna be I'm gonna continue to work a few shifts I'm gonna get a job at BiggerPockets hosting the money Show podcast I'm going to uh have a real estate portfolio or be an agent or I'm going to break some of the rules around best practices investing in leverage real estate or in in the four with the four percent Rule and I'm going to actually invest in something that is probably not optimized but generates Expendable after taxable income that I can actually use to sustain Financial Independence and I think that's hard after you've spent years or decades optimizing a financial position to begin breaking some of those rules in order to actually achieve the benefits that we've gone after for so long that would be a very interesting show how did you start to break these rules once you got past the the Phi hump and that would be you know what that's a very good question for our Facebook group if you have started to change your mindset after reaching Financial Independence shift from saving to spending we would love to hear your how you got over that because it is a big struggle for me currently I would be really interested in that discussion and my hypothesis is there is no typical way we're not going to get a set of answers that are all at a pattern other than the fact that everyone's gonna have or 95 of the people who are actually financially independent and have left work or materially reduced the amount of hours that they work have some kind of Ace in the Hole beyond the four percent Rule and pass the cash flow from a leveraged real estate portfolio that would be my hypothesis I'd be really interested to hear um uh uh from from folks that that have left their jobs or made a big career change because of the the padding that their financial Independence position has gotten them all right Scott should we get out of here let's chalk it up that wraps up this episode of the BiggerPockets money podcast he is Scott trench and I am Mindy Jensen saying bye bye butterfly BiggerPockets money was created by Mindy Jensen and Scott trench produced by Kalyn Bennett editing by Exodus media copywriting by Nate Weintraub lastly a big thank you to the BiggerPockets team for making this show possible [Music]

Channel: BiggerPockets Money

Views: 10,556

Keywords: early retirement, retire early, how to retire early, retire in your 40s, retire in your 30s, fire movement, financial independence, financial freedom, financial independence retire early, the fire movement, retiring early, quit your job, how to quit your job, investing, invest for retirement, retirement accounts, roth ira, 401k, passive income, short term rentals, retire in your 50s, how to invest, biggerpockets, biggerpockets money, biggerpockets money podcast, podcast

Id: uE77YKt3EIs

Length: 46min 31sec (2791 seconds)

Published: Fri May 05 2023