Bogleheads® Conference 2023 -Sean Mullaney Interviews Brad Barrett on Financial Independence

00:00:00.000 | (audience applauding)

00:00:03.160 | This session, however, is going to be

00:00:09.280 | one I've been looking forward to.

00:00:11.460 | We're gonna be talking about financial independence.

00:00:14.500 | Our interviewee is gonna be Brad Barrett.

00:00:18.900 | Barrett, he's the host of the Top 50 Business Podcast,

00:00:22.180 | Choose FI.

00:00:23.020 | He's passionate about financial independence

00:00:26.220 | and mostly helping people take action

00:00:28.860 | to make their lives richer in every way.

00:00:30.940 | Wealth, health, connections, and ultimately, happiness.

00:00:34.740 | He achieved financial independence at 35,

00:00:38.220 | which is pretty impressive to those of us

00:00:39.980 | who didn't come out of residency until about that age,

00:00:43.140 | and lives in Richmond, Virginia

00:00:44.800 | with his wife and two daughters, so welcome.

00:00:47.000 | Interviewing him is Sean Mullaney.

00:00:50.180 | He's an advice-only financial planner

00:00:52.260 | and the president of Mullaney Financial and Tax.

00:00:54.420 | He writes the Plutus award-winning blog, FI Tax Guy,

00:00:58.420 | on the intersection of tax and financial independence.

00:01:01.340 | He also has a personal finance YouTube channel

00:01:03.620 | and published a book that apparently

00:01:05.420 | 21 million people in this country need,

00:01:08.300 | Solo 401(k), The Solopreneur's Retirement Account,

00:01:11.820 | a book about his favorite retirement account in 2022.

00:01:14.900 | So, Sean and Brad, take it away.

00:01:16.540 | (audience applauding)

00:01:22.600 | - Thank you very much, Jim.

00:01:27.060 | Before we get started, I do want to address

00:01:28.900 | the elephant in the room.

00:01:30.540 | Oh.

00:01:32.700 | - And I'll be collecting questions during the session.

00:01:34.900 | - Yeah, yeah, so your questions go to Jim.

00:01:38.360 | I do want to address the elephant in the room.

00:01:41.540 | A lot of people believe financial independence

00:01:45.020 | is all about deprivation.

00:01:48.020 | Well, I think we can safely say after two nights

00:01:51.300 | at the luxurious, the opulent Bethesda North Marriott,

00:01:56.900 | that is most certainly not true.

00:01:58.820 | So, well, Brad, thanks so much for being here today with us.

00:02:03.860 | - Yeah, thank you for having me.

00:02:04.700 | - Looking forward to this conversation.

00:02:06.940 | Let's kick it off with what has the pursuit

00:02:10.020 | of financial independence meant to you?

00:02:13.080 | - Yeah, that's a good one, Sean.

00:02:18.580 | So, the pursuit of financial independence

00:02:22.080 | has essentially changed everything in my life.

00:02:26.420 | It took me from, I was a corporate tax accountant

00:02:31.420 | doing corporate state tax returns,

00:02:34.420 | which, as you can imagine, is as mind-numbing

00:02:37.220 | and Groundhog Day as that sounds.

00:02:39.940 | And now I'm, I think it's not hyperbole to say,

00:02:46.060 | I am a different human being.

00:02:50.220 | I get to spend time seeing my daughters grow up.

00:02:55.420 | I, at this point, now they're 15 and almost 12,

00:02:58.660 | and I left my corporate career eight and a half years ago.

00:03:03.660 | So, since they were little girls, I've been home.

00:03:07.700 | And I've been there every single day

00:03:09.380 | when they get off the bus.

00:03:11.340 | And as Sean said, I think the caricature of FI

00:03:15.460 | is that it's about deprivation.

00:03:17.540 | And I reject that so wholly you can't even imagine.

00:03:23.420 | Because to me, it's about reorienting

00:03:26.380 | to what actually matters in life.

00:03:28.860 | And having the financial wherewithal

00:03:31.980 | to not be stressed constantly, right?

00:03:34.900 | So, obviously, speaking to the choir here at Bogleheads,

00:03:37.740 | but nevertheless, most people are financially stressed

00:03:42.340 | all the time.

00:03:43.600 | And that is an ever-present,

00:03:45.980 | and they can't think about anything else.

00:03:48.460 | But when you focus on saving money,

00:03:52.420 | obviously investing wisely, but saving money specifically,

00:03:56.500 | and you have some net worth,

00:03:58.860 | you have some space to take a step back and say,

00:04:02.380 | what do I actually want to do in life?

00:04:05.060 | What do I want my life to look like?

00:04:07.180 | And my wife and I, actually, it's interesting.

00:04:10.340 | Sean and my wife went to high school together.

00:04:13.140 | And we grew up about four minutes apart on Long Island

00:04:17.420 | and reconnected about, what, a handful of years ago?

00:04:21.180 | Five, eight years ago, give or take.

00:04:23.500 | And my wife and I lived in this high-cost-of-living area.

00:04:27.700 | And we got married at 26 years old

00:04:32.220 | and basically decided at the point,

00:04:33.780 | okay, look, we're both CPAs.

00:04:36.860 | We have done everything conventionally well.

00:04:39.680 | We've succeeded college and getting great jobs

00:04:43.100 | at the best accounting firms.

00:04:44.540 | But it all seemed like a hamster wheel.

00:04:49.020 | It all seemed like this never-ending,

00:04:51.520 | the carrot when you're at an accounting firm

00:04:55.020 | or an investment bank, et cetera, or a law firm is,

00:04:57.980 | oh, I can make partners someday, right?

00:05:01.340 | But I looked around, and I looked at the partners,

00:05:05.180 | and I saw them working until 2 a.m.,

00:05:08.180 | just like I was in tax season.

00:05:09.980 | I mean, literally, this is the old days, right?

00:05:12.420 | But literally stapling tax returns with me

00:05:15.560 | at 1.45 in the morning because April 15th

00:05:18.960 | or October 15th, the deadline's coming up, right?

00:05:21.520 | And that just, that wasn't a life that I aspired to.

00:05:25.760 | It didn't make any sense.

00:05:27.860 | And at 22, I looked around and said,

00:05:31.640 | okay, there has to be something better.

00:05:34.320 | There has to be some purpose here other than just

00:05:37.360 | I'm going to do this for the next 40 years.

00:05:40.240 | I just simply didn't want to.

00:05:41.800 | And luckily, my wife is of similar mind,

00:05:46.000 | and we just saved money.

00:05:48.160 | And at that point, we didn't have an investing philosophy.

00:05:51.160 | We hadn't come across J.L. Collins, Simple Path to Wealth,

00:05:54.480 | or Bogleheads, or Vanguard.

00:05:57.000 | But when we focused on our savings rate,

00:06:00.300 | it enabled us to really stockpile money

00:06:03.200 | and give us choices.

00:06:05.120 | And when we got married, like I was saying a minute ago,

00:06:08.720 | we decided, okay, look, we can make a life here

00:06:12.080 | on Long Island, but we don't want to.

00:06:15.160 | It's always gonna be giving something up.

00:06:18.440 | There was no way that one of us could stay home

00:06:21.320 | with these future fictional kids, as I like to call it.

00:06:24.800 | At that point, we didn't have kids,

00:06:26.240 | but we knew someday we would want to.

00:06:29.000 | And it's incredible now to look 15 years,

00:06:33.760 | 18 years after the fact, and say, wow,

00:06:37.760 | all those plans we set out as, I mean, kids, 25,

00:06:42.760 | it's worked out better than I could have possibly imagined.

00:06:46.360 | So, yeah, it's interesting.

00:06:50.480 | Sean, it's been a wild journey.

00:06:52.280 | - Yeah, and Brad, I really like some of that reframe there,

00:06:55.520 | because essentially, you and your wife, Laura,

00:06:58.120 | met one of the biggest goals of financial independence

00:07:01.240 | well before you ever retired from your day job, right?

00:07:05.580 | You were able to have your wife stay home

00:07:07.640 | with your children, and you weren't financially independent

00:07:11.840 | at that point.

00:07:12.680 | You probably weren't even all that close.

00:07:13.960 | Maybe, I don't know your numbers, but.

00:07:15.800 | - No, you're right, you're right.

00:07:16.760 | - So I think that's just a great reframe of the whole,

00:07:20.400 | people think it's tech bros,

00:07:22.040 | and we're gonna get to retire at 40.

00:07:23.960 | Well, no, you just saw it with the Barretts,

00:07:26.080 | that it was, hey, step one, goal one, a huge goal,

00:07:29.520 | is mom gets to stay home with the two daughters.

00:07:32.480 | I think that's fantastic, Brad.

00:07:34.280 | - Yeah, and you hit on something, which is,

00:07:36.520 | there's, many of you have heard of FIRE, right?

00:07:39.640 | So Financial Independence Retire Early.

00:07:42.640 | And I feel like the RE is such a distraction.

00:07:45.840 | It becomes this, it sucks up all the oxygen

00:07:50.280 | in the room, essentially.

00:07:51.760 | People only focus on, oh, what are you gonna do?

00:07:54.360 | Sit around, do nothing, just be unproductive,

00:07:56.920 | and just waste away, in essence.

00:07:59.280 | And it becomes, oh, these 30-year-old kids,

00:08:02.760 | they're just doing nothing.

00:08:04.160 | And I just, again, that's something I reject

00:08:07.240 | so significantly.

00:08:08.240 | I don't know anybody, well, A, as you notice,

00:08:12.720 | this is about financial independence.

00:08:14.680 | There's no retire early.

00:08:16.960 | My podcast is choose F-I, not choose FIRE,

00:08:21.240 | because, again, it's a distraction.

00:08:23.280 | The RE is irrelevant.

00:08:25.080 | I don't know, I know there are a lot of my friends here

00:08:28.360 | in the audience who also create content

00:08:31.120 | in the financial independence world,

00:08:32.280 | and I can't think of one single person I've ever met

00:08:36.800 | in the FI world that just sits around and does nothing.

00:08:40.360 | Because that's not what we aspire to.

00:08:43.720 | We aspire to make a difference in the world.

00:08:47.080 | We aspire to add value to our community.

00:08:50.160 | Whatever you define community as,

00:08:52.520 | could be as micro as your neighborhood

00:08:55.080 | to your religious organization,

00:08:57.880 | to the local nonprofit, to your university,

00:09:00.840 | to whatever it may be.

00:09:02.800 | And when you have that time and space

00:09:04.400 | to focus on these things, you actually can

00:09:08.160 | for the first time in your life.

00:09:09.800 | So it does feel a little bit odd for many of us

00:09:13.760 | to step off the career path,

00:09:17.000 | because I think so many of us have defined success

00:09:19.680 | as the career path, but if you can just reframe it

00:09:24.680 | and not think that you're being unproductive

00:09:27.040 | or people are gonna look at you differently

00:09:28.920 | or negatively, and just say,

00:09:31.480 | there is a big wide world out there,

00:09:34.080 | and if I'm really, really fortunate,

00:09:37.040 | I get nine decades on this planet, right?

00:09:40.800 | Think about that, really fortunate.

00:09:42.920 | You get nine healthy decades.

00:09:45.160 | To spend any of that additionally working for money

00:09:51.320 | in a job that you don't absolutely love,

00:09:54.160 | that you're not cartwheeling down the road to go to,

00:09:58.160 | I think that's the height of folly.

00:09:59.960 | It doesn't make any sense to me.

00:10:01.560 | - Brad, what are your thoughts on the difference

00:10:06.000 | between financial independence

00:10:09.160 | and conventional personal finance?

00:10:12.560 | - Oh, yeah, that's a good one, Sean.

00:10:17.080 | So I would certainly not define Bogleheads

00:10:20.000 | as traditional personal finance.

00:10:22.440 | I think to me, the biggest thing,

00:10:26.520 | and we had thought about calling this talk

00:10:30.200 | the superpower of financial independence.

00:10:33.200 | I think the traditional personal finance world,

00:10:38.640 | it's almost like fear-mongering to a large degree.

00:10:43.520 | I know you hear the Susie Ormans of the world say,

00:10:47.600 | oh, you can never retire,

00:10:49.760 | or you're gonna need $12 million because healthcare.

00:10:56.280 | Okay, well, healthcare is expensive.

00:10:58.280 | Nobody's gonna deny that.

00:10:59.240 | But do you need, is $12 million completely made up?

00:11:03.200 | Yeah, of course it is.

00:11:04.520 | Can most people aspire to 10, 12, $15 million?

00:11:09.440 | No, they can't.

00:11:11.040 | So what do they do?

00:11:12.600 | What do humans do when we're met with something

00:11:15.000 | that is just so far out of reach

00:11:17.160 | that we can't even contemplate it?

00:11:19.280 | We throw our hands up and we go on YOLOing our lives, right?

00:11:24.640 | And I think what Phi does is, and the biggest superpower,

00:11:29.600 | is it reorients around what you can control.

00:11:33.440 | And I think this is really the biggest distinction

00:11:37.120 | is Phi looks at, and it's funny

00:11:41.120 | because this is gonna be the least technical talk

00:11:43.800 | of this entire weekend, obviously, by a mile,

00:11:46.080 | but Phi looks at what does my life cost?

00:11:49.480 | Okay, it's not just some magical number

00:11:53.800 | for your financial independence or your retirement number.

00:11:57.440 | It's not based on what a retirement calculator says

00:12:01.000 | because, I mean, frankly, those are fundamentally flawed

00:12:04.200 | because they start with your current income,

00:12:06.480 | which is wholly irrelevant to what you actually need

00:12:10.000 | in retirement or financial independence

00:12:12.120 | or whatever you wanna call it.

00:12:14.040 | We look at what does my life cost?

00:12:17.360 | And that's actually what I need to cover

00:12:19.760 | to live each year, right?

00:12:22.160 | Just very simply.

00:12:23.200 | Again, this is a rethink,

00:12:24.120 | but it's pretty evident once we think about it.

00:12:27.480 | And then, again, the technical,

00:12:31.280 | we can have large, in-depth conversations,

00:12:33.760 | but just very simply, even just saying the 4% rule.

00:12:36.960 | Again, we'll put to the side the analysis

00:12:40.040 | and just say, all right, my life costs $80,000 a year

00:12:44.440 | multiplied by 25, I need $2 million.

00:12:48.160 | That's my Phi number, mine.

00:12:50.720 | It's not what Susie Orman tells me.

00:12:52.880 | It's my Phi number because my life costs $80,000 a year.

00:12:57.200 | And now, of course, that's gonna change

00:12:58.760 | and seasons of life, you can model that clearly.

00:13:03.760 | But I think what's so beautiful about the message of Phi

00:13:08.160 | is there is some degree of certainty

00:13:11.640 | and you control the starting point.

00:13:14.480 | And like Sean said, there is a caricature

00:13:18.720 | of Phi being about deprivation.

00:13:20.920 | And I think that's because, frankly,

00:13:23.480 | many of the early adherents of the Phi world

00:13:28.000 | were people who, Jacob from early retirement extreme

00:13:32.720 | who spends, whatever it is, $8,000 a year on his life.

00:13:36.840 | I don't aspire to that.

00:13:38.000 | I can't imagine any of you do either.

00:13:40.120 | I mean, that's not a life I want to live,

00:13:42.840 | but if Jacob wants to live that, then wonderful.

00:13:45.480 | That's great.

00:13:46.320 | If your life costs $30,000 a year, all right,

00:13:50.160 | well, you need, what, $750,000 to reach Phi.

00:13:54.280 | And that's your life and you control it.

00:13:56.740 | And so again, I think just that fundamental starting point

00:14:02.640 | is really the biggest difference, Sean.

00:14:04.720 | - Brad, what do you think are the superpowers

00:14:08.400 | of financial independence?

00:14:10.040 | - Yeah, well, I mean, I guess that is honestly,

00:14:15.400 | that's one of them is really that starting point.

00:14:19.800 | Yeah, superpowers.

00:14:20.720 | So I jotted down some things here.

00:14:22.360 | So right, it certainly gives you certainty.

00:14:25.280 | I think your savings rate being critical.

00:14:30.320 | So I don't know if anybody's ever heard

00:14:33.620 | of Mr. Money Mustache, which is kind of a funny name,

00:14:36.840 | but he's the biggest name

00:14:38.680 | in the financial independence world.

00:14:41.160 | And he has an article that I would suggest

00:14:44.560 | every single person read.

00:14:45.560 | It's called "The Shockingly Simple Math

00:14:47.480 | Behind Early Retirement."

00:14:49.680 | And I think this is one of those aha moments.

00:14:53.600 | So yeah, everybody that's, take a second, write this down.

00:14:56.360 | "Shockingly Simple Math Behind Early Retirement."

00:14:58.960 | Because when you see it,

00:15:03.600 | it's one of those moments you can't unsee.

00:15:06.400 | It's similar to when you learn about Vanguard

00:15:09.800 | and low-cost index fund investing.

00:15:11.860 | You can't unsee it.

00:15:13.960 | When you see that, hey, if I had my money

00:15:16.800 | in a 1% expense ratio fund with a 1% advisory AUM,

00:15:21.800 | I'm gonna lose whatever it is,

00:15:23.760 | 30 to 50% of my net worth over a 40-year period.

00:15:27.080 | You can't unsee that.

00:15:28.880 | It's the same with this in terms of,

00:15:31.280 | hey, what is your savings rate?

00:15:33.360 | And Sean, this frankly goes back to your question,

00:15:35.320 | what's the biggest difference

00:15:36.360 | between traditional personal finance and FI

00:15:40.560 | is traditional personal finance says,

00:15:44.200 | oh, you're succeeding if you save 5 or 10% of your income.

00:15:49.200 | And yeah, I mean, to some degree,

00:15:54.520 | you're certainly better than living paycheck to paycheck.

00:15:58.200 | We can all agree on that.

00:15:59.080 | Or going in the red every month.

00:16:01.080 | Obviously, saving 5 or 10% is better.

00:16:03.880 | But when you look at that article,

00:16:06.160 | and I don't have it committed to memory, unfortunately,

00:16:07.960 | but it's something absurd like 45 or 50-year working lifetime

00:16:13.800 | you would reach financial independence.

00:16:15.680 | If you save 10%, it would take you about,

00:16:18.280 | is that roughly somewhere in the vicinity of 40 years?

00:16:20.920 | - Something like that, I'm not entirely sure.

00:16:22.840 | - Again, don't quote us,

00:16:23.760 | but it's somewhere right around there.

00:16:25.520 | It might even be more, frankly.

00:16:27.000 | But if you save 50% of your income,

00:16:30.500 | which to most people sounds outlandish,

00:16:33.200 | but if you happen, like I think about my daughters,

00:16:37.600 | before they've made any mistakes, right?

00:16:39.720 | Before they bought fancy cars and a big house

00:16:43.880 | and went to college and got $200,000 of debt,

00:16:46.820 | if I can reorient them around saving 50% of their income,

00:16:53.080 | I would argue you essentially cannot possibly

00:16:56.240 | screw up your financial life

00:16:58.040 | if you save 50% of your income.

00:17:00.200 | You can, I mean, I've done incredibly stupid things.

00:17:02.720 | I invested in some real estate speculation

00:17:05.080 | when I was in 2007, 2008,

00:17:07.680 | that cost me hundreds of thousands of dollars,

00:17:10.080 | and because I oriented around a significant savings rate,

00:17:13.780 | it's but a blip.

00:17:15.980 | I mean, sure, would I love to have compounded?

00:17:18.200 | It's probably $700,000.

00:17:19.800 | Would I love to have that money?

00:17:20.880 | Obviously, I would.

00:17:22.040 | But I don't think about it ever again

00:17:24.120 | because it was but a blip.

00:17:26.640 | And so you look at that article,

00:17:29.200 | and I think he has it as if you save 50% of your income,

00:17:33.720 | you reach fly in 17 years in his article.

00:17:37.160 | I think a lot of people have it

00:17:38.480 | a little less than that, actually, 14 years.

00:17:40.320 | So somewhere, again, we're not gonna quibble

00:17:42.920 | over exact details,

00:17:43.880 | but somewhere in the 14 to 17 year period,

00:17:46.280 | that sounds like a much better working career

00:17:49.740 | than 40, 50, 60 years.

00:17:52.240 | So again, orienting around savings rate,

00:17:54.400 | I think, is just absolutely critical.

00:17:56.380 | - All right, let's get away from the technical stuff

00:18:00.320 | and back towards the lifestyle stuff.

00:18:03.040 | Are there major life changes that are necessary

00:18:05.760 | in order to pursue financial independence?

00:18:08.620 | - Necessary, no.

00:18:12.320 | But every single person,

00:18:16.000 | and I almost cringed as the words were coming out

00:18:19.320 | of my mouth talking about my daughters

00:18:21.200 | and saying, "Oh, before they bought fancy cars

00:18:23.600 | "or big houses."

00:18:24.560 | And frankly, if you saw my house,

00:18:26.960 | it's a nice big house

00:18:28.280 | in the best part of the Richmond metro area.

00:18:30.920 | This is not about deprivation.

00:18:32.640 | And if you wanna drive your BMW, great, do it.

00:18:36.800 | That's wonderful.

00:18:38.000 | Make choices based on value, okay?

00:18:41.880 | And what you value and not what your neighbor wants you,

00:18:46.280 | or the keeping up with the Joneses nonsense, right?

00:18:49.560 | So I think, hold on, Sean,

00:18:51.320 | I lost the plot on your actual question.

00:18:53.320 | - So just the major lifestyle change,

00:18:55.040 | are there major life changes necessary?

00:18:56.480 | - Thank you, I'm sorry.

00:18:57.560 | So, right, and I've led this story with,

00:19:01.480 | I lived in a high cost of living area,

00:19:05.000 | and I moved to a lower cost of living area,

00:19:07.440 | which again, is something that I almost cringe about

00:19:10.120 | because I don't want anybody to think

00:19:12.120 | that that is a prerequisite,

00:19:13.520 | that you have to live in Richmond, VA,

00:19:16.840 | or Alabama, or wherever, fill in the blank.

00:19:21.840 | Not the case at all.

00:19:23.720 | Again, it's orienting around a mindset of savings

00:19:28.720 | and savings rate, however that fits into your life.

00:19:31.520 | It might, very simply,

00:19:32.840 | there are two sides of an equation, right?

00:19:35.120 | So earning additional income, upskilling, negotiating.

00:19:40.120 | We have multiple episodes on salary negotiation,

00:19:43.960 | which has been a remarkable thing for our community.

00:19:46.400 | I mean, I get emails constantly from people,

00:19:49.560 | hey, the woman's name is Financial Mechanic, she goes by.

00:19:54.040 | So I heard the episode with Financial Mechanic,

00:19:57.480 | and I negotiated a $15,000 raise with my next job.

00:20:02.120 | I get these all the time.

00:20:04.240 | So obviously, there's two sides of an equation, clearly.

00:20:07.760 | But is your path to FI going to be accelerated

00:20:12.760 | by cutting out some of the frivolous waste,

00:20:16.920 | which we all have, in your budget?

00:20:19.900 | Yeah, I mean, it obviously is.

00:20:21.440 | I'm not gonna sit here and lie to you and say,

00:20:23.360 | if you're living the YOLO mentality,

00:20:26.280 | and you're living paycheck to paycheck,

00:20:28.520 | or going into the red every single month,

00:20:30.920 | that you can just continue doing that,

00:20:33.200 | and reach FI in 10 years.

00:20:36.280 | It's not gonna happen, right?

00:20:38.280 | What is the critical part,

00:20:41.660 | and this is, I think, really the fundamental lesson

00:20:45.400 | from my podcast, which, I mean,

00:20:49.040 | I'm not one of those pat myself on the back people,

00:20:50.760 | but 600 episodes, 65 million downloads,

00:20:53.920 | a community of hundreds of thousands

00:20:56.320 | of people across the world.

00:20:57.720 | The common bond is very simply taking action, okay?

00:21:04.160 | So you can get all the information you want

00:21:10.040 | from Bogleheads this weekend.

00:21:11.940 | But if you just sit there and just passively take it in,

00:21:14.960 | it's worth nothing.

00:21:16.800 | You might as well go home.

00:21:18.760 | You have to get up off the couch

00:21:21.320 | and take action to make your life better, very simply.

00:21:25.400 | Hard stop, end of story.

00:21:27.480 | So I think that is the thing that I've been hardened

00:21:32.320 | by most of people pursuing FI and people in our community

00:21:36.560 | is they understand that every situation is personal.

00:21:41.480 | The old cliche, the personal finance is personal, right?

00:21:45.080 | It is, because every one situation looks different,

00:21:48.700 | and I don't give blanket advice to anybody.

00:21:51.080 | The only advice is you have to take action

00:21:53.640 | to make your life better.

00:21:54.880 | And you have to determine what is valuable

00:21:58.280 | to you in your life.

00:22:00.000 | So for me, automobiles mean nothing.

00:22:04.660 | They're literally gets me from point A to point B.

00:22:07.500 | And driving old cars.

00:22:10.880 | I recently upgraded from a 2003 Honda Civic

00:22:15.040 | to a 2013 Honda Civic, so you can tell

00:22:17.280 | just how much I care about what people think of me

00:22:20.560 | driving around, but that decision to essentially

00:22:24.680 | have no car payments for the last 20 years,

00:22:28.560 | except for obviously two lump sums,

00:22:31.200 | I think when compounded, that's a,

00:22:33.640 | somewhere in the vicinity of $400,000 plus decision.

00:22:37.100 | And obviously timeline, et cetera,

00:22:39.960 | we can go on into all this.

00:22:41.240 | I have podcasts about it, but nobody really cares.

00:22:43.580 | But it's a massive decision, right?

00:22:46.440 | And that's one thing.

00:22:47.960 | Do I feel like I'm depriving myself

00:22:50.000 | because I drive a 2013 Civic?

00:22:51.920 | No, gets me where I'm going.

00:22:54.400 | Again, if you value that, if you value BMW or something,

00:22:57.480 | okay, do it.

00:22:58.500 | But understand, it's a finite pot of money, right?

00:23:02.440 | You can grow your income, but at the end of the day,

00:23:05.220 | the easiest first steps, I think,

00:23:08.160 | are cutting frivolous things.

00:23:11.000 | So yeah, I guess, Sean, that's what I would say.

00:23:13.520 | It is certainly not a prerequisite,

00:23:15.120 | but you have to take action.

00:23:16.440 | - Absolutely.

00:23:17.960 | So Brad, what type of investing strategies

00:23:21.000 | do most people pursuing financial independence follow?

00:23:25.180 | - Yeah, so this is near and dear to everyone here.

00:23:29.840 | Certainly it's, most people in the FI world

00:23:34.840 | follow J.L. Collins and his book, "Simple Path to Wealth."

00:23:39.880 | VTSAX, obviously Total Stock Market Index Fund

00:23:43.960 | from Vanguard, has become, really thanks to J.L.

00:23:48.840 | and his book and his message

00:23:50.360 | and the stock series on his website,

00:23:53.260 | that's almost become the default investment strategy.

00:23:57.240 | And of course, it doesn't start and stop there.

00:24:01.800 | But I think for a lot of people,

00:24:04.120 | low-cost index fund investing is where the vast majority

00:24:08.560 | of people in the FI world put their money.

00:24:11.000 | And I know for me, it was, and I'm sure many of you out there

00:24:15.360 | have had this same aha moment with Vogelheads,

00:24:17.760 | is when you see it, again, it's one of those moments

00:24:21.840 | you can't unsee once you've seen it, right?

00:24:25.280 | You understand, all right, what is the likelihood

00:24:29.200 | that I'm going to beat the market?

00:24:31.560 | Net of fees and taxes for trading

00:24:35.880 | over a 40, 50 year investing lifetime,

00:24:38.480 | what's the chance I'm gonna beat the market?

00:24:40.400 | Approximately zero, right?

00:24:43.800 | So why would I even try?

00:24:46.720 | If like literally the brain-dead version,

00:24:49.120 | it's the only place I can think of in life

00:24:50.800 | where putting less effort in

00:24:53.600 | is going to get you better results.

00:24:55.120 | So again, I'm preaching to the choir here, obviously,

00:24:57.120 | I don't need to waste a lot of time on this,

00:24:58.820 | but yeah, the vast majority of people put the,

00:25:02.800 | I would say the vast majority of their net worth

00:25:05.400 | in low-cost Vanguard and the like index funds.

00:25:09.880 | There are many people who pursue real estate

00:25:12.960 | as an investing strategy, certainly.

00:25:15.480 | There's a large overlap between the bigger pockets community,

00:25:19.080 | anybody who's a real estate investor

00:25:20.960 | certainly recognizes bigger pockets.

00:25:22.760 | And of course, there are always the religious arguments

00:25:27.760 | of dividend investing and real estate

00:25:30.200 | and people thinking that their specific type of investment

00:25:34.800 | is gonna outperform.

00:25:36.880 | I mean, I find it a little dubious at best,

00:25:40.960 | yet to be swayed.

00:25:42.600 | So the vast majority of my net worth

00:25:44.880 | is certainly in low-cost index funds.

00:25:47.160 | So yeah, I mean, Sean, I think it's probably a pretty large,

00:25:50.960 | there's a large sample,

00:25:53.920 | but I would say the vast majority of people,

00:25:55.760 | it's index funds and real estate.

00:25:57.920 | - Yeah, it's certainly an area I think of overlap

00:26:00.360 | or alignment between the typical bogal head

00:26:03.000 | and the typical financial independence person.

00:26:06.320 | You know, Brad, so you are one of the most prominent voices

00:26:10.000 | in the FI community.

00:26:11.600 | And one of the things I appreciate about your voice

00:26:14.640 | is you're very goal-oriented, right?

00:26:16.480 | What are we trying to get to?

00:26:17.720 | What are we trying to achieve here?

00:26:19.640 | But you're certainly not the only voice

00:26:21.360 | in the financial independence community,

00:26:22.880 | as it should be, right?

00:26:24.160 | I've got a question for you about that though.

00:26:27.200 | Are tactics overemphasized

00:26:30.040 | within the financial independence community?

00:26:32.480 | - Ooh, so our tactics.

00:26:35.600 | So like precise tactics?

00:26:37.440 | - Yeah, I mean, things like,

00:26:39.240 | it could be backdoor Roth IRA, it could be 529.

00:26:43.320 | It could even be just maxing out your 401k,

00:26:46.120 | getting your employer match.

00:26:47.520 | Do we spend, you know, HSAs,

00:26:48.960 | there are all sorts of tactics out there,

00:26:50.880 | even on the investing side, right?

00:26:53.000 | Are tactics too, are we focusing too much on tactics

00:26:57.120 | in the financial independence movement

00:27:00.400 | over sort of the bigger picture and the goals?

00:27:04.200 | - Yeah, yeah, that's a good one.

00:27:05.520 | So for me, I focus,

00:27:09.600 | I don't wanna speak for the community at large, certainly,

00:27:12.880 | but for me, I focus so little on the tactics.

00:27:17.520 | So yeah, I mean, I guess I would say by extension,

00:27:20.960 | if there is significant focus on the minutiae,

00:27:24.600 | I think it's missing the forest for the trees.

00:27:29.240 | I really do.

00:27:30.080 | So, because again, I think the biggest driving factor,

00:27:35.040 | and obviously, all of the events that I've been to today

00:27:38.960 | have been phenomenal, but you know,

00:27:40.840 | we're getting into the weeds.

00:27:42.160 | And I think if you're saving zero to 5% of your income

00:27:47.160 | and you're focusing on little tenths of a percent of return,

00:27:53.360 | I think you're missing the forest for the trees.

00:27:56.120 | I think the better way to start

00:27:59.280 | is to really prioritize your savings rate,

00:28:03.560 | because the bigger shovel you have to throw

00:28:05.640 | and just put it in low-cost Vanguard funds, ETFs,

00:28:10.360 | wake up in 50 years, you know, what's the,

00:28:12.880 | is it, I don't know if it's Bogle or if it's,

00:28:15.120 | I think it was Bogle, wake up,

00:28:16.120 | you're gonna need a cardiologist on hand, right?

00:28:18.480 | So to me, it's, all right, focus on savings rate,

00:28:24.480 | but then honestly, it's focus on your life.

00:28:27.600 | I think so many of us, and this is something, frankly,

00:28:32.280 | that is very personal for me now,

00:28:34.840 | is so many of us lose sight of ourselves, right?

00:28:39.480 | Like we lose sight of who we are as humans,

00:28:42.880 | what lights us up, what we wanna do

00:28:44.920 | with our finite time on this planet.

00:28:47.520 | And again, this is very personal for me,

00:28:52.560 | and I'll tell you honestly,

00:28:53.920 | like this is something that's going on in my mind now.

00:28:57.600 | I have focused, and again, our goal

00:29:00.200 | before our kids were born was to spend so much time

00:29:04.240 | with our kids, and mission accomplished,

00:29:08.400 | I mean, it's incredible.

00:29:09.960 | But I think just like anything in life,

00:29:14.320 | you can get out of balance.

00:29:15.920 | And I think what Sean's question ultimately is asking is,

00:29:20.000 | can we get out of balance with our personal finance?

00:29:23.680 | My question is, can we get out of balance with our lives?

00:29:26.540 | I think they're inextricably tied.

00:29:29.160 | I think you need to take those couple of steps back

00:29:34.160 | and figure out what you want your life to look like.

00:29:37.800 | So I have these funny little examples of like,

00:29:40.500 | it almost sounds laughable,

00:29:43.240 | but I think I've watched fewer than 10 movies

00:29:46.840 | in the last 15 years.

00:29:48.420 | I think I used to be a huge English Premier League

00:29:52.920 | soccer fan, like back in the 1990s,

00:29:54.840 | like before it was big here,

00:29:55.800 | and like I probably watched fewer than 10 matches

00:29:58.560 | in the last 20 years.

00:29:59.980 | And like, you know, again, this is very personal,

00:30:03.560 | and this is not necessarily what this event is about,

00:30:06.720 | but I think it's important,

00:30:07.680 | and I think it's important to be honest with ourselves.

00:30:10.020 | And of course, each of you are gonna have something

00:30:12.200 | different in your own minds and your own lives of,

00:30:16.920 | all right, focus on what's actually important.

00:30:19.780 | Don't necessarily focus on the little tenths of a percent

00:30:23.760 | of, oh, if I over contribute to my 529,

00:30:28.760 | or if I contribute to my 529,

00:30:32.040 | I'm gonna get a state tax benefit,

00:30:33.680 | and what's the absolute maximum?

00:30:35.480 | Should I be in the Utah plan, or I live in Virginia?

00:30:39.000 | You can do all that stuff.

00:30:40.720 | And I think it's fine at the margins,

00:30:42.380 | and I think there is a place for it.

00:30:44.220 | So I'm not saying it's not important,

00:30:46.080 | but I think you have to look at your life.

00:30:49.720 | I think you really do.

00:30:51.640 | And you have to say, what am I doing here?

00:30:54.920 | What am I doing on this planet for the nine decades

00:30:57.960 | that I'm afforded if I'm really lucky?

00:31:00.760 | And don't focus on the tactics.

00:31:02.520 | Don't focus on the minutia.

00:31:04.260 | Focus on your relationships.

00:31:05.640 | Focus on the real things that matter.

00:31:07.560 | So yeah, Sean, I mean, that's what I got.

00:31:10.940 | - Great.

00:31:12.160 | So those of you in the audience,

00:31:14.640 | you may listen to the Choose a Five podcast.

00:31:16.880 | You may think of it as sort of a one-way street, right?

00:31:19.520 | Brad talks into a microphone, maybe he has a guest on,

00:31:22.680 | but it truly is a two-way street, right?

00:31:25.040 | Especially at the size and scale of Choose a Five,

00:31:28.240 | you should see how active their Facebook group is.

00:31:31.320 | Brad has a very successful newsletter

00:31:33.080 | that he sends out every Tuesday.

00:31:34.440 | He gets tons of responses to that.

00:31:37.540 | So you really have sort of a view

00:31:40.080 | as to the community and the listener reaction.

00:31:44.560 | And I'm gonna ask you something about the Five movement,

00:31:47.600 | the Five community, and we're gonna talk about this

00:31:50.160 | a little later today, just in the Vogelheads context.

00:31:53.520 | You know, I worry about other sources,

00:31:56.640 | such as say TikTok, and what they're putting out

00:31:59.160 | about personal finance.

00:32:01.080 | As much success as you've had, and as the Fire movement,

00:32:04.600 | Five movement, whatever you wanna call it, has had,

00:32:07.200 | are we missing 20 and 30 somethings?

00:32:09.540 | Are we missing a cohort out there

00:32:11.800 | that might be getting their financial information

00:32:13.880 | and education from other sources

00:32:16.360 | that perhaps are looking to sell more financial products?

00:32:19.360 | You know, in places like TikTok,

00:32:21.520 | I think we're probably somewhat familiar

00:32:23.120 | with things like IULs and all that.

00:32:25.280 | There's a lot of that content on TikTok.

00:32:27.600 | Or maybe, Brad, hopefully you're getting

00:32:30.240 | a lot of 20 and 30 something interaction.

00:32:31.980 | What are your thoughts on that?

00:32:33.960 | - Yeah, it's a good question.

00:32:37.360 | It's hard to say.

00:32:38.360 | I think there's always the allure of get rich quick, right?

00:32:44.140 | I think there's always the allure of

00:32:46.340 | there's some secret behind the curtain.

00:32:48.640 | And I mean, I guess at this point,

00:32:52.580 | I have a fairly decent net worth.

00:32:54.140 | I know a lot of other wealthy people.

00:32:57.080 | I've yet to find the secret behind the curtain

00:32:59.660 | that's actually real.

00:33:00.620 | Or hey, I'm let into this room now all of a sudden.

00:33:04.020 | So, you know, for me,

00:33:07.700 | I orient my life around simplicity, certainly.

00:33:10.820 | So, which again, is preaching to the choir here,

00:33:13.260 | and bogal heads investing.

00:33:15.980 | But yeah, I mean, I think unfortunately, Sean,

00:33:18.860 | and we saw this with GameStop, and we saw the Robinhood.

00:33:23.360 | I think there is a mentality of YOLO,

00:33:28.360 | some intersection of YOLO, get rich quick,

00:33:31.340 | and stick it to the man, right?

00:33:34.140 | And not understanding that investing in stocks

00:33:39.140 | is not gambling, right?

00:33:41.780 | I think like, if we can proselytize for one thing

00:33:45.260 | here as bogal heads community, it would be everyone,

00:33:49.700 | you hear it, you hear the phrases, right?

00:33:51.420 | I'm gonna gamble, gamble in the stock market.

00:33:56.420 | Like, people think of it as risky.

00:33:59.240 | Like, I'm rolling the dice.

00:34:01.220 | Like, I've actually heard people use this phrase.

00:34:02.840 | Like, no, you're buying a tiny little ownership percentage

00:34:07.700 | of, in the case of VTSCX, of three to whatever it is,

00:34:11.500 | 4,000 American companies and 100 plus million workers,

00:34:16.140 | and their ingenuity and hard work.

00:34:17.960 | That's a totally different thing.

00:34:20.580 | It's not get rich quick.

00:34:21.860 | It's you are buying a tiny little ownership piece

00:34:24.460 | of all of those companies, and getting all of these

00:34:27.420 | amazing American workers and workers across the world

00:34:30.380 | as essentially your employees, right?

00:34:34.000 | So, yeah, I mean, Sean, I think, ultimately,

00:34:37.400 | everyone is susceptible to the get rich quick mentality.

00:34:41.920 | So, I think it's incumbent on people like us

00:34:46.920 | to, again, not stand up, and even though

00:34:50.120 | I just used proselytize, and shout from the rooftops

00:34:54.040 | and try to, like, win people over.

00:34:55.720 | It's to look for people in our lives

00:34:59.400 | who might be open to a message of orienting around

00:35:04.080 | long-term thinking, around savings rate,

00:35:07.040 | around smart, low-cost investing.

00:35:10.000 | And where do you find those people?

00:35:13.120 | How can you help them?

00:35:14.160 | Like, I have never found success in spouting.

00:35:18.540 | I'm not a very outgoing person in general.

00:35:20.840 | So, if you see me sometime later this weekend,

00:35:23.880 | come up and say hello, 'cause I'm probably

00:35:25.520 | gonna be standing in the corner.

00:35:27.840 | So, I'm not running around telling people about FI,

00:35:32.480 | but when I hear people talk about,

00:35:34.800 | oh, I invested in my 401k, or even down to,

00:35:38.680 | oh, I'm clipping coupons, like, people who are oriented

00:35:42.320 | around, again, somehow saving money,

00:35:46.360 | somehow thinking about money.

00:35:48.120 | Because, I mean, I think all of us know

00:35:50.320 | the vast majority of people are just kind of YOLOing it,

00:35:53.200 | and we never learned, we never learned personal finance.

00:35:56.000 | It's not like, I'm not blaming anybody.

00:35:58.320 | It's all of our faults.

00:36:00.000 | But if you can find those people,

00:36:02.800 | I think we can make a difference in our own lives

00:36:06.080 | and families and communities in a very empowering

00:36:09.780 | and positive way, as opposed to demeaning people.

00:36:14.320 | Obviously, that never works.

00:36:15.760 | Or talking down to entire groups of 20-somethings,

00:36:20.320 | whatever, fill in the blank.

00:36:22.760 | And find people to help in your lives.

00:36:26.400 | Find that younger niece or nephew or cousin

00:36:30.280 | who hasn't made mistakes yet.

00:36:32.240 | And, of course, this is not predicate.

00:36:34.000 | We have a lot of, we have Bill here

00:36:36.440 | from catching up to FI for late starters.

00:36:39.780 | FI is not about getting it right at 17.

00:36:43.780 | But it's a hell of a lot easier, right?

00:36:46.760 | Like, let's be honest.

00:36:48.380 | But there are many people in the FI community,

00:36:51.680 | I would even hazard to say the majority of people

00:36:53.960 | in the FI community who are finding it

00:36:55.320 | in their 40s and 50s.

00:36:56.840 | So it's never too late.

00:36:59.640 | But again, not to sound like a broken record,

00:37:01.800 | but you have to take action.

00:37:03.080 | You just, you have to, very simply.

00:37:04.840 | - By the way, so we're getting close to the time

00:37:08.220 | for the audience question.

00:37:09.160 | So if you have one, please write it down.

00:37:11.040 | Dr. Jim's in the back.

00:37:12.480 | Brad, I'm gonna challenge you here with a two-parter, right?

00:37:16.880 | I know this isn't really fair, but I'm gonna do it anyway.

00:37:19.880 | So are there contradictions

00:37:22.400 | in the financial independence movement and do they matter?

00:37:25.940 | And I'll give you an example, right?

00:37:27.640 | Maybe someone out there is in the FIRE movement,

00:37:30.320 | FI movement, and they're like,

00:37:31.380 | you know, I'm gonna retire early at say age 50.

00:37:35.280 | Well, how are you gonna support yourself?

00:37:36.360 | I'm gonna leave corporate America, right?

00:37:38.240 | Done, right?

00:37:39.100 | No more nine to five job, no more corporate America.

00:37:42.240 | All right, well, how are you gonna support yourself

00:37:43.640 | in your early retirement?

00:37:45.200 | Invest in corporate America, right?

00:37:47.480 | So Brad, are there contradictions in the FIRE movement

00:37:51.520 | and do they matter?

00:37:52.480 | - Yeah, that's an interesting one, Sean.

00:37:55.960 | I've never thought about that.

00:37:57.360 | So yeah, this will be on the fly thinking,

00:37:59.280 | but I don't, oh, he's dangerous.

00:38:02.200 | I don't think that's a contradiction, certainly,

00:38:05.160 | if that is a caricature.

00:38:07.360 | Yeah, I mean, contradictions,

00:38:12.420 | where my mind goes,

00:38:15.320 | and I don't know if this is necessarily a contradiction,

00:38:17.600 | but is like the,

00:38:20.120 | this is going back to the RE, the retire early.

00:38:25.160 | And if you take that as kind of the bare bones of this,

00:38:28.000 | whether you believe that or not,

00:38:29.880 | but a lot of people think,

00:38:32.040 | okay, once you leave your corporate job,

00:38:35.300 | that you have to be done.

00:38:37.540 | You're retiring early, hanging up the boots, whatever,

00:38:42.400 | and riding off into the sunset, and that's it.

00:38:45.040 | And you're gonna sit on a beach and sip umbrella drinks.

00:38:48.200 | And that's the only definition of successful FIRE,

00:38:53.200 | which you can tell, dripping with sarcasm,

00:38:56.320 | because I think that's preposterous.

00:38:58.860 | I think what most of us actually aspire to

00:39:02.600 | is making a difference, however we define that.

00:39:07.280 | So again, Sean, I'm not sure if this

00:39:10.120 | is necessarily a contradiction,

00:39:11.560 | but I think what should be apparent to all of us

00:39:15.780 | is after you leave your traditional job,

00:39:20.780 | or frankly, renegotiate your current situation.

00:39:25.800 | I think what FIRE does is it gives you power,

00:39:29.900 | and it reorients, and this doesn't mean lord it over people,

00:39:34.760 | or be a jerk at work because you can,

00:39:38.160 | because you have power.

00:39:39.000 | It doesn't mean that at all, obviously.

00:39:40.880 | But what it means is when you are not beholden to your job,

00:39:45.820 | like most people are, right?

00:39:48.200 | Most people's lives will fall apart

00:39:51.280 | in somewhere between 30 and 90 days

00:39:54.160 | without their current income,

00:39:57.840 | because they live paycheck to paycheck.

00:39:59.640 | It's a house of cards.

00:40:01.080 | They might even make a nice income.

00:40:03.080 | But if you spend it all, and you have no net worth,

00:40:05.920 | you are poor.

00:40:06.840 | You know, that sounds a little extreme,

00:40:10.340 | but it is the truth.

00:40:11.400 | If you have no net worth, you're living paycheck to paycheck.

00:40:14.360 | I don't care if you make 70 grand or 300.

00:40:17.260 | Same bottom line, same net worth, right?

00:40:21.540 | So I think, yeah, ultimately,

00:40:26.540 | it's like I was saying.

00:40:29.960 | You can reorient and not lord this over people,

00:40:33.600 | but what do I actually like as part of my job?

00:40:38.840 | For people that, I'm sure there are many of you

00:40:40.760 | who would say, "I love my job."

00:40:43.040 | And I believe you to a degree,

00:40:47.420 | but I'm sure there are many aspects of your job

00:40:51.100 | that you don't love.

00:40:52.660 | I'm sure nobody wants to go to endless meetings

00:40:54.840 | and fill in TPS reports and whatever other nonsense, right?

00:40:59.700 | Well, I wonder if there's a way to re,

00:41:02.300 | I don't know, reorient?

00:41:04.620 | I guess I'm overusing that word,

00:41:06.340 | but to change the entire way that your job looks

00:41:10.380 | and add more value, potentially the same value,

00:41:15.180 | with less time spent at the office, okay?

00:41:17.900 | So what does that look like

00:41:19.140 | when you reach financial independence

00:41:21.120 | and the power is in your court?

00:41:24.100 | Could it look like, "Hey, I only want to come in

00:41:28.500 | "three days a week for four hours,

00:41:30.260 | "but I really love this aspect of my job,

00:41:34.180 | "and I think I do it in a way

00:41:36.380 | "that would be really hard to replace."

00:41:38.620 | Nobody's irreplaceable, obviously,

00:41:40.260 | but this would be really hard to replace,

00:41:42.180 | and there's no need to because I want to keep doing this.

00:41:46.540 | Well, I think the powers that be at your office

00:41:49.940 | will be a little bit taken aback at first,

00:41:52.320 | but I suspect you have more power than you think.

00:41:57.320 | And that would be kind of like a parting message

00:42:02.180 | that I would leave to everyone here is,

00:42:04.820 | I think you have more power than you believe,

00:42:07.300 | and when you are at this point of financial independence,

00:42:13.340 | and even, frankly, far before it,

00:42:15.560 | the power just keeps subtly shifting towards you,

00:42:21.220 | and then you can actually devise a life

00:42:24.560 | that you want to live, and it's not just the same

00:42:28.340 | groundhog day nonsense over and over again.

00:42:31.140 | So, John, I didn't exactly answer your question,

00:42:33.420 | but I think the contradiction is,

00:42:34.860 | it's ultimately like, it's not either/or, right?

00:42:37.820 | Like, you're going to be doing something,

00:42:40.620 | but you're gonna be doing it on your terms,

00:42:42.980 | and that might mean earning income.

00:42:45.260 | For most people, it will be in some way,

00:42:47.840 | but it doesn't have to be the same amount of income.

00:42:49.780 | It can be a tiny little fraction.

00:42:51.180 | It can be anything.

00:42:52.940 | The ball is in your court,

00:42:54.460 | and I think that is just so powerful.

00:42:59.500 | - All right, we've got some audience questions.

00:43:01.780 | We don't have that much time,

00:43:02.780 | but we're gonna try to get through some of them.

00:43:04.780 | This one's very personal to you, Brad.

00:43:07.420 | How did you feel about your portfolio during March 2020,

00:43:12.420 | and did you rebalance or spend less

00:43:15.340 | after restrictions were lifted?

00:43:17.420 | - Yeah, this is a good one.

00:43:21.580 | I think all of us would like to believe,

00:43:27.180 | like Dr. Jim over here,

00:43:29.580 | that we have an investor policy statement,

00:43:31.820 | and we have steeled ourselves

00:43:36.380 | for whatever calamity is gonna befall us or the world,

00:43:41.380 | and I think what's really important to remember

00:43:47.700 | is we're all human, right?

00:43:50.660 | And I think, for me, 90% of personal finance

00:43:56.940 | is up here in this little primitive brain,

00:44:00.580 | and 10% of it is numbers and getting the minutiae

00:44:05.220 | and all the tactics right.

00:44:06.780 | So yeah, I mean, I'm not gonna lie.

00:44:10.020 | In March of 2020, when the world,

00:44:12.700 | when who the heck knew what was gonna happen,

00:44:15.800 | I mean, I freaked out like everybody else did,

00:44:17.900 | and luckily, because I have some degree of knowledge

00:44:22.780 | and I understand that this is, in this case,

00:44:26.420 | a 60-year investing horizon,

00:44:28.820 | I didn't sell everything and run for the hills

00:44:31.520 | and buy gold and MREs and whatever other nonsense, right?

00:44:35.280 | But the thought crossed my mind, you know?

00:44:37.900 | I'm sure it did most of us.

00:44:39.820 | But obviously, that's what having

00:44:42.340 | an investor policy statement, where that helps,

00:44:44.580 | or even if you don't have it written down,

00:44:47.000 | just understanding that this stuff happens, right?

00:44:50.260 | It's not gonna be COVID next time.

00:44:52.060 | It's gonna be something.

00:44:53.460 | Something is coming, right?

00:44:55.480 | And we've all seen the numbers,

00:44:58.540 | and I'm not gonna get the paraphrasing right,

00:45:00.740 | but if you miss the 12 best days in the market

00:45:04.340 | over a 20-year period, you lose X% of the return, right?

00:45:07.340 | You cannot let your emotions rule you.

00:45:12.840 | But man, it's hard, right?

00:45:14.700 | It's hard.

00:45:15.540 | I think a lot of us freaked out.

00:45:16.800 | So did I sell a little bit?

00:45:20.820 | I mean, this might be the first time I've publicly said,

00:45:22.740 | yeah, I did.

00:45:24.460 | It wasn't a lot, thankfully.

00:45:25.660 | It was just, it was emotional and it was rash

00:45:27.700 | and it was stupid, frankly, and it obviously cost myself,

00:45:30.900 | but it was, luckily, I didn't make anything terrible.

00:45:35.100 | This wasn't a significant thing.

00:45:37.060 | So my, and I guess to the second part of the question,

00:45:42.060 | I am still in an unusual place where my,

00:45:46.860 | I own a number of websites.

00:45:48.260 | I travel miles 101 where I help people travel the world

00:45:53.140 | with credit card points, and I choose a FI.

00:45:55.780 | So I'm earning enough money to cover my life expenses.

00:45:59.420 | So in all candor, there has never been a month

00:46:03.060 | where I've had to draw down on my assets.

00:46:07.000 | So I am not the prototypical, but again,

00:46:09.860 | there is no prototypical FI person

00:46:11.380 | 'cause I think many of us continue to earn

00:46:13.860 | some amount of money after we've reached FI.

00:46:16.620 | But yeah, have I reached a point

00:46:18.300 | where I'm earning zero dollars and drawing down?

00:46:21.380 | No, so I mean, frankly, my tactics and strategy

00:46:26.180 | didn't have to change, which I think

00:46:28.900 | is perfect world scenario anyway,

00:46:30.740 | that hey, I'm not changing anything amidst calamity

00:46:33.260 | or coming out of a calamity.

00:46:35.460 | I think we should all, again, the hardest part is up here.

00:46:39.740 | Let's all be honest with ourselves, right?

00:46:42.620 | So anything you can do, it's like running the reps on things.

00:46:47.620 | How can you get these reps in?

00:46:50.500 | And do we want calamities to befall us

00:46:53.120 | to get these reps in?

00:46:53.960 | No, but okay, I've been through 2008,

00:46:57.420 | and again, I screwed up royally on real estate there,

00:47:01.500 | but at least I've learned, and now I look at real estate

00:47:04.380 | as I own a couple single-family rentals down in Georgia,

00:47:08.180 | and I own them mortgage-free, and nothing can go wrong.

00:47:12.100 | So that was a lesson that I took from it,

00:47:14.700 | and I will never make that speculation mistake ever again.

00:47:19.220 | I learned that I am as susceptible to freaking out

00:47:23.380 | as anybody amidst a market downturn,

00:47:25.900 | but now I understand the emotion.

00:47:29.540 | I understand what's gonna happen the next time

00:47:32.100 | in my own head, and hopefully, I'm the wiser for it.

00:47:35.700 | - Here's a little one, Brad,

00:47:38.820 | that is near and dear to your own heart.

00:47:41.940 | Kids are expensive.

00:47:44.220 | What advice do you have for parents of young children

00:47:47.780 | seeking to reach financial independence?

00:47:50.580 | - Yeah, I mean, I think kids can be expensive.

00:47:57.260 | I don't think kids necessarily are by definition expensive,

00:48:01.980 | though I guess if we look at opportunity cost,

00:48:06.980 | which I think, so I would argue that my kids

00:48:11.580 | have not been terribly expensive, like out of pocket,

00:48:15.660 | but I think that would be a silly analysis

00:48:19.980 | because the opportunity cost is my wife

00:48:23.860 | has not been working now, essentially, for 15 years.

00:48:27.460 | So I would have to be a fool to stand up here and say,

00:48:31.380 | "Kids are not expensive," right?

00:48:32.660 | So opportunity cost has to function,

00:48:34.600 | has to matter in any equation.

00:48:38.220 | I think pursuing FI with kids

00:48:42.700 | is just like pursuing FI, to a large degree, without kids,

00:48:47.900 | in the sense that it's about choices, right?

00:48:52.540 | So, and every single person is different.

00:48:55.940 | Now, my kids are both excellent,

00:48:58.660 | like I guess they were, national-level swimmers

00:49:02.420 | as younger girls, and we had them

00:49:06.860 | in a very expensive year-round swim program,

00:49:10.220 | and that was a choice we made,

00:49:12.220 | and that was very, very expensive,

00:49:14.540 | but we made that choice from a place of value,

00:49:18.220 | and I think that's the important part is,

00:49:22.300 | so I'll take this 30,000-foot view,

00:49:25.700 | is make any spending decision, whether kids

00:49:29.720 | or just in your own life, from a place of value

00:49:33.260 | and not from a place of impressing people or, right,

00:49:38.260 | impressing your neighbors or whatever it may be,

00:49:40.020 | and frankly, so this swim program,

00:49:42.900 | I said it was in the past tense,

00:49:45.220 | is they fell out of love with it.

00:49:48.020 | It's anybody, I don't know if anybody has swimmers in here,

00:49:50.200 | but that is a brutal sport.

00:49:51.780 | I mean, they're swimming 20,000 yards a week,

00:49:54.180 | and it's just ludicrous, and we could've forced them, right?

00:49:59.020 | If we were parents who cared about,

00:50:01.580 | "Oh, my kid got a scholarship,"

00:50:03.220 | or, "My kid is swimming Division I,"

00:50:04.820 | like, they could've easily done that,

00:50:07.340 | but they fell out of love with it,

00:50:09.900 | and that was the day they stopped swimming

00:50:13.660 | because it wasn't about us, right?

00:50:15.620 | So I think a lot of parents, and this goes,

00:50:18.340 | let's all be honest with ourselves,

00:50:19.580 | it goes with the car decal that you put up

00:50:23.140 | on the back of your car, right?

00:50:26.220 | Like, again, my daughter, who's the older one

00:50:29.540 | who's an excellent swimmer, that very easily

00:50:32.180 | could've said, "MIT," but she stepped off that hamster wheel,

00:50:36.900 | she stepped off the swimming,

00:50:38.100 | and it was made with eyes wide open.

00:50:39.900 | And, you know, I'm kinda going off the rails here,

00:50:43.740 | but I think the more important point is,

00:50:48.020 | yes, kids can be expensive, but I think, just like anything,

00:50:52.400 | kids don't want fancy stuff.

00:50:56.860 | They want your time, and they want your attention,

00:51:01.380 | and they want you to put the stupid phone down

00:51:04.700 | and just spend time with them, right?

00:51:07.660 | So like, yeah, kids can be expensive as you make them,

00:51:11.580 | or they can be as inexpensive

00:51:13.440 | as your family wants it to be, right?

00:51:18.060 | Like, there's so many free, amazing,

00:51:20.140 | I live in Richmond, VA, which is not, like,

00:51:22.440 | the center of the universe, by any means,

00:51:24.120 | but we could do something free, outdoors,

00:51:27.820 | or some festival, every weekend of the year,

00:51:30.980 | if we decided, and that costs nothing.

00:51:33.060 | I know we had, and I know we're running out of time here,

00:51:35.820 | but Liz from Frugal Woods, on way back in,

00:51:38.960 | I think it was, like, episode 12 of "Choose a Buy"

00:51:40.940 | in early 2017, and she was saying

00:51:43.340 | that the interesting thing of living in a city

00:51:45.820 | is everybody thinks it's so expensive.

00:51:48.880 | She's like, "That's laughable."

00:51:51.900 | Yeah, it's expensive to actually, the rent,

00:51:54.860 | but everything else is free.

00:51:56.820 | They lived in Boston, and there are 30 universities there

00:52:00.220 | with events every single weekend,

00:52:01.780 | so I think the larger point that I would give

00:52:05.340 | to everybody here is think a little bit differently, okay?

00:52:10.340 | We're all thinking a little bit differently

00:52:12.420 | being here at Bogleheads.

00:52:13.940 | We're thinking a little bit differently

00:52:15.820 | being in the Phi community.

00:52:17.320 | Think a little bit differently.

00:52:19.940 | You don't have to be cookie cutter.

00:52:22.380 | You can actually do what you want to do

00:52:24.860 | based around your values, so that's my challenge.

00:52:29.260 | Think a little bit differently,

00:52:30.900 | and get up off the couch, and take action.

00:52:33.000 | - Brad, well, first of all, thank you for being here today,

00:52:38.140 | and can we get a round of applause for Brad Barrett?

00:52:40.660 | (audience applauding)

00:52:43.820 | (applause)

Bogleheads® Conference 2023 -Sean Mullaney Interviews Brad Barrett on Financial Independence

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