20 - Building Your Financial Future Using FIRE with Angela Tipton - Revelizations

Episode Transcript
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(00:09):
This episode of Revelizations is brought to you by Stealing.
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Stealing.
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Hi everyone and welcome to Revelizations.

(01:15):
I'm your host, Brian James.
I've heard that our modern school system started to take shape after the Industrial Revolution.
The school system was designed not to get people ready for the world, but rather have
them get ready to work in the world of factories.
Which makes a lot of sense if you sit and think about it for a few moments.

(01:35):
School days are long with not a lot of freedom of choice in what activities you participate
in.
You go to the same classroom, sit in the same desk, learn how to follow directions, learn
only what they tell you to learn, and told not to talk unless it's about the subject
matter.
Straying outside of those parameters is not only discouraged, it's punishable.

(01:55):
There is a lot to be learned in school, but what you learn doesn't necessarily translate
to anything other than getting a good test grade while you're in school.
Leaving people to learn more life applicable skills and knowledge by either seeking it
out in higher education or learning as they live.
Skills and knowledge like how to exercise, eating a balanced diet, navigating the many

(02:17):
dynamics of interpersonal relationships, how to have a healthy relationship with social
media.
If that is possible, even personal finance is something that gets neglected.
These are topics not taught before college, but topics we need to have an understanding
of to successfully transition from adolescence to adulthood, which naturally I think lends

(02:39):
itself to being great podcast episodes.
So today, we're going to focus on one of those topics, financial literacy, with the
help of our guest, Angela Tipton.
It's important to learn how to make good financial decisions because uninformed financial decisions,
whether seemingly benign ones like eating fast food several times a week or major decisions

(03:01):
like going to college and taking out a student loan, can have implications for years to come.
A reality Angela Tipton is very familiar with.
Angela graduated college with $100,000 in student loans.
As she was building her career, she felt tethered and limited by her debt.
As someone who was diagnosed with Crohn's disease at 19, she was no stranger to hearing

(03:25):
other people say what her life was going to look like.
Life was going to look a certain way with this diagnosis, and life was going to look
a certain way being a young woman saddled with that much debt to her name.
Not willing to settle, she has pivoted several times in life to get where she is.
Starting as a molecular biologist, she decided to lean into her love for writing and turn

(03:48):
to marketing and communications.
Along that journey, she learned about the financial independence retire early philosophy,
or more succinctly, FIRE.
After learning more about FIRE, she started applying its principles to her and her family's
life.
As a result, she was able to pay $85,000 in student loan debt in 18 months.

(04:10):
Incoming pun, this ignited a fiery passion in her to help others find that same financial
peace.
Angela empowers others by providing the foundational financial knowledge that enables others the
freedom to choose how they spend their time.
Join me today as I sit down with Angela Tipton and we discuss financial literacy, the FIRE

(04:31):
philosophy, balancing your current lifestyle with the standard of living you want to have
in retirement, how to chip away at debt, understanding credit score, different retirement investment
options, mindset for financial freedom, and more.
One last note before we start.
I want to let listeners know that this isn't financial advice.

(04:52):
This is one philosophy of many on finance.
Ultimately, you still need to do your own due diligence on what is the best financial
practice is for your situation.
Disclaimer aside, let's jump into the episode.
Thanks for listening.
Hi, Angela. It's nice to meet you.
Thank you so much for being here.
I'm very excited to sit down and have a conversation with you.

(05:14):
Likewise, Brian. Great to be here.
Thanks for having me.
Of course. So tell us a little bit about yourself.
Yeah, so a little bit about me is I am the founder of a platform called FIRE, your career,
where I teach concepts like financial literacy and how to use your career and follow a traditional
career method to really empower your life so that you can live life on your terms.

(05:38):
And for many of us, that means different things.
It could be traveling the world.
It could be spending more time with family or even just taking a step back from your
career and relaxing. But I use the FIRE method to really help people understand the ways
that you can empower yourself with your finances so that if you want to retire early, you
can or you can just get to a certain point where you're able to invest more in other

(06:02):
areas of your life that are driving more value for you.
So what is the FIRE method?
Great question. So FIRE stands for financial independence, retire early.
And it's actually a fairly simple concept.
It's simple to realize, but hard to obtain.
And let me explain what I mean.
Financial freedom or financial independence, whichever phrase you choose to use, is really

(06:27):
allowing you to use your finances, so your investments, to live off of.
So that gives you the freedom to explore new careers, to retire early, to travel the
world or to really do whatever you want with your life.
But the end goal is to get to a point with your finances where you are so successful

(06:49):
in your investments that you can live off of that indefinitely.
So that the idea is to get to that point so that you have the freedom to choose.
What attracted you to the FIRE method?
I'll be honest, the first time I came across the concept of FIRE, I was one of those that
was very skeptical. It just sounded too good to be true, right?

(07:09):
It just sounds so unobtainable.
It sounded unrealistic because I was one of those that when I grew up, I saw people
working really hard until their traditional retirement age of 65 or even above.
So what I understood was that you get to that age and you retire if you have the

(07:30):
finances to do that.
I think what attracted to me to it initially was that the idea was so foreign and although
initially it sounded so unrealistic that I thought there's going to be something to
this, right? It can't be that interesting.
It can't really be that far out of reach that I really think it's that, right?

(07:52):
It started to really appeal to me because I thought that kind of lifestyle sounds great.
You know, what if I do have the freedom to choose?
What if I can do this with my career or I can make a career change or I can retire early?
It took me a while to get to that place.
But having built up my career, I started getting used to working with some older

(08:14):
professionals. And I honestly saw people that were truly miserable in their careers.
And I just decided that I do not want to be one of those people.
It just it doesn't sound like a fun way to live.
And I've always loved life and the opportunities that were brought to me.
So I thought there's got to be a better way.
And the more I dove into understanding the concept of fire and financial freedom and

(08:39):
what you can do with your finances, the more I thought, you know, this is actually
obtainable. It's not easy to get.
It doesn't happen overnight, but with really conscious action, with thoughtful steps,
with careful planning, it's feasible and achievable for really just about anyone,
especially if you're an American.
There's so many opportunities here.
It just seems like a foreign concept.

(09:00):
There's a lot of foreign concepts that you addressed.
And one is that it doesn't have to look like you retire when you're 65 or 66 or
whenever they're going to move the age in the next few years, because Social Security
isn't properly funded or too many people use it as a slush fund, IOU, and never kind
of put the funds back out that they took.

(09:22):
So it's wise to diversify your portfolio and to not just depend on one social net
that might not be there when you get older.
And it's a it's a very dynamic problem that will hopefully get addressed.
But there's also this idea of Social Security and retirement and the younger

(09:48):
generation paying for the older generation to kind of like retire some of their wages
so that they paid into it.
But what they what the older generation paid into, they're not necessarily reaping
like this is all new money.
This is actually a new generation of money.
And the replacement pace of humans in the United States right now is starting to

(10:09):
decline. So you can already see right now there's going to be a problem with an older
generation that can't necessarily work anymore or that is just completely relying on a
younger generation that is there's not as many of them to support this older
generation. And so, yeah, of course, you should be looking at how to protect yourself

(10:31):
as you're you're getting older, but also don't wait until you get older, until like
you're in your 60s and you're like, can I retire?
Like, this is what everyone else is doing.
And so look into that.
And a kind of a very radical idea of retiring early is you kind of only think about
that for people who are very successful, people who they magically found oil in their

(10:59):
backyard or something, or they had a startup and Facebook is like, that's mine.
I'm going to buy it from you.
Congratulations. You're rich now for one good idea.
But it can be looked into when you're younger.
You don't have to be that person.
So how can an average person with an average level of income hope to retire before
their 60s or 70s using the fire method?

(11:21):
Yeah, I love this question because this really gets at the heart of what you can do and
how it is achievable.
And I'll mention again that, yes, it's not easy.
It does require focus.
It does require dedication, but it is achievable for anyone.
If you have even a lower income, I've heard plenty of stories of teachers being able to

(11:45):
build up a sustainable lifestyle and for them being able to retire early.
And you think, you know, we talk often about teachers just being so undervalued and
underpaid for the work they do, which I truly believe is a problem.
But teachers don't typically earn a very high salary unless you live in a high cost
of living area. And even then, your income is usually just about enough to make ends

(12:12):
meet, right, especially in the state of the economy today.
But and I say this with a big but if you are very thoughtful about the way you are
spending your money and I do mean being really conscious about the way you're spending,
anyone can achieve fire.
Now, it's very, very common, especially in our society, to live at your means.

(12:34):
And we do that and it's very easy to do and it's easy to get in this trap of keeping up
with the Joneses, you might say, or buying the newest vehicle because it's something
you need. And I'm not saying that those things aren't justified.
But really, when we're talking about conscious spending, it's about being really mindful
about what you're putting your hard earned money into and what you're choosing to

(12:59):
forego in the interest of obtaining financial freedom.
It does mean at times that you have to make some difficult choices.
You if you enjoy eating out, for instance, you might need to make sacrifices.
And instead of eating out, let's just make up a number that's three days a week.
Maybe you stop eating out entirely because it's worth it to you to invest that extra

(13:21):
money instead into your financial future.
Maybe instead of cutting it out entirely, you're going from three days a week of eating
out to one. Now, we all have to make these choices.
And I'm using a very simplistic example, but we need to do that with every single one
of our finances. If you have a Netflix subscription you're not using, then you need to be

(13:44):
mindful of potentially cutting that out or using something else.
And not every single cutback is going to make sense for every person.
But what is important is to carefully look at your budget and to look at your finances
and understand where your money is going every month and every week and figure out what of
those things can I cut back on and what are those things are worth it to me to then put

(14:09):
that money towards my financial future so that I can retire early or I can travel the
world or I can do something else with my career.
So it really what it is is the key is to live below your means to make those really
conscious choices and to be really mindful about where each of your dollars are going.

(14:30):
Yeah, it's it seems like it's a very fine balance of what sacrifices are you willing to
make right now for a long term goal of retiring early.
And I feel I feel like like you're saying it has to be very thoughtful because.

(14:53):
No one's promised tomorrow.
And so you want to make sure that you're not sacrificing so much for 10 years of barely
scraping by and just, you know, making hard, difficult choices, making life a little bit
more challenging in the meantime, you know, maybe driving a vehicle that is, you know,

(15:14):
just the bane of your existence for a few more years than you wanted to rather than just
like having a slightly higher car payment or something like that or having a car payment
at all. And then it just it, you know, it turns out some cosmic irony that it was your
time to go before it was time to retire.
And I think it's also something that you have to think of like, is this a precedent that I

(15:38):
can continue to live in?
Because it's not like you're suddenly going to reach retirement age and this money, you
know, whether that's 40, 50, however much you're able to save and however much you've
figured that you can live off of.
Do I want to continue the standard of living or do I want to live at a higher standard
of living? So how do you how do you balance all that?

(15:59):
That's a great question. And that is something that, honestly, I reflect on often in my
life. I am a mom of two little boys that are six and three.
So it's something I think of often.
And I also have a chronic illness.
I was diagnosed with Crohn's disease when I was 19.
So believe me, those thoughts weigh on my mind.
Am I going to have a full lifespan?

(16:21):
Am I as present as I can be for my boys?
So we all are faced with those realities and we're all faced with those choices of how
do I balance the here and now versus the future?
And that's really the key.
And the word itself is balance.
So, yes, I live for the future and I build towards that future, but I also live in the

(16:43):
now. And if I didn't live for the now, then that future wouldn't be as promising and
optimistic to me as it is.
And it is a hard balance to achieve.
And everyone's balance looks a little bit different.
Just for example, if you're younger, if you're in your 20s and 30s, maybe you decide that
you want to work extra hard so that you have a higher income so you can put more money

(17:08):
in your earlier working years into your retirement or maybe you put it into savings or
it's some other special fund for you to enjoy an early retirement, whatever that is.
Now, you can do that.
The trade off with that, of course, is that you're not going to have as much time to
enjoy that here and now in your 20s and 30s.
You're not going to have as much time maybe to spend with friends.

(17:29):
Maybe you won't want to start your family as early.
As another example, because you're working so hard now, that is a sacrifice you make
for that now. And for some people, that sacrifice is worth it.
For others, it's not.
And for others, that balance might look more like, well, I'm not going to have the kind
of income that I would like to have, maybe.

(17:50):
But I'm working in a job that doesn't require as many hours for me.
I have more flexibility with my family.
I have more flexibility to enjoy time with my friends.
And that's a different kind of balance.
Now, that might mean that your runway to early retirement is longer, and that's very
possible. Or maybe instead of having a longer runway to fire, you're looking at doing

(18:12):
something like a lean fire for an early retirement.
And I'll explain what I mean by lean fire.
If you can lower the amount you need every month to retire, you can retire on whatever
amount you can imagine, especially if you decide to become a digital nomad and live
abroad or live somewhere that's in a lower cost of living area.

(18:34):
But the sacrifice there is that are you willing to live in a lower cost of living area?
Are you willing to live in a different country?
Maybe that has different living standards is further away from your family.
For some, it's worth it. For others, it's not.
So it's just a matter of understanding.
These are my values.
These are my no-gos.

(18:55):
These are I definitely have to have this.
For some people, they have to be close to their family.
Maybe they're just starting their family for the first time and they need to be close
to grandparents for support, for to be close to their little ones, whatever the case
might be. In which case, if you also want to retire early, you're going to either need
that higher income or you're going to need a longer runway to fire.

(19:18):
So these are all a series of choices and not any one choice is wrong or right.
There are choices that are right for some people, some other choices that are wrong
for people. But what's really important is that you mindfully think about this is what
I value. This is what it's important to me.
These are the sacrifices I'm willing to make.
And this is on the timeline that works for me.

(19:40):
And so you said lean fire.
Yeah, lean fire.
I talk about different ways to achieve fire on my website, but two of the main ways that
are often referenced in the fire community are lean fire and fat fire.
So lean fire is a lower monthly spend kind of situation.

(20:03):
And this could be for some people, maybe it's a couple thousand dollars a month, maybe
it's five thousand dollars, whatever that is, whatever your number is, it's a lower
number. So what that means is that the what you need in your investment is lower.
You only need to be able to match your yearly income.
So if you're going for a lean fire, it means that you may not have as much in your

(20:26):
investment portfolio, but you don't need as much because your monthly expenses aren't
going to be as high with fat fire.
You're looking at a more luxurious retirement.
You're looking at having more luxuries like eating out more often or living in a higher
cost of living area.
It'll require a higher investment portfolio and it may in fact it will very likely

(20:50):
require more time to be able to retire.
But it also affords you more luxuries, more flexibility, less you have lower concerns,
usually running out of funds for your in your investment portfolio if you're pursuing
fat fire opposed to lean fire.
I think I kind of jumped ahead a little bit.

(21:11):
I want to roll it back a little bit and talk about what is financial literacy, because
in school we learn a lot of things and I think it's very important that we have a
diverse well of knowledge to be able to draw from.
But it seems like the school system isn't necessarily set up to teach us practical
things like there used to be home ec class, woodworking class, just things that you

(21:35):
would learn to like, oh, I need to learn how to cook.
But now no one needs to learn how to cook.
Just go to fast food, I guess.
Like that's the school system just gave up on that for some reason.
But financial literacy is really something that you have to seek out yourself.
It's something that is not intuitive at all.
And you can, yeah, you can get into some trouble and not even realizing that you're

(22:01):
making a mistake for yourself, just living slightly above your means.
And then you get overdraft fees and like, it can just really cascade or just snowball
very fast and get out of control.
So can you explain what is financial literacy and what are some really core
fundamentals that everyone should know about finances?

(22:25):
Absolutely.
Another really important question.
And to the point that you made, you're right.
We don't learn a lot of this in school.
In fact, many of us when we pursue college, we're told, yeah, go get the student loan.
It's fine.
You'll be able to pay it off.
Right.
I was definitely one of those that fell in that trap.
And when you're 18 years old, you don't think about the implications of it.

(22:48):
You don't know.
You figure, oh, I'll have a job that will pay for it.
And I won't have to worry about it.
Right.
That was, that's one of those lies that I'd say that we were often taught in school.
The other one too, that I've been seeing more and more, especially with the way the
housing economy has been is, yeah, buy that house.

(23:09):
You know, that's the American dream.
And not to say that it isn't.
For some people, buying a house is very important.
In fact, I own my house.
It is important to me.
But with the state of housing right now and how unaffordable it is, it's just
not very realistic for people, especially if you're one of those people that really
values traveling or exploring abroad.

(23:30):
A house can become a very big expense that just doesn't always pay off.
Sometimes it does.
And again, it depends on your personal situation.
But getting back to the heart of financial literacy, I think this is incredibly
important and I think most of us learn the hard way, just how important it is.

(23:51):
We make those big mistakes.
We make those mistakes of I'm going to get this much in student debt.
I once bought a car that to this day, I'm still ashamed of.
I'm embarrassed that I did this, but I bought it at an interest rate of twenty
one, twenty, excuse me, twenty nine point nine five percent.
And now it wasn't a very expensive car.

(24:12):
I think it was, you know, eight thousand dollars, whatever it is.
But at the time, I didn't think about the implications of such a high interest rate.
I just thought I need a car.
Right. Twenty nine percent sounds like a deal.
Yeah. So believe me, I have made my share of financial mistakes.

(24:33):
I have learned some lessons the hard way and I would not care to repeat those.
I am appreciative of the lessons I learned from those very hard lessons.
That said, it's really important for each of us, all of us to understand
what are the implications of this choice?

(24:54):
What kind of debt am I taking on?
And I will be the first to admit, as I pointed out, that
that wasn't the first thing that I thought of.
It was, in fact, it was a back thought in my mind.
I figured this is something I'll eventually pay for,
and it won't be that big of a burden. Right.
So in some ways, I've kind of trapped myself into this mentality of this is OK.

(25:15):
This is fine. I'll eventually pay it off.
And this is a trap that many of us fall into.
And I'm not saying that there's any shame because of it.
But you have to, first of all, be willing to be honest
with your situation as painful as it is.
I definitely had a few of those moments where I had to look at the choices I'd made.

(25:37):
And I did. I felt ashamed of some of the choices I made.
And I felt really embarrassed.
And, you know, now looking back on it, having come started there
and gotten to where I am now, I can say that that initial shame was,
well, not not very fair to myself, maybe.
But it did force myself to look at the situation and do something about it.

(26:00):
So I think that when it comes to anyone's situation,
educate yourself. Education, I think, is the most important thing.
And unfortunately, our school system just doesn't really do that for us
unless you are really thoughtful about pursuing particular courses
and maybe college or other extracurriculars.
I'm not too familiar with what options of that world might be available.

(26:24):
But what I opted to do instead was really start reading some finance books.
That's what really helped me get on the right page.
When it came to my finances, when I started exploring investing options,
when I first had access to a 401k, I had no idea what I was doing.
And I still remember a conversation I had with a supervisor at the time.

(26:46):
And I asked him, I said, there's a ton of options here.
I have no idea what I'm doing. What do you recommend?
And his answer to me at the time was, well, I can't really give you finance advice.
So you're just going to have to figure it out on your own.
I remember it wasn't it wasn't the most helpful answer at the time.
But it did remind me that I need to own this.

(27:11):
I need to figure this out.
And I didn't want to get into a situation where I was just making blind choices.
So I invested in my education.
For me, that was by reading finance books.
For others, it could be courses and might be YouTube videos that you find.
There's all sorts of really great resources out there these days.
So I'd say just invest your time in your financial literacy.

(27:34):
It is super, super important.
It is the first thing that you really need to do
in order to understand how to get out of these traps and get out of
a debt burden that you might have already gotten for yourself.
It's not something that will happen overnight.
But when you educate yourself, you can start to build that awareness
and start taking action the way you need to to really rebuild your finances

(27:57):
and get them in a state that is much better for you in your future.
You don't know what you don't know.
So you can look back and be like, oh, my gosh, I can't believe I took a loan for that much.
But the truth is, you you just didn't know.
So someone out there just starting.
I know I kind of got lucky because both my parents lived within their means.

(28:17):
We didn't live like lavishly or anything.
But like if if I wanted a video game or something like that,
it wasn't like they were stressing about it or anything like that.
Or if a car needed maintenance suddenly just out of nowhere, it wasn't like,
oh, my gosh, how are we going to make this happen?
We kind of just lived within our means and had enough.
And I think you kind of just take that on as a kid of what your parents do.

(28:39):
You're just watching some financial advice that my mom gave to me
that she heard from her dad is basically pay off your credit cards every month.
Like you don't need this isn't your money.
They're going to give you credit.
And they're just saying here is money that you can spend,
but this is our money and we want it back.
And if you don't pay it back right away, there's going to be interest associated

(29:01):
with it, which is fair because they're lending you money
that you otherwise might not necessarily have liquid in your reach.
And so that's always something that I kind of live by.
I've never and I want to get into credit scores a little bit later
because I know this isn't good for building your credit score as much
because you kind of want to carry some debt from month to month,

(29:24):
some credit card debt.
But I've never wanted to do that because I don't to me.
I'm like, OK, if I want to buy something, I want to buy it for how much it costs.
I don't want to pay for it and then pay more for it
because some some rule for credit is it's better for you to do that.
It'll jump up your credit score if you few points.
But I never really saw the personal logic in that.

(29:46):
So I've I've never done that.
But what are some like basic things like that?
Like don't get into credit card debt.
A little like quick tangent side note is there is a show on MTV
probably a couple of decades ago called True Life.
And it was a documentary series.
And they used to follow around different people about whatever
the the subject of the documentary was.

(30:07):
And one of them was true life. I'm in debt.
So it followed around a few young people who are in debt.
And one of these people who is in debt said, like,
just because I don't have money doesn't mean that I shouldn't be able to have nice things.
And it's like, I'm sorry.
That's exactly what that means.
Like, yeah, that credit card money is not your money.

(30:28):
Don't spend that money because it's not yours.
It's not some entitlement that you've been given to by your your best friend.
Visa and MasterCard.
Like, no, they will be predatory and they will give you that money
knowing that you can't pay it and so that you're stuck in this cycle.
And like, that's not that's it's kind of similar with what happened to you with the car payment.

(30:50):
They gave you I don't know what your credit score was,
but they give you a very high interest rate, which kind of would indicate that
maybe your credit score wasn't up to par yet or something like that.
So it's higher risk or something, but they take advantage of people who don't know.
So that would be like one little tip.
Like, don't live outside your means.

(31:11):
Pay off your credit card every month.
So what other kind of little someone's just getting out of out of high school?
They're about to go into college.
What can they do?
Yeah, great question.
So, yeah, first thing, as I would say, avoid debt.
As much as you can.
And I realize that this is not always achievable.

(31:32):
It's not always realistic.
And I will also acknowledge the fact that some degree of debt,
if, for instance, you're one of those that invests in housing or rental properties, things like that.
There are good ways to do that, but there are also bad ways to do that.
That said, if you're just getting out of high school for the first time,
just manage that debt.

(31:53):
Try not to take on as much of that.
And the very first thing to the point that you made, Brian,
avoid credit card debt like the plague, because the interest rates that they charge on that.
If you look closely at that and you're carrying a balance month to month to month,
then what you're actually paying versus what you actually put on your card.

(32:16):
It's painful.
So so look at that.
If you are carrying credit card debt and this is a very, very common trap.
Brian, ironically, I can't came up from the same kind of a bring when it came to credit cards.
I have never ever in my life carried a credit balance.
That said, I know that is not a very common thing.
Most people at some point in their lives have carried some kind of credit card debt,

(32:37):
and sometimes it's necessary.
I get that. But whatever you can do, get rid of it.
First of all, try to avoid it if you can.
If you don't need to take on credit card debt, don't, because it is extremely costly.
Don't get sucked into the incentives, the zero percent APR for six months, whatever it is.
It's a trap. It's designed to be a trap.

(32:59):
There are entire industries that are built on taking advantage of you.
And I was one of those being young and dumb that I believe that, you know,
the world is great and golden and no one is trying to get it out for me.
And and I'm not saying that there are people doing that,
but there are businesses that are deciding to take advantage of you.

(33:21):
So you have to be mindful of that. Yeah.
So that's a big thing.
If you are in debt, if you've already gotten to a place
where you've already accumulated so much debt, there are a few things
I do teach to help you get out of debt.
There are a few strategies you can use.
The first one I usually recommend starting with is what's called the debt snowball.

(33:43):
It's also closely related to its cousin, the debt avalanche.
Now, depending on the state of your finances
and the kind of debt that you're carrying on,
you might choose one or another or some sort of hybrid approach.
But the debt snowball, the idea with it is that you create small wins.

(34:03):
So with the debt snowball, when you're paying off your debt,
you start with the lowest balanced debt.
Now, I realize you're not starting with the highest interest debt.
So you're maybe not paying off your total debt as quickly as you might
with the avalanche, which is what you would do instead.
With the avalanche, you start with your highest interest debt.
But what the debt snowball allows you to do is really start building momentum

(34:25):
to the kind of idea of a snowball is that you pay off that small debt first.
Let's say it's a small credit card bill of three hundred dollars, whatever it is.
You're paying that off.
Once you pay that off, whatever payment you're putting into that,
then you put it into the next lowest balance.
Maybe it's a thousand dollar car loan that you have left over, whatever it is.

(34:46):
And then you continue doing that for each subsequent debt
that you have until that debt is eliminated.
And that is one good approach to help eliminate debt.
So try to avoid all debt within reason as much as you can and only take it on
very, very thoughtfully after you've carefully weighed the pros and the cons.
And first and foremost, avoid that credit card debt

(35:08):
and then pay off whatever you have of debt as quickly as possible.
Because once that debt is paid off,
instead of paying that money towards interest for something
that is really not delivering any more value for you,
you can then put that money into investments.
And those investments are going to build a return for you in the long run.

(35:29):
Does it just depend on your financial situation,
whether you go the snowball route or the avalanche route?
Like, or is there one that's slightly better than the other
or orders of magnitude better than the other?
Good question. If you are just starting out,
I usually recommend starting out with the snowball.
And the reason why I recommend starting with the snowball is because

(35:51):
your mindset, especially as it comes to money, is super, super important.
And we can talk a little bit more about that if you want.
But what the snowball does is it creates a psychological benefit.
It gives you this win, this this building, this building of momentum
and achievement and excitement that helps propel you forward

(36:13):
as you continue to pay off your debt.
It feels good to pay off a debt when you've had it for however long it's been.
It feels really good.
And that really helps you build momentum moving forward.
If you've been in the world of paying off debt for a while
or you don't really need that mindset boost,
that's when I would recommend the avalanche.

(36:34):
The avalanche in the long run is going to have a bigger impact
on your finances, because with the avalanche,
you're paying that highest interest debt first.
So you're in the long run paying less money out the door.
You're getting rid of whatever bad debt or the worst of your debt
that you have first.
And then you can focus on paying off the rest of it as as you have the finances

(36:57):
for it. I think that method is much better
if you've been the role to finance for a while, if you've had a lot of debt
for a while and you've already made some good traction with it.
That's when I'd recommend that.
But if you're really just getting started out for the first time,
that snowball is one of the best ways to start building momentum.
What about a debt consolidation company?

(37:18):
Is that like another trap or is that something that can actually
benefit the consumer? Good question.
Yeah, so that is one actually that I use to help pay off
my student debt faster.
So this is one situation where you have to be very careful
about the choices you're making because some debt consolidation is good

(37:39):
and some is bad.
In my case, the debt consolidation that I was able to do
was actually able to.
When I got into paying off my student loans to a certain degree
and I had so much of a balance left, I transferred over to a different lender
who charged me a lower interest rate overall.
So it was I forget what it was.
It was between two and maybe five percentage points lower,

(38:02):
which then enabled me to pay it off faster
because my lower required balance was lower.
But I still made the same monthly payments I was making.
But more of that payment was going towards a principle
than it was the interest.
So that is an example where I'd say consolidation can be good.
There are other areas of where consolidation can be bad.

(38:24):
If, for instance, you consolidated just to make the payments lower
and more bearable, yet the interest is higher, I'd say only take options like that
if you truly, truly have to.
And you're not able to pay off that debt, because if you're having to get
to a point of declaring bankruptcy or you're not able to pay off that debt
for whatever reason, then that's going to impact your credit score.

(38:47):
And that is going to long term hurt your finances more.
So try to avoid that type of consolidation
unless it's really a last ditch measure and you can't do anything else
to get rid of that debt.
This seems like it's going to be a stupid question.
What is stopping people from getting?
Let's say you're starting from just normal credit,

(39:10):
but you have this scheme and you say, hey, bankruptcy.
What I'm going to do is I'm just going to rack up as much debt as I can.
I'm going to take out 10 credit cards.
I'm going to max them out.
And then I'm just going to declare bankruptcy
and I'm not going to have to pay anything.
I just get to keep all the all the stuff like how does bankruptcy work?

(39:31):
And like what is to de incentivize like that kind of behavior?
How is that behavior incentivized?
Yeah, good question.
So I'll be the first to admit that I have not gone through bankruptcy.
I'm not super familiar with how bankruptcy works, having never done that myself.
But but that said, I do know that it destroys your credit.

(39:53):
And just because you've accumulated certain things does not mean
that you get to keep it.
You can have a car, a house repossessed.
So going out on a wild spending spree is probably not the best idea
because you're not going to necessarily get to keep those things.
You can lose a lot of those things.
And in turn, your credit turns into absolute trash.

(40:17):
And trying to rebuild from that state can be incredibly difficult.
I've talked to a few people about what it's like to do that.
And I know it's not fun.
And I know it's something that you want to avoid at all costs.
So I'd say the first thing when it comes to finances is you got to be responsible.
It may not be fun.

(40:37):
It may not be the most exciting thing to do.
It might be really tempting to go on a crazy spending spree with your credit cards.
But the amount of rebuilding you're going to have to do from that,
to me, it's not worth it.
I would not want to be one of those people having to rebuild from that situation
to get in the future a credit card to apply for a house or another car loan

(40:59):
or really just about anything in life.
It's going to be very, very hard for a number of years
because lenders are going to look at you as one of those people that's not responsible.
And they're not going to want to lend money to you until you can show a solid record
of being able to repay your obligations back.
And it's hard to do that if you can't get a credit card or a car loan

(41:21):
because no one wants to give those to you.
Yeah, I just remember when I was growing up, I heard about this couple and they weren't married,
but they were essentially married.
And every seven years since that credit score is like a seven year period,
they would just the other person would go bankrupt.
So one person would just accumulate a massive amount of debt and then just go bankrupt.

(41:46):
And then the other person would kind of have their credit built up in that time.
And they would just kind of go back and forth.
And it seems like, well, that seems not bad.
But is that like they found a vulnerability in the system or something?
So yeah, definitely not advocating that for anyone because yeah, like you said,
people don't want to give you money anymore.
And interest rates very basically is just how cheap do you get to buy someone else's money?

(42:13):
How do you get to pay it back?
So if you're if you have very bad credit, it's going to cost you a lot of money
to like, let's say get $20,000, it's going to cost you $40,000 to get that in the long term
in that whole time that you have that loan out to where someone with good credit,
they can get that same $20,000 for like $5,000 because no one's going to give you money for free.

(42:37):
Everyone's going to have that interest.
So it makes sense that you would want to keep your credit good.
And we kind of you kind of alluded to this talking about good credit or good debt and bad debt.
Is that still true?
Because you seemed a little bit skeptical giving how the housing market is.
I know historically that housing debt is considered good debt.

(43:01):
And maybe to an extent, given what your degree is in,
I could see that like school loans could kind of qualify as like a good debt or an acceptable debt
because theoretically you get a degree to get a job that will pay it off.
But again, that's that's in theory.
And unfortunately, a lot of people are finding out that that's not the case

(43:25):
with the degrees that they go into.
But that's another conversation for another day.
So is there still good debt, bad debt?
Or if you subscribe to the FIRE ideology that it's no, there is no good debt, bad debt.
You should always live within your means.
Yeah, good question.
So to answer both of your questions, I think yes, you always live within your means regardless.

(43:50):
But that said, I do think that there is good debt and there is bad debt.
For me, although I took on as many student loans as I did and it was as much of a burden as it was,
it did make sense and it did pay off in the long run.
So I'd say some of that was good and some of that was bad.
If I'd made some different choices, though, about the field that I pursued or which job I ended up

(44:16):
getting, I would say it was probably just overall bad if I could have done it again.
I would have preferred, of course, not to have student loans.
So I think, again, this is going back to those choices.
You have to be really mindful about the choices you're making for the degree you're taking on,
the student loans that you're taking on.
You have to be honest and realistic with yourself about,

(44:38):
okay, what is the state of the job market in my prospective field?
And that's a hard decision to make when you're 18 years old and getting out of high school for
the first time.
And most of those of us who go to college probably don't get it right the first time
or have to make some changes along the way.
That's okay, too.
To some degree, we have to be able to invest in our learning.

(45:01):
Hopefully, you don't make super costly mistakes that take a long time to pay back.
But that said, there is bad debt and there is good debt.
I think that certain housing investments can be really good.
I know of a number of people that are really big and playing in the housing market,
and they like to flip houses.

(45:21):
And for them, that's a good investment.
I will say right now with the state of the housing market right now,
it's a riskier investment than it's been in years past
because you're having to get in at such a higher level compared to where it's been.
So to get a return on your investment, it's challenging.
It's not impossible, but I would say not every property is going to be profitable.

(45:46):
Some properties are, others are not.
I, for instance, would not want to buy into an area that has a very high cost of living.
As much as it might be nice to live in Southern California,
that is not any sort of housing market that I want to even touch right now, to be honest.
Housing market being the big one, the current state of the environment there

(46:10):
with the wildfires they've had, that's another one.
Anyways, that aside, I think really what it comes down to
is making those really conscious decisions and making as informed decisions as you possibly can.
Educate yourself, learn about what is available to you.
If you're interested in, for instance, getting into a housing market,
spend as much time as you can learning about that market,

(46:33):
where that market has been, where it is today, what are prospects.
If you want to say, for instance, flip a house or rent it out,
just spend that time on learning about that before you dive headfirst into it.
And that's a hard lesson that I've had to learn over the years, but it's served me well.
And I think that can serve anyone regardless of where your finances are today.

(46:57):
Yeah, selfishly, my wife and I are hoping for a housing market crash so we can get in.
But obviously there's bigger implications there,
but it would just be real nice to have housing be reasonable.
But it seems pretty far off that.
I don't know if it'll ever be what it was just a few decades ago or even one decade ago.

(47:17):
But is there objective good credit, bad credit?
So like if a creditor is looking at you and your credit score is factored into it,
because if you have credit card debt, if you have medical debt,
that's going to be bad debt that's going to weigh against you.
That's going to anchor down your credit score.
But if you have housing debt, if you have, is student loans considered bad?

(47:40):
Yeah, what creditors really look at is they don't, I mean, to some degree, yes,
your total debt does matter, but they care less about that and more about your ability to pay
or your history of being able to pay repeatedly.
So when I was first building my credit score as an 18 year old and I got my first credit card,

(48:01):
I didn't have a very high credit score simply because I just didn't have a history.
It's not that I was bad at managing money.
It's just that I didn't have a very showcaseable history for creditors to look at.
So there were some creditors that didn't want to give 18 year old me a credit card,
which I understand makes sense.

(48:22):
But yeah, there is good credit.
And if you have lower credit to the point you had made before Brian,
you're going to have a harder time getting a loan and you're probably going to pay a higher
interest than someone that has a better or a higher credit rating.
But what creditors look at from what I know of it, and I'm not a financial advisor,

(48:44):
I'd encourage anyone to explore this with someone if they need that advice.
Explore anything that you hear on this show.
Yeah, absolutely, absolutely.
I'm all for educating yourself as much as you possibly can.
I'll say more so from my mouth.
Don't trust anything I say.
Look into it.

(49:04):
But yeah, creditors are going to look at how you're able to pay off your balances.
What is your income to your total debt?
Things like that.
But yeah, the big thing is, are you able to pay off your debt or do you make on time payments?
And just because you carry a debt doesn't mean that you'll get a low credit score.
Even carrying a credit card balance doesn't mean that your score is bad,

(49:29):
as long as you're able to consistently pay it.
But if you have a history of missing payments or not making payments,
those are all things that are going to ding your credit score.
Let's talk a little bit about credit score.
What is a credit score and how do you improve it or how do you just absolutely tank it?
What's good to do and what's bad to do?

(49:50):
Your credit score, to put it simply, it's what tells those that want to lend you money how
reliable you are and how likely you are to pay them back.
So if you have a high credit score, that tells a lender that this is someone safe to lend money to.
They are someone that pays off their debts.

(50:12):
They are someone that's reliable and responsible and they'll pay it off.
This is a lower risk person to lend this money to.
If you have a lower credit score, it's probably because, well, the opposite of that,
that you have a history of not making on-time payments,
that you're a riskier person to lend money to,

(50:32):
that you're someone that that lender may not get money back from.
Therefore, you'll probably pay a higher interest rate.
So credit scores, all they really do is they tell whoever you're trying to get money from
if they can trust you to pay it back.
So a high credit score to them indicates that they will probably get their money back and then some.

(50:54):
A low credit score says to them that this person may not pay me back and this is a pretty big risk.
And so what can you do to improve your credit score if it's not the best?
Yeah, so if your credit score is not the best,
one of the best things you can do is simply make on-time payments.
Lowing your debt, if you have high amounts of debt, will help too.

(51:15):
But honestly, just getting into a rhythm and a repeating cycle of paying your debts back.
So paying your student loans when they're due,
paying your credit card bill when it's due, housing, all of those things.
That is one of the best things that you can do for your credit score is just to get consistent
and be paying those things as you're supposed to or as you're scheduled to per those lender's

(51:40):
requirements. I would continue paying off debts as much as you can, especially high interest credit
card debt. If you are carrying credit card debt, that is, we talked about this already, but that is
really bad debt to get into and it's very, very expensive and it'll keep you in debt.
That is one of the biggest shackles of debt is really credit cards.

(52:03):
So pay that off first or whatever your highest interest debt is from there.
Those are a few simple things, but honestly, just getting into a rhythm and a routine
of paying lenders back, those that have given you money to borrow, that's going to be the best thing
for your credit score. Your credit score, especially if you have low credit score,
is probably not going to improve overnight. But with thoughtfully putting money back into

(52:27):
those obligations, you will start to rebuild it. Are there any companies out there that can help
boost your credit score that people can look into that you're aware of?
That's a great question. I honestly don't know. I have never had to look into resources like
that. I'm sure there probably are, but I will say this with a note of caution. There are many

(52:49):
predatory companies out there that will make promises that they can't follow through or
they'll charge you a ridiculous amount of money to make these things happen. So whatever you do,
by all means, find whatever resources you can, but very carefully research those resources before
you commit to anything. Because unfortunately, the state of the world we're in, there are some

(53:13):
businesses that thrive on taking advantage of people, so don't let yourself fall into that trap.
Lenders are definitely one of those people. Definitely.
Yeah, money and the pursuit of making more money and not really having any qualms with how you get
it is not great for the consumer out there. Let's go back to the FIRE method. You are essentially

(53:41):
saving for your future. There are different avenues that you can put your money in. To my
knowledge, it's a very bad investment strategy to just take your extra money and put it into
your mattress and just say, grow. It's not going to happen. You're not going to get a very good
return and it's just not wise. So what are the wise ways? What are the ways of investment that

(54:10):
are going to produce the yields that you want to be able to retire early or just a more traditional
way? Someone isn't trying to retire early, but they're trying to build their retirement. What
are some good ways to invest in your future? Great question. There are all sorts of really
great options that are out there. The first thing I'll start with is if you're following a very

(54:33):
traditional career path, you're working for a corporation, you probably have access to some
version of a 401k. In fact, if you work for a major employer, a lot of times those companies
will also have a match. So one of the best things to do if you have access to a 401k is start
investing into that 401k and take advantage of the employer match at a minimum. Otherwise,

(54:59):
you are leaving money on the table. You're losing out on free money that you can have
to build towards that future, whether it's an early retirement, traditional retirement,
whatever that is. So start with that. There's all sorts of different investments that you can usually
invest in inside of that 401k. What is available to you is going to depend on your employer. So

(55:21):
usually you have a selection of different investment options. Having gone through this
experience before and not knowing what I was doing, the best thing you can do is if you find
yourself in this situation and you have no clue what you're doing, start reading up on some of
these funds. It's going to feel overwhelming at first, I promise you, because I felt very overwhelmed.
But take your time with it. Just dive into it little bits by little bits. Don't accept to learn

(55:46):
overnight because you probably won't. Be willing to invest in your education. What I mean by invest
in your education is that you might make some missteps along the way, but just use the lower
amounts of your investments dollars as you're starting to experiment and get a feel for what
works. 401ks are historically, traditionally a lot more safe than other investments. If you have

(56:11):
an outside stock investing portfolio, for instance, you have access to wider options than
you do in a 401k. And generally 401k options are a little bit more limited and a little bit safer
than you would have in other investment options, for instance. So it's a relatively safe way to
educate yourself. If you're not sure what to do, target date funds aren't a bad way to start. That

(56:36):
can be a good way to just get started on your investing game and start building some kind of
a portfolio. You can always make changes down the road if you decide that, you know, I learned a
little bit about this. I don't think this is what I want to do. I want to do this instead. I've done
that and there's no harm in doing that. As you continue to learn more, definitely don't be afraid

(56:57):
to make those changes that benefit you. But absolutely, if you have access to a 401k,
I would start with that. If you work for a government agency, forget the term,
but I know that there's a different kind of fund that's like a 401k, but not a 401k. You might also
have access to other kind of retirement benefits as well. So just educate yourself on your options,

(57:19):
understand what is available to you. If you don't have a 401k, that doesn't mean you can't invest
and that it's not the end of the world. It doesn't mean any of those things. So you have
other options as well. You can open up your own IRA. That's another version of a retirement fund
and those options are really available to anyone, regardless of where you stand in your employment

(57:43):
game. Whether or not you have access to a 401k doesn't really matter, but you can open up one
of those. Or if you would prefer to have more diverse options, you want to have some money to
plan that isn't necessarily for your retirement, you can open up your own stock investing
portfolio. And there's all sorts of different portfolios that you can go to. E-Trade is a

(58:05):
common one. Allies, there's others. So I recommend that people Google options and see what options
are good for them. I like E-Trade simply because it offers you a pretty nice array of different
statistical tools and different graphics and things like that you can look at to track how

(58:26):
investments are performing over time. So that's one that I like, but I also acknowledge that that
is not right for everyone. That might be a little bit too much. Someone might prefer to do something
that's a little bit more simple. So just investigate whatever resources are available to you and
options like E-Trade have a very wide base of different investments that you can put your money

(58:50):
into from investing in individual company stocks to index funds, mutual funds. There's so many
different options, but something that I share on my website is that if you're just starting getting
invested and you're not well, even if you're investing in a 401k, one of the simplest ways
to get started is by funding or investing in index funds. Index funds track a common index

(59:18):
like the S&P 500. So when you put money into an index fund, you're actually buying a small fraction
of a company that's in the S&P 500. So you're getting those 500 different companies. That way
you're not putting all of your money into just one company stock. You can do that.
You're investing into all of them, like all 500 of them?

(59:40):
You're a portion of it. So I mean, you're going to have a fraction of a fraction of a percent,
but when you invest in an index fund that matches the S&P 500, for instance, you're getting a very
small piece of every single one of those companies. So those are much safer investments in comparison
to investing in, say for instance, an individual company stock.

(01:00:02):
And what's a mutual fund?
So a mutual fund is kind of like an index fund, but a mutual fund is an actively managed fund.
So it's one that a company or some form of companies are managing directly and they are
choosing the companies that go into that fund. I usually opt not to invest in mutual funds for

(01:00:27):
one very, very simple reason, because the cost tends to be a lot higher than it does in comparison
to an index fund. An index fund is passively managed, so there's no need to have a high expense
associated with it. Whereas with a mutual fund, you're having an advisor or a series of advisors
look at that fund and make changes to that fund over a period of time. So the cost is much higher

(01:00:51):
in comparison to an index fund. And there are some great mutual funds that you can invest in,
if that's something that's of interest to you. Again, it's one that I tend to steer away from,
simply because the cost is so much higher. And if you are really passionate about
stock market investing like I am, the more you learn about it, the more you realize that even

(01:01:13):
those small costs can make a really big difference in your long-term gains, if you really start to
dive into those numbers. So it may not seem like a small impact. It might seem like a very small
fraction of a percent, which on paper might be true. But if you run the numbers and figure,
okay, I put this much money in and it ended up here, what you'll get in comparison between

(01:01:37):
index funds and mutual funds, if you're looking at strictly the cost factor alone, it's a pretty
big difference. So cost really does play a pretty big role in your long-term gains.
Would people choose like a mutual fund over an index fund because the potential payoff is higher?
The risk is going to be a little bit higher?
You could, although I will say this and I don't know the exact percentage, but yes, some mutual

(01:02:03):
funds do try to outperform the stock market. That's really the idea, right? And I remember
looking at some figures and a vast majority of mutual funds underperform index funds.
So when you're looking at in the long run, the index funds performance and cost compared to
mutual funds, it's a risk you can take. But for me personally, with my investing strategy,

(01:02:27):
it's not a strategy that I like to use. Sure, you can try to outperform the market,
but if you look at historical trends of those companies that try to outperform it,
they're usually not very successful.
Yeah. So maybe it'd be like a more high risk, high reward scenario for a mutual fund over an

(01:02:48):
index fund, like within reason. An individual stock seems more like your high risk, high reward
if everything's all in one basket. Is there a max that you can put into a 401k?
Yes, there is. And I'll have to look and see what it is. It changes year over year.

(01:03:10):
So the government does set a limit on how much you can put into your 401k. And I can't remember
offhand what it is. I think it's around $22,000 a year, something like that. So if you're getting
to a point of maxing your 401k, which first of all is great. If you're getting to a point of
maxing out your 401k, I applaud you. That's a great achievement. It really is. At that point,

(01:03:32):
if you can no longer invest in your 401k, there are other investing options that are available
to you. But yes, the government sets that limit on a yearly basis and it does change year to year
or can change year to year.
So let's say you have all the options available to you. You have Roth, 401k,
index funds, mutual individual stocks. What would be for someone who is making sacrifices

(01:03:58):
every month to save? What would be the wisest investment that they can make for their future?
Which investment philosophy should they go into?
So are we assuming that they're getting to a place of paying off debt or being close to
paying off debt and they're ready to just invest and focus just on investing?
Yeah. This hypothetical is the person doesn't have debt, but they're like a large amount of

(01:04:23):
Americans who are pretty much paycheck to paycheck, but they want to invest. And so
what would be the safest investment and then still get a good yield? Maybe not the best yield, but
they're focusing more on protecting their assets for the future.
Yeah. So if you're more concerned about protecting your assets and this is where you have to weigh

(01:04:46):
what risk tolerance you have as well. So there's never anything wrong with having
savings, especially if you have an emergency fund. I think that is a good place to,
in some senses, start your investments. I know it's not really an investment, but
if you don't have a savings account, if you don't have an emergency fund,

(01:05:07):
I would really start there because you really want to start to build yourself some kind of a
safety net because unexpected expenses happen, right? There are car accidents, unexpected
medical bills, things happen. Life has a way of just getting in the way. And one of the quickest
paths to debt is being unable to cover an unexpected expense. So I'd say start there

(01:05:29):
if you don't already have an emergency fund, but let's say that you're already in a place,
you already have an emergency fund. You can put your savings into a certificate of deposit.
That's a pretty safe investment. You're not going to get as good of gains as you would if you
invested in the stock market, for instance, but that is a safer investment than it is playing

(01:05:52):
in the stock market. If you have already decided you don't want to do that or you've done that to
your heart's content, then I would say start with whatever retirement options are available to you
via your employer, whether it's a 401k or something else like that. And again, those options are
usually set by your employer or the company that's managing your employer's 401k. So I'd say just

(01:06:16):
choose a safe investment in there to get started. And that's really where I started with my investing
journey. I'd say start investing in those safer investments to start out as you start to build
confidence and you feel more capable. You feel like you have more funds to expand to others.
Absolutely do that. I've gotten to a point now where to me it's fun to invest in individual
companies and I've lost money on some, but I've also been able to gain money on others. So

(01:06:44):
you just have to weigh what is your risk tolerance? What are you willing to lose? What are you willing
to risk and what reward are you hoping to gain? So a good place to get started though, if you
haven't already, is with that emergency fund, what's the certificate of deposit and then move
to your 401k and then grow from there to what the other investments are of interest to you.

(01:07:05):
There's others too. We didn't even talk about gold bullion, real estate, things like that.
There's all sorts of other options. Yeah, because it seems like there's so many options,
like you just said, there's even more than we have talked about. But would just a high yield
savings account outperform something like an index fund or something like that with

(01:07:25):
pretty much no risk? Yeah, I mean, chances are probably not. I mean, there's certainly that
possibility. You could get in a situation where the stock market is down and it does happen.
And maybe in that particular year, your high yield savings account outperforms the market.
That is certainly a possibility. Savings accounts in general, CDs, bonds, all of those things are

(01:07:49):
safer comparatively, safer investments than stocks. But that is a trade off is that you're
going to get safer, but you're going to have lower reward more likely, unless again, it's a weird year
for the stock market and the stock market is just tanking. In that case, you might see better gains
from your high yield savings account. But chances are year over year, especially if you look at

(01:08:12):
historical performance, that's just not going to be the case. You're going to see better gains in
the long term with the stock market in comparison to a high yield savings account, for instance.
The other thing I'll point out too, that is really important when it comes to your investing game
is over time, I have learned this, but doing things like selling in the short term

(01:08:35):
are going to come at a cost to long term investments. And I've seen and heard plenty of
stories of people making these mistakes where when you're putting your hard earned money into
something, you want to see it perform well. So if you choose to risk your investment like the
stock market and the stock market is declining, that can feel not great. It kind of gives you

(01:08:57):
this sick feeling in your gut of, oh, I wasted this money. But if you look at historical year
over year performance, there are downturns in the market, but there are also upturns. And really
important thing is if the stock market is tanking, don't just react with your emotions
and immediately sell as tempting as it might be. Sometimes the best way to invest is just keep your

(01:09:21):
money in it for really as long as you can. It really should be a long term investment if you're
going to do well and be able to realize the gains of the typical historic stock market performance,
for instance. So you don't want to just constantly turn out money. There are some people that are
very successful at doing that, at selling short term investments. I know of a few of those that

(01:09:45):
do that. And to them, the reward is worth that risk. I'm not one of those people. And I wouldn't
encourage that for someone just getting started out for the first time. If you get to a point
where you feel really comfortable with it and you're willing to take that level of risk,
you know, maybe if it's truly worth it to you, maybe then you want to consider that. But
it's definitely not one that I would start with. You made a good point.

(01:10:09):
Just because the stock market is going down and you have money in the stock market doesn't mean
that you've lost that money. It's like in this weird limbo. You only lose the money or make the
money if the stock market goes up. But when you sell, that's the only time that you're either
going to realize your gain or loss. So if you're watching the market go down and down, it's like,

(01:10:31):
oh man, that's rough. But like you said, just wait it out. Historically, if it's a good company,
it's going to come up. Or if it's index funds, they're going to come up. The stock market will
rise again. And the same thing if you made a really good investment. Let's say you put a lot
of money in one company and they seem to be doing really well. You don't have all that money

(01:10:53):
suddenly. You don't have like, if you started with $10,000 and suddenly it's ballooned up to
$100,000. If you don't have $100,000, you don't have that extra $90,000 until you've taken the
money out. And even then you have to pay taxes and all that. But don't go living your life like you
just suddenly have $90,000 because if it's a bubble or something like that, the stock market can turn

(01:11:13):
and you've lost that money, which can feel just as bad as to not having money that you thought you
had as losing money that you invested into something. Yeah. I agree to your point of
realized gains. So yes. And when you're in the stock market investing world, there's this concept
of realized gains and unrealized gains. So regardless of where you're selling, you are

(01:11:37):
choosing that this is the money I want. I want to realize these gains and I'm going to accept this
gain or this loss or whatever it is. So that's why it's really important to be mindful about
when you're selling because if you sell as the market's going down, if you make that good
decision, you are saying, okay, I'm fine with realizing these gains. I want out. I'm good with

(01:11:59):
this. You then realized what could be a loss. And yeah, I mean, that's a risk. And you have to
remember at the end of the day that when you're investing in the stock market, it is a risk and
you're going to be much more successful in the long run if you have your investments in for the
long term. And if you look at the performance of the market over the years, there are dips in the

(01:12:23):
market. There are rises in the market. It's a very natural thing. It's an ebb and flow. It's not
constantly up. I'm sure we'd all love to see it when it's up, when we have money invested
in the stock market. But that's just not the reality of the situation. We face economic
downturns. There are challenges. So the stock market is going to respond accordingly. But the

(01:12:43):
key thing is just to keep that money in for the long term. And that's really the idea of a fire
too, is that you want to be able to live off of your investments. So really your investments are
something that you have for the long run, for whenever you're ready to retire, whenever that
is, whether or not it's early. This is such a deep field of knowledge and I'm sure we could talk for

(01:13:07):
several more hours. But as we're wrapping it up, is there anything that I didn't talk about that
would be really important for someone to know? Anything that you feel that, hey, it would be a
disservice if we didn't cover this. Yeah. So the one thing I'll say is that we kind of started this
episode with is that when it comes to fire, financial freedom, early retirement, and living

(01:13:29):
life on your terms, really the key thing is to live below your means, to be really thoughtful
about what matters to you and think about how does this align with my lifestyle and my goals?
What sacrifices am I willing to make in the short term in pursuit of my long term future?

(01:13:49):
And I want to point out too that your mindset is really, really important. We didn't get into this
really, but I learned that there were some beliefs that I had about money that were hindering my
progress along the way. And I find that this is very, very common, especially for people that are
carrying debt, that it's a common trap to get ourselves into, that we're taught these things

(01:14:12):
from a young age that we just take into ourselves and accept as fact. And I'm not saying that those
things are necessarily wrong, but I think it's really important to understand what your money
mindset is and whether or not it's helping you on your journey to pay off debt and live life on your
terms. And if there are certain beliefs that you have about money that aren't helping you,

(01:14:36):
you're really critical about those things and try to challenge them. I'll just give an example of
one that I had, and it's grounded in some truth is that I had this inherent belief, and I still do,
that you have to work really, really hard to earn money. Now, again, like I said, this is grounded
in some truth. And in my early career, it actually served me really well, helped me get ahead

(01:14:57):
and achieve certain gains in my income. But it got to a certain point in time where it was
starting to cause a problem for me. I had turned into a workaholic. I wasn't working as efficiently
as I could have, and I was burning myself out. And that became actually a very huge problem.
And when I uncovered this mindset, I realized that I was kind of building, in a sense, a problem for

(01:15:23):
myself. And I wasn't even aware of it. I was getting in my own way. And it was creating some
serious barriers to my success that I wasn't previously aware of. And I started to build some
practices around that mindset and some other beliefs that I had, too, that helped empower me
and helped me challenge those things that weren't helping me. As I mentioned, that's a belief that

(01:15:46):
never really went away. I still believe that. But I've developed some ways to counter that or to
recognize that and remind myself that, OK, this isn't helping me on my journey. I need to
take a different approach to this. So I think mindset is something that is very frequently
undervalued, but super, super important when it comes to paying off debt and living life on your

(01:16:10):
terms. The other thing I want to leave people with, too, is that I know retiring early, especially
in the current state of the economy, can feel like a far-off impossible goal. And if you're one of
those that is just barely making it by month to month or you're not making it by, you're accumulating
large amounts of debt, I feel you. I was there at one point in time, too. But this early retirement

(01:16:37):
fire truly is achievable for anyone, regardless of your income. Now, if you can increase your income,
it'll help increase your progress towards fire and you'll be able to achieve an early retirement
sooner. But that's not a necessity for you to be able to retire early, especially if you're able to
pay off debt and do really well at living below your means. So it might feel hard. It might feel

(01:17:04):
impossible right now, depending on your situation, but it is achievable for anyone with the right
mindset, with the right plan, and with the dedication to make it happen. If people want to
learn more about you, get in contact with you, and learn more about the fire method, where can they
do those things? Yeah, so the best place to find me is on my website. It's at fireyourcareer.com,

(01:17:28):
spelled just the way it sounds. In fact, a resource I recommend to start with is I have a free ebook.
It's a very handy guide to help you get started. It's called Seven Ways to Fire Your Career, and
that's at fireyourcareer.com slash ebook. That's a great resource to get you started. Just a few
simple concepts that you can implement today, and it's very easy to get started with. Angela,

(01:17:50):
this has been real fun. I appreciate you. Thank you so much for sitting down and just really
diving into a very complicated topic and just helping it be easily digestible.
Absolutely. Thanks, Brian, for having me.

(01:18:23):
So there I was, squatting in my newest home when my neighbor's porch swing caught my eye.
I thought that swing would really tie together my Norman Rockwell front yard aesthetic I've been
curating. And when I'm right, I'm right. Even the neighbors can't help to notice all my effort to
make this house a home. They're always gathering in front of my house, pointing at my stuff,

(01:18:48):
whispering to each other. Hey, is that my car? Nope, it's mine. Thanks, stealing. Oh, by the way,
while I have you all here, I want to let everyone listening know that I have my own podcast
releasing soon. It's called Rev, Reeve. No, Revva. Oh, that's right. Revvalizations.

(01:19:10):
It's a podcast where I have interesting conversations with interesting people.
Be sure to check it out. Stealing. Want for nothing. Take from everybody.

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20 - Building Your Financial Future Using FIRE with Angela Tipton

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