Podcast: Jonathan Mendonsa — Past, Present, & Future of Financial Independence
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Full Transcript of Steve Chen’s Interview with Jonathan Mendonsa
Steve: Welcome to the NewRetirement Podcast. Today, we’re going to be talking with Jonathan Mendoza who’s a former pharmacist turned podcasting rockstar and founder of ChooseFiIcom. Jonathan lives in Richmond Virginia, he’s married, and has two dogs, Zoe and Kiki. I met Jonathan in September at my second FinCon in Orlando, Florida. I thought it will be interesting to talk with him about the past, present, and future of the FIRE Movement, since he’s got a great perspective on this as someone who’s personally on the journey to financial independence, and someone who’s learning a lot from his rapidly growing community at ChooseFI. So, with that, Jonathan, welcome to our show. It’s great to have you join us so thanks for making the time.
Jonathan: Steve, thanks so much for having me. Thank you so much for including my dogs by name on the show. I mean they are grateful for the mention, and yeah, it’s one big family.
Steve: I think you’ll have to start an Instagram for them, right? Like get them superfans?
Steve: Yeah. I know, I have a dog as well, Lilac. She’s definitely been a great addition to our family. Keeps us all happier, I think, and also exercising a lot more. Getting out in the woods every day so it’s been good.
Jonathan: Awesome. Past, present, and future financial independence or the FIRE Movement. I love it. What a great title for an episode, and I think it’s one that we can have a lot of fun talking about because it’s not something that started like this year. It has a pretty storied history going back probably I mean farther than any of us can even really track. Maybe even the 1900’s with Henry David Thoreau in Walden, I mean talking about a simpler way of life, you know.
Steve: Totally. Yeah, I was actually, and I’m getting ready for this, I was doing some reading and I’d written a little bit about the FIRE Movement before with Early Retirement Extreme and Mr. Money Mustache. Then as I was digging around I was like oh, wait. Look, Vicki Robin with Your Money or Your Life, which was published in 1992 and actually reading up on what she was doing. Apparently, she was giving talks back in the mid-80s and made a cassette tape version of her talk. I’d like to kind of spread the word. In a lot of ways, she says the same stuff that … She was definitely a precursor to Mr. Money Mustache with the simple living and intentional living.
Jonathan: Oh, yeah. In 1980 when Vicki Robin and Joe started doing their seminars around the country, I mean that was really probably the first time that the word Financial Independence was actually levied or being used. Then when they, in the 1990’s when she released the book, Your Money or Your Life, that thing took off. I mean it was getting picked up on all the major TV networks. She was going on the morning circuit, she was on the Oprah Book Club. I mean she was telling me that by the time when it hit critical mass, when it kind of peaked in the mid 1990’s they estimated that they had reached, and there’s probably a lot of overlap, a lot of duplicates here, but just by in terms of sheer numbers of the people that were watching the shows that were being talked about this idea, over half the country, half of the United States.
Steve: Wow. That’s amazing. It definitely feels like it’s coming back again with a vengeance. I definitely want to get into that, a little bit further ahead. Before jumping there, I always like to kind of, for our audience, you know, start with people’s personal story. I mean I remember talking with you about yours. But I’d love to hear kind of in your own words, kind of like what brought you to pursuing financial independence and kind of where you are today.
Jonathan: This is a really interesting question and can go a couple different directions but let’s just start by saying that I have, for a long, long period of time, been a fan of this idea of financial independence. The idea that you can get to the point where working is optional. Not to say that you have to stop working but if you do work, it’s on your terms, it’s because you want to. What was interesting about this is probably in the early 2000’s I was trying to … I was deciding my career course and I was at this point looking into going into pharmacy, and I had actually got accepted to school, and I knew there was gonna be a pretty heavy student loan burn that went right along with this.
Jonathan: About that time, I stumbled on to Dave Ramsey talking about debt is dumb, cash is king. That was really my gateway to personal finance. I was introduced to personal finance before financial independence, and what was interesting to me is Dave really motivated me to pay down my debt and kind of moved towards this debt-free standpoint, which is difficult when you have six figures of student loan debt. But along that journey, I realized you know, I could see that I would be able to get to debt-free but I realized it’s kind of just the beginning. So, I was wondering well, what else is out there? That’s when I stumbled into some of these other characters that maybe we’ll get a chance to talk about in the context of the history of the FIRE Movement.
Jonathan: But, you know, this idea that it doesn’t have to be so complicated. You don’t need to get a masters degree or a doctorate. It’s not something that you need to fork over tens of thousands of dollars or go to college just to be good at personal finance. You can learn this with a relatively short amount of time. Maybe 20 to 40 hours of just being willing to soak yourself from this type of information. Frankly, that amount of time would probably be enough to carry you to a pretty solid financial future. Then if you want to take it to that next level there’s all these different ways to get better and better with personal finances. Then I just got hooked and people like Mr. Money Mustache turned it into a game, turned it into an optimization strategy.
Jonathan: I realized man, if he can do this on … You have this lifestyle of like $30,000 a year, if I wanted to have double that, the math is just the math. Here’s an article called The Shockingly Simple Math of Early Retirement, and that, for me, was just a really big deal. The idea that you could simplify how to get to the point where working is optional. It’s just a math problem. Build a construct, build a frame that allows you to get to that point, and allows you to have a lifestyle that you can actually get excited about in the process.
Jonathan: So, it was kind of like there’s these touch points and that we can maybe slow down and touch on a few of them. There are these influencers that brought together these different concepts that allowed me to forge a roadmap in my own mind to reach financial independence. I thought frankly that my path was basically just going to look like all right, I am a pharmacist. I have an entry level six-figure income. I have six figures to student loan debt. I am initially going to save 70, 80% of my income, pay down my debt, do that in about four years, and then I’m going to work for another like 10 years, and then I’m going to be financially independent. Then I’ll decide whether or not I’m going to work or not.
Jonathan: Along the way what you realize when you’re debt-free like you’ve automatically already built options into your life. If your job is no longer lighting you up like you can go do something else. In our case, in my case, I actually started a little side hustle just as a project on the side with a partner, with my co-host, Brad Barrett. We just wanted to talk about this idea of financial independence and find people that had kind of similar idea on the topic, and we started a podcast. Neither one of us have a radio background. We just like talking about this. If we could do anything, if we could talk about anything we’d wanna to talk about this topic.
Jonathan: I found an audience. This is the beginning of 2017. I found an audience pretty quickly. Using some of the principles that we actually talk about on the show, in a relatively short period of time it started to actually cover my bills, cover my core living expenses. It wasn’t like lighting up the world. I’m not a millionaire, but just it was actually replacing my core expenses. Keep in mind because I had already cut my expenses down to the bone to pay off my debt like it didn’t cost a lot. It didn’t cost a lot to make it from one month to the next.
Jonathan: As I kind of got farther down this path, and it kind of started to now pass my core expenses I said, “Wait a second. I have options. I’m not saddled by six figures of student loan debt anymore. I’m not saddled by an expensive mortgage. I’m not saddled by the trappings of a high, flying consumer lifestyle. If I want I could take this,” you know, you could call it risk but I was just thinking of it as an opportunity. I could take this opportunity and just do this podcast, which is lighting me up full-time and go down this path. If it doesn’t work out, if I burn out, if it doesn’t work I can just go back. That’s my worst case scenario because I don’t have debt anymore. There’s no real risk involved. It may have been scary but it wasn’t risky.
Steve: Right. I think that’s really amazing kind of hear your story about how the framework and mindset that led you to pursue FI, kind of gave you the flexibility to think about doing something different, the podcast, which you tried, right? That was something you’re really passionate about. That passion show through obviously and attract an audience, and has led to other options in your life. You didn’t really set out necessarily to say, “Hey, I’m gonna become financial independent through this podcast. Maybe that’ll happen, maybe it won’t.” But setting yourself up initially to think about FI and cut your cost slow, gave the optionalities to do that. It seems to be working out pretty well.
Jonathan: There’s this duality here that with my co-host, my partner, he was actually out financially. He was financially independent. He never needs to work another day in his life. He will be fine and his family will be fine. He’s hit that number that maybe we can talk about in a little bit here. I was clearly on the path, and we thought at the beginning wouldn’t it be fun to document someone that’s there kind of reaching a hand back and saying, “Here’s what I did,” and then someone that’s on there passing, “Here’s what I’m doing,” and you can kind of vet it out and say does this really work? Does this work for someone that’s just on it, not just someone that said, “Hey, look at me. I’m an early retirement guru.”
Jonathan: It works. If you cut your expenses, and you don’t have risk, and then you position yourself to do different types of startups like opportunities open themselves up to you. It’s kind of like creating your own luck. This experience isn’t just my own tale but I’ve seen this mirrored in the lives of hundreds, if not thousands, of people in our community that are making these somewhat unorthodox choices but getting these radically awesome results. They’re excited to share them with us, which kind of creates a virtuous circle, and that we kind of create a platform. We talk about these ideas, what were trying to do. People tell us how they one upped us, right? How they did it better.
Steve: Yup, nice.
Jonathan: That’s get put back on the pipeline and the ideas get more concrete, and we get a little bit more focused. What you start to do is you put together a roadmap of ideas. It all starts with … Let’s just go back and talk about what is financial independence, right? You have this equation, what you earn minus what you spend is equal to the difference of the gap. That’s the ultimate equation that all of us are subject to. How you tackle that equation is what makes it fun. You could focus on the income. We could blow up the income game and that all, that takes care of the equation. We could focus on the frugality game, the expenses.
Jonathan: You could crush that side of the equation and it creates such a low level of risk that almost anything is possible. Then finally what are you going to do with that difference? How are you going to optimize that difference? That’s what creates virtually unlimited possibilities for how the story that you want to tell, the roadmap that you want to create, it’s just fun to be a part of it.
Steve: Right. I love the whole kind of thinking about it much more broadly. I think most people they’re so focused on hey, yeah go to school. Get my degree. Incur likely a lot of debt. There’s so much crushing higher education debt out there. By the way, just as an aside, I have an 18-year-old who’s applying to school right now and we’re looking at the whole financial aid process and everything else. It’s definitely daunting. I’ve talked with him about you wanna be really thoughtful about incurring a lot of debt.
Jonathan: Let me just throw some math at you just to really cement that. I came out with $168,000 in student loan debt at the age of like … Let’s see. I was 28 years old with a 168,000 in student loan debt. Four years to pay it off, back to broke at 32, and then I have a pretty good income so I can go forward. If you were to contrast that with an individual that graduates high school at 18 years old and figures out a way to get a median income job, a $50,000 a year job, and they can save 50% of their income either because for the first four years they’re doing some form of house hacking or living with roommates or living with their parents, whatever. They’re a little bit more extreme on the front end.
Jonathan: Instead of going 168,000 they’re actually over the first eight years or 10 years of their earning years actually were to save $168,000 a year. $16,000 a year you try to save at the age of 28 you have a $168,000 of net worth. From there on, you are borderline financially reckless. You never save another penny. You only live paycheck to paycheck. You don’t accrue debt but you don’t worry about savings anymore.
Jonathan: At the age of 50, if that money were invested and you are earning average maybe 8% rate of return, like that’s basically it. You’re a millionaire. That’s what it takes, that one decision. So, then the question is becomes just solve the problem, and for the 18-year-old it’s like how can I get a job that makes a median income? You can get an associates degree as a nurse and make a $140,000 on the West Coast. I mean that’s two years of education. You can be a coder and do a six-month class, and make 50 to $60,000 a year with less than $1,800 investment.
Jonathan: It doesn’t matter. Forget these examples. These are two that have popped up on my show, but I guarantee you that there are hundreds and hundreds of these. What if you could build a portfolio and you’re just picking which one works for you. You’re like, “Yeah, it would be kind of cool to have basically got the point where I’m guaranteed to be a millionaire before I’m 30. That’s kind of cool.
Steve: Yeah, totally. By the way, one of the things that I’m a personal champion of is just teaching personal finance, and making it mandatory in high school. It’s not mandatory, and many students, most students don’t want it. I think it sets them up for a lot of downside. That’s probably one of the reason we have such high credit card debt in this country. People that are less thoughtful or they’re just less aware in the beginning and they might incur before they know it, before they really are aware of what’s happening, they’re like, “Oh, we’re going graduate and have a $100,000 in debt or $150,000 in debt.” Then they’re spending the rest of their life kind of sliding away on how to pay it off.
Jonathan: Because that’s the thing, right? You lose that deck. The average millennial right now is losing that first decade to paying off their student loan debt. You have to go to college. You have to go to college because college is the only way to guarantee success. Don’t worry if you can’t afford it we’ve got your back with student loans. It’s a human right that everyone should be able to get student loans and okay, fine. But the problem is this naïve kid doesn’t realize that you got to pay those student loans back, and you got to pay it back with after-tax dollars. It’s going to take a while. It’s going to be harder to pay them back than it was to take it out. That’s a scientific fact.
Jonathan: Most of us, many of us lose that first decade, and we wake up in our 30’s and hopefully, in a perfect scenario, you’ve paid off the student loan debt. There are many people that just assumed they’re going to have student loan debt into their 50s and beyond. It’s going to outlive them. That’s just a problem. This kind of goes to a quote by a Jim Rohn, “You’re the average of the five people that you spend the most time with.” If that’s accepted as a societal norm you’re always going to have student loan debt, then you’re just going to accept it.
Jonathan: But if you surround yourself with people that say, “Oh, heck no.” I’m going to do something different or I’m going to pay it down or whatever. If you can move yourself to a tribe of those individuals then you’re going to end up with such a different outcome. You have the option to essentially retire or have the option to work decades ahead of your peers but it’s your choice.
Steve: Right. I think that’s what so amazing about the community and seeing success out there, right? Seeing kind of normal people achieve this. That’s obviously working with your community, right? Where people are like, “Hey, I’ve done this. It can be done. I’m on the path.” I see it in the Facebook group that you have where people are sharing their successes along the way, and I just paid off this debt or I just put away my first 100,000 or whatever it is, right? And I also saw — we’ll talk about it a little bit later but kind of I think the stages of FI are pretty interesting.
Steve: By the way, one quick note before I move on to … From getting started in your life, part of this, I just want to give a shout out to my … I have a half-sister who is in the marine. She kind of went through this where she graduated high school, she was thinking about what to do. She was like all right, do I wanna go and get an associates degree? Do I wanna to become a chef? Do I wanna to be this or that? She wasn’t quite sure. Then she ended up joining the Marines, which was a pretty different decision. She’s gone through. Now, she’s in the marine security group but she has saved probably 70, $80,000. She lives very efficiently. She’s really thoughtful about it, yeah, and she’s in her early 20s.
Steve: When she comes out, the G.I. Bill pays for a huge chunk of school. I think she may actually come back out and become a nurse or something. Yeah, she’s going to be set up much better than many people. She’s really thought about it. Now, granted she’s going to give up a big chunk of her life to the marines but she’s also been in different parts of the world. It’s worked out for her. But I think that approaching it, being thoughtful, trying something different may end up working well for her. A side note, too shout-out to the military guide, Doug Norman, who writes a lot about this and really helps people in the services be thoughtful about money.
Jonathan: Doug is fantastic. Yeah, absolutely congratulations to her as well for what she’s accomplished. That is no small feat.
Steve: Yeah. She’s kind of doing what you described, right, which is like hey, I’ll try to liberally, efficiently save money in the beginning, and then be setup up. She is investing. She’s asking good questions about like how do I invest and how do I keep my cost low. Maybe she’s even a member of this audience. I don’t know if she’s in ChooseFI. I don’t know. I’ll have to ask her.
Jonathan: That’s awesome. No, I was thinking about it. This isn’t just for 22-year-olds or 18-year-olds. Since it’s just based on math, it’s not based on your age. If you woke up and you’re 35, you’re 45, you’re 55, and you’re like, “Oh man, this would have been great if I thought it 20 years ago.” What’s amazing is I’m going to upfront, this is not “get rich quick”. That’s a good thing. Get rich quick usually is a scheme that ends up with your money in someone else’s pocket and maybe you’ll a little bit better in looking for something else. It is get rich quick-ish, and get rich quick-ish can work every time because again, it’s just based on math.
Jonathan: Here’s the math. If you save 1% of your income every single year, so you have a 1% savings, right? You have to work 99 years to replace that single year, right? You work 99 years, you get one year off. If you bump that up to a 25% savings, it’s three to one so you worked three years and you have one year off. If you can save 50% of your income that means you work a year, you’d get a year off essentially. If you can stack enough of these wins together and do it for a relatively short period of time like 10 to 15 years through the magic of compounding, and by having this in solid investment vehicles, you essentially create a perpetual money making machine.
Jonathan: Essentially what you do is the compounding gains from those investments provide enough to support your lifestyle for at least 30 years and probably for the rest of time. This is based on … I know you talk about this all the time so 4% rule that sort of thing. This is heavily leaning on some of those concepts and ideas, which is probably outside the scope of what we’re going to talk about right now but that’s just incredible. So, put yourself in the perspective of someone that has made, has not been aggressive with this. Maybe they don’t have a ton of debt but they have not saved anything. They got all the toys and they’ve paid them all off but they haven’t saved anything.
Jonathan: They’re waking up at 45, 47 and you know what, retirement is coming around the corner. I probably should get serious. 10 to 15 years, that’s amazing. Think about that. You can sharpen yourself down. You can focus. You can come up with a strategy for yourself, and you can have an incredible traditional retirement. People that are pursuing early retirement by definition that is going to include traditional retirement. It’s the same tactics. That’s very empowering for people that maybe are finding this a little bit later in life.
Steve: I totally agree. I think that’s one thing that was really huge when I was just reviewing your site the fact that you kind of say hey, this is a 10- to 15-year process but it’s totally achievable. I think that makes it much for real for many people and certain, right? I think that’s the big thing with kind of financial planning in general. It’s always been kind of this hazy thing. It’s like hey, most of the financial services is just like save a lot of money or save 15%, right, and just kind of keep piling it up.
Steve: What’s the right number? Nobody knows. As much as humanly possible because all of financial services makes money when you have more money piled up there traditionally, right? Now people in your community and the FIRE community, they’re much more cognizant of like hey, what are the fees on thing, right? If someone charging me 1% to manage my money is that good? Not really because that’s like potentially 25% of your actual earnings every year on your money, right? Yeah, I think-
Jonathan: It’s crazy. People don’t know what the expense ratios are on their investment. They have no idea how their investment … Maybe they don’t even know how their adviser is getting paid and how much money that is actually is coming off the top there every single year. That is a real wake up call. I mean just imagine that. Put yourself in the situation as someone that’s just been blindly doing what they’re told, never even knowing what questions they should have been asking and how much money that actually cost. Steve, maybe you can do this math for me, if you’re paying 2% assets on your management and you stack that together on a $2 million portfolio for 10 or 15 years, I mean how much money are we talking about?
Steve: It’s huge. I mean I think for us, from our average user it’s 50 to 60 years old and has a million dollar saved, so we can make it even simpler and say they pay the average asset management fee or adviser is 1.3%. They’re paying 13,000 just a year. For anyone if 13,000 a year is 13,000 a year, right? If you’re living on 60,000 a year that’s 25% of your living expenses so it gets too big on the end. Then like you said if someone starts to pile up a couple of million bucks and they’re paying even more then it’s just a huge component of your future … It actually has two impacts. It’s the cost that you’re not capturing. Also, you’re not able to reinvest this money and earn additional dollars on it.
Steve: That’s another-
Jonathan: It’s not 13,000. It’s the 13,000 compounded over 10 to 20 years at whatever percentage we were building into this calculation, let’s say 8%. It’s an insane amount of money.
Steve: Yeah, I know. Vanguard did a study on this. That ends up being like 30% of your returns over time so it’s just massive. The good news is more people are waking up to this. Groups like, I was talking to Rick Ferry about this, groups like Bogleheads you know, what Vanguard is doing in terms of just driving fund fees to the floor, and creating a fee war out there between Vanguard and Charles Schwab. It’s helpful for the end consumer as long as they know to take advantage of it. That’s the whole back to education.
Steve: We’re all about education here and kind of awareness. So, I think that’s a big part of what ChooseFI and groups in the retirement and other groups are bringing at the table. All right, before we go on, I’d love to just kind of hear from you since you’ve gone through this. I know that you used different tactics, right? House hacking, travel rewards, managing expenses, low grocery bills, side hustles like you’ve built. What are the top things that you find working for yourself?
Jonathan: I think that’s a great question. Can we first pause for just a second while I organize my thoughts here?
Jonathan: Slash cough. Yeah, that’s a great question. I think the way that I would look at it is I tend to look at the pie, what’s taking up most of your pie. For instance, for the vast majority of people their biggest expenses are taxes, housing, and maybe food, right? We could start there. We have transportation. We could work our way down. We have something that we call like the pillars of FI. A lot of them focus on these obvious expenses that most people have in their budgets that you can very quickly make moves on. Now, taxes, are you taking advantage of the United States marginal tax bracket system and taking advantage of tax-deferred vehicles? If you are in a, I don’t know, 12% or beyond marginal tax bracket, 25% et cetera, et cetera, are you maxing out all of your tax-deferred vehicles?
Jonathan: Basically most people in the FIRE community once you’ve gotten rid of the crazy consumer that you take advantage of those tax-deferred vehicles like your 401K, your traditional IRA, et cetera, et cetera. That’s huge. There’s real money savings there. Behind that you’re housing. Buy a reasonable house or consider renting. I think one thing that is interesting about community is that we are not dogmatic about buying a house. I think this is something that I actually grew up with. I thought you had to buy a house to make into the middle class. That was the key to make it in the middle class is buying a house.
Jonathan: Now I’m a homeowner and I don’t have anything against buying a house but I do think that there is this incredible pressure that people say you have to. We’ve kind of taken a look at some of the math. A lot of times it doesn’t make sense. If you’re going to be moving in a relatively short period of time probably like two or three years it doesn’t make sense. If you live in a crazy high cost of living area in many places, it doesn’t make sense. You just need to be able to look at the numbers and decide for your situation. Aside from rent or buy, the other thing is like do you need to a mansion or do you need a house that actually serves your need?
Jonathan: So many of us have bought into this HGTV model that requires the brand new renovated kitchen, the upgraded bathrooms, the guest suite, everything else, and we are house poor. I mean that we have this massive house and we have to work over time in order to afford it. We have this amazing car but it sits unoccupied in the parking lot of our employer’s job because we have to work constantly to afford the payments. Do you own your stuff or does your stuff own you? Are you paying for storage facility to store all the extra stuff that you don’t have room to fill up in your attic or your basement? Like just think about that.
Jonathan: When you buy this massive house being next to immediate thing is, “Man, the rooms are empty. Man, we need to get window treatments. Man, we need to get the color coordinated. Man, we need to do renovation like a home.” There’s a reason that they look at home ownership as a way of measuring the economy. Because when people buy houses, they have to then fill the houses. That’s a couple examples there, and I could keep going but like that was one’s that’s just very interesting.
Jonathan: I have a lamp that has a crack on it and out of principle, I super glued it one time. Out of principle, there’s one thing I’ve taken a stand and refuse to replace this freaking decorative lamp. I’m not really hard core on this particular, but on this one thing like I actually won, and we have this one cracked lamp, and it’s just turns. You can see the beautiful face on the front but on behind, it’s got a very indiscernible crack.
Steve: Yeah, well I think that the main thing here, my takeaway here is it’s just questioning what you spend your money on, and looking at what things cost. I think so many people they go through, it just kind of grab stuff at the grocery store or they’re getting healthcare or whatever it is. They don’t necessarily look at the cost of things and very often, you can find much cheaper alternatives or just think creatively about it, right? Do you want to go movies or can I go, catch a free movie at the library? Or are there programs in the community that are just available to me? Many people don’t even ask that question, but if you look around, there’s actually a ton of stuff that you can do everyday life to just bring your cause way down. It makes a massive difference.
Jonathan: I can definitely go through a few more. We had talked just previously about a car but like a lot of people say is it a new car or is it a … Should I get a new car or should I get a used car? You know frankly, well probably, a used car it would be a better choice in most cases. Let’s just say instead of getting that 40 or $50,000 car, you just get a reasonable $20,000 car. A new car, $20,000 but then you drive it forever. This is one of my coach, that back in 2003, him and his wife got a new-ish cars, new cars, and I think he chose a nice reasonable choice like a Honda Civic and he just drove it forever.
Jonathan: So many people think that it’s just okay to just manage the payments. If I can afford $200 a month so every five years, I’m just gonna upgrade my car and then I’ll just have that forever. The difference between buying a car new, a reasonable car new, and then driving it for 15 years before you replace it, and then repeating that process three times, like over 45 investing or 45-year investing timeline, literally, between that person and the individual that manages the payments and has that 250, $300 a month payment forever, that’s a million dollars. That one choice right there is worth a million dollars.
Jonathan: It’s interesting that it’s you think that sometimes these are little things, maybe not the house. Most of us recognize the house is kind of a big deal. The car, really the car and the things like maybe the cellphone. For instance, I don’t use a $200 month Verizon phone plan. I use, they’re called MVNOs. They basically run the lines. I’m sure you’ve seen ads for it. In my case, I used one that’s actually done by Google, that’s called Google Fi but there are several others. Republic Wireless is another one, and instead of paying a 100, $150 a month, you can get a phone line for, I don’t know, $20 a month, $30 a month, something like that. It’s a very reasonable price. That’s another example.
Jonathan: Then food, I probably should have moved this up. People that aren’t tracking their finances hemorrhage money on food and entertainment, dining, alcohol, whatever. That is just a black hole for your budget. Just by the fact that you’re not tracking it, if you’re just, “Hey, we’re going out with our friends this weekend,” you just don’t look at it. Or, “Hey, I don’t really feel making something from scratch so we’re just gonna go buy and bring in.” That could easily swallow up for family $1,200 up to $2,000 a month. I’m sure there’s people that go well over that without blinking an eye.
Jonathan: My co-host uses something called the $2 per person per meal rule, and I’ve used this with some success that can alter it. I’m not quite as like hard line on that exact number but I think it’s still such a reasonable term. What’s a reasonable amount to spend on a meal? For Brad, it’s $2 per person per meal. If it’s a one person, then that means everyday you’re spending $6 a day, right, and then times 30 days will be $180. Let’s say you screwed that up and like just double it, right? That’s $360 a month per person. If you use a template like that for your life, it’s gonna save you almost out the gate on month one. It’s gonna save you $500.
Jonathan: If you can stack that together again, remember we’re talking about doing this for relatively short period of time. If you can do this year over year, you’re talking about tens of thousands of dollars. Because we’re talking about such sort compressed timelines, like well, does it matter a $100 a month here or $100 a month there. Using the 4% rule, for every $100 a month that you can save, every $100 a month that you can cut off your budget, it’s $30,000 less that you need to accumulate in that total pie to say that I reach financial independence. That is incredible. Incredible. The power of these small gains. It’s frankly, it’s the aggregation of these marginal gains that thrust you to the outcome that you’re looking for.
Steve: Right. I think it’s I will say, and for many people, if they thought, if they listen to you and say, okay, two bucks per meal depending where they’re from, they’re going to be like, “That’s crazy.” I think that I have data that actually does show that Americans can eat at home for four bucks or something like that, or three bucks. I mean whatever —
Jonathan: You know what’s interesting about that?
Steve: …section out that bad.
Jonathan: Let’s say that, well even if you’re not super hard lined about it, let’s just say that you’re just kind of watching it. You’re using that $2 per person per meal as an anchor. Like for instance, all of a sudden, you can get oatmeal and eggs for nothing, right? That’s gonna cost you 40 cents a serving. That’s gonna give you some pretty good macros there if you’re watching your nutrition. But you also know you can spend $20 a pound easily without blinking an eye on a steak.
Jonathan: It’s not that you need to eat all beans and rice or all caviar, it’s that you have a blend of it, too. You have some meals that are very inexpensive because you know the price of these calories. You know they’re nutritious, and you have other meals that are gonna be more expensive and you just blend those two together.
Jonathan: Then when you go out and you get servings and you know that you’re gonna be going through this, just think about what it would … When you’re anchoring yourself at whether every $2 per person per meal, or whether it be $5 per person per meal, but then you go out and you get a dinner for the family, and every plate is causing you 30 or $40, and you stack one of those a week. Like you can see what this does and so part of it is, a lot of … It’s kind of goes back to convenience. Most of just feel like we’re so overworked. We have so little time that we just need to use the convenience of delivery, the convenience to take out, the convenience of restaurants. We don’t want to do it.
Jonathan: If you can figure out how to build strategies in place to actually both reclaim time and then use that time to make clean meals, there’s other benefits for you far outside just the economics. Your health comes into this. Many people find when they actually have a little bit of space and can take the time to actually make some meals at home, maybe cook in batch, right, because you don’t want to make a meal every single night. Maybe you cook once or twice a week, and then you have those meals throughout the rest of the week. If you can implement some strategies in your life like they’re not only as your wallet a little fatter, but your waistline gets a little skinnier, too.
Steve: Yeah, totally. I heard that actually at the last FinCon, I heard Mr. Money Mustache, Peter or Pete kind of talking about his approach and he said step one is just track your expenses. Just understand what you’re spending-
Jonathan: I think he said track, I think he said step one was buy a bicycle. We’re right behind that track your expenses or two.
Steve: Yeah, track your expenses, and then the simple math is try to get to … The lower you can get your expenses obviously, the quicker you can get there. Really, it’s 25 times. If you can get your net worth to be or your investible savings to be 25 times your annual expenses, you’re independent, assuming a 4% draw down.
Jonathan: This doesn’t have to be limiting. I think some people maybe, for better or worst, think this is like an extreme frugality play. This is just a life optimization strategy and it just shows you what your number needs to be. Like for instance, I do know people that are planning on living on 30 something thousand a year. I know other people that are planning on a very luxurious 100 to a $150,000 a year with no mortgage, no car payment, no debt. It’s basically 30 to 40K of core expenses.
Jonathan: Then like 60 to 80K of just slush money. That money goes very far when you don’t actually have any actual bills. It’s just all discretionary spending, and I think that’s a thing you need to figure out what works for you, what your number is. But it’s hard to do that when you have no idea how much your life actually cost.
Steve: Totally. I think a huge part of this is really having, in terms of secondary benefits, there is a really lot to being mindful and I know intentional is overused, but thoughtful about what you’re spending, what you’re spending it on, and just by thinking about it, and having that to some scarcity in your life where you are thoughtful about why you’re spending or why you’re spending it. Hopefully, it makes you appreciate it more and be more grateful and that all those things lead to people being happy. I think really, the sense of control that people have when they’re like okay, I’m in more control of my destiny, and I understand the path I’m on, and what I’m doing, that’s game changing for people and their future, their present and future happiness.
Jonathan: Yeah, absolutely. Couldn’t agree more, man. That’s really, I think I mentioned it. This is a life optimization strategy. Then once you get … Frankly, let me come back to this. You get the control, you get most of the benefits of financial independence long before you hit that magical number. I kind of omitted a small amount from my story, what I was telling you, my situation, and going ChooseFI full time. I actually was doing the side hustle at the same exact time as working full-time. I was putting about 40 plus, 45 hours in at work and then ChooseFI as it was growing was taking up another 30 or 40 hours. I was starting to hit a wall and there are bunch of things that were kind of landing at the same time.
Jonathan: There was a documentary that actually wanted to come film with us and talk a little bit more, and it’s gonna be released in 2019 so that’s something that your listeners maybe interested in later on this year, it’s called Playing With Fire. We were gonna go FinCon, our first FinCon. Then on top of that, we were due to go visit my wife’s family and she’s from Zimbabwe. Zimbabwe is a 20 plus hour flight to get there. It’s not something you do for two days and you come back. You need two days just to get over the jet lag. I was planning to try and take two weeks to go do that.
Jonathan: In America, most corporate jobs, employees get 20 days total. Excuse me, hang on, 20 days total of, in my case, it’s called PTO, paid time off, and that was divided between your sick leave and your regular pay. While you could have that time throughout the course of the year very rarely could you take it all together. Now, there’s no way you could do all of that in this particular period of time. I wasn’t in control of my schedule. I just I didn’t, I couldn’t really make those sorts of decisions. I check the company policy and I saw that they had something in there called an unpaid leave of absence that you could apply for and get conditionary approval.
Jonathan: So, I did that. I went through that process and I kind of explained to my boss at the time exactly what I’m telling you. I have all these things. I just can’t keep doing it all. “The pharmacy is in good shape. Would it be possible for me to take a three week unpaid leave of absence so that I can round all the stuff up and then I can come back?” To which of my boss said, “I don’t think it’s in the companies best interest for us to let you do that.” Because of everything that I laid out for you, because I’m following the same steps and talking about in the show, I was able to say to him, “I don’t think it’s in my best interest to stay.”
Jonathan: You get that. I wasn’t at financial independence. I didn’t have 25 times my annual expenses but I had several years worth of savings to cover my living expenses. I knew that this isn’t me burning down my house. I knew I could go back or go across the street to a competitor. I had a little side hustle that was just starting to cover all of my bills. The power comes to your side of the court long before you reach 25 times your annual expenses.
Jonathan: You know what? If I had had all these debt, if I had had an expensive McMansion, a car payment, I would not have been physically responsible for me to do that to my family, right? We would not have been okay, and you have to make sure that you can take care of your family first. Pursuing financial independence gave me the ability to make a choice that was in my best interest, and my family’s best interest in the construct of a very low risk lifestyle.
Steve: Right. Yeah, actually right. On that note, I want to touch on the stages of FI. You were probably the right, I was looking on your side and reading some of your previous podcast but a $100,000 saved, or two to three years spending, you were there. The income halfway to FI in terms of income versus expenses. Getting to lean on FI in terms of you can be financially independent with no discretionary spending. Flex FI 20 times, annual expenses, which I thought it’s interesting to call out. That’s 82% chance of success of your life that you’ll never go negative. Full FI 25 times, and then Fat FIRE 30 times. It’s actually great to see that, those stages kind of laid out with the multiples.
Jonathan: Yeah. We’ve got some of that from Joel from 5180 but it was kind of … It’s kind of nice just to map it out and say, “Hey, it’s not binary, right? It’s not you’re starting …” Like hey, the financial independence sounds great. Okay, well wake me up in 15 years and let me know it’s over. No, we want … We’re humans. We want to see progress. We want to check the box. We want to know that we’re getting closer to our goal. How do you actually do that? Because frankly, when you get to 50%, when you get to …
Jonathan: Because frankly, when you are actually get to the point where you have several $100,000 of net worth, like that’s really when your portfolio starts kicking in and doing all the work for you. For the first like 50% of your path to financial independence, you’re doing the heavy lifting, right? You’re taking your savings, which you’re not spending and you’re putting it in your investments. You’re gonna get to a really cool place as you’ve been on this for six, seven, eight, nine years. You’re gonna get to this crazy place where you realize that your investments just added. They’re actually growing by more than you’re actually putting in.
Jonathan: They’re working harder than you are 24 hours a day and that’s when you’re like, “Man, I don’t think I can screw this up. I got this.” It just keeps getting more and more and more. Like you realize that long before you get to financial independence and like that’s the feedback loop that you need to keep yourself on this path. That’s why financial independence, of course, it’s personal finance but it’s like an elevator pitch for personal finance. How can we package something that for so long is just seemed like academia and make it real for someone that this is a human being that wants to live a better life and just trying to figure out how to get there.
Steve: Right. You’re delivering on the vision here where you’ve built this community, and that you’ve got the virtuous feedback loop happening. People are hitting these metrics and sharing with each other and encouraging each other, which I think is awesome. I’d love to talk a little bit more about your audience but first, I just want to ask you about like when you first started this, and you did you first podcast back in December of 2016, you said you and Brad kind of connected. You were like, “Hey, we just want to talk about this.” I guess you’d never done it before. Why did you say podcast thing versus blogging and how did you kind of get the word out and how did the initial growth go of the emergence of the community?
Jonathan: Yeah. This is interesting. Back in December or 2017, when I pitched Brad on the idea and he said yes, frankly, I was just as shock as anybody else like this isn’t like we didn’t know each other for years and years and years. We just knew that we’re both inside this community. We’re both passionate about talking about it, and maybe even more important at the time I had met him in real life. We had gone and gotten lunch and we had kind of shared a meal. That was real life connections are a really big deal, which maybe is we’re circling back to at some point.
Jonathan: We started with ChooseFI.com, the website and the podcast at the same time. I think I had started the website first and then just said, “Hey, we could do a podcast right along with this. Both of us, like as soon as we had both … Because he had done some writing before and I had written a couple of articles on the website, but as soon as we did our first podcast episode, I think that’s when we said, “We love this. Like this is our preferred medium,” and I suspected that would be the case for me. I’m a verbal guy. In Brad’s case, I think it was almost a surprise for him.
Jonathan: We recorded like a couple of episodes privately and that’s a cool thing. You can just record, see how it goes, and like, you don’t have to release it. If you don’t like it, you could just redo it or whatever. That’s the amazing thing about podcasting. You get the same benefits with blogging but for the sake of this conversation. Anyways, these episodes that weren’t released, we had about four of them, we recorded it. I had it down and then I gave them back to him and he played it and listened to it with him and his wife. His wife, Laura, said, “Man, you guys are actually kind of good. You’re good,” and she gave him this … I’m gonna cough, give me a second.
Jonathan: She kind of gave him this, the level of affirmation that there’s something really here like I am listening to you, and I’m connecting with you at a different level over this content. I think you need to just go for this. I think with that in mind like suddenly, he went from like, “Hey, there’s no downside to this,” which, right, that’s totally true. He’s not doing this for the money. He never needs to work again like it’s totally fine but it lit him up. It lit that spark. Like what if you could tap dance your way to work every day. Like Warren Buffett, he doesn’t need the money. He’s not doing it for the money at this point. He gets a level of fulfillment from that.
Jonathan: I think there’s many other people that can identify with that same thing, and it actually adds a lot of power and a lot of flavor to this. I wanted to actually point out that so many of us try to make a decision that is gonna last for the rest of our lives at the age of at 17 or 18, right? What do you want to do? What are you gonna go to college for? What are you gonna get your degree in? Once you make that decision, there’s this thing that you’re baked in, right? You’ve set your path and I hope you enjoy it because you’re gonna have student loan that’s gonna tie you to it.
Jonathan: If you can reject that model and decide well what is it that I actually want to do it, and do it from a place, a strong financial base, in some cases, that means you never waste those years. In other cases, it means you get to reclaim your best years and reallocate it to something that you actually enjoy and can make you money. There’s no rule. I guess, there is theoretically something called the internet retirement police and so they would say, “Well, Jonathan is not retired.” You are right my friend, I am not retired. That’s fine. I don’t care. That’s fine. I will probably never retire. This is something that I really love.
Jonathan: What if you could get to that place, and in any field, in any job, what if you could had the liberty or flexibility to just try everything until you find something that you like because you’re not doing it from a place of financial scarcity? For instance, with my free time now, I’m trying everything, like all these things that I never thought I had the bandwidth to go and put back into like wood working, or painting or drawing.I’ve always said to myself, I’m a bad drawer. How do I know that? I never really did it.
Jonathan: What if you could spend hours and hours and hours just on YouTube learning how to draw? This goes to something called autonomy mastery purpose. It’s a talk that Daniel and Pink gave. I think it was a Ted Talk. This is what humans crave. We want autonomy. I want the ability to work on what I want to work on, when I want to work on it. I want mastery. I want to be able to spend weeks and weeks and weeks trying to figure out one stupid little problem that no one else cares are about, but it means something to me.
Jonathan: You see skateboarders do this, right? Kids with Minecraft. And I had purpose. I want to know that what I’m doing actually matters. There is a few others that we’ve kind of landed on as well from our community, identity and connection. Like this is what doctors grapple with. When you’re a doctor, a doctor is a big part of your identity and then sometimes when you’re trying to figure out how if you could move away or leave that, you’re trying to figure out what or where you’re going to be getting your identity from.
Jonathan: In connection, like can you find your tribe? Can you find your people? Can you find a community of like-minded individuals? So, consider this five cocktails that are going to make for a very happy existence and you don’t have to and you probably won’t get all of them. But if you can go through life picking up things that light you up, that land on some of these boxes, let’s say land on some of these check boxes, it’s going to be incredibly powerful and then to be able to stack that with a frame of well what does the mass say, what do I need to accomplish to still hit my goals. That’s why it’s a strategy.
Steve: Yeah. Well, I think it’s awesome to hear you kind of describe the autonomy mastery purpose and also the identity side of the stuff. I think one thing that you’re going to see though is … But I totally agree with that, I think that FIRE and pursuing FI gives people this purpose when they’re doing especially, people that are really hard core into it, but once they get there, they really hopefully have thought about what they want to do next, or start to explore some of the stuff early on because I think also you can have, okay, now I’m fully independent. I don’t really have to do anything, so what am I going to do? Do you see any of that in your community where people where they achieve it and then they’re kind of like wandering around the woods like, “Well, okay, what’s next?”
Jonathan: You know, it’s so interesting. I am sure that at the periphery I have seen or heard somebody mention something like that, but I don’t see a lot of it. I really don’t. I mean, this is I think, “Oh, what are you going to do with all your free time?” You know my frame, what I see from my friends and from the people that are pursuing this is, “How did I ever have time for a 9 to 5? How do you have time to fit that in?” I’m like, “I have so much that I wanna accomplish and a cubicle just isn’t part of it.” You know, it can be a part of it for a period of time, if you find that balance, but you know, the world opens up to you.
Jonathan: So, I will never want to be the guy that’s like hating on the person with a Piña colada on the beach. Like if that was what you wanted, like enjoy that and when it gets old, feel free to go do something else, but it’s your choice. You’ve earned it, that’s fine, but I don’t think it’s what the driving force is for many people. It’s not what you’re running from, it’s what are you running to. Like once I do this then I can fully invest in my entrepreneurship goals. Think about it like my friend Alan Donegan from PopUp Business School calls it a suite of armor. If you can put on financial independence like a suite of armor, it doesn’t matter what people say.
Jonathan: When you write three copies of your book and all the publishers reject it, it doesn’t matter. When you write a movie script and you go all in on this hand and Hollywood doesn’t accept it, it doesn’t matter. You’re doing it for different reasons. You’re doing it for you, and if the world accepts it, great. If not, it doesn’t affect you financially. What this means is people that are able to be unreasonable, people that are able to think outside the box, people that can do these things not for the money, but for themselves, people are drawn to that like flies. You know, it’s just it’s attractive to see that and you end up producing more authentic content, more authentic work and I think we’re going to be able to continue highlight ways that people have actually been able to pull this off.
Steve: Yeah, totally. So, I’d love to get your take on where you think most people are in your audience on the journey to financial independence. Do you see a big chunk of them at the beginning stages, middle, or getting to the end? Do you see that changing over time?
Jonathan: Yeah. This is why the community is such a big part of this and why I’m excited I actually have a group to be able to track this, track the progress. You know, I would say probably weekly we have someone announce that they reach financial independence. Notice that on our show we put a little bit more emphasis on the financial independence than on the early retirement. I don’t want someone to tell me, in order for someone to get credit for it, they don’t have to tell me that they quit their job. They can if the want to, but financial independence is financial independence, right? You reach your number. You hit your stride.
Jonathan: Having said that, based on just some informal numbers that I’ve seen on our group, I would say that the vast majority of the people are within five to 10 years of financial independence. Well, maybe I should spread that out or within five to 15 years of financial independence, but we do have a significant segment of people that are there. What’s interesting is, you would think well once you’re financially independent, wouldn’t you just stop listening at the show? Wouldn’t you stop being part of the community? Wouldn’t you just like want to go off and do your other thing now?
Jonathan: I think it’s because you made a different choice to get there. Very few people get to financial independence by accident. It requires intentionality. It requires you making choices that other people weren’t considering, or weren’t aware of, or didn’t make. So, many people want to kind of stretch their hand back and say, “Look, I did this. It really worked. Here’s how you can do it, too.” There’s actually a really large segment of people that are right at that finish line and were capturing their goals, their dreams, their aspirations, we’re getting again that feedback of putting that back into the community and letting the next year, the next year’s graduates essentially kind of say, “We’re right there behind you and we’re looking forward to getting there.”
Jonathan: So, I’m sure at some point, if you’re to interview me a year or two from now, our community is more and more interested in this type of data. We could put a poll out there and see if we can get some buy in and kind of get a sense. I suspect the vast majority of people in the community are kind of still in this five to 10 year window, but I bet you, and this is something I knew this myself, and I know other people, once you just start tracking how long it’s going to take to reach financial independence over a period of couple of years, you keep winding it down because your income goes up, because your expenses get lower, because you’ve figured out an optimization strategy.
Jonathan: Although we tend to think about life as a snapshot, it’s really a moving picture and things are always in flux, and people that are now thinking about how can I focus on this equation, how can I both increase my income and decrease my expenses, and stacking these gains together, you keep winding that number down. So, you may have projected, it’s going to take me 15 years. Two or three years later, like man, I’m only five or six years out. I mean, that happens. It happens pretty quickly, and as you get closer, you’re like, you know maybe it would worth it just to be even a little bit more intense, so I can pull this off.
Jonathan: Conversely some people, as a result of maybe pursuing the income side of things, maybe make a shift to go to a different field or different sector or different company, and suddenly what was a toxic work environment has become one that’s full of joy, maybe hit the brakes and say, “You know what, I don’t need to pursue this as quickly.” Basically, they’re like that person that case study that we talked about at the beginning, the guy that saved up $168,000. By the time he’s 28 and he has basically got it set and figured out. Maybe they’re kind of like in that situation where at this point, they can’t really screw it up … I’m sorry. They can’t really screw it up and now there’s kind of autopilot to the finish, and they’re just excited about the journey.
Steve: Yeah. Well, it’s awesome to hear that you’re seeing the community help each other and reach back and teach other people. I mean, I think that’s one thing that we see and hope happens in our community as well. You know, we’re sort of kind of in the more traditional retirement folks, but we also believed that there’s so many lessons from the kind of FI group because for our traditional folks. But you know, even as people are in their 50s, 60s and getting a little bit older in life, people are living longer and they have a lot of human capital on knowledge to share. I think people want to do that.
Steve: You know, once they’re independent either younger or older, it’s like, “Okay, how can I help other folks?” You get a lot of satisfaction with helping these folks. So, it’s kind of great to see that. That’s emerging and happening inside your community. So, what do you think the big factors are that are driving the growth? I mean there’s the podcast, there’s the content, there’s kind of people just talking to each other any other big … You mentioned kind of the Face-to-Face, the live stuff that you’re doing, you know what do you think the big things are that are driving this?
Jonathan: Yeah. That is a really good question there. It’s one that I’ve really tried to give some thought to, and let me just kind of go back to kind of the history of the FIRE movement. You know, Vicki Robin, when she had the attention of the entire country, it faded, right? It slipped away. What happened? The content is still good, it still works. I think in the 1990s, what didn’t happen, what we didn’t have was social media. We didn’t have our own platform and so it kind of went through like when it was no longer fashionable. When it was no longer in the best interest of the mainstream, I guess, to be covering it. It didn’t have a place for people to come together and share their own version of the story and what it was doing for them. That was in 1990s.
Jonathan: So, circa 2010, when maybe Jacob from Early Retirement Extreme starts talking about extreme frugality. I mean this guy, in this case, this guy’s living of like $7,000 a year and it’s incredibly intense, but it’s very reminiscent of some of the stuff that Thoreau is talking about, going back to a simpler life, rejecting consumerism, that sort of thing. People jumped back on. People that had found Your Money or Your Life just ran to his blog. Shortly after him, maybe like a year or two later, you know, very close to that, a young upstart called Mr. Money Mustache started writing and man, he just blew up. I mean millions and millions of paid views. It was kind of this like next inflection point.
Jonathan: It was like it may seem a little bit hard core now that some people would like, “Well, I would never bike,” but his way of writing was so authentic and real and his way of just showing you the idiocy of things that maybe you just took for granted was unparalleled. Rightly so, it just captured the imagination of … I mean honestly, I would estimate the world. I mean, that was probably the largest audience anybody have had since Vicki Robin up to that point, and then that was 2012. Then, I would almost say that there was like a peak and then it kind of does this thing and it kind of you know steady state for a while.
Jonathan: Then in 2017, when we started our podcast, I mean we still had that spark. This was even six years after he had written that content. We had still carried that ourselves and there were a lot of other bloggers and we’re now talking about it as well, but we started with … Hang on. I need to mention two more people otherwise I’m going to … It kind of hit steady state, but there were couple of other things that were happening about the same time. Brandon the Mad Fientist spent a bunch of time humanizing the IRS Tax Code and showing how early retirees could actually leverage the tax code with both put their money in pre-tax buckets and then draw it out tax-free. That was insane.
Jonathan: Then JL Collins in his timeline as well wrote The Simple Path to Wealth in the stock series, which is a phenomenal resource simplifying investing down to a level that probably hadn’t been seen before. I mean Dave Ramsey is also getting people to debt-free. White Coat Investor is doing a lot of the same stuff, and Bogleheads, you mentioned Rick Ferri, the Bogleheads group also has this wonderful platform of talking about simplifying investing. So, it was suddenly easier to get all this information and start to put it together in a linear fashion. So, that’s kind of what’s happening from 2012 to maybe 2017 and there are other bunch of other flavors of people that were now writing and talking about this stuff and people doing an incredible work.
Jonathan: In 2017, when we started our podcast, Brandon was the only other one that had really done, Brandon, the Mad Fientist who had done a financial independence podcast. So, I mean in our minds, like, “Why isn’t this already happening?” That was kind of like why isn’t this there? This is what I want to listen to. The closest I can get to it is like BiggerPockets, but it’s just about real estate. I want to focus on the more holistic picture. We should just do it. This goes to frankly a strategy that anybody should use if they’re trying to figure out what can I do for a side hustle. Just find problems, find things that are just obvious holes and just fill the hole.
Jonathan: All right, I’m going to keep going, give me a sec. Fill the hole. So, we were like, “Why can’t we do that?” So, we very early on just created that product in 2017, and I honestly, within about three months, we had both created the podcast, gotten a very small audience, and we were the guest on Radical Personal Finance, which is Joshua Sheats, and you may be familiar with him. We were a guest on his show, and that episode, I think, probably got us … You know, the day that we are on there probably at least a thousand people found us. That’s not a massive number of people that came and found us, but suddenly like there were people that were now listening.
Jonathan: Then from there on out, those people stayed with us and then they told their friends, and they told their friends, and going back to the feedback loop, I think the combination of the information all being there and put together in almost a roadmap, and then our weekly touchpoints, and frankly, the community being able to have a community … One thing that was always very apparent to me, this is something that I noticed early on, is that when you read comments, like when you read blog posts by Mr. Money Mustache, some of the best information was buried on the 12 pages of the comments, right?
Jonathan: When people comment on a blog, it’s lost all time and very early on, I said to my co-host Brad, I said, “This is the best stuff. I mean, frankly I could love the blog posts in many cases, but I love the comments.” How can we make the comments to show? How can we bring the community? Because this community is everything. So, that was our guiding light very early on and we rolled out a Friday roundup format, too. Have a Monday episode where we interviewed a guest who brought on a new topic. Every Friday episode where we got to talk about our takeaways and bring in audience feedback but make the audience like the show. This is your show.
Jonathan: I think frankly that’s when it became a movement. When the audience felt like they had ownership. When the audience felt like when they took ownership of financial independence this is our movement. That was the minute when one of our listeners, Scott messaged us and said, “Guys, I’m a documentary filmmaker and I think this community is worth capturing. I’d love to come film this …” All right, one more sec. I’m going to wrap this up. “I’d love to come film with you guys and kinda capture some of this.” When we knew that there was a documentary happening in 2017. and we were able to put that back in the community, I mean I actually went back and listened to a podcast that was there. It was right around that time.
Jonathan: That was the first time Brad said, “I think this is a movement. This is more than just a thing that you need to do. This can change the world,” and we truly believe that. We kept putting that out there, and at some point it just became true. I mean it’s a movement. Now in 2016, this wasn’t a movement. In 2015, this wasn’t a movement. In 2017, the art community made this a movement, and now going into 2018 and beyond, I mean it’s having that impact.
Jonathan: Recently, I saw a Market Watch article that just talked about the FIRE movement. No context. No explaining what FIRE movement was. It just assumes that everybody knows what the FIRE movement is. When you get to the point where everybody just knows what that acronym means, with all the million variations of what it could mean to be on fire, you just know that it talks about very aggressive life optimization strategies. That tells you something that you broke through whatever noise barrier there is.
Jonathan: This could fade. It could hit critical mass and fade away except that it’s actually changing lives. Except that the community has a way to aggregate their successes except for the fact that there’s an actual feedback loop to help. Because think about it, it’s very sexy to say financial independence. I find that I want to get to the point where working is optional, right? That touchpoint is awesome, and the endpoint when you’re there is awesome.
Jonathan: If there’s a, you know, 10 to 15-year window in between, there’s plenty of room for attrition, but if you have a community, if you have accountability, if you have motivation, you know, you have someone to keep you company as you commute to and from work for several years in a row, suddenly it becomes an imminent reality. As soon as you realized that, you realize this isn’t something that’s just a subset of the population. This is what everybody needs to do.
Jonathan: Because by not making a choice, by not realizing that you’re doing this, it’s causing you decades of your most valuable precious resource. Your only nonrenewable resource, your time. The pursuit of financial independence is merely a way for us to re-prioritize our most precious resource, re-prioritize our time around the things and the people that we value.
Steve: Totally. I think that’s a super summary that you just kind of gave about. Kind of where we’ve come from, where we are today, and what might happen. I was checking out the Playing with Fire trailer yesterday. It’s pretty compelling, and I saw that it hit it kind of as well. So, I see things like that, that could dramatically expand the audience for this, I think, and make it much more mainstream. But also I see things like there’s a lot more volatility in stock market. I mean, for people that have come up in the last nine years since you know, or 10 years, right, since the 2008, 2009 downturn, they have just seen you know, up into the right margin in the equity market.
Steve: It was like, “Oh yeah, I’m gonna invest. I’m gonna go passive. I’m just gonna put my money in,” that has totally worked. No risk. Very low volatility. Now, suddenly we’re seeing kind of return to the you know, mean reversion terms like, “Hey, there’s actually is volatility, right? You’re going to have to deal with this.” I can see that blowing some people away in terms of the emotional ups and downs of investing and the risks that’s involved. How do you see this as you look forward over the next couple of years for the kind of the FIRE evolution or the FI evolution?
Jonathan: Yeah. You know, depending on when this gets released, we’re actually talking about this in-depth in the episode that goes out on January 11th. It’s called Bare Perspective, and we actually brought Big Ern from Early Retirement Now to help us kind of go through it. I’ll be honest with you, the stock market, it’s kind of wiped off all the gains since the beginning of the year. I haven’t batted an eye. It doesn’t affect me, but there’s two different types of people that are hearing this. So, keep in mind if we’re talking about the FIRE community, people that are more than five years out, like five or 10 years out, most of them, if they’ve been in the group for any period of time, they’ve been listening to the show, this is like the best thing that could have ever happened to them.
Jonathan: Don’t slap a gift horsing them out. Like no horses were hurt in the recording of this podcast, but you know, if you can suddenly get the market for 20% on sale, knowing that you don’t need it tomorrow, yes, invest, deploy your capital. That’s an incredible thing. The other half of this is when you have a 50%, a 30%, a 50% savings rate, you’re kind of invincible. If you have so much leverage in your life, so much ability to be flexible to value or expenses back, for individuals that are listening to this, maybe are retiring or thinking about retiring right now. I mean, that’s where sequence of return risk comes into this and you need to just kind of understand some of these concepts and know what it means.
Jonathan: When I was talking to Big Ern, one of the things he was actually saying is that while historically in the past, you know, maybe six months ago, he would have been a little bit, say, the 4% rule is maybe more like the 4% rule of thumb, you might want to dial that down. He personally was using like a 3.3% safe withdrawal rate. Now, with the new market conditions, if you’re still FI after having had this market drop, you might actually be able to be a little bit over-aggressive, and have a very close to a 4% withdrawal rate or maybe even beyond.
Jonathan: Because now, the market, for no real apparent reason, has gone down and his market conditions are actually pretty good. The fundamentals are good, but for whatever reason, the price is down right now and frankly, currently this is just a garden market, a garden type … Hang on. Currently, this is just a run-of-the-mill kind of correction. We have these every three years or so you’re going to have a correction, and frankly if you can kind of sharpen your teeth on something that’s relatively gentle like this compared to maybe a 2008-2009 great recession-type deal, like you can start to build your investing, your spine, your bone.
Jonathan: I think our community, that’s another reason you don’t want to do this in a vacuum. Because if you’re doing this in a vacuum and all you’re listening to is Kramer, like the media it’s either everything can never go down, Bitcoin can never go down, it’s going to take over the world, or the sky is falling. It’s one of those two. There’s nothing in between. You know, what if it’s just, this is just what it does and I think people that are around a community of like-minded individuals, people that are around … Some of the wealthiest people were made in 2008, 2009, and Warren Buffet has that quote about, “When everybody else is running, you know, run in with your bathtub and collect gold coins from the sky.”
Jonathan: Like when you can reject fear and look at a situation like this as an opportunity, when you come out the other side, you’re going to be so much better. So, I think that it’s a mindset. A lot of these is mindset. It’s just follow the plan. Don’t be naïve. You know, if you had a million dollars. The stock market drops, and you go down to $500,000 and you’re still drawing 4% based on your million dollars, that is going to be a problem my friends because you’re … Because when the market does eventually correct, you’re going to have significantly outdrawn what you anticipated or expected to have drawn.
Jonathan: So, you need to understand how the Math works. It’s important to understand what sequence of return risk is. For the vast majority of our community this is a huge gift. It’s like getting 30% off sale right at Christmas. For people that are either planning on retiring or have already retired, for people that are planning on retiring and they were just barely at their number, maybe they keep working a little bit longer. For people that have already retired, just don’t be naïve with your withdrawal rates. Maybe reel it in. Be a little bit conservative. It’s just be important. Look and know how the Math works.
Steve: Right. Well, I think that it’s so good that the community is out there, educating each other, kind of reinforcing each other and hopefully making good choices. Yeah, I totally agree, and you know, I think Warren Buffet also said, “Buy when there’s blood in the streets.” That’s when you get wealthy. I love Carson and you know, a.k.a. Big Ern as well and we’re trying to build in some of the more complicated modeling around sequence returns and withdrawals that he plays out and does on the side with case studies into our tool as well. Because we think that there’s a lot to be gained, but it is about making this simpler for people, making it more understandable and you know, not so complex.
Jonathan: I want to drop one more line on there.
Jonathan: Let’s say that you are pursuing early retirement. Like you want to feel that just wanted to be early retired. Absolutely you were going for it and you did on the bare amount of money possible, and it didn’t work. After 15 years, you crashed and burned. Your worst-case scenario, is someone else’s every day. It is a turn style. You can go back into the market. It’s going to be fine, but it’s not a risky proposition. It’s just you have options.
Steve: Yeah. Right. I was talking to a friend of mine who’s a coach and he is like, “Hey, you know what, you can do is plan out the worst-case scenario in anything, right” So I say like, “Oh, I’m not really worried about it.” So, I was like, “Okay, well what’s the absolute worst-case scenario?” I was just, “Take it all the way out,” and you’re kind of like all right, it’s actually not that bad. So, if you applied that to you know, this or anything else, I think it really does make it much more manageable in your mind.
Steve: I know on that note, one thing that jumped out of me when I was watching this Playing with Fire documentary, It’s like I think they said, “69% of Americans have less than a $1,000 saved and 34% have nothing saved.” I mean, I know these stats, but it’s just so scary to read that, and what’s actually happening out there. It’s so daunting for many people.
Jonathan: Yeah. You know, we put a lot of emphasis on getting to 25 times your annual expenses, but scale that back for the person that you’re describing, just imagine what it’s like to have a thousand dollars. You know, to have six months of expenses, to have any level of savings at all is life-changing. So, if you are trying to have 50% savings rate and you fail, you know, you only hit 20% or 30% savings rate, you know that’s incredible, that’s the best fail ever, and you are crushing it compared to the rest of the world. So, it goes back to anchoring. You want to anchor yourself to people that are being fiscally responsible.
Steve: Yeah, right. Well, we’re going to get a little tasteless right now. I mean, we’ve got the Federal government shutdown. I was listening to NPI this morning and they were interviewing a TSA agent and they’re like, “Hey you know what, if we don’t get paid in the next week, we’re not gonna be able to pay rent, we’re not gonna be able to pay our electric bill, and you know, so it’s really scary.”
Steve: But then you know, on the other hand, you know when in groups like yours, people see people were saying, “Hey, you know why don’t you just try not to spend any money except for the absolute essentials in the next month and see what happens?” You know? Throwing out challenges like that and people do it and they’re like, “Oh, you know what, I did it and I just saved up a thousand bucks that I never had before, right?” So, I think things like that are totally inspiring to people.
Steve: All right, so we have covered a ton of stuff here. Well, I have another question for you, you know, as we look forward, and hopefully you know this continues to spread and takes off, but do you see any blowback from the growth as these gets more bigger? One thing I saw. It’s on Twitter recently and someone was like, “You know, some of these FIRE people bloggers come across as a little bit holier than thou.” You know, like “Hey, I have done this and it’s easy,” and you know you kind of like a loser for not being able to do this. Do you see any of that out there? Or do you think that’s just I just happen to notice I was kind of surprised in hearing that?
Jonathan: Yeah. It’s interesting. You know, I haven’t seen it. I’m sure that there is someone out there that you know, was tone deaf or there was someone out there that wrote an article that was smug or something. You know, I have not personally seen it. I know that that’s not my frame. I certainly understand that you know, it is challenging, and depending on what your situation is, you may have significant obstacles you’re having to work through.
Jonathan: I have a very good friend that actually works in ChooseFI and he’s a widower. His wife came down with cancer and passed away, and he’s raising two kids with autism. I mean he has a lot of challenges that he said worked through that frankly that’s just not my life experience. Life is rarely Pinterest perfect. It’s rarely HGTV-worthy. You know, there’s many people that don’t have the luxury of a $50,000 a year income and maybe battling you know, frankly, they’re just minimum wage or whatever. There’s just a series of obstacles they have to work through.
Jonathan: I think from my end, and I can’t speak to what every blogger or to every other podcaster talks about but on my end there’s somebody that has it more difficult than you have it, that has had to deal with challenges that you have never had to experience, and has come through the other side, and figured something out that other people haven’t. So, the only thing that Brad and I do not consider ourselves gurus, but what we do have is the platform, a platform that’s growing. We just want to highlight this meandering path, this unique path to financial independence and all the shapes that it may take. If we can do that enough, if we can do that consistently over time, we can have a portfolio of 200 respective paths to financial independence.
Jonathan: So, it’s not the blogger path to financial independence, but rather hey, I’m in the military and here’s what I did. Hey, I used house hacking, here’s what I did. Hey, I went and got a coding job and here’s what I did. Hey, you know, whatever. You know, let’s take a look at every single variable that we cannot come up with. This past week, we looked at exploring international teaching opportunities. So, in my personal life, I’ve a friend that has over $90,000 in student loan that is probably making somewhere between $35,000 or $45,000 a year as a teacher in the public-school system.
Jonathan: That’s a difficult, difficult number to imagine. There’s like a baseline of how much your life is actually going to cost. You just can’t frugal below that. It only works so far, and to imagine being able to pay off $90,000 with the difference, it’s like tough for me to imagine that. You know, for some individuals, maybe it’s like looking at student loan forgiveness programs, maybe that’s an option. For other individuals, you’re going to have to figure how to change the numbers on the income side of the game. Maybe you had private loans because you just didn’t realize the cons to having that.
Jonathan: We just did an episode this past week called Exploring International Teaching Opportunities, and individuals that weren’t able to make enough in the public-school system here, and actually made the choice to go overseas and be a teacher at an international school making $70,000 to $90,000 a year plus living expenses and plus travel expenses, to be able to travel back and forth to family, and just an incredible compensation package. So, if we can just hopefully over time find things that people are struggling with and then provide examples of how other people have overcome, and then slowly get better together.
Jonathan: Frankly, that doesn’t have to do with, that’s not lithesome. That’s not, “Hey, this is just for working class professionals. This is for everybody.” But you can’t possibly in one episode capture the exact path. That’s why blank device is difficult. That’s why I’m so grateful to have a platform that allows us to circle back twice a week and add to the portfolio of ideas to reach financial independence.
Steve: That’s awesome. I love the fact that you leverage the audience and learn from the audience and feed them into the process. It’s clear why you’re so successful in terms of you bringing a ton of enthusiasm and also, you’re so positive about this stuff, which is great. Listen, I’m super hopeful for the future, too. I think that there’s a lot of great things hopefully you know, coming around health care and technology that will liberate many more people to have a lot more choice in their lives and be a lot more intentional. So, I think there’s a lot of good things to come, and platforms like you’ve built are going to be a big part of helping people be thoughtful about how they pursue their lives and what they do with their time, which is, as you said, kind of the scarce resource.
Jonathan: Yeah, thank you, Steve. It’s really been a privilege to be a part of it.
Steve: Yeah. So, on that note I think we’ve covered a ton of stuff. I would love to get just a couple of final thoughts from you now, like where do you think ChooseFI is in three years? Also, I mean you’ve mentioned some of the original gangster you know, FIRE folks, but who are some of the other big influencers for you personally?
Jonathan: Okay. Yes, that’s a great question. Okay. Yeah, it’s a great question. It probably depends on whether or not we’re talking about the financial independence community or not. In the financial independence community, Tanja from Our Next Life has an incredible blog and White Coat Investor.
Steve: Yeah. It can be outside of it, too, though. I think you mentioned like Joe Rogan when we’re talking once, you know. You said, “I think this audience can be like a Joe Rogan-sized audience.” I thought that was pretty interesting.
Jonathan: Great. Yeah, I mean that’s great question. There’s probably a couple of people that I kind of looked to as kind of forging a path. I mean Tim Ferriss being one of those, and just continually finding things that he’s interested in, and adding them to the conversation, and building essentially a skill set. Mike Rowe is another major influence for me. I think he’s just frankly changing culture and showing people that there are all these jobs available that you just frankly have taken for granted. He’s doing an incredible work.
Jonathan: You know, Joe Rogan is another one that just challenges societal norms. It’s not one that I listen to a lot just because he is so long. Because we have a hit-hour podcast. He’s like a three-hour podcast. Like how you do it, man, in respect. But those are ones that really stand out to me. White Coat Investor is someone that I have a deep respect for, also. His ability to take very, very complex topics and break them down into something that you can implement has been really cool.
Jonathan: So, those are a couple of resources that I have appreciated. I’m sure I’m going to get off the call and like, “Oh I should have mentioned you know, a couple of other few.” JL Collins is another one that I’ve very much benefited from his book, The Simple Path to Wealth, and Stock Series have just been truly eye-opening for me and have provided a wonderful baseline of information. So, those are all people that I’ve certainly enjoyed listening to and benefited from the content directly.
Steve: I appreciate that. I’m actually not familiar with Mike Rowe, so I’ll go check him out, but we’ve just had Jim Dahle from White Coat Investor on. He went live. Yeah, he had a lot of great things to say, and I agree with you. He was really good at kind of summarizing, you know, here are the things you need to think about for audience, and make it really digestible. That was cool. Then, yeah, anything on do you have a vision for what ChooseFI looks like in a few years?
Jonathan: I mean I’m sure I do, but I don’t really know how to like verbalize it, but I think, I mean, this is going to sound so hyperbolic but I think it can change the world in some way. I don’t know how to express it. I don’t know how you get from here to there, but there’s something very powerful about knowing that when you listen to … People tell me this, like I’ve listened to 200 episodes and your guest, they change my life. I’m on a different track than I was then, and I didn’t know how to get from here to there, but I do now. If I just seen that one time, you know it will be like, “Wow, that’s amazing. That’s awesome.”
Jonathan: When you see a pattern of people saying their lives have been changed by something, and they just want to tell everybody that wants to listen and some that don’t, that means something and it’s going somewhere. So, I don’t think that this is critical mass here. I still think that it is rising into the public consciousness, and I think when you start thinking about personal finance going into maybe the next year, the next three years, I think you are going to simultaneously be studying financial independence as a goal. So, I don’t know what numbers back that up. I would love to say, “Oh, I think 10 million people are going to be listening to this podcast in a couple of years.” Maybe, I mean hey, I don’t have a problem with that, but I certainly think that we are far from done with our mission.
Steve: Yeah. I agree with that. It seems like you guys are rising fast and got a lot of great things going. So, congratulations on that growth and it’s awesome to have a goal like, “Hey, we want really to change the world and change thousands and hundred thousands, and millions of lives. I agree with you that it can be done. I mean podcasting is so interesting. You obviously you’ve done a 100 episodes and you’ve got a much bigger audience than we do, and we’ve done twenty episodes, but both of us come from places like, “You know if you ask us on our kids, would you be doing a podcast?” I think that thousands of people would listen to you. I’m sure I would say, “No.” At least I would.
Jonathan: I had someone message me and said they were listening to our podcast, and if they ever hear this, I hope they do, they were listening to our podcast as they climb the summit to Mt. Everest. That’s where an episode I was listening, and when I heard that, I mean I could see our stats and see what countries I think has been listened to in over 190 countries. That was awesome. When someone said they were summiting Mt. Everest while listening to the show I was like, “Oh man, okay. I feel like we rock.”
Steve: I’m going to contrast that with a story a guy told me, who’s a total opposite and he’s like, “Yeah. I was in Wisconsin. I was on my riding mower, driving around, listening to your podcast, but it was awesome. You know, your tools are awesome and all that stuff.” I was like, “Gosh, that was our team. I was like this is awesome.”
Jonathan: That’s great.
Steve: Podcasting is pretty interesting because it is so personal, and you can listen to it anywhere.
Jonathan: There’s two things about it. I think it’s the intimacy that comes through, you know. If you can connect with somebody … It gives you an ability. There’s a level of trust that’s build up over a period of days, weeks, and months that podcasting can give you that I don’t think any other platform does. Just put yourself in the situation of a reader. If you’re just reading a website or you’re watching a YouTube video, usually you’re like multitasking, right? You’re competing with multiple things, but I would suspect if I were … You know, when I’m a listener, I’m doing one of two or three things. I’m like exercising, it’s a run or a workout. I’m commuting or I’m just going for a walk somewhere. It’s something that you can simultaneously do while you’re doing something else, but also be 100% focused on. This is just what you’re doing. You’re in your quiet space and this is just your time. It’s part of your routine. Very few other formats actually give you that, and it’s something that I’ve truly come to appreciate about the medium.
Steve: Totally. Yeah, it’s pretty interesting and it’s definitely growing. I saw one thing that’s interesting about like the US versus China is that in the US, podcasting it’s all kind of free, given away, advertising-driven. But in Asia, it’s like a $4 billion market where people actually pay to subscribe and they’re talking about you know, some of the venture community out here saying, “Hey, we think in the future it’s gonna look more like Asia. There’s gonna be premium channels for podcast and it’s gonna be a much bigger industry. It’s gonna change pretty dramatically over the next few years.” So, we’ll see what happens.
Jonathan: Wow. Boy, we will see. I’ll look for you on by demand, man.
Steve: No. I think we’ll be looking for you. Okay, well look. We’ll wrap this up. Any questions from me before we get off?
Jonathan: No. Thank you so much for having me on the show. I’ve really had a lot of fun.
Steve: Yeah. No Jonathan it’s been great. So, I’ll close up. So, thanks, Jonathan, for being on our show. Thanks, Davorin Robison for being our sound engineer. Anyone listening, thanks for listening. Hopefully, you found this useful. Our goal at NewRetirement is to help anyone plan and manage their retirement so they can make the most of their money in time.
Steve: If you made it this far, I definitely encourage you to check out the ChooseFI website and the podcast, and their YouTube channel, and other ways of getting to know their content and what they’re doing, and their message. On our side, if you want to join our Facebook group or follow us on Twitter, we’ll be out there. The last thing is for both of us, if you like what you’re listening to, any reviews of our podcast are definitely super helpful. Okay, thanks again, and have a great day.