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YFP 340: YFP Podcast Replay – How to Teach Your Kids About Money and Investing

Posted on December 28, 2023December 26, 2023 by YFP Media

Dylin Redling and Allison Tom discuss their journey to FIRE and their book for kids on investing and personal finance, sharing practical advice and tips.

Episode Summary

On this episode Tim Ulbrich welcomes Dylin Redling and Allison Tom, creators of Retireby45.com and authors of two books, Start Your F.I.R.E. (Financial Independence Retire Early): A Modern Guide to Early Retirement and Investing for Kids: How to Save, Invest and Grow Money. Dylin and Allison achieved ‘financial independence retire early’ status in 2015 when they were in their early 40’s. Have you ever thought to yourself, I wish I had learned more about the topic of personal finance sooner? If so, that’s exactly what today’s show is all about as Tim interviews Dylin and Allison about their work with their book, Investing for Kids. They discuss practical advice and meaningful activities to help with teaching kids about money and investing.

About Today’s Guests

Dylin Redling and Allison Tom are a married couple living in Oakland, California. After working for 17 years in the tech industry in San Francisco, they left the workforce in January 2015 and never went back.

They own and operate the website RetireBy45.com, which provides inspiration, tips, and resources for achieving FIRE (Financial Independence / Retiring Early) and making the most of the FIRE lifestyle. In 2020, they wrote and published two books: “Start Your FIRE: A Modern Guide to Early Retirement” and the best-selling “Investing for Kids.”

They love food, fitness, and travel. Their goal of “60 by 60” is to visit 60 countries by the age of 60.

Key Points from the Episode

Learn about Dylin and Allison’s book for kids ages 8-12 called, “Investing for Kids: How to Save, Invest, and Grow Money”
Dylin and Allison’s first book was “Start Your FIRE: A Modern Guide to Early Retirement”
Their book for kids is easy to understand with lots of activities and lead by the colorful characters called the Dollar Duo: Mr. Finance and Investing Woman
Career paths and choices led Allison and Dylin to live in the Bay Area of California
When Dylin had pneumonia and was in the ICU for many days, the couple began to ask themselves, “Do we want to work for 25 more year?”
Dylin’s pneumonia experience along with changes in their careers led them to pursue with FIRE (Financial Independence, Retire Early) journey
Because they are passionate about learning about personal finance, they felt inspired to reach a younger audience
Dylin and Allison believe it is important to have a healthy respect for money, even in the age of digital currency
They hope their book can be read with an adult so that it can lead to good conversations about personal finance
Good finances early on can put you in a good position to be in control of future opportunities

Episode Highlights

“So there are plenty of ways to cut costs in your life that are relatively painless, that we’ve talked about all the time, so there are just different ways to do it to achieve FIRE. And some people don’t even choose to do the early retiring like my father is the example. So retirement is really more of the optional part. We’re not saying you have to retire, you have to leave your job and just sit around drinking mojitos all day long, although it’s certainly not a bad lifestyle. But you know, the retiring part is up to the individual. “ – Allison Tom

“So we love our FIRE lifestyle and the fact that we left our W2 jobs in our 40s, but we know it’s not for everybody. But what we do also know is that the concepts of Financial Independence are good for anybody, no matter when you might want to retire. And those concepts are really about doing the right thing with your money. So it starts with saving, it starts with being somewhat frugal — and when we say frugal, we don’t mean living a spartan lifestyle. We just mean not going crazy with money with spending on things that you don’t want or that you don’t need or you feel like you have to keep up with the Joneses and get a brand new SUV every two years.” – Dylin Redling

“I got to college, and then I had my first credit card that I just — oof. It was bad. I did not understand the concept of paying credit cards and interest rates and late fees and minimum payments. And so, you know, I got in trouble with credit cards after I graduated. And it wasn’t until after that that I thought, oh, I really need to learn more about what’s going on here. And so I started watching some shows on PBS, but by then, you know, I’m in my early 20s at that point. My learning took a lot longer for the habits to become engrained in me. So you know, I really do think that if kids could see this stuff earlier, it would be so much more impactful.” –Allison Tom

“That’s the beauty of the time being yours is you can make it whatever you want to do. We also do a lot more work with our community that we never had time to do when we were working. So we’re a lot more invested in our neighborhood, and we spend more time working with businesses in our neighborhood to bring in more business. So having that luxury of time means you can go explore whatever interests pop up.” – Allison Tom

“And so as the educators come up with their curriculum, I think honestly, a lot of adults are really intimidated by personal finance. And so it’s something that seems easy enough for them to cut out of the education system as an elective because well, if they don’t understand it, then kids aren’t going to understand it. And if they’re intimidated by it, then kids are definitely going to not understand it and be intimidated by it, so let’s not even talk about it, which actually is one of the reasons why we thought it was important to write the book.” – Allison Tom

Links Mentioned in Today’s Episode

Episode Transcript

(INTRO)

Tim Ulbrich: Dylin and Allison, welcome to the show.

Allison Tom: Thanks for having us.

Dylin Redling: Thank you very much. Great to be here.

Tim Ulbrich: I’ve very much been looking forward to this interview to talk more about your story achieving financial independence and early retirement and more specifically, the work that the two of you did in writing “Investing for Kids: How to Save, Invest, and Grow Money.” And Dylin, let’s start with you only because we share an Ohio State connection since you’re an alum so go Bucks. Why write a book specifically designed for kids about investing? What was the motivation behind your work?

Dylin Redling: Yeah, well, first of all, go Buckeyes. Yes, a great connection there. It’s interesting because I’ll start off with the interesting fact that Allison and I actually don’t have kids. And so you would think that the impetus would have been we had our own kids and we taught them financial literacy and it inspired us to teach more kids. But in fact, we sort of stumbled into this book. This is our second book. Our first book is called, “Start Your FIRE: A Modern Guide to Early Retirement.” And it’s all about early retirement and financial independence, which that book just poured right out of us because it’s something that we live and we know very well. And what happened was the publisher who we worked with on that book came back to us a couple months after that book was published and said, “Hey, we have an idea for this other book. And it’s investing for kids ages 8-12. And what do you guys think because you know about investing and financial concepts, and we think you guys might be able to pull this off.” And we thought, wow, we don’t have kids, we’re not teachers, we don’t hang out with kids. We have a few friends with kids, but we don’t spend a lot of time with them. And so we thought, man, this sounds really challenging and daunting. But it was during the 2020 year of COVID, so we had a lot of time on our hands. So we thought, let’s just go for it. And we dove into it, and it was very challenging because we wanted it to be interesting for kids and informative and fun but somehow, we put our heads together and we had a really good editing team that helped us with some of the concepts to relate to kids. And that’s — and we just dove into it and we just made it happen.

Tim Ulbrich: And I think you guys did an awesome job. You know, one of the things that stood out to me as my wife and I were looking through this book as parents of four young kids trying to teach this topic of money is that’s it’s very hands-on, it’s relatable, it’s digestible, lots of activities, really cool ideas. You know, I often find myself, especially writing, talking about this topic regularly, presenting on this topic, you take for granted how you learned some of this information along the way. You know, I often think, OK, take a concept like compound interest or, you know, mutual funds or index funds or ultimately trying to determine what your retirement savings goals, any of those concepts, and it’s very easy to get lost in the weeds. And I think it’s often hard to figure out, how am I going to break this down and teach this with my children and really work through this? And so I found myself looking through this, not only learning myself of oh, that’s a really neat way to teach a different concept or a very visual way or a nice activity to apply that information. So I think as I looked through this, whether someone is more advanced in their own knowledge and understanding of personal finance or whether they feel like they could also learn from these concepts, either one I think this book could be a really good guide for them alongside of working with their child. So great work in the work that you put together with the book. And Allison, knowing your background is a technical project manager, I’m curious, I mean, how and why did you catch FIRE — pun intended here — with this topic, not only as an individual pursuit for financial independence but also in wanting to help guide others to the work that you’re doing with RetireBy45.com and with the book “Investing for Kids.” Where does the interest come from?

Allison Tom: Part of it is that my college degree is actually psychology and education. So I had all these grand ideas of becoming a teacher, an elementary school teacher, after I graduated from college. But you know, after a couple of years, it dawned on me that frankly, our teachers are woefully underpaid. And there was pretty much there was no clear financial path for me to continue being a teacher making the salary I was making, so I was living in Boston at the time and I moved back to New York where we eventually met waiting tables, of all things. And we came out to San Francisco on a whim, we were on vacation, we were in our mid-20s, we thought, alright, let’s check out San Francisco. And so I bounced around from career to career and ended up on a consulting company that eventually brought me into the technical world of the Bay Area. But you know, so being a project manager is basically being a glorified teacher. So it’s dropping people, wrangling people to do things that you want them to do but do it in a way that makes them want to be — work as a team and learn from each other. So in a way, it was being a project manager was — it had very similar tendencies as it was being a teacher. And so we had always thought, oh, it would be great to retire early, but we didn’t really know what retiring early meant. We thought, oh, 55, that seems like a really good age to retire. It’s earlier than 65, but it seems so far in the future. And living in the Bay Area, our expenses were so high that we were like, there’s no way, even if we’re making decent salaries between the two of us that we’re ever going to retire. But about 11 years or so ago, Dylin came down with double pneumonia and was in the ICU for about 10 days and in the hospital altogether for almost two weeks. And that for us was a light bulb moment because he was within a 50/50 chance that he would make it. And so you know, after that, we kind of thought, OK, do we really want to keep working for the next 25 years or so? And so we kind of like made it our goal to get out of the rat race as soon as we could. And so we kind of fell into by accident. We can talk about that later, but it just — it kind of was a natural progression from all of the things that we’ve been doing over time.

Tim Ulbrich: Yeah, that makes sense. And I appreciate you sharing some of the background and story. We’ll come back to how you got to that point of early retirement, obviously as I mentioned in the introduction, early 40s to be able to accomplish that goal, and we’ll talk a little bit about how you got to that path, why that was possible as well. And so let’s first dig into some of the book of “Investing for Kids.” Let’s start with the main characters of the book, the Dollar Duo: Mr. Finance and Investing Woman. Allison, tell us more about these two characters, how you came up with the idea, why it was important to the overall text, and how those characters can really help the learner, again, 8- to 12-year-old is the target group here, engage with the material throughout the book.

Allison Tom: Well, first of all, it was kind of funny, today is actually Superheroes Day, so –

Tim Ulbrich: There we go.

Allison Tom: It’s a perfect segue into the topic. We were actually taking a walk one day as we were writing the book, and we were talking about politics, of all things. And we were trying to figure out in the administration, whichever administration, whoever won the presidency, what each president could do to make their administration better. And so we kind of were talking and talking about of all things, the Justice League of America and who we would think would be a good fit for making this country a better country. And so the whole idea of the Justice League, kind of thought, we thought, oh, superheroes. Kids love superheroes. Let’s talk to our publisher about bringing in some superheroes. And we were like, well, I don’t know if they’ll go for that, there’s some extra graphics involved and it could be expensive, but we felt that it would really be a good way for kids to relate to finances. And so we kind of pushed hard for this idea of having superheroes teach kids finance.

Tim Ulbrich: Yeah, and that stood out to me in addition to how visual it is. This does not — especially for a topic like investing, right, can be weighty at times, it can be overwhelming, I often find myself when I’m giving a talk on this topic, starts with excitement often when we think about what the — and then you get into the weeds and you see the eyes gloss over, right, and other things. And this does not read like a textbook in any way, shape, or form. And I’m grateful for that. So thank you for the illustrations, the activities, the superheroes, but I think it very much reads like an interactive, applicable, nuts-and-bolts, important information, but how do I actually apply it and hopefully get excited about this information. Again, we’re thinking about an 8- to 12-year-old of wanting to really hopefully empower them to be excited with this for the rest of their own financial journey. And I very much read this book, as I mentioned, being a father of four boys who also lives and breathes personal finance, I really do often find myself in conversation with my boys about money. And honestly, I struggle at times with making the topic of money tangible and meaningful. And it can feel abstract, especially when I find myself trying to say and teach a principle that I very much understand but it feels more abstract as I talk it out loud and especially when you start to view it through the lens of a child. And so I like how you start the book with Chapter 1 on Money 101. You cover important topics like money doesn’t grow on trees, ways to earn money, a little bit of entrepreneurship in there, which is really cool, the history of money, where to keep money. And so Dylin, here’s the challenge that I’m seeing with my boys. In the age of credit cards, debit cards, direct deposit, online banking, digital currency, electronic payment methods, it can feel difficult to teach a child about money when you don’t see it. Right? There’s very little actual, physical cash and therefore, it can be hard to connect work and I think the opportunities from work with earning money and therefore, the opportunity to then save and see it grow. So what are some tips and strategies as you put this book together as well as the other teaching you’ve done on this topic about how can we teach kids about money in a way that it can be relatable, it can be tangible, and then hopefully it becomes memorable for them.

Dylin Redling: Yeah, you know, that’s a really good point about money being very digital in this day and age. I remember when I was a kid, one of the coolest things was my grandmother would give me and my cousins 50 single dollars for Christmas and for our birthdays. They would come in a little box just big enough to hold those 50 $1 bills.

Tim Ulbrich: I love that.

Dylin Redling: And — yeah, it was really cool. And you know, $50 back then for a kid was a lot of money. And those 50 $1 bills would last a really long time. I would take them into the arcade, into the pizza parlor, whatever. And so maybe one way to do it is to actually bring back physical money. And I don’t think the amount really matters that much. But like you said, I mean, being able to tangibly feel it, see it, and understand it, it helps a lot more if you’re using physical money. And I’ll actually give an example of that we used on our blog and in actually “Start Your FIRE” book. I don’t think we mentioned it in “Investing for Kids,” but it’s a little story I like to tell about a money lesson that I actually learned from Allison when we were waiting tables in New York. So we met in a big restaurant in Times Square, and Allison grew up with a little bit of a better financial education in her household than I did. My single mother was wonderful, but it was all paycheck-to-paycheck, there wasn’t a lot of saving or investing. So I came into our initial relationship not very good at dealing with money. So anyway, we were waiting tables. So all of our money pretty much was in tips. So we would have tons of cash. And I remember just putting the money — I would wad it up into balls, I would stuff it into all four of my pockets because I was busy. And then we would go out afterwards and Allison saw how I was treating my money, and she was like, “What are you doing? How do you even keep track of that? That’s awful.” And so she taught me this little lesson. And she doesn’t even remember this because this was 25 years ago, but it stuck out in my head. And basically, I call it the Wallet Lesson. When you take all of your bills and you put them nicely, neatly in order from small to big or big to small, whatever works, fold it neatly into your wallet. And it’s really simple, but the reason it was impactful for me is because it just got me to think about how to respect and treat money. You know, you work really hard for money –

Tim Ulbrich: That’s right.

Dylin Redling: And if you don’t treat it well, you don’t respect it, you know, that $50 might not seem like a big deal. But when it gets to $100,000 or $500,000 and you don’t have that same respect and feel for what that money represents and how hard it was to earn it, you’re not going to put it and treat it and save it and protect it as well as you could.

Tim Ulbrich: Such a good example of a behavioral move, right? The number of dollars didn’t change, but how you treated them, how you respected them, how you viewed them, and I think many of our listeners, we talk on this show often that I believe personal finance, it’s about the math and it’s about the behavior, and both of those are very important and some of those types of moves or here, teaching kids in that way, I think can be very powerful as well. Allison, Chapter 2, save your money, you have an activity titled “Be an Interest Rate Detective.” I love this. I thought this was a really cool interactive activity where you challenge the reader to work with an adult to research interest rates for a local bank savings account, a CD, so a Certificate of Deposit, and an online savings account. So again, this was just one of many example activities you have throughout the book, but why is an activity like this so important in terms of someone being an interest rate detective to experience and go through as they begin their journey of understanding some of the basics of investing?

Allison Tom: So part of it is we wanted all the activities to be something that kids could do with the adult in their life. And we didn’t assume that every child has a parent because we know in this modern day and age that families are different nowadays, and you might have two moms or two dads or a grandmother or grandfather or a guardian of some sort. So we wanted something that people could do together with — kids could do together with someone else. And we thought, oh, it’s going to be interesting because banks are closed during COVID. When we were writing the book, it was right in the heart of shelter in place. But we thought, well, you know, kids have access to — most kids have access to a computer, they can at least walk around to a local bank and banks always have their advertisements on their windows with their interest rates. But we thought it would be an interesting way for kids to see what is in their environment and practice some good behaviors like oh, what does interest rate mean? What is APR? Those are, they’re jumbled letters and so you actually learn what the acronym stands for. And so we want to make sure that kids could kind of connect their physical world to their these abstract ideas about money. So all these activities are kind of a way to get kids to start thinking about it, and we were like, oh, kids aren’t really going to want to do activities, it’s extra homework. So we tried to make them fun and things that they could actually do and feel like they were learning something.

Tim Ulbrich: And I think this was a good example where the activity really, to me, is a rabbit hole of other learning, right? So if you go to the bank and do this activity, just like you suggested, Allison, it leads to other conversations and questions like, what is the federal reserve? And what is an insured account? What does that mean? You talk about that in the book, you know, how do you explain the federal reserve? What is compound interest? Why is that so important? What is principle? What’s interest? What do terms mean? And I think it, again, leads to further conversations, which obviously hopefully spark some motivation and curiosity to learn more on this topic. Dylin, in Chapter 3, Introduction to Investing, you cover very important topics, you know, why to invest, risk v. reward — and I love the Risk-o-meter throughout the book, that was really neat — liquidity, the importance of conducting research, and connecting back to my previous comment about the difficulties teaching a child about money when it may not be tangible, you can’t see it, can’t feel it type of a mindset, I think this is another area where parents may feel challenged to teach a child the importance of investing when again, it might feel somewhat abstract and here, we’re talking about delayed gratification, right? So not spending money on something today that has an instant reward. I think back to my childhood, it was driving to the corner store, buying baseball cards, buying candy, you earn the money, you spent the money, you saw the reward instantly. So here, the activity on investing, which I thought helped to really drive this concept further, you talk about an activity of picking a stock and really going through that process of understanding what’s involved there. So talk us through that type of an activity, what’s involved in that, and why that’s important to help a child relate to the concepts of investing.

Dylin Redling: Yeah, sure. It’s interesting because I can also relate it to how Allison and I do our own investing. And most of what we do, to be honest, are buying mutual funds and index funds. We don’t do a lot of single stock buying. However, there are some advantages to just helping a child or anybody, really, think about, well, if you were to buy a single stock, what would the thought process be when you do that? We actually just wrote an interesting post on our blog just about a week ago where we had $10,000 that we wanted to experiment with. And what we did is we selected five different stocks to invest that $10,000. So $2,000 per stock. And I went through the process in that blog post of why we would do this. And it wasn’t to get rich quick or to see what would happen in a week or a month. This particular blog post talked about a one-year time frame. And it’s the same with the activity for the child. I think we used a shorter — a relatively short time frame so they could at least measure their success. At the end of the day, investing, as you know, as your listeners know, it’s very much a long-term process where you’re investing over years and decades. But again, to get the child to think about some of the things that you might want to think about with whether you’re investing in stocks or any sort of investment, what are the things that go into that thought process? And so getting back to that blog post I wrote, some of the stocks that I suggested that we test out, one was a blockchain ETF. So now that bitcoin and other coin-based just went public, those are things that we wouldn’t necessarily invest in directly. But a blockchain ETF is an example of a way you could dip your toe into that technology. So that was the thought process there. Another example was a cruise company, NCL, Norwegian Cruise Line. Now that COVID is starting to disappear and everyone’s getting vaccinated, people, there’s this pent-up demand to start traveling again. So we thought, hey, in the next year, NCL may actually start to do really good. And they even have a program where if you have 100 shares, you get extra bonus points. And so the idea is to think about all the different aspects to that investment, like how does it relate to what’s going on in the world right now? And what other pros and cons are there to that investment?

Tim Ulbrich: Yeah, and I think we share your philosophy. What I heard there is our planning team often says a good investing plan should probably be as about boring as watching paint dry.

Dylin Redling: Right.

Tim Ulbrich: At the end of the day, it’s about a long-term play. But I like this activity as a concept. You know, I remember I had a great Econ101 teacher that had us do a similar activity. And it’s very memorable because it also leads to many other conversations like well, what type of influence does my marketing have? Or I thought this was going to go this way, and it didn’t go this way. Maybe I had some overconfidence in my selection of things. So why is diversification important? So I think, again, reading it and doing it, two very, very different things. And I think people experiencing this firsthand, especially you think of an 8- to 12-year-old, a very kinesthetic learner, right, hands-on experience that moment, be able to learn through that experience. Allison, as I went through the book, many times I thought to myself, man, what if I would have had some of this information earlier? What if I would have had this in middle school or high school or perhaps even earlier? And shoutout to my parents, who did an awesome job of the foundations, grew up in a small business, felt like I had a little bit of a head start. But outside of some K-12 programs and in higher education, I would say it’s largely absent, maybe some elective courses or some opportunities. And so I can’t help but think like, why aren’t we doing more of this? Why aren’t we covering more of this in a K-12 education? I mean, this type of book, this type of experience, these types of activities would be a home run in teaching kids about money. Here, we’re taking 8-12 investing, but obviously we all know it’s broader than that as well. So question here, I’m not asking you to solve the personal finance educational system woes, but why do you think this is not more foundational to our educational system in terms of personal finance education?

Allison Tom: Right. So I think part of it is that our generation didn’t really learn this either. And so as the educators come up with their curriculum, I think honestly, a lot of adults are really intimidated by personal finance. And so it’s something that seems easy enough for them to cut out of the education system as an elective because well, if they don’t understand it, then kids aren’t going to understand it. And if they’re intimidated by it, then kids are definitely going to not understand it and be intimidated by it, so let’s not even talk about it, which actually is one of the reasons why we thought it was important to write the book. We didn’t get this education when we were growing up. I know my parents are second-generation immigrants. And so the money lessons that they learned were from their parents, who grew up during the Great Depression. And as immigrants coming over to this country, they just pooled their money and they saved and they saved and they worked 20 hours a day to make money and then they would maybe invest it in the bank, although plenty of my relatives didn’t even bother with that. So my lessons growing up were save and save and save and save. I had a little piggy bank, and I would put all my coins in from the piggy bank, but that was the only thing that I learned. And so it wasn’t until I got to college, and then I had my first credit card that I just — oof. It was bad. I did not understand the concept of paying credit cards and interest rates and late fees and minimum payments. And so, you know, I got in trouble with credit cards after I graduated. And it wasn’t until after that that I thought, oh, I really need to learn more about what’s going on here. And so I started watching some shows on PBS, but by then, you know, I’m in my early 20s at that point. My learning took a lot longer for the habits to become engrained in me. So you know, I really do think that if kids could see this stuff earlier, it would be so much more impactful. You know, I’ve talked to a girlfriend of mine, her daughter is 17 and she read the book and she was like, “Yeah, you know, I’m going to start doing the savings plan when I get a job.” My friend was laughing because she’s like, my daughter doesn’t have a job. But she was just like, she got inspired by it, and I thought, oh, if we could just get kids to learn this stuff sooner –

Tim Ulbrich: Yeah.

Allison Tom: All the great things we could do with them. So hopefully. Hopefully.

Tim Ulbrich: Yeah, and I love that, to that point, Allison. I think it was early in the book, you have the reader go through an activity where they identify problems, things that could be improved upon, right? And one of the things I often say is that any business is a solution to a problem, and that solution is one that people care about and are willing to pay for. And you know, I love that because I think for a child, like if they can think about, what are some things that could be done better? You know, one of them you proposed in the book, which was really cool because we recently just bought this — or actually we got it as a gift for our kids from our family — is you mention like chess. Really hard game for kids to play, kids to learn. Why isn’t there a solution out there that can make chess easier to play? Sure enough, there is. There’s a card game where you draw cards, you learn the basic moves of chess. So things like that, I think you’re inspiring some of the creative thinking, the problem solving, and laying some of the seeds of entrepreneurship or even for those that don’t own their own company, which would be the vast majority of folks, intrepreneurship, how can you be a problem solver within your organization? And how can you create solutions that make you a valuable asset within that organization? I want to shift gears a bit to connect some of the work that you have in “Investing for Kids” with what you cover in your site, Retireby45.com. You mentioned your other FIRE book as well. And I got the impression that you both, you believe that everyone could put together — especially an 8- to 12-year-old reading the “Investing for Kids” book — put together a plan for FIRE, again Financial Independence Retire Early — by the age of 45. So Dylin, our listeners know firsthand that time in the market equals success, and that compound interest, as you mentioned in the book, is the eighth wonder of the world. So we know the math is possible if someone starts at an early age. But why do you think it’s important that someone plans for FIRE by the age of 45?

Dylin Redling: Whether you’re able to retire in your 40s or your 50s or you do a traditional retirement in your 60s or even beyond, Allison’s dad, for example, is 70 now — or slightly older — and has no intentions of stopping working even though Allison suggests that he stop and enjoy life. But he’s got a job that he really loves. And so there’s a lot of people out there that are like that. So we love our FIRE lifestyle and the fact that we left our W2 jobs in our 40s, but we know it’s not for everybody. But what we do also know is that the concepts of Financial Independence are good for anybody, no matter when you might want to retire. And those concepts are really about doing the right thing with your money. So it starts with saving, it starts with being somewhat frugal — and when we say frugal, we don’t mean living a spartan lifestyle. We just mean not going crazy with money with spending on things that you don’t want or that you don’t need or you feel like you have to keep up with the Joneses and get a brand new SUV every two years. So there’s that, and of course investing wisely. And you know, we have another story that we write out on our blog, which kind of I think can be somewhat inspiring to people who are in their 20s and maybe haven’t really done anything with their finances yet. We, as Allison alluded to earlier, kind of our story is we met in New York and then we moved to San Francisco. And we were in our mid-20s at the time. And we still hadn’t invested a dollar yet. And it wasn’t until our late 20s that we got “real jobs” with a 401k plan and that sort of thing. And so it wasn’t until our late 20s that we really started investing. And our entire investment life cycle, if you will, was about 17 years from our late 20s to our early 40s. And in that time, we just were so diligent about dollar cost averaging, we did — we invested into both our 401k, our IRA, and a taxable account once we got some extra income literally on a weekly basis for years and years and years, no matter what the market was doing. Through the 2001 .com crash because we’re both working in that industry and of course through the ‘08-’09 recession. Never stopped. And so those kind of habits, again, are good for anybody no matter what your retirement goals are, just really those financial habits are going to put you in a great position.

Tim Ulbrich: Yeah, and I’m glad you shared that, Dylin. One of the questions I had for you was I read your story of not really late 20s, early 30s getting serious about investing, but retired or achieving FIRE by 43, 44, so short window of time, right? We tend to think of a very long trajectory of savings. You mentioned 17 years. So my question was what was the secret sauce? And if I heard you correctly, it was tax-advantaged accounts, 401k’s, IRAs, some taxable accounts and dollar cost averaging and being consistent. Is that fair?

Dylin Redling: Yeah. You know, a couple other things we did — we did the phrase “side hustle” is really popular now. But when we did it, we just called it a side business. This was in the mid-2000s. I came up with an affiliate marketing business that I ran on the weekends. And it ended up being a third income for us. So there’s things like maximizing your income. And then another concept — I’ll shoot it over to Allison to talk about — is geographic arbitrage. And that helped us kind of move about nine years ahead of schedule. Do you want to talk about how we did that?

Allison Tom: Sure. So geographic arbitrage has a lot of different meanings in the — for people. And the gist of it is that you leverage your current salary and move to a lower cost location. And so most people think that is oh, I’m going to make my United States salary and move to Thailand or Costa Rica, where the cost of living is exceedingly low. We did it by moving from San Francisco to Oakland, California, which geographically is a 10-mile difference but at the time, we were able to save about 50% on our housing costs.

Tim Ulbrich: Wow.

Allison Tom: So yeah, it was pretty insane. For being 10 miles away, two or three train stops away on our BART system, we were able to pay off our condo in Oakland in cash by selling our place in San Francisco, which alleviated all the mortgage payments, the increase in property payments and our insurance went down as well. So that, Dylin calculated later, saved us probably about nine years of working because our mortgage in San Francisco was so astronomical that just cutting 50% off just pushed us into the financial independence sphere that much sooner. So it’s things like that. Obviously not everybody is going to be able to save 50% of their housing by moving 10 miles away, but there are other ways to do it. You can do things like house hacking where if you have space on your property, you could build an extra unit and rent it out or if you have an extra bedroom, you could rent it out and have a roommate or Airbnb it. So there are ways tod do it without going through the extreme example that we had. So there are plenty of ways to cut costs in your life that are relatively painless, that we’ve talked about all the time, so there are just different ways to do it to achieve FIRE. And some people don’t even choose to do the early retiring like my father is the example. So retirement is really more of the optional part. We’re not saying you have to retire, you have to leave your job and just sit around drinking mojitos all day long, although it’s certainly not a bad lifestyle. But you know, the retiring part is up to the individual.

Tim Ulbrich: Yeah, I’m glad you said that, Allison, because I know many of our listeners love what they’re doing as pharmacists and they worked hard, and they got a doctorate degree and they have student loan debt and they invested in that education. And so my read is that many pharmacists are captivated by the idea and the power of financial independence. And you know, I believe that’s a goal we all should strive for for a variety of reasons with RE, Retire Early, being one of those perhaps reasons, but other things as well in terms of why that financial independence may be important. So nine years, nine years was estimated from that one decision, which I’m coming full-circle, Allison, about what you shared at the beginning of Dylin being in the hospital with double pneumonia. And when you start to think about the value of time, I mean, nine years and doing some of those calculations and what does that mean for one’s personal situation, I think that’s a really powerful example of taking something that can be mathematical or objective and looking at it in a different mindset. If we were to make this move or this move, what does that mean for us in terms of timeline to retirement, working part-time, pursuing another opportunity, what does that mean for one’s goals towards financial independence? I’m glad you discussed geographic arbitrage because one of the things we see in our profession in pharmacy is that unfortunately, a pharmacist’s income usually does not translate with cost of living. So here I am in the Midwest and that income for a pharmacist in the Bay Area might be a little bit more for a similar role but nowhere near the cost of living difference between Columbus, Ohio and San Francisco, California. So I think this is a move, especially for many of our listeners that might be saying, you know, ‘I’m making a decent income, but I’ve got a lot of work to do on student loans, I want to invest, I want to buy a home, I want to do this or that. And at the end of the day, there’s only so much income.’ So is a move, whether it’s near, within 10 miles, or something a little bit more significant, is that an option that somebody may be able to pursue? Allison, what have you guys been doing since achieving FIRE? You know, what’s been the goals, what’s been the priority, how have you been spending time? I think that’s one of the other common objections that comes up is like, if I retire at 45, like I don’t even know what I would do with my time. Tell us a little bit about that journey since you guys have achieve FIRE.

Allison Tom: So it’s funny, we — so we FIREd quite by accident. We were both working in tech startups, and Dylin got laid off and then I got laid off about five weeks afterwards. And so we kind of took the time after we were both laid off to travel a little bit. That was one of the things that two people who are working can’t always schedule, coordinate their schedules, to take some time off. And so we thought, alright, this is the perfect time. We went to Europe for two weeks and did a cruise around the Mediterranean and had a blast and then came back and thought, alright, we’ve got to get back to work. So we went about — we went on interviews and we just saw just how miserable people were at their jobs. Just so stressed out, and I interviewed with this one guy who was like, “You need to tell me who said this about us so I can go talk to them.” I’m like, I don’t want to work for you. You’re scary. And so you know, the three months turned into six months and then nine months and then Dylin figured out kind of like back of the envelope math, figured out that we could actually retire without having to go back to work anymore. He stumbled into the 4% Rule, which we still hadn’t at that point heard the term FIRE before. You know, the first few years we did a fair amount of traveling domestically. Like we would go back to visit his mother and my father, who both live on the East Coast, which is one of the things you just don’t get time to do when you’re working is spending time with family. And so you know, if we would go back East, we would maybe spend two days with each parent because they don’t live that close to each other. And now, we can actually go and spend a week with each parental unit. And that makes a big difference because, you know, they’re getting older and living across the country, it’s harder to connect with them. So we do a lot more slow travel where we don’t have to feel rushed between people. And then it’s funny because we — our retirement has changed as time goes by. So for people who are concerned that oh, what am I going to do with my time? Your time is yours. You can now make your own schedule. And that, to me, is the beauty of not just financial independence, it’s financial freedom because you can choose what you want to do. And so you know, the first two years were traveling domestically, the second two years were more about traveling internationally. And we had two cats that passed away at 19. So for us, they were like our kids. And so we did not do a lot of traveling away from them until they passed on. And so once they did, we’re like, alright, we’re going to go crazy and go travel around the globe. And so the last — and then the last two years have been focused on writing books and going to financial conferences and kind of learning from others and then applying that and communicating out to audiences like yours. That’s the beauty of the time being yours is you can make it whatever you want to do. We also do a lot more work with our community that we never had time to do when we were working. So we’re a lot more invested in our neighborhood, and we spend more time working with businesses in our neighborhood to bring in more business. So having that luxury of time means you can go explore whatever interests pop up. So you know, did we ever think that we would be working with small businesses two years ago? Probably not. But now we are, and we’re advocates for small businesses in our neighborhood, and that’s something we would never have thought we would have done when we first retired.

Tim Ulbrich: That’s very cool. And I read as well your goal of 60 by 60. Sixty countries to visit by the age of 60. If I understand it, you’re about halfway through. Looking forward to following your journey. I’m hopeful you’ll be blogging about it along the way as well. Dylin, I’m going to throw the last question I have over for you. And one of the things I think about when it comes to early retirement and achieving financial independence or the FIRE movement is that it really does require delayed gratification and at times, you mentioned the word frugality earlier. And that frugality can be at various levels. As you mentioned, we’re not necessarily talking spartan type of frugality. My question here though is how do we strike the balance? You know, whether it’s for ourselves or teaching our kids about saving and investing to take care of our future selves but also valuing and making sure we understand that it’s important that we enjoy some of the money along the way as well. I find myself often struggling with this individually of, OK, I know I need to take care of my future self and probably sometimes I do that at the expense of the experiences and the enjoyment today. And I think striking this balance is really important. What are your thoughts on that?

Dylin Redling: You know, I’ll actually plug a couple of other books besides ours that I really like. One is “A Simple Path to Wealth” by Janelle Collins, which I highly recommend. And another one is actually one of Allison’s favorites. It has a funny title, it’s “I Will Teach You to Be Rich” by —

Allison Tom: Ramit Sethi.

Dylin Redling: Ramit Sethi. And we saw him speak. He was a keynote speaker at FinCon a couple years ago. And one of the things that he said, which really resonated with me and it goes to your question, is spend liberally on things that you enjoy. But hold back aggressively on things that are not important to you. And it’s a very simple concept. But again, it goes directly to your question, and it’s really — maybe you or your kids or whoever’s thinking about this makes a list. Here are the things I’m passionate about. Here are the things that I really enjoy. I love travel, I like eating out at restaurants, I like entertainment, sports, whatever it is. And I’m going to set my budget to focus on those things. I’m going to be OK — maybe I’ll go to a World Series game because I’m a huge baseball fan. Or I’m going to set a goal to go to every baseball park in America. You know, whatever that goal might be. Conversely, think about the things that aren’t that important to you like maybe a brand new car is not important to you, so you drive your car for 10-20 years and you really just never focus on spending a lot of money on that. And so those are the concepts that I think are something to really think about. And for us, that’s what we’ve always done. When people look at our lifestyle from the outside or even some of our friends, you know, they may think, wow, we’ve always lived in pretty expensive apartments — or condos or houses, so they might think, wow, they spend a lot of money. But if you look a little deeper, like we had a car for almost 20 years. We had a Volkswagen Jetta. We just recently got a new-to-us couple years old Toyota Corolla. So there’s an example where we just — you know, having a brand new car wasn’t that important to us. But again, we have the 60 by 60 goal. So travel is really important to us. And we have no problem spending that extra money to go travel for a few months and really try to see the world because that’s something that we’re passionate about. That being said, when we do travel, we try to — we don’t stay at four-star hotels because part of our kind of nature is to also find some deals here and there and to just spend consciously, to just spend our money kind of wisely.

Allison Tom: We prefer to spend money on the experiences rather than the hotel room that we’re putting our suitcase in.

Tim Ulbrich: Yeah. And I was at that keynote that you were at, and with Ramit, and I’ll never forget it. I mean, the concept that he talks about in “I Will Teach You to Be Rich,” money dials, right, is find the things that are of value to you and dial it up. And find the things that are not and dial them down. And you know, I remember hearing that, and I was like, heck yeah. It just makes so much sense. And you know, to the comment of experiences and even the literature really showing happiness related to money, it’s experience and giving typically are the areas where we see that biggest connection. So Allison and Dylin, I really appreciate you guys taking time to come on the show. Kudos on the work here with “Investing for Kids,” I really enjoyed it, as well as the work that you’re doing at Retireby45.com and your other book, “Start Your FIRE: A Modern Guide to Early Retirement.” As it relates to the book “Investing for Kids,” I hope our audience will pick up a copy of this, available at Amazon, Barnes & Noble, many other online vendors as well. I really did find it engaging, it was rich with relevant information, practical exercises to apply the information, as I mentioned, certainly does not look, feel, or read like a textbook. And so I think many in our community are going to find it helpful. What’s the best place for our audience to go to follow the work that the two of you are doing?

Dylin Redling: Well, our — I’ll plug our website, and I’ll have Allison plug our Instagram account. Retireby45.com is our website, and we blog there on a once or twice a month with a fresh new blog post, and we have a bunch of stuff on there, courses and other things. And then Allison’s been working on really putting together a pretty cool Instagram account.

Allison Tom: So we have Instagram and Twitter both @retire_by_45. Yeah, it’s been an interesting challenge trying to get into the social media, the social media space.

Tim Ulbrich: Very good. We will link to both of those in the show notes as well as the Retireby45.com as well as the books that we’ve mentioned, not only your books but the others that you referenced as well. So the two of you, thank you again very much for your time. I really appreciate it.

Allison Tom: Thanks, Tim. It’s great.

Dylin Redling: Thanks.

Allison Tom: O-H

Dylin Redling: I-O

Tim Ulbrich: I-O!

Dylin Redling: Thanks, Tim. Great talking to you.

Tim Ulbrich: As we conclude this week’s podcast and important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

[END]

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YFP 111: How One New Practitioner is on FIRE

Posted on August 1, 2019November 2, 2022 by yfpadmin

One New Practitioner and His FIRE Journey

Jared Wonders joins Tim Ulbrich on this week’s episode. Jared is a 2012 graduate of the University of Findlay and currently works for the VA remotely doing home health care. Jared and Tim talk about how he and his wife, Jess, aggressively paid off their debt within a few years, how they got started in real estate investing, and how and why they are on a FIRE journey (financial independence, retire early).

About Today’s Guest

Jared Wonders graduated from the University of Findlay school of pharmacy in 2012 and completed a PGY-1 general residency at the Dayton VA Medical Center in 2013. Jess, his wife of two years, and Jared currently reside in Charlotte, North Carolina to pursue job opportunities and get away from the long Ohio winters. Jared has had the amazing opportunity to serve our nation’s veterans for the past 5 years as a Home-Based Primary Care Pharmacist at the Dorn VA Medical Center. Jess, who is also a pharmacist, and Jared are currently pursuing FI through a high savings rate mixed with real estate investing.

Summary

On this podcast episode, Jared Wonders joins Tim Ulbrich to give an insight of his financial journey since graduating in 2012 from the University of Findlay, how he paid off their debt within a few years, how they got started in real estate investing and how and why he and his wife Jess are on the path toward FIRE (financial independence, retire early).

Although Jared and Jess didn’t carry the debt load most pharmacists accumulate, $75,000 is still a large amount of money and requires a lot of intentionality to pay off. Jared and Jess were motivated to tackle their debt to have more opportunities in their life, have the ability to explore investments and not have to be tied to a job.

They caught the FIRE (financial independence, retire early) bug when they realized that they didn’t want to be stuck without options. Jared explains that they are trying to diversify their investments as much as possible by taking advantage of different retirement funds like the TSP offered through the VA, his wife’s 401(k) as well as looking into an HSA account.They also have two real estate investment properties and are pursuing brokerage funds like Vanguard. The real estate income is supplemental and allows them to have more control in regard to expenses with the properties. Traditional retirement vehicles are unable to be accessed until age 65 1/2 , so real estate investments provide cash flow sooner and also have tax strategies and savings. Additionally, Jared and Jess currently save 50% of their income or more. Jared says that it helps that they have two good incomes, but they also try to live frugally.

Jared discusses the purchases of their real estate properties next. He shares that the first purchase was full of pure excitement. He had done research for 8 to 10 months prior and was excited to finally take the next step in purchasing a property. The biggest issue he’s faced so far is having a good property manager, so he and his wife manage their properties. They put 20% down on a $170,000 home that’s now worth $190,000 to $200,000. They purchased the second property for $140,000 and it’s now worth $190,000 to $200,000 (paid $10,000 for renovation). Jared says that they are getting close to the 1% rule, meaning that rent should be 1% of the purchase price.

Although Jared enjoys his job, he shares that they are pursuing FIRE aggressively to create opportunities in the future. In the next 5-10 years, Jared envisions that they will focus on building more equity in their properties but will keep an eye out for good deals.

Mentioned on the Show

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to this week’s episode of the Your Financial Pharmacist podcast. Joining me is Jared Wonders, a 2012 graduate of the University of Findlay, who completed his residency training at the VA in Dayton and currently works for the VA in South Carolina remotely doing home healthcare. Jared and his wife Jess have a fascinating journey as two new practitioners that are on the path toward financial independence. Jared, thank you so much for joining me on this week’s episode of the Your Financial Pharmacist podcast.

Jared Wonders: Hey, Tim, I want to thank you so much for giving me this opportunity. Always good to meet a fellow Buckeye.

Tim Ulbrich: Absolutely. Go Buckeyes. So before we talk about what you’re doing with real estate investing, we’ve got some exciting late-breaking news on that related to your own journey. And before we talk about Financial Independent Retire Early, I really want to give our listeners some insight into your financial journey since graduating in 2012 from the University of Findlay, because I think all of what you did and laid the foundation has set you up on the path to be that you’re on right now, which is certainly one that I think is bright. So give us an overview of the student loan and the debt position that you and your wife Jess were facing at the point of graduation.

Jared Wonders: Yeah, absolutely. So when I graduated pharmacy school, I went and decided to go through the route of residency, so I did a residency in Dayton, Ohio, which is fortunately where my wife was actually living at the time, current wife. So we ended up moving down to North Carolina kind of just on a whim, and I was able to find a job in South Carolina working as a pharmacist. When I graduated pharmacy school, I had about $75,000 in debt, so definitely not the typical debt load that you might see with some pharmacists graduating.

Tim Ulbrich: So this is all your debt, then, not Jess’ debt.

Jared Wonders: This is all my debt. She came to the table with no debt at all. So I definitely married up in that situation for sure.

Tim Ulbrich: Well done, yes.

Jared Wonders: Yeah, so she actually was very fortunate. She went to the University of Toledo, a public school, and actually worked as a TA. So she did not come in with any debt whatsoever, which was great.

Tim Ulbrich: That’s awesome. And I think that speaks to, you know, I always talk with the students when I talk about student loans, say, “Hey, anything you can do to minimize the amount of debt at graduation makes all the difference in the world.” And here I think that’s certainly a case where being aggressive and whether it’s support from parents, scholarships, TA, anything students can do to minimize that debt load will pay off in the long term. So even though you didn’t have $160,000 like is the national average right now, $75,000 is no small chunk of change. And it still requires being intentional to get it paid off in such a short period of time. So tell me about the motivation. Why were you and Jess so adamant about aggressively paying off this debt?

Jared Wonders: Yeah, absolutely. My motivation was definitely just to have more opportunities and to kind of just give my life some sort of purpose. And I think that the one thing that really kind of catapulted me into really being aggressive with paying off my loans was actually, honestly, getting married to Jess because that just kind of gave the motivation I really needed and really thought that — you know, because I needed to provide for not only myself, but I needed to provide it for my wife. And I knew by being able to do that, paying off these loans would not be necessarily hog-tied to a job if I didn’t want to do it and would maybe be able to pursue more opportunities as far as like investments or real estate, whatnot. Yeah. So that’s pretty much where the motivation came from, honestly.

Tim Ulbrich: Yeah, options, options, options, right? Once you have that off your back, I mean, the rest of the story, you’ve got a lot of opportunities ahead. And we’ll talk about some of those here in a minute with real estate investing and other things. So one of the questions I want to ask you — because I think often, I’ve seen where whether it’s two pharmacists or not, couples may or may not be on the same page in terms of how aggressive they want to pay off the debt. Sometimes, there may be competing priorities like home or investing or cars or other things. Was this something that you and Jess had to work through to get on the same page? Or were you both of this mindset of hey, we need to aggressively get this off our plate?

Jared Wonders: Yeah, I think that for the most part, we are on equal pages I think for the most part of kind of going forward in that process. It did take us — of course there were some definite times where we were kind of like, well, maybe we don’t need to be necessarily as aggressive as we need to. But for me, I guess it was — actually before our marriage, I really wanted to try to get all my loans paid off before we got married. So it was one of those things where I wanted to make sure that happened, and I actually worked an extra pharmacy job in retail as well just to make sure, ensure that happens.

Tim Ulbrich: So did you guys go all in to get the $75,000 paid off? Meaning that you delayed other goals such as savings and other things? What was your approach to pay off the debt in the context of balancing other goals?

Jared Wonders: Yeah, no, that’s a great question. So we actually went the unconventional route, possibly from the Dave Ramsey crowd, and we actually did buy a house before we had all my debt paid off. We bought a house together before we got married, but it ended up working out. Obviously it worked out very well.

Tim Ulbrich: And we actually did an episode — I can’t remember it off the top of my head, we’ll reference it in the show notes — we did an episode on what we think are some of the pros and cons and some of the considerations around the Ramsey plan that people should think about. It’s certainly not a one-size-fit-all. I think for certain people, the steps are spot-on, exactly what they need. For others, depending on personal situation, how much debt you have, what else is going on, so I think certainly for the two of you, that made sense in the route that you went.

Jared Wonders: Right, and honestly, the interest rates were only going up at that point, so we kind of just wanted to lock in what we got.

Tim Ulbrich: Yeah. Now they’re finally coming back down, right?

Jared Wonders: Exactly.

Tim Ulbrich: It’s crazy, my wife Jess and I bought a home in October 2018 here in Columbus.

Jared Wonders: Oh yeah, congratulations.

Tim Ulbrich: I think it was a 4.62% interest rate, and now we’re back down to the 3.7-3.8%, something like that.

Jared Wonders: It’s crazy.

Tim Ulbrich: Yeah. So let’s talk about FIRE, Financial Independence Retire Early. And in Episode 104, we covered the basic tenets of FIRE. Again, Financial Independence Retire Early. So I don’t want to spend too much time rehashing exactly what is FIRE but rather talking more about specific plan that you and Jess are taking around FIRE and why you’re taking that route. So talk to me about why you caught the FIRE bug. What was in terms of why this concept of Financial Independence Retire Early really stood out to you as an option that you want to pursue? And really, what is the goal? What are you trying to achieve when it comes to FIRE for your personal situation?
Jared Wonders: Yeah, that’s a great question. Honestly, I think the most important thing is when pursuing FIRE, having a why. So you really need to have that why in order to really, I guess just really make it happen and really kind of just studying those goals and attaining those goals. So mine, honestly the thing that kind of pursued me and kind of got me into it was honestly like just really trying to not be stuck at a job or position I didn’t necessarily want and having those options to pursue if I really wanted to and you know, not having those golden handcuffs, if you will, and just being able to really not necessarily be hog-tied to a job for 30 or 40 years.

Tim Ulbrich: Sure. Yeah. I mean, again, options, like we talked about. And in Episode 104 when we interviewed Jason Long, he had retired at the age of 38, self-made millionaire, and he gave a lot of really good specifics about the amount and the calculations and how he determined that and how he was saving and a distribution plan. So what is the goal? Have you guys defined a number? And how aggressive are you saving to try to do that and the investment strategy in getting to that point?

Jared Wonders: Yeah, I mean, Jason has an absolutely terrific story. I would definitely reference that or definitely check out that podcast episode as well. But honestly, what we’re doing right now is we’re really trying to diversify as much as we can. So we’re taking advantage of the retirement accounts, we’re taking advantage of the TSP through the VA, which is an absolutely terrific retirement program. My wife is taking advantage of her 401k. We actually just recently looked into doing an HSA as well, so you know, the high deductible plan. The HSA we found out just is an absolutely terrific vehicle for those who haven’t looked at it. I know that you guys have done some research on that as well in previous podcasts. One of the things we stumbled upon is real estate, of course. And I mean, honestly, what we’re doing right now is we’re saving probably around 50%, maybe a little bit higher, of our income, and we’re trying to pursue those active investments like some of the brokerage funds, like doing some Vanguard, but also trying to attain our goals in real estate as well.

Tim Ulbrich: So let me talk about that for a minute because I think some pharmacists hear that and say, “Jared, 50% of your income? Like how is that even possible when you just think of life’s expenses and housing?” So what are you guys sacrificing? What are you giving up? What have you minimized costs in other areas so that you’re able to both save in traditional tax-advantaged retirement vehicles, you mentioned those: TSP, 401k, HSAs, but also be able to then build up cash reserves to get involved in some real estate investing? How are you doing that? And what are you giving up to be able to do that?

Jared Wonders: That’s a great question. We obviously have the advantage of having two great incomes right now. But I mean, for how we’re doing that is I would say we don’t do fancy stuff, honestly. We’re trying to live frugally. I mean, we’re still going out and enjoying ourselves from time-to-time, of course, but we have a goal and we have a mindset of when we want to retire, when we want these future assets to be utilized for our kids. So we just have that goal and are really focused in on that goal, on what we want to do. So honestly, that’s just kind of what’s kind of pushed us forward and getting us to that point. So it’s really just a lot of mindset. Honestly, you know, there is a little bit of luck that’s involved, but I believe that I’ve heard this reference on I think Scott Trench referenced it, but luck is the intersection of preparation and opportunity.

Tim Ulbrich: Amen.

Jared Wonders: So just being able to find that aspect and being able to prepared and kind of make yourself prepared for what’s coming I think is incredibly important.

Tim Ulbrich: So you mentioned an interested in diversifying in real estate, so let’s talk about that for a few minutes. Why real estate investing? And what do you see as the advantages of doing that and why you want that to be such a big part of your financial plan going forward?

Jared Wonders: Yeah, I think the biggest thing for us is that supplemental income that you can get through real estate. If you are a little bit more aggressive and have a paid-down real estate portfolio, then you have an income coming in, and it’s not through dividends, it’s not through other things. And I think that one of the greatest things that I love about real estate is the control that you have. So we currently have two properties that — and it’s obviously not like a huge portfolio — but we are able to control basically every single aspect when it comes to expenses, when it comes to income. I mean, there’s obviously things you can’t control like some capital expenditures and things, but you know, I can see a property and I can be like, “Oh wow, there’s carpet there. There’s a value-add. We can put in vinyl plank and the property look more appealing to renters,” those types of things. So it’s just a lot of different opportunities and things that you can do with a particular property that really just make it look better and make it more appealing for someone to actually live in.

Tim Ulbrich: Yeah, one of the things I enjoy — just building off of what you said there — that gets me excited about real estate investing, we’ve talked about it before on the show why I think it’s a good fit for our community to consider, and obviously, I don’t want to minimize, there is risk involved, of course, with anything. But when you think about traditional retirement vehicles, you think about accessing those at the age of 59.5, and this obviously is an opportunity to generate some cash flow sooner. It’s an opportunity to be able to have some different tax strategies and savings. But also, one of the things that I really enjoy in thinking about this — you and I talked about it before the show — is if you have that tolerance of risk, it’s I think a really fun challenge to think through. It’s a very different mindset in how we typically think as pharmacists. And there’s no ceiling on the opportunity in terms of what you’re able to do. Obviously, there’s limitations in terms of how much cash you have to invest and other types of things. But talk our audience through the IDEAL principle because I think that really helps frame the relevance and importance of why pharmacists out there may want to consider real estate investing.

Jared Wonders: Yeah, absolutely. And as pharmacists, we have the opportunity I think to actually invest in real estate and use our capital because of our good salaries as well, so because of our good income. And yeah, we had mentioned the IDEAL principle, the acronym IDEAL, which I like to use in real estate because it’s kind of a good way to kind of understand the different ways you can actually make income or offset some of your expenses that you have in real estate. And I, of course, can’t take credit for this. I’m going to give a shoutout to Bigger Pockets and Andrew Syrios, and I can’t remember the other brother, but the Syrios brothers in one of the earlier episodes, they mentioned this principle. The I stands for Income, so income being cash flow that actually comes from the property after all your expenses are paid off and everything is kind of paid off with the property. D stands for Depreciation. So the government sees the house or a home as a depreciating asset, kind of like a car or like a vehicle. So they mark it off on 27.5 years, so you basically buy a property for $100,000. They use that asset, and they divide it by 27.5 years, and you can use that depreciation to offset some of your income that you make going forward. There are some caps like as far as like income and stuff goes, so you definitely don’t want to buy a property just for tax purposes. But definitely something to look into and check out. The E stands for Equity, so as a tenant is paying off or giving you rent money, they’re actually already paying down the mortgage. Your mortgage principle is being taken down. The A stands for Appreciation. So properties typically appreciate in value, but you mentioned risk, like you said before. So 2008-2009 can happen, of course. But properties typically over a long period of time do appreciate. And then the L standing for Leverage. Now, my wife and I take a little bit less of a stance on leverage. We have leveraged two of the rental properties that we’ve bought, but we’ve bought them in a position of financial strength, which I think is incredibly important when you’re delving into real estate because we put 20% down and we have stable jobs and incomes and we’re able to kind of offset — and when we went into this going forward, we wanted to make sure that we had the reserves in place to be able to cope for anything that comes up because problems will come up. I will give you an example of one that just came up. So we had a storm come through in North Carolina, and a couple branches fall down, and you know, that’s just something that we have to deal with. I mean, stuff comes up.

Tim Ulbrich: Got to have cash reserves. Yeah, and I’m glad you mentioned that because I think, Jared, I think it’s easy to listen to something like “Bigger Pockets,” and you get all fired up and it’s like, man, I want to go buy a property tomorrow. And I think building a strong foundation — so obviously, you guys were in a position, no debt, you have reserves, I’m guessing you’re in a good equity position in your home, you’re putting 20% down, so obviously if things happen, which they will, you’re in a position to be able to handle them, market dips 5%, 10%, 15% next year, who knows what will happen, you’re able to weather some of those things and continue to move on with that plan without it being derailed. So I did just find the “Bigger Pockets” episode you were mentioning. It’s Episode 121. We’ll link to it in the show notes. “Creating the IDEAL Real Estate Investing Business with Andrew and Phillip Syrios,” and we’ll link it to our show notes for those that want to learn more about the things that you mentioned with IDEAL. So talk us through that first purchase because, you know, when I’m listening to the “Bigger Pockets” podcast, I often hear them say, “It’s about doing the first deal and getting it done.” Obviously, you don’t want to lose your money, but it’s about learning, it’s about actually doing the deal because I think so many people learn, learn, learn, read, read, read, but don’t actually do the deal. And obviously, the second one becomes a little bit easier, the third, the fourth, and so on.

Jared Wonders: Yep.

Tim Ulbrich: So when you were getting ready to do that first deal, what did that look like? And how fearful were you in that process? And what made you decide to actually finally pull the trigger?

Jared Wonders: So like I would say that the first deal was pure excitement. Like I was so pumped about this first deal because I had probably done research for 8-10 months, I did a lot of research on “Bigger Pockets,” I listened to Paula Pant. It was one of those things where I think another important thing is having an accountability partner to kind of pull you back a little bit. So my wife is my accountability partner and kind of pulling me back a little bit. The first property, I mean, it was definitely one of those things where we thought it was a good buy. And it was a good buy, and we bought it in a great area. However, we did make a lot of mistakes. That is something that I think that when you make a mistake, you can’t let it define you. You kind of have to work through it. And I think it makes you stronger on the other end of it. But you know, like you said, you have some issues that come up, of course. I don’t know if you want me to — I can give some examples because it definitely happened quite a bit. But the first one that we bought was not like a value-add, so it was one that was probably — it was pretty much rent-ready when we bought it.

Tim Ulbrich: OK.
Jared Wonders: So we were pretty much ready to have a tenant and basically move into the property. The biggest issue that came up with us was we vetted property managers, however, we probably didn’t vet them as well as we should have. So we had not a great experience with property managers, which is actually —

Tim Ulbrich: It’s funny how often you hear that.

Jared Wonders: What’s that?

Tim Ulbrich: It’s funny how often you hear that. I mean, they talk about that on the show all the time.

Jared Wonders: Oh, yeah. You really need to manage your manager. Like I can’t emphasize that enough. And honestly, for me, it’s definitely busy managing it — like we self-manage right now. It is busy, but it’s more rewarding, I think. And you get more of that control aspect back because you lose that control aspect of real estate when you do have a property manager do it. But like I said, if you have a really good property manager that you trust and is really good, then definitely — well, either send them my way —

Tim Ulbrich: Yeah, right?

Jared Wonders: But no, it’s definitely very important to have great processes around you.

Tim Ulbrich: Getting a little bit more detail if you’re willing to share, how did you guys finance that first property? What was your strategy for finding the deal? How much was the property that you’re purchasing? Because I think our listeners may be thinking, hey, I’m really interested in this, but what are we talking about here? Like what would I maybe need in terms of cash and things to get started with that first deal?

Jared Wonders: Yeah, absolutely. So we put 20% down. And Charlotte is a crazy market right now, so we purchased outside of Charlotte a little bit in an area called Lake Wiley, which is a little bit south of Charlotte. It’s in South Carolina. And that was one of those things where we purchased, like I said, 20% down, so we put in about $40,000 into the deal. The property itself was about $170,000. It’s probably worth about $190,000-200,000 now, so definitely not like a property like with a big value-add, like I said.

Tim Ulbrich: Is it a single family?

Jared Wonders: It is a single family rental, yes.

Tim Ulbrich: OK. And conventional loan, 20% down?

Jared Wonders: Conventional loan. And I should probably talk about how we found the deal too. So we honestly just had a realtor that we liked, we trusted, and he would just give us leads automatically through email. And this popped up on a Saturday. I was like, oh, this is kind a cool-looking property, nice area. I checked out the area, and he responded right back. So I think having a really good realtor on your side, especially for that first deal, is really important because having a very responsive realtor is great because you can go in and see the property that same day and really check into it before it’s popped up, especially if you’re in a hot market like Charlotte is.

Tim Ulbrich: So your goal with this first property is buy-and-hold, is that correct?

Jared Wonders: Yeah, correct. That’s honestly our focus for most — actually all — the two properties that we have right now is buy-and-hold, yeah.

Tim Ulbrich: And the second one, you mentioned before we jumped on, had a little more rehab and other things involved?

Jared Wonders: Yeah. The second rehab that we had, we might have it — we talk about the acronym BRRRR, which is Buy, Rehab, Refinance, Rinse and Repeat, which we could possibly do for this property but definitely more of a value-add. We purchased this one at $140,000, and it’s probably worth about $190,0000-200,0000 now with about — I think we spent $10,000 to renovations.

Tim Ulbrich: OK.

Jared Wonders: So there is a pretty good amount of equity buildup in there. And we kind of are trying to get close to the 1% rule, which where you buy a property for — so I’ll use my example, the $140,000. So you buy a property for $140,000, and we’re actually going to be renting it out for $1,400, which is right at that 1% rule purchase price. And that kind of usually takes care of most of your expenses, your property management if you do want to pay for property management, repairs and maintenance that come up, and vacancy, of course.

Tim Ulbrich: So to our listeners that are hearing some of this for the first time and thinking, this is awesome and I’m cracking along but I’ve got these questions, stay tuned. We’re going to be bringing a lot more content on the podcast, on the blog, around real estate investing and trying to do some more education. Obviously, Bigger Pockets is a great resource, fantastic resource as well, and we’ll continue to bring more into the future going forward. Going back to the FIRE — and obviously, real estate investing is playing a big part in that, I want to talk about the concept of Financial Independence Retire Early. And the reason why I’m thinking about this is I’m going through re-reading — actually that audio book, so I guess re-listening — “Four-Hour Workweek” by Tim Ferriss, which is a fantastic read. And it really has me thinking more and more that the concept of early retirement is somewhat overhyped and somewhat overrated, although I think the Financial Independence piece is incredibly important. And obviously, I’m making broad generalizations. This is a unique situation for everyone. But when I hear you talk and we had our previous conversation that you really enjoy your job, you’ve got great benefits, you’re working with the VA, pharmacists have great scope of practice. I think you’re probably practicing at the top of your license, you’re teaching students and residents, so really doing a lot of neat things. And so some people may be thinking, why in the world are you so aggressively chasing Financial Independence Retire Early. So talk to us about that. Is it more about the FI, Financial Independence for you? Is it about the options? You never know what may change in the future. Give us some more input on that.

Jared Wonders: It’s more about opportunities. I think having the — I believe that Jim Collins referred to it as F-You money, so have the financial resources and those funds to I guess make it happen and just kind of pursue opportunities that you wanted to pursue that may not have been possible if you didn’t have that income at your disposal I guess. So I think that’s kind of the biggest thing why we’re pursuing this. And I’m the kind of guy that I want to be there for my kid when he has a game. I want to be there for my kid. I don’t want to be stuck at work all the time and like have to have that be something that I’m tied down to. So it’s just all about opportunities and all about something that I can pursue in the future. If something comes up, and I like it, then I’m probably going to try to do it.

Tim Ulbrich: I love that. And I even love how you shared practically what you guys are doing. It sounds like you’re kind of carving out 50% of your income, some of that going to maxing out 401k’s and TSPs, some of it you’re saving up cash for real estate so you’re ready to put money down, you’re ready to do a rehab. And then obviously, you’re going to build equity in those homes and they’re further going to generate cash flow and other types of things. So a mixture of tax-advantaged retirement savings and real estate. But I think that gives our listeners one example of a road map of something you may follow if this is an area of interest. So I’m hopeful you and Jess have had some of these conversations, you know, I’m guessing you have because your story’s awesome and what you guys are doing is pretty aggressive. But what does success look like for you guys in 5-10 years in terms of where you’re at with savings, where you’re at with real estate, maybe you have other goals and things that you’re thinking about? Where are you hoping to head in the next 5 or 10 years?

Jared Wonders: Yeah, honestly, that’s awesome. I really appreciate you asking that. So I think that the biggest thing for us is we’re probably slowing down after the second one because it’s a little more rehab, a little bit more work. It was great because I tell you, I know a lot of stuff about homes that I definitely did not know before going into the second one. So that has been really interesting. So I think we’re probably going to slow down the real estate just a little bit, maybe build a little bit more equity in these homes because I think that for us, having that income at our disposal with a fully paid-off rental property is really important to us. So that’s something that we’re going to be pursuing. But we’re definitely going to keep our eyes open for deals if they come up. And if we spot a real estate deal that we like or even could partner on or something like that, that’s something that we’re definitely going to consider taking on for sure because we really like it, we like the process, and it’s something that we both really like, really enjoy.

Tim Ulbrich: That’s good. And I think that makes all the difference when the two of you are on the same page and getting excited. And you mentioned accountability partner, which is awesome because I think that getting on the same page is so critical to be able to achieve the dreams and the visions and the why that you guys have identified for your family. Do you have — outside of Bigger Pockets and the things that you’ve mentioned, do you have a book, a podcast, a resource, something you’d recommend to our community that either has inspired you in your journey in the past or is currently inspiring you in your journey towards this quest of Financial Independence?
Jared Wonders: Oh my gosh, there’s so many. But I’ll list my top three that I really enjoy. My first one is the guys at ChooseFI are absolutely incredible. Jonathan and Brad Barrett are just outstanding to listen to.

Tim Ulbrich: One of which is a pharmacist. That’s cool.

Jared Wonders: And Jonathan was a former pharmacist. Like that was one of the things that really got me hooked on the FI, honestly. The second one is Paula Pant. Paula Pant’s interviewing skills are just terrific. I would encourage anyone that is pursuing FI to listen to the Suze Orman episode because that is just an absolute hoot to listen to.

Tim Ulbrich: That’s a good one.

Jared Wonders: It will get you fired up if you’re wanting to pursue FI. But she is a great interviewer, and she’s outstanding on her FI journey and does a lot of real estate and everything. My third one is Chad Carson. He just recently had a book come out, and I think it was called “How to Retire Early on Real Estate.” That kind of was a little bit more in tune of me and Jess’ goals as far as like not — we don’t want to be real estate moguls and have thousands of properties. We want to just have a couple properties, kind of give us that cash flow, and kind of be able to just kind of live on that in the future and have those options. So that was an incredible read.

Tim Ulbrich: Awesome. And that book, “Retire Early with Real Estate: How smart investing can help you.” So we’ll link to that in the — or “How smart investing can help you escape the 9-5 grind and do more of what matters.” So we’ll link to that in the show notes. So for our listeners that have heard your story, are fired up and say, hey, I’d really like to get in contact with Jared, how can our listeners reach out to you if this is something they’re interested in learning more about?

Jared Wonders: Yeah, reaching out to me on Bigger Pockets is great. And I’m actually not really on social media too much, so Bigger Pockets is probably the biggest social media advocate or arena that I’m in. You can honestly just shoot me an email too. [email protected].

Tim Ulbrich: Awesome. Yeah, and for those not familiar with the Bigger Pockets community, easy to sign up. And from there, you can connect with others. I would highly recommend that as well. And to our listeners that are interested in learning more about FIRE, again, make sure to check out Episode 104 of the podcast where I interviewed Jason Long about his journey, including how he retired from community pharmacy at the age of 38 as a self-made millionaire. And I’d also recommend the blog post written by Jeff Kymer on our site, “The FIRE Prescription: How to retire early as a pharmacist,” which is available along with all of our blog posts at YourFinancialPharmacist.com/blog. So Jared, thank you so much for reaching out, No. 1, No. 2, coming on the show. You have got me fired up, and I enjoyed both of our conversations. And I have a feeling this is just the beginning to hopefully some exciting collaborations and future with the community as well. So thanks for coming on the show.
Jared Wonders: Absolutely. And I want to say congratulations again for getting to 100 podcast episodes, that’s incredible.

Tim Ulbrich: Thank you, appreciate that. And as always, to the YFP community, if you like what you heard on this week’s episode of the Your Financial Pharmacist podcast, make sure to leave us a review and rating on iTunes, Apple podcasts, Stitcher, Spotify, or wherever you get your podcasts each and every week. As always, we appreciate you joining us for the Your Financial Pharmacist podcast. Have a great rest of your week.

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