Finance Friday: Enjoy Life Before FI with Simple Investing Strategies

Mindy:
Welcome to the BiggerPockets Money Podcast, show number 236, Finance Friday edition, where we chat with Yourri and talk about setting yourself up for financial independence.

Yourri:
I used to have a motorcycle. I sold my motorcycle. I would love to be able to get a motorcycle again. I would love to be able to get my pilot’s license and go flying on the weekend. Unfortunately, I tend to find that my hobbies are really expensive, so it’s like, okay, I got to try to figure out which one do I want to pursue right now and then from there take it further.

Mindy:
Hello. Hello. Hello. My name is Mindy Jensen and with me, as always, is my champion of the people, co-host, Scott Trench.

Scott:
Great to be here with my champion of the intros, Mindy. Thank you.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business or crush a pretty good career and build a lot of wealth the normal way, I guess, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams.

Mindy:
I love today’s guest, Scott. I’m going to crown him the champion of thinking outside the box. He has a unique way to heat his home, one that I have never heard anybody do before, as well as a great mind for research, which has developed or uncovered a lot of advantages for him both in his job and in his investment strategy.

Scott:
I think that’s right. And I think that that makes the nature of the way we guided him in his thinking over the course of the show. So much more ironic because he’s so out of the box yet the out of the box or the in the box package for financial planning. I think a lot of that traditional stuff and going back to the basics and really thinking about it the way that I think a lot of us are taught originally to think about it.
I think the playbook of spend less, buttered into a tax-advantaged accounts and build wealth over the longterm in those areas really applies to him in perhaps a funnier, ironic way, given all of his interests and creative ideas and all that kind of stuff. So I think it was a great episode and it just shows that there’s a different playbook for every goal. And his goal, I think, is best served by the boring old fashioned way to a large degree.

Mindy:
I think you’re right, there is a different playbook for every goal, but a lot of goals will have the same boring playbook and that’s okay. The best type of personal finance is steady and solid instead of super sexy, really risky. Oh my goodness. I lost everything. It’s super awesome to make $100,000 in a minute, but it’s really, really soul crushing to lose $100,000 in a minute, especially when you don’t have it to lose. So boring is the best.
Before we bring in Yourri, let me tell you what my attorney makes me say. The contents of this podcast are informational in nature and are not legal or tax advice, and neither Scott, nor I, nor BiggerPockets is engaged in the provision of legal tax or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal tax and financial implications of any financial decision you contemplate.
Today, we are talking to Yourri. Yourri is an engineer, and as such, he has his numbers dialed in, but he still has questions and we are going to answer them. I was just chatting with Yourri before I hit record and holy cannoli, strap in because you are going to learn a tone today. Yourri, welcome to the BiggerPockets Money podcast. I am so excited to talk to you.

Yourri:
Well, thank you so much. Honestly, pleasure is mine. I’ve been very excited and I’ve been more or less thinking that I really should apply to this. And I was surprised in how quickly it turned around and I got in, and so let’s get started. I’m so excited.

Mindy:
I am so excited. I love your story. I love all of the possibilities and you just threw another one at us, so I can’t wait to jump in. Let’s go on to your income statement and balance sheet. What is coming in and where is it going?

Yourri:
Yeah. Currently my yearly gross income is sitting at approximately $120,000 a year, which turns out around 10 K a month gross. As far as what I see every month, realistically speaking, I don’t exactly know that number right off the bat. And the reason is, at least in my case, budgeting has not always been the best for me. I tend to get super hyper-focused on the numbers.
So what I’ve chosen to do is take in this concept of the anti-budget, which means that I’ve simply automated all my investments. I’ve automated any sort of saving that I need to do, and anything that comes in is kicked back out. I utilize that for anything and everything that particularly fits within my life.
So realistically what’s going out? I think that’s probably best addressed through what’s been automated out. I am doing around 13,500 in a 401k every year. Right now I’m planning on bumping that up to the 19,500. This year I just needed a little bit extra capital, so I chose to not max it out. I max out my Roth IRA, doing $500 a month split up weekly.
Every month I basically purchase around $80 of cryptocurrency. I have additionally a few different investment accounts, which we’ll obviously dive into deeper. One is based on speculative growth, another one is based off of running an options plan, which we can discussed further as well. I know in one of the other episodes someone had mentioned cash secured puts and covered calls. I do something very similar and I would be happy to talk about that further.
And then lastly, I have a dividend fund. So taking a look more at the value side, more or less acting as a hedge against growth socks. We have this preconceived idea of what the market’s going to do. I tend to be, not necessarily risk averse, but I like to plan accordingly and I can talk about my modified Golden Butterfly whenever you choose that we should do it.
Now, as far as my liabilities go, I do have a few loans. An auto loan, which is $142 a month, a solar loan, which is at 192 a month. And then my mortgage, which is sitting at 1,372. And then I also have a loan from the Bank of Dad. When I first started graduate school, I didn’t get paid for the first few months just because of accounting issues, so I had to get some money to live off of, 0% interest, which…
Thank you, dad, and I greatly appreciate it. But I’m doing my best to pay him back as quickly as possible. So I’m doing $500 a month until that’s gone. That should be gone in about 10 months. Beyond that, that’s kind of it. I regularly pay my credit cards, so I’ve never had a late payment on that so there’s no liability there.

Scott:
I love it. So I’m getting about 6,500 to 7,000 in free cash flow every month that’s hitting in your bank account. Is that right?

Yourri:
That sounds about right. In fact, I use personal capital, so I can tell you approximately how much that works out in total cash flow every month. Between liabilities, I’m seeing yeah, that’s around 6,500.

Scott:
Okay, awesome. And then your net worth is somewhere in the ballpark of 50 to 100 grand. Is that right?

Yourri:
No. That’s been my… We’ll talk about that when we get into the investments and everything I do. But a little over a year ago when I left grad school, I was sitting at negative 3,000. And right now, as of this morning, I’m sitting at $131,306.

Mindy:
Woo-hoo.

Scott:
And that’s awesome.

Mindy:
Sorry.

Scott:
Congratulations.

Yourri:
Thank you.

Scott:
That’s a huge year and where… Okay. So we have the investment accounts of 80 or so thousand, and then we also have the home equity. Is that what’s comprising that net worth?

Yourri:
Yeah. Honestly, the big one was the home equity. I did end up getting a… I basically got a fixer-upper and the area has just exploded. I’ve fixed this place up to the best of my ability thus far. There’s still things to do, but I got it for 250 and right now we’re sitting at 302.

Scott:
And where are you located?

Yourri:
I am in the rural mountains of California, between Bakersfield and Los Angeles.

Scott:
Nice. Okay. And so what is the goal here?

Yourri:
Well, the goal is realistically… I don’t intend on retiring early per se. I think my retirement goal is really sitting around 55 at which point I’m too squirrely to ever actually truly want to retire. I think the end goal would be to go and adjunct as a professor at a small university and just teach. I thoroughly enjoy it. There’s just… Academia doesn’t really necessarily pay, so it didn’t make sense for me to try to go down that route and then pursue my hobbies/I guess giving back goal.
And my giving back goal is to more or less run a rescue ranch as I go later in life. Unfortunately that’s quite expensive, especially since I’ve got some expensive hobbies or at least I’d like to pursue some expensive hobbies. So at this point it’s maximize as much as possible so that by 55 I’m sitting at a pretty significant amount of money.

Scott:
Okay. So the goal is as much wealth as possible. You don’t really care where, so just say you have access to or can control a large ranch and be happy with the professor role.

Yourri:
Correct. I mean, I really went through and tried to make predictions on how much it’s going to cost, which is something I’m going to mention later. And I came up with a value of my retirement accounts going to have to be at least in today’s terms, 7 million, which makes no sense to me, but I tend to think I’m pretty decent at math. So I’m at a loss.
I guess if that’s going to be the case, I just need to pursue it and do what I do now, live like a grad student, invest as much as possible, and it’s not like I’m uncomfortable by doing it. I still think I have a really decent living situation. But yeah, I guess it comes down to trying to, I guess, further optimize my situation a little bit further and maybe come up with…
Or maybe realize that the way that I’m going about this right now doesn’t make all that much sense. Maybe there’s better investment vehicles for me to pursue, and once those are figured out, then later I can go back and pivot back into the way I’m currently working things out on top of whatever recommendations you make.

Scott:
So we just want to optimize for longterm value as much as possible and make all the right moves that just lead to the most wealth. You don’t really care about cash flow in the short term. You just care about that end state wealth number [crosstalk 00:11:36].

Yourri:
Yeah, absolutely not. I’m incredibly lucky to be in the position I’m in. $120 a year as a single individual is nothing to scout at. I totally recognize that and as a result, it’s given me an awesome standard of living. I’m not necessarily looking to create any more significant cashflow. I don’t think it’s necessary. And if I wanted to, if I’m being entirely honest, I could just move into a different role at a different company.
I’ve definitely had offers to make significantly more. It’s not something that interests me, so I choose not to pursue it any further. Specifically in my case, I work in the space industry, but if I wanted to take all my knowledge and pivot into defense, I can make probably 160,000 a year. But I’m honestly not interested in working in that field also.

Scott:
Yeah. There’s a rocket science joke coming at some point later on with this, but-

Mindy:
Oh, God.

Scott:
… that’s awesome. Okay. So here’s my first instinctive observation. There’s four levers to build wealth. You can spend less, earn more, create or invest, and you are earning a lot of money at your job, and to me, you spend very little, you’re generating a lot of cash flow. To me, this one is about an investment approach. Is my instinctiveness. Does that sound right? Or do you think there’s another opportunity in the create or income side that we should explore?

Yourri:
There could be some income stuff that I personally enjoy doing, which I’ve thought of some ideas, and I would love to bounce it off of you, but yes. Looking at the way that I’m investing is realistically probably the best thing to do, and possibly another idea… Because I know that I personally have been called out by my friends and I completely respect them for their opinion on this.
They definitely see me as a bit of a miser, so maybe I am, maybe I’m over-investing at this point to a detriment, which sounds crazy because obviously this is an investment-focused podcast or personal finance podcast. Obviously investment is a huge portion of that. But maybe I am spending too much or not spending enough on myself and investing too much and it’s to the detriment. I’d love to hear anything and everything.

Scott:
You definitely have room to spend a little bit more and still accumulate a lot of wealth and your timeline is a very long one with this. So to me, that says, as long as you’re accumulating 50, 65, $70,000 a year, and you’ve planned on your income increasing over time, you’re going to have plenty of money to invest, bit by bit over this period of time.
You can probably relax a little bit there, but I don’t think that’s going to be… That’s a lifestyle choice that I think… You have a very tight budget from what I can tell here, based on what we just discussed. On the investment approach, my first observation is you have a lot going on and you are very diversified. Is that fair to…

Yourri:
Yeah. If I were to say that any one investor is an inspiration for how I go about things, I’m a big fan of Ray Dalio. Statistically uncorrelated assets are king in my eyes.

Scott:
My observation on that would be to think about it completely opposite of that and here’s why, right? I love diversification and doing that if you’re managing a large amount of money and the goal is not to lose a lot of money, but you’re guaranteeing yourself a… The point of diversifying is to not have a large loss or not experienced a lot of volatility. And you just told us that your timeline is to build the maximum possible wealth 30 years from now.
So if you say, “Hey, this portfolio is going to generate 8%, I don’t know, or 7% in a very predictable, low volatility way, you’re guaranteeing yourself a six or seven or 8% return instead of the 10% that would just be straight up from index funds.” I’m making that up. You might have a different assumption about your portfolio. A real estate portfolio, if you’re constantly leveraging or whatever, might be able to earn 15, 16, 17% with some volatility and those types of things.
And so what I would actually encourage you to do is think through each one of your investment choices or the investment options available and say, “What’s the best one? And I’m going to concentrate there for the next two or three years on that, because that is the mathematical best bet for this.” And since you said, and you can always… Based on this, you might change your goals or you might be like, “Oh I actually do want some money in the meantime.”
And I don’t like the going all in on one area with that, but that would be the first thing I would observe is, mathematically, you’re going to be better off if you invest in one asset class heavily and begin layering in this diversified approach later on as time moves on and you’re moving closer towards that future state in 20 years. What’s your first reaction to that thought?

Yourri:
No, I agree with you on that because there’s varying amounts of performance in each one of these portfolios. Some have… Like for example, my highly speculative fund until this week wasn’t doing all that well, but then one of my big bets paid off. So that’s not the case anymore, but yeah, realistically I don’t.
My super speculative accounts probably could be untouched at least for a little bit because, realistically, if I’m taking a look at what has really skyrocketed my portfolios, it is more or less taking your more traditional index fund style. It’s just had… Obviously the S&P has had an incredible last year for obvious reasons. But that being said I still sprinkled in some little odds and ends that I felt very strongly about and had good conviction and I actually did… I brought it up.
The S&P last year did 33.5% and I did 52% with all of my accounts combined, but obviously I had some drag weight. So yeah, no, I completely agree with you. Realistically, I think that if I were to chop out one of these accounts and take whatever funds I’m putting in there and transferring them elsewhere, more specifically likely real estate as I had pre-show brought up, that would probably be where to go to try to maximize the returns. Yeah. No, that’s a very good point.

Scott:
I just encourage you to say, “Yes, which one of these areas do I believe is the best?” It might be real estate, it might be stocks, it might be one of these options or creative things here. It might be your speculative fund with that, but you’re clearly capable of making that assessment for yourself about which asset class or which investment approach you think is best over a long period of time, which is 20 plus years with that.
And I think if you stack all your chips into the one that you think is best, especially in the first couple of years, that’s the mathematically right approach, right? It may or may not have the right outcome. You might be wrong with that, but you want to get to 7 million bucks in 20 years, you got to make some mathematically correct bets and, I think, dump it in there, or you need to just earn a tremendous amount of money and dump that into something that’s very passive and stable with that.
So those are both viable options. But if you do both, you’re probably even better off, but that’s my first observation about your investment protocol is I think you have really done a lot of research and thought through all of these things. And I think that because of that, you’re actually diversifying yourself away from probably the best one of that and that’s where you need… And that’s a scary thing, but I think that diversification is wonderful once you’re wealthy.

Yourri:
No. Okay.

Scott:
And-

Yourri:
No. That makes sense.

Mindy:
I don’t think we have congratulated you enough on turning your personal situation around from negative 3,000 to positive… What was it? Positive 131. First of all, I’m going to say good job, Yourri. That’s awesome.

Yourri:
Yeah. That’s awesome. [crosstalk 00:20:04]

Mindy:
I think that’s one of our big downfalls of this Finance Friday, is that we don’t congratulate the guests enough for getting themselves to this position. So you’re doing awesome right now.

Yourri:
Thank you so much, but to be fair, being in school for what is essential… For almost a decade tends to slow you down a little bit.

Mindy:
Well, but you’re still… Hey, there’s a lot of people who are 28 years old, who weren’t in school for a decade and they don’t have 131 in net worth either. So you’re doing good. Take the compliment. You just say thank you.

Yourri:
Thank you.

Mindy:
You mentioned that you really like your job. You could go in another direction and make more. Are there any opportunities for contract work? Like I just said, you’re 28, I know that you’re not married and you don’t have any kids. So right now is a really great time to put in some extra work on the weekends and really crank up the investments.

Yourri:
So, yes and no. Working within my field would be very difficult and that’s where the real money would be. If I could do any sort of weekend consulting, that would be best, but because of conflict of interest and not being able to necessarily… It falls in this weird zone of, I could put myself into trouble if I really wanted to go for those maximized returns from consulting.
The aerospace industry is pretty well controlled, and specifically if you work in anything ITAR related and engineers out there who know what ITAR is. It’s International Trade of Arms. So anything rocket-related, you don’t want to get yourself in trouble. That’s a great way to end your career very quickly.

Mindy:
Yeah, definitely not suggesting that. Are there any consulting opportunities outside of the space industry that could generate some income?

Yourri:
That’s a good idea. That’s a thing that I’ve tried to come up with. And I did come up with a potential side business, which I was going to try to get some thoughts on. Working within my own industry or tangentially might be very difficult. I think what I could make realistically is maybe, part-time work, trying to help people with mold design and things of that sort and mold in the sense of casting things, not the stuff that grows in your walls.
But it’s, once again, in this weird situation of, I don’t know how much work there’s going to be specifically out here. Where I work everything’s aerospace, so it would just be me going to try to basically help out a competitor or something like that. So I think I would really struggle with that.
There are some options in terms of side businesses that could exist. One idea that I had was Twitch streaming, which I’m assuming Scott’s familiar with since you’re the video game guy by the sounds of things. So I’m with you on that as well. I’d like to play video games occasionally too.
Twitch streaming caught my eye, but not for playing games, actually for renovating my house. Just live streaming how I renovate and trying to teach people little odds and ends and why would I go about doing this, how do you go about doing this and just teaching people different things. So more or less doing Twitch education is probably not going to make a huge amount of money, but obviously there’s people who can make crazy upside if you just happen to hit it big.
And if not that, the one that probably makes a lot more sense but would require significantly more capital to do would be in van conversion. The converted van market, for whatever reason, is absolutely bananas. I’m pretty savvy when it comes to these sort of things.
I’m one of those weirdos who love station wagons, and until recently when I hit a deer, I had a lifted station wagon and I did the lift myself, funny enough. So I could get in van conversion because I have access to very inexpensive vans being so close to the Mexican border. I could literally just go to Mexico and import in cheap cargo vans once they meet regulations.

Scott:
What is your current salary, again?

Yourri:
120 a year.

Scott:
What would you be able to make if you switched jobs?

Yourri:
If I went into the defense industry, I think I could feasibly make 160 pretty quick here. [crosstalk 00:24:38]

Scott:
And how much would you be able to make from one of these side jobs?

Yourri:
One of these side jobs, I think… Well, if my math works out, I think I could maybe make around 20 K a flip. And I think it would take me about two months to flip a van, start to finish. So I think feasibly if the numbers work out and I’m… I was a little liberal with the estimations on this. I think it’s probably safe to say I could probably make another 40, maybe 50 doing conversions and flipping them throughout the year. If I’m really successful, I could do a lot more.

Scott:
How much would you enjoy flipping the vans?

Yourri:
Not nearly as much as building rockets.

Scott:
Okay. I was actually at the opposite answer there.

Yourri:
I have a long sleeved shirt on, but I literally have the Saturn V rocket and the Apollo landing tattooed on myself. I’m a little bit space-obsessed.

Scott:
Nice. And with the switch over the careers, would that mean you have to stop building rockets? Is that what I’m hearing?

Yourri:
The payload would be different. Instead of people, it would be explosives which isn’t necessarily something I’m super keen on doing. I mean, I could do it, don’t get me wrong. The principles still apply. Everything that I’ve done now in the space exploration industry would directly transfer into building missiles for… There’s really no difference other than how you recover the object and what you put in it.

Scott:
Within your current industry in space, is there opportunity to move jobs as well?

Yourri:
There’s definitely room to move up. I’m still technically a level one engineer. So there’s definitely room for me to go up the chain. After this I would become a senior level, after that I would become a principal, after that I would be a… I don’t know. After that I would be a specialist and a principal engineer. And at that point I could feasibly try to get a position as a director, which would be me running an entire department.
And ultimately that is actually the end goal. I have found that I really like, not only the engineering side of things, but also the management and operations. So I would love to be able to run a department at some point or another. I enjoyed it when I was managing interns as a grad student and I’m finding I still like it now.
So I’m still relatively early in my career and I’m still relatively low on the ladder. There is definitely room for me to grow. It’s just that I could grow much faster in a different industry simply because I’m so highly specialized in a particular thing that would make more elsewhere.

Scott:
I don’t know how it works, how you’re thinking about it, but I know that there’s concerns there about one set of work is furthering space exploration, the other set of work is building things that kill people with that.
And so I know that there’s a lot of nuance to that decision and you have a great setup either way and a great career it sounds like, great career prospects in your current field or financial prospects in the defense industry with that. But is that, maybe, partially addressing the issue and the conflict around the decision?

Yourri:
Yeah. That is the root of the cause. Someone’s got to do it and I’m so happy that someone is willing to do it. I just have… I don’t know if I could personally do it. I think I would struggle. If I worked on the exact opposite side, like I was building ballistic vests and more of the protection systems, I would have absolutely no qualms against it.
It’s just on the offensive side that, I don’t know, I personally struggle with it, so it’s… Considering how happy I am at my job right now, I don’t know if I would trade 40,000 for that, which sounds crazy for some people, but-

Mindy:
No. Money is not everything. You have to be able to sleep at night. So I would absolutely say stay with what you’re thinking right now and you can always change your mind down the road.

Yourri:
Yeah. No, of course. Totally of course.

Mindy:
If you turn 40 and you’re like, “You know what? I just want to go blow things up.” Then you can go do that. I mean, war isn’t going out of style anytime soon, which is unfortunate.

Yourri:
Exactly.

Scott:
Here’s my instinct, hearing what you said, and this is not yet where I’m at, but this is where I’m heading towards in my mind and would love to have you steer me back in the direction you want this to go with this, but I’m saying you’re a year out of school and you’re an incredibly advanced rocket scientist doing space. You’re building rockets that are going to explore space with this.
You just started in your career and spend very little and earn a huge income. And your career prospects are phenomenal within the current vertical, and you have options elsewhere from the income front. And to me that just says, flipping vans on the side while building rockets, it doesn’t seem compatible to me on the surface. It seems like, not unfortunately, but kind of unfortunately, the game plan is you’ve won.
The game plan is there, you spend very little, you build rockets, you’re very confident in your career prospects, and it sounds like you should be. And I think a very boring approach is starting to form in my mind where you spend very little, you put it into the highest and best investment case and you crush this career thing, and you’re going to just build a tremendous amount of wealth over two decades by following the very simple basics of that plan. And I don’t know. Mindy, I see you starting to look… What are you thinking about that?

Mindy:
No. I think that you are right. I really thought when you asked him if he was going to like flipping vans, he was going to say, “Yes, it’s my passion.” And if that’s the case, then yeah, try to flip a van and see what happens. Maybe you’ll love it. Maybe it goes, instead of two months, it’s a month and a half, instead of making 20,000, you make 25.
Maybe it turns out to be a really awesome thing. Or maybe it takes you five months instead of two, you make $1,000 instead of 20 and you’re like, “You know what? I’m done. I don’t need to flip any more vans.” You have the benefit of youth, so you can try all these fun things and be like, “Ooh, that didn’t work out so well.” Or, “Hey, this is great. I’m going to continue to do it more.”
You need ways to spend time that you enjoy, that aren’t just nose to the grindstone, make more money, think about investments all the time. So I think you have a lot of options to explore, and I would not say change jobs to make $40,000 more in an industry that does not make your heart thing.

Scott:
It is just like, you have every option available and clearly are just abounding with intelligence and eagerness to learn. And to me, that combination goes right back to… Perhaps frustratingly, maybe a simple approach here is really good for a lot of these things with money, because the principles are so simple and you’re going to become so wealthy with that.
If you were saying, “Hey, I want to come in and I want to retire in three years from my job,” okay. Now we’ve got a completely different discussion and we need to begin building these other things. But if you’re saying, “I want 7 million by 55,” that to me says, tax advantage, simple accounts or simple philosophy with that, one or two approaches that can be managed with that, and then go become that director as fast as you can by crushing it at work with this and that’s going to…
I got to imagine that’s a 200, 250 plus income position with probably solid bonus potential and those kinds of things and game over. You’re going to have much more than 7 million most likely if the market continues its historical performance over that period of time. And you’re probably like, “No, I’ve got 50 million ideas on how to do this.” They’re probably all really good. I just wonder where that allocation of your time and capacity might be best spent based on that. What’s your reaction to that?

Yourri:
Yeah. No, I think you [inaudible 00:32:36] here on the head. Yeah, my brain’s a little bit goofy at times, so I tend to… If it’s not clear enough I’m bounding with energy and my mind is even faster. That can be a bit of a distraction at times. And that’s probably what it comes down to. I probably am over-complicating things pretty significantly, if I’m being entirely honest, and-

Mindy:
Listen to Scott and I not argue with that.

Scott:
I didn’t say that.

Mindy:
But you’re over-complicating them in a good way. It’s not like you’re over-complicating and you’re racing to the bottom. You’ve got a really great position. It’s just, let’s free up your mind from your investment strategy so that you can focus on flipping your vans.

Yourri:
Yeah. I mean, I think I mentioned it in my application, there’s certain projects that I have that I want to… There’s certain things I want to pursue and at least right now because I’m investing so heavily, I’m still not necessarily having access to those funds in such a way where I can pursue…
The big one, for example, is my pilot’s license. If it’s not clear by now, flight is pretty cool for me and I would love to be a pilot, but it’s an expensive thing to do. It’s between ground school and actual flight hours, if you can find reasonably priced rates, it’s almost a $10,000 cost.

Scott:
That’s nothing. That’s one and a half months of your free cashflow.

Yourri:
Yeah. Fair and true, but most that [crosstalk 00:34:30]

Scott:
It seems like a lot because you just came from zero last year, right? And you’re now at 131. But now you’re in a different place now. You’re not a student. You’re a full-on employed rocket scientist, probably doing pretty good at your job. That to me sounds like a perfectly reasonable… Now, again, if you were saying, “I want to retire in three years and I want to create a bunch of cashflow,” then no, that was not a good time to get your pilot’s license.
But if you’re saying, “I want $7 million in wealth in this point in time,” you are crushing it. You’re going to accumulate 50 grand in the next year without really trying on this. You can take a small percentage of that, get your pilot’s license, still invest and becoming a multimillionaire. As long as you’re focusing on that career and moving that thing forward, you’re going to be great.
We just don’t usually have folks coming on and saying, “I want to build a mid to $10 million net worth over a 20 year period with that.” That’s one you can model out and go after and you can have a great life the entire time and crush your career with the things you want to do with that, which is hopefully good news.

Yourri:
Yeah. And to be fair, I think a majority of that figure I came up with is because of where I would inevitably like to live is just expensive and it’s only going to probably get more expensive. I don’t do too hot in the sun. I don’t particularly care to be in a place where I walk outside and sweat immediately. My ideal environment is as close to the Canadian border as possible up in Washington.
And as it turns out real estate up there is really expensive, crazy expensive. And I think I came up with that number simply by taking an average 3% inflation, which seems to not probably going to be the case. That always is a little bit concerning.

Mindy:
Washington. Does it have to be Washington? Could it be Idaho? Could it be Montana?

Yourri:
I like Montana. The big thing is I love the concept of living in a deciduous rainforest. Rain and fog, if it could be 60 degrees raining every single day of the year, I would be the happiest camper there is, which sounds nuts to most people, but I love it.

Mindy:
Great. It doesn’t have to make sense to anybody else so long as it makes sense to you. Okay. And is that where you would have your rescue ranch?

Yourri:
Yeah. I’d love to have some acreage up there and just be able to adopt senior dogs. That’s the big thing. I just want to be able to continuously adopt senior dogs. I’ve already got one senior right there and then the puppy over there.

Mindy:
I see your goal of 30 years from now having $7 million as, unless catastrophic events changed the course of history, a no brainer will absolutely happen and most likely, I can’t say absolutely, will most likely happen and most likely you will have way more than $7 million. [crosstalk 00:37:30]

Scott:
Yeah. As long as you keep your expenses reasonably close to the control level you have right now, as you scale that income, I completely agree. And so backing into an investment approach, that’s very simple around that. You might consider saying, “I’m going to take the 401k match. I’m go back to the basics of tax advantage now with that,” right? Do you have an HSA? Can I maximize that?
Then, do I have a 401k match? Then do I have a Roth option that I can do with that? Then do I have a 401k option with that? Then after all of that, you’re going to accumulate 75 grand this year based on what? the profile you just said. 6,500 times 12 is what? You probably can do that faster than me.

Yourri:
That would be… Actually, no. Surprisingly I need a calculator.

Scott:
78.

Yourri:
I’m good at math, but I need the tools. My brain doesn’t work that well.

Scott:
78 K, right? So if you do some tax optimization on that, you get a match. So I imagine you have good benefits in your profession with that. So you go through that, you probably, after maxing out the 401k or Roth option, if you worked with that and a personal Roth if you do the 401k through work, for example, with that, and the HSA, you’ll probably be left over with 40 to $50,000.
You can take 10 of that and get your pilot’s license next year. And then you have $30,000 to invest in a real estate deal or into your after tax brokerage accounts with that. Now you’ve got a very simple and boring investment strategy with that that allows you to focus on one of your passions or hobbies.
I was also, like Mindy, expecting you to say, “Oh, I love building vans. It’s my favorite hobby.” If that’s not it, then maybe you get another hobby that maybe makes money, or maybe it doesn’t with that. But that would be how the situation presents itself to me.
And that tax advantage is probably going to be a really good option, I think, unless you have a desire to get right into real estate, for example, and you would need the bigger down payment in the short run for the first or second property with that. But what does that sound like to you?

Yourri:
Yeah. No, that makes complete sense. I do have actually a follow-up question afterwards. Because real estate is something I’m interested in, genuinely interested in. I think I would probably take a different approach than most people. I actually intend on taking 0% of the cashflow from them and just dumping them right back into the actual properties.
Going back to how I mentioned, I like the concept of Ray Dalio’s Golden Butterfly. Normally those include bonds. Particularly, I’m not too keen on bonds right now. But bonds, more or less, it’s an uncorrelated asset and a hedge against inflation and I see real estate doing the exact same thing.

Scott:
Can you explain the Golden Butterfly concept?

Yourri:
Yeah. A Golden Butterfly is a portfolio where you find five uncorrelated assets and you build a portfolio that is 20% so equally weighted across. And what you find is in downturns of one, the others aren’t affected because statistically they’re uncorrelated. So in his case he would normally do, it was stocks, bonds, gold. And then I can’t remember the… Real estate, so they’re usually the form of rates and then something else. And I can’t remember that off the top of my head.
But I wanted to take that same concept, modify it to something I’m more comfortable with and then go from there. Statistically, real estate’s uncorrelated from the stock market so it makes complete sense to use that as your inflation hedge. That’s why I really, really like it. Plus it’s a good tool and people tend to be very… When they get into real estate, if they are successful at it, they tend to be really successful down the line.

Scott:
I think that’s a great approach. I think it makes a lot of sense. Once you cross the 500,000 to a million dollar net worth mark and start wanting to grow your portfolio modestly and diversify it with that. To me, I just don’t think that’s an option for folks in their early days if you want to try to maximize long-term performance with that.
I think that’s a good a debate you should have with yourself on that one about whether you want to follow the Golden Butterfly approach and that diversified approach in the early days, the next three to five years, and then begin working towards it, or whether you want to put it in place right away, which you’re currently doing, but you know that guarantees you the modest returns rather than that [crosstalk 00:42:14]

Yourri:
No. That makes complete sense. Yeah. I mean, I’m young, just take on more risk right now. It’s okay at this point in time.

Mindy:
I have a comment and this is just an observation. I am not giving you advice on how to run your investments, but I’m slightly older than you and I have 0% of my portfolio in bonds and 0% of my portfolio specifically, on purpose, in dividends. Through my index investing, I have dividends, but I have purchased no stocks specifically because of dividends. I think that growth stocks is the most option for growth, which is the dumbest statement I think I’ve ever made on this show, but that’s what I’m in it for.

Scott:
I think it’s a great statement.

Mindy:
Growth stocks have the most potential for growth. So that’s where I’m at right now. I also want to introduce you to the concept of the rule of 72, which I’m sure you already know about because you know everything, but you have, at age 28… I’m sorry. The rule of 72 means that approximately every seven years, your investment will double if you’re getting a 10% return.
And there’s other rules involved. Google it you’ll get a lot of information. But at age 28, you have $131,000. At age 35, you’ll have 262. 42, $524,000. 49, 1 million. 48. Where’s my… Zero, zero, zero. Yeah. $1,480,000. 56, 2,960,000 and by age 64-

Scott:
2,096,000.

Mindy:
2,096,000?

Scott:
Yes.

Mindy:
Hold on. I’m not [crosstalk 00:43:57]

Scott:
But I love where you’re going with this.

Mindy:
Age 64, 4,192,000. Yeah. Okay. Well, I do… You get the point. You’re going to have $4 million by the time you hit age 64 if you don’t put any more money in. Are you really going to sit there and not ever invest another dime? No. So look at how much money you’re going to have just by putting it in the stock market, assuming that it gives a 10% return and all the rule of 72 stuff, you’re actually going to hit on to a point where you’re like, “I have so much money I don’t know what to do with it.”

Yourri:
You know what’s the worst part about this? As soon as my friends listen to this podcast, they’re going to be screaming, “I told you so,” I mean, so much.

Mindy:
No, no, no, no. Oh, no, your friends are wrong. I hope they listen and I hope they hear me say, all of your friends are wrong.

Yourri:
[crosstalk 00:44:42]

Mindy:
He is not investing too much. I think that he is… I mean, you have fun, right? Do you feel deprived, Yourri?

Yourri:
Well, I mean, I live out in the middle of nowhere. There’s nothing. I think the closest Walmart is 30 minutes away, so there’s not much to do. It’s work on the house and play with the dogs and then play video games, of course, with my friends who live throughout the country.

Mindy:
But do you feel deprived? Would you rather live someplace else?

Yourri:
Would I rather live closer to a city? Not necessarily. I’m not necessarily… I tend to get claustrophobic in cities. Would I like to have more toys? Sure I would love. I used to have a motorcycle. I sold my motorcycle. I would love to be able to get a motorcycle again. I would love to be able to get my pilot license and go flying on the weekend.
Unfortunately, I tend to find that my hobbies are really expensive, so it’s like, okay, I got to try to figure out which one do I want to pursue right now and then from there take it further. Turns out there’s not all that many activities in the desert, unless you’re into dirt biking and dune buggying, which I’m not really into.

Scott:
Yeah. Okay. In that case, I generally agree somewhat with your friends to a limited extent on this. And here here’s why, right? Because Mindy just said, your net worth is 131,000 right now. You invest that at the rule of 72, you’re going to have 2 million bucks. Let’s say the next year you invest 60 grand, right? Or half of that 65 grand, right?

Yourri:
Yeah.

Scott:
Now, you’re going to have another million or a little less than a million layered on top of that at 55, 56, right? according to this. So that’s 3 million. Then you do the same thing again the year after that, you’re going to have 900,000, right? So you only need to keep the investment profile alive and keep control of it for another five, six years, with your current spending. And if you get a raise next year or a bonus, or any of this… You’re going to be able to sustain that level of investing most likely in there.
Now, you want to be conservative, but you’re way, way farther conservative than you need to be to get to 7 million by age 55 with your current approach with this. Again, we’re often talking to folks who want to retire in three to five years and so that where we need to get really aggressive and keep the foot on the gas with the way you’re spending and how you’re investing, and maybe consider some of these alternative investment approaches.
But with your goals, you are so good from where I see that you can just live your life and love it in the meantime and you have a very high probability of becoming pretty wealthy by that time point you want and get your pilot’s license as well in that.

Mindy:
Okay. So I’m going to tack onto what Scott is saying. What I’m hearing you say, because I do agree with Scott, but what I’m hearing you say is that you like your life right now. I think that you can go out and get your pilot’s license at the $10,000 that it’s going to cost. And you’re not going to derail yourself from your future goals. I think you can go and get a motorcycle. You can get a really great motorcycle for sub 10,000, right?

Yourri:
Yeah. But knowing me, what I’m going to do is I’m going to go buy a beaten up one and then fix it because that’s fun.

Mindy:
Okay, so do that. And then you have your motorcycle, you can fix it up, because it’s fun. You get your pilot’s license, you can go around and fly. But I hear Yourri saying that, “I make this much money, but I spend this much money because that’s just what my life spends. I don’t spend this much money because I feel deprived and I’m hoarding away every single dime trying desperately to get to a million dollars so I can retire tomorrow.”

Yourri:
Yes and no. I would say that if I knew that I had more flexibility, if I knew that I could invest half as much and still meet my goals, I would invest half as much. I just [crosstalk 00:48:37]

Mindy:
What would you do to the other half?

Yourri:
No, I’d just probably take more trips. I have not flown out of this country in over a decade, which sounds crazy because I have family in Canada.

Scott:
I’m sure you’re more than capable of this. I would do this following the call. Take a spreadsheet out and put in a stock market index return number of 8%, something really conservative or 7%, something like that, and say, “Here’s where my current net worth is if I just put it into an index fund at 7%,” or whatever toggle number you want with that, right?
And then say, “If I invest this much per year, where am I going to be at at age 55? If I invest this much per year, what am I going to be at? How’s my salary expected to change over that period of time and my investment,” because you’re not… If you’re able to invest 65 or 78 this year, based on your current profile, if you do drop that down to 50 and I give you 28,000 more dollars to spend this year in fund money, which is going to seem like a lot, I’m sure with that.
And then next year, do you get a raise? Or the year after, do you get a raise or a promotion with that? And so can you sustain those types of things? I think you’re going to find that your net worth is going to be so far and way beyond that $7 million mark in a lot of those models that you put together, as long as you sustain a 50,000 ish or 30 to $50,000 level of investment that you’re going to be like, “Oh my gosh, that number is way higher than I really needed to be with that.”
And that I think will be very freeing for you because that’s super simple and you can just think about it like that. And then you get as much fun as you want putting together the other parts of your investment profile with other portions of that. But if you just stick to one formula, for example like that, I think that will be very freeing for you from a mental standpoint with that. Have you done that exercise?

Yourri:
To the nth degree and further I actually have the spreadsheet up right now. It projects everything from every single year, all the way till my age 100, assuming standard returns and-

Scott:
Where are you at at 55 in that model?

Yourri:
If I continue what I’m doing right now, let’s see, 55 years, year of-

Scott:
I love this. This is awesome. I have the same thing.

Yourri:
My net worth in that case is 6.4.

Scott:
Really?

Yourri:
Yeah.

Scott:
How much are you investing per year?

Yourri:
Exactly as I am right now, but the other assumption I made is a wage growth of 1.5% er year. And then I also assumed-

Scott:
It’s killing your model, is your 1.5% wage growth. What is a more realistic number there? And I know we don’t want to be… We’re not going to plan aggressively, but-

Yourri:
Yeah. I mean, it depends. And that’s the real question, because I don’t necessarily know, because I’ve been in the workforce for exactly one year, so I actually don’t have any reference to it. And last year, at least with my work, I got a cost of living adjustment, but not necessarily a raise and the reason being they couldn’t offer it to somebody who had been working there for six months. So I haven’t necessarily had technically a true raise yet simply because I hadn’t been in my job long enough.
Come January, that’ll probably be different because, in my personal opinion, I’ve knocked it out of the park where I work. And I’ve taken on probably more responsibility than I should have, but I still swing it. And at that point I’ll be there for a year and a half. So at that point I’ll be able to take a look at this and readjust accordingly, but I don’t know for sure.

Scott:
Well, I think you can do some research around people who have been in the profession for three to five years and form an opinion about where you benchmark mark against some of those folks and put that in, and that… It just doesn’t seem to me with your ambition level and the way you’re self-assessing, unless you’re wildly off, which seems unlikely in this, that you’re going to be earning the same level with this.
You are in your first year in your career, in a high demand field with that, but there’s no way that the salary figure doesn’t start with a two in five to seven to 10 years, in my opinion. That seems unlikely in this field, right?

Yourri:
Yeah. My projections for 55 with that 1.5%, I would end at 182, which might not actually be super necessarily far off. My dad’s 55. I know how much he makes.

Mindy:
He’s 55 in this year. He’s not going to be 55 in 30 years from now.

Yourri:
True. Totally [crosstalk 00:53:12]

Mindy:
I would use three to 4% just for cost of living, but if you’re already knocking it out of the park… And by the way, I recommend that you start a document right now that says all the things that you have done, and as you remember what you’ve done add to it, because sometimes it can be difficult in the spur of the moment to remember exactly what it is you’ve done over the course of the year and a half that you’ve been there. But that’s a side note.
I think cost of living is three to 4%. So knocking it out of the park, I can see you getting a 7, 8, 9, 10% raise. I don’t know anything about the space industry. I don’t know if that’s realistic, but if they-

Yourri:
It tends to not work necessarily that way. Once you get to this area of engineering, you start a little high and then you sit there for a pretty reasonable amount of time. For example, my dad works in defense, so by every definition factoring-wise, he would be making more than me, which he is, but at 55 he is not making 182. So that’s where I’m… unless I really take the step toward trying to do more managerial.
If I take the more managerial route, I absolutely will be making more than this. But if I really am dedicated towards staying in engineering… Engineering actually plateau. You start high, but you tend to plateau and that’s the weird situation. But if I switched fields, yeah I would. 10% is easy. I’d probably do more than that if I’m being entirely honest.

Scott:
Okay. Well, my instincts without going too far into the model tell me that you’ve got a really conservative model to get to 6.4 million, would you agree that that’s potentially fair?

Yourri:
Yeah. It’s probably overly conservative, and there’s no doubt about that, but I guess that’s just my risk-averse brain.

Scott:
Change the wage inflation to 2.5% from here.

Yourri:
Okay. Will do. I am changing that to 2.5 right now, and we are pulling that across, autopopulate. How many times have you had somebody run their spreadsheet in front you?

Scott:
Never. This is fun, but we do it internally at work all the time with this stuff. What’s your net worth at 55?

Yourri:
Yeah. My new net worth, if I do 2.5%, I’m sitting at 6.7.

Scott:
But there’s some other things to fiddle with there, but look, I think the bottom line is I bet you got a really conservative model here. I bet you you’re going to outperform that. I bet you, you can relax a little bit on some of the spending there. And I think I would strongly urge you to consider the best investing approach or one, two or three of those in the early years and then work towards potentially that butterfly methodology longer term. Look, that may have a bad outcome, right?

Yourri:
Yeah.

Scott:
It may underperform, but mathematically, I think you’ll agree that, that makes more sense. I imagine you might come, as you noodle on it, to think, “I might as well make the best mathematical bet here and then optimize into the protection mode long term with that.”

Yourri:
No. That makes complete sense. There’s a few of my accounts that are probably more trouble than they’re worth because they do require me to actively manage them. And I love my job, but I’m not looking for more. It’s really sometimes what it comes down to. I’m looking for investments not additional work on my plate at times.

Scott:
And if things don’t work out there, you can always go to Southwest since you’re going to get your pilot’s license next year.

Yourri:
Yeah. There you go. Exactly.

Mindy:
I’m going to tell you, they make a little bit less than you do.

Yourri:
You know what? Feasibly though, you could be a pilot and then go into crop dusting, because it’s an agricultural area and that you can make some pretty insane income doing that.

Scott:
Well, I know Mindy had two topics you wanted to get to here in addition to what we discussed here. Should we dive into those, Mindy?

Yourri:
Yeah, let’s dive into those.

Mindy:
Yes.

Yourri:
So my super funny fun ways of going about coming up with additional tax savings. And this was brought up into my mind because last week’s published episode, at least from wherever we’re recording this, the other individual and her husband had solar panels and it’s not the only time I’ve heard people say that they have solar panels and a solar loan on the money podcast and time and time again, no one ever mentions it.
But technically, if you live in a state where you do a credit exchange with the utility company, you’re creating a transaction. And because you’re creating a transaction, that solar panel system can technically be written off as a business expense and you can do markers on it or rapid depreciation of an asset, which means that not only can you get your 26% credit from when you purchased it, but you can additionally then write off in deductions 80% of the value on top of it.
And so if you’re in a high income tax state like myself, actually even though your loan amount might seem high, there’s a good chance that you actually recover it on the backside. Which is what I determined because of those deduct every year, how much I’m making and whatnot.
It actually works out that instead of paying around $100 a month for electricity, because electricity’s expensive out here, actually it’s close to 65, 70 projected out. And then on top of it, in my area power outages are so common that when I had my house reappraised recently to get the PMI removed they determined that the cost of the panels would be a 100% return on investment to the value of the house.

Scott:
And you’re in a sunny location.

Yourri:
I have a nearly 90 sun score, which means that I am producing significantly… I only use about 25% of the power I generate.

Mindy:
And you sell it back to the main power company?

Yourri:
Yeah. Now I’m getting paid around $60 a month right now. [crosstalk 00:59:26]

Mindy:
Wait. Oh, oh, oh, oh, I misunderstood. So instead of you spending $100 a month, you are getting paid $60 a month for electricity.

Yourri:
So instead of spending $100 a month from the utility company, I instead got solar panels, which cost me 192 a month. But with the credits and deductions, I should feasibly be able to bring that monthly cost down to… And then with whatever cash back, the cashback’s a little difficult because we’re actually doing a credit exchange. So in the winter, when I’m not producing power, I still am just exchanging those credits.
It really works out to I’m basically paying around 65 to $70 a month after those deductions come back my way. It’s deferred. At the end of the year, when I get my tax credit back then I get it there, unless I do much better tax planning, which you’ll probably be proud of me. I’ve always done my taxes on my own, because to me, it’s a game of a optimization and I love doing it. But now it’s getting way too complicated and I’m just going to hire a CPA because it’s so far over my head that I’m just not comfortable taking this on any further.

Mindy:
Okay. I want to say yes, when you are a student and you have one source of income and you don’t have any deductions, if you can figure out TurboTax, and you can because I did, you should do your taxes by yourself.
But when you get all these weird credits and all these funky stuff and you’re making enough money that you can hire somebody and it’s not going to be any sort of even line item on your budget, you should absolutely hire a professional who knows what they’re doing, who can help you optimize your taxes.
In many cases, they are saving you way more than it’s costing you to pay them to do the taxes. That’s awesome. And then I’m going to super smoothly segue into, hey, do you do anything fun with that extra electricity that you have?

Yourri:
Yes. During the winter, in fact, I heat my house because I live in an area where I’m so off grid that my house is fueled by propane and wood stove. So during the summer I have to cut wood, which is annoying and I don’t feel like spending $1,000 of propane every winter. So instead I mine Bitcoin, which sounds crazy but-

Mindy:
For those of us who don’t know what mining Bitcoin has to do with heating your house, can you share?

Yourri:
Yeah. A GPU, for all intents and purposes, if you let them run in max and you don’t care how efficient they are, they’re essentially a glorified space heater, which works really well when your house doesn’t have vents on the second floor. Because I’m working on my computer anyways, I mine Bitcoin, it produces a significant amount of heat.
And then it works out that, assuming, as long as Bitcoin doesn’t go back below, I think, 17,000, which, regardless of your opinion, I personally don’t think it is, but to [inaudible 01:02:27] I’m still up ahead. And if it does go below that, then I still have cost savings because it’s less expensive than propane at the end of the day, which is crazy, crazy expensive. I really wish I was on NatGas. But the SoCal Edison is not willing to run pipes up a mountain along a fault line.

Mindy:
Just for you.

Yourri:
Yeah, exactly.

Scott:
How many of these graphics cards do you have running?

Yourri:
I’m running four at a time, but I’ve chosen some older units, which I know are significantly less efficient, which sounds, once again, crazy. But so what I-

Scott:
You want the heat.

Yourri:
I just want the heat, which… That doesn’t make any… And people could be like, “Oh, just run a space heater.”

Scott:
That’s wild.

Yourri:
But I think that, in my personal opinion-

Mindy:
But space heaters-

Yourri:
… space heaters don’t pop out an asset that could potentially continue going up in value. That’s the difference. And if it doesn’t go up in value, then fine. I just have a glorified space heater and I got nothing out of it.

Scott:
I love that. That is super creative.

Mindy:
Yeah, that’s super creative. I’m going to throw a shout out to Alex Wald who used to work at BiggerPockets. He said his biggest regret in college, when he had free electricity was not mining Bitcoin.

Yourri:
Same.

Mindy:
How long does it take to mine a Bitcoin, because I don’t know anything about this. I know that’s shocking with the way that I phrased that.

Yourri:
Let me rephrase that. Okay. I’m mining cryptocurrency. Mining Bitcoin is just an easy way so people who aren’t familiar with this space, just understand. What I use is a pool minor. So basically I’m renting out those GPU units to people around the world at a rate and then they pay me in Bitcoin and they’re choosing to mine whatever particular cryptocurrency of the day is being mined. I don’t care. I’m agnostic to whatever they want me to do, but they’re paying me a rate. So while I’m heating my house, my graphics card are producing assets for me.

Scott:
What’s the dollar value of the Bitcoin one might mine on a cold winter’s night on a California mountain using five GPUs?

Yourri:
Those GPUs were producing me… Before we were at these prices back last winter, I was making around $200 a month.

Scott:
All right. Not bad. What’s your electric city bill on that?

Yourri:
I don’t really know. Well, before I had the solar, because that was installed in the summer, I was paying around $54 for that. So arbitraging, I was making about 150 a month just from heating my house.

Scott:
And would one be able to do better with more efficient GPUs.

Yourri:
You could make significantly more money. But you definitely would not have nearly as much heat, which is my concern.

Mindy:
So how about this? Get another machine that generates the… That is faster to make more money while you are also heating your house with the old units.

Yourri:
It would work except for now it, probably because of the global silicon shortage, which is what’s causing the weird fluctuations in cars, the Silicon shortage is also affecting the GPU market. Which Scott 100% knows unless you’re on console. I’m assuming your computer.

Mindy:
Yeah, in my computer.

Yourri:
Okay. So he knows 100%. The graphics card prices right now are so astronomically inflated to the point where it doesn’t actually make all that much sense. I actually got in before this occurred. I bought things when you could actually buy a deal. And if you think the real estate market’s hot, the GPU market’s even worse.
If and when the prices go down, 100% I’ll probably flip out my old cards for newer ones that are also inefficient, unless I decide to come up with some other ingenuitive thing like… I don’t know… Maybe I’ll start manufacturing methane or something crazy like that. I’m just making my own gas because that’s something that I would do in my garage.

Scott:
Wow.

Mindy:
His guts. I don’t know what to say. Do you have a methane tank under your house? How do you-

Yourri:
No, I mean, you could feasibly do it. I live in a community with a lot of forces.

Scott:
I don’t manufacture methane intentionally.

Yourri:
I mean, you could. I live in a community with a lot of livestock, so livestock produce something that creates a lot of methane, so I could technically use that, harvest it, and then when that’s done, use it for compost-

Mindy:
Harvest it.

Yourri:
Yeah. Use that for my garden and whatnot and just… Yeah. I’m eccentric and weird and I love it. And I come up with these weird ideas. So regardless, I could do that, but I’m going to not do that because there’s probably safety issues with it. So for all intents and purposes, I’m just going to keep GPU mining for heating my house because it’s making me money and I’m not burning through propane at a ridiculous rate.

Scott:
I really think you’re in the right profession, Yourri. This is awesome.

Yourri:
I hope I am, because I spent nine years in school.

Scott:
Well, has this been helpful to you so far? [crosstalk 01:07:48]

Yourri:
No. Full disclosure, I think what I’m going to do after this is take a day to sleep on it, think about it a little bit further. I’ve been taking notes the whole time. I think at first glance, probably what I’m going to do is simplify the approach a little bit for now. I think you are right. I’m young enough right now where taking on some of these risk protection measures that I have, even in a massive downturn, let’s say March 2020 happens again, it probably doesn’t even matter for me.
I can probably take on some more risk and start addressing some of my more interesting investment thoughts. The big one being that real estate investment deal that I have got in the pipeline and pursuing that because it is something I’m genuinely interested in. I love building systems. I mean, it’s not kind of clear.
I love building these things, so building up a team and trying to create that, I think is something that I’m going to… I mean, not only is it going to build my wealth, I think I’m genuinely going to enjoy myself, which is, if your fund makes you money, then why not? So I think it probably does make sense.
Plus if I do start taking on some of these larger deals, I’m pretty dead set on doing it without a partner, which means I am on the hook for the capital, which that is going to be quite a bit. So I’m probably going to have to start realizing that and planning a little bit better ahead.
Scott and Mindy, I did pull something from this, which is I’m probably being a little too risk averse which I probably don’t need because I’m young enough and I’m in demand enough where it doesn’t really make sense for me to be doing this.

Scott:
I think That’s a good takeaway from some of this. I think if you need to catch up, you always can with that. But I think your salary is… I’m still skeptical a little bit of your assessment of the salary situation because I feel like three years in, five years into this, there’s probably a good chance you’re going to do pretty well in being, I would imagine, in demand, although I could be wrong.
And I think that you’re going to be happier with your life over the next 15 years if you get your pilot’s license now rather than stock pile all that into the next investment with that. There may be an investment or something with that as well. So I think you’re just crushing it right now. I need you to take a step back and say, “I am crushing it right now. I’m going to be very wealthy.”
I’m probably going to say, “Oh, well, past that 7 million mark, if anything goes well with a couple of these things…” And I think that… That would be how I would be thinking about it, I think personally.

Yourri:
Well, I appreciate that. I think I’m doing a lot of things right and I think there’s probably things I’m doing wrong and I’m not even conscious about it because I’m so hyper focused on what I’m doing. And I don’t know if those will pop up over time. But yeah, I think you’re right. I should probably focus in on some of the things that are going to be better generators for me at this point.
The dividend fund could probably go, as much as I love it because it’s… Mindy, I don’t know if I… Because I didn’t show what was in it. It’s not dividend stocks. It’s not your classic values, your Colgate or anything like that. It’s actually covered call strategy-based dividends. So things like QYLD, XYLD, BST, and BST actually beat the QQQ over the past decade. So things like that.
So they’re still growth-focused, but they’re going about it differently. It’s an ETF that does it via options trading which I’m not… I’m really good at the sell side and terrible at the buy side. So I’ll let someone else do the buy side for me. I’m still apprehensive on getting rid of the dividend fund simply because I think that… And please correct me if I’m wrong. I won’t be able to pull any of my retirement funds if I…
Let’s say one day I changed my mind and I’m like, “I’ve had a good run. I want to retire early,” I’d like to make sure that I have some extraneous baskets that are bringing income, and if it’s not… Real estate will hopefully and should be there. But I guess I’m apprehensive on putting all my chips in said basket.

Scott:
I just encourage you with your language choice. You’re not doing anything wrong, there’s no wrong choice here with that. It’s not like you’re doing something wrong and have something to correct. I would just think about it like this, you need after tax investments.
And the reason you need them is because you are able to stockpile so much wealth on an annualized basis, on a go-forward basis from now until the time you stop doing your job or similar that you’re going to be able to max out your 401k or tax-advantaged accounts and have 30, 40, $50,000 per year leftover with that.
So in practice, that’s not actually going to be an issue. Many folks we talk to are struggling to save 1,000, $2,000 a month. And there is a hard choice there with that, but you can march right down the list with a tax-advantaged approach and do all that other type of investing with that.
And my bias would be, unless you’re trying to be an entrepreneur or start a business, or you want to stop doing what you’re doing and go into the van or one of these other side hustle ideas and you really want to do this until 55, then why not do the tax-advantaged approach that’s boring, basic 101, formulaic long term tax-advantaged investing approach with that. There’s lots to like about that as a component, because you can still do the real estate in addition to that. That’s how I think about it.

Yourri:
I have one more question and it’s actually… Once again, it doesn’t surprise you. I did efficient frontier analysis on my 401k and all the different options and I was like, “This is what I want.” And figured out exactly how to distribute it. But my immediate reaction when I saw my salary, because I wasn’t expecting that, I was expecting significantly less initially in my offer, was I should probably go the trad route, traditional 401k, since I’m in a really high income tax state. But I have the Roth 401k option.
I don’t know if it makes sense for me, but then again, if next year I have as many deductions as I’m expecting, there’s a good chance that I would fall into that category. But I guess I just don’t know… It’s in this weird situation of… I don’t know what to do at that point.

Scott:
Do you want to live in California at 55, 65?

Yourri:
Probably not. Honestly, if I’m being entirely honest, depending on what happens with my health. Technically I’m a Canadian citizen, so I could just move back to Canada, if that’s a huge concern of mine because I’m originally from Quebec.

Scott:
I don’t know. Does do the Canadians pay more or less taxes than Americans?

Yourri:
It depends on where you live.

Scott:
Okay. So, the question is, do you think you’re paying more taxes now or going to pay more in retirement? Right? And my view, because I’m slightly arrogant and I’m starting young on this, is that I will be pay more taxes at retirement age than I will today because… Let’s use this example. You want to have a 7 million net worth, that means that ultimately you’re going to realize even at the 2% rule $350,000 annually on that 7 million net worth, right?
That’s going to be realized in some form. If you believe that, you’re going to be earning more income, even inflation-adjusted, or perhaps very close to inflation-adjusted, at retirement than you are today at 55 with that, and even more potentially in retirement with that. And so my bias is, I like the Roth 401k for folks that are younger in most scenarios, and I personally invest in the Roth 401k myself because of that dynamic.
I believe that the odds of the federal government raising taxes over that period of time is more likely than them lowering taxes. And that the odds of me having more income, even on an inflation-adjusted basis at that point is higher than they are today for me. That’s why I like the Roth versus the 401k, even though I, like you, I’m in a little bit of a higher tax bracket today.

Yourri:
Actually funny enough, while you mentioned that, I pulled up SmartAsset. So if right now my effective tax rate is 30.34% where I live, technically a little higher because I also have restricted stock units which technically fall under income, but I don’t consider them because that’s an asset I just don’t want to even deal with because it’s directly tied to my work so I just don’t consider that. If I move up to Washington, I will have the exact same effective tax rate if I’m making 325,000. So nearly triple the income, I’d still be paying the same in taxes or at least effective tax rate.

Scott:
Well, in that case, you might have a decision there where you’re like, “You know what? It’s just lower risk to put the money in the 401k right now and think about rollovers or whatever it is later on.”

Yourri:
[crosstalk 01:17:51] Okay.

Scott:
It could be that there’s some enough nuance in your scenario where that’s true. That’s interesting.

Yourri:
Done. That was something I was hoping you’d have a really good idea on because I was… It breaks my brain. I think it might just be California’s taxes.

Mindy:
Well, I’m going-

Scott:
And sometimes the 601 half [crosstalk 01:18:09]. Oh, go ahead now.

Yourri:
Sorry, Mindy.

Mindy:
No, no, no, that’s fine. I’m going to invite you to listen to episode 200 with Kyle Mast again, because he’s a CFP. In that episode we asked him Roth versus traditional and he said he likes the Roth right now for as long as you can qualify for it because he thinks that we have been writing big checks in the last year to help Americans get by during the pandemic. We are going to have to, at some point, pay for that program, pay for the additional programs.
And one of the easiest ways to make cuts is to cut something like the Roth option. He doesn’t think that they would touch any existing Roth accounts, but that going forward, it wouldn’t be allowed or it would be off the table or reduced or something. So, contributing while you have the ability to contribute to a Roth could make the decision easier for you. And he’s, of course, very smart and explained it way better than I did, but that was the gist of what he said.

Yourri:
Okay. That makes sense.

Scott:
And another way of think about it too, in the same vein, is you’re going to pay for it, you can cut the Roth, but you can also say, “We’re going to either raise taxes or we’re going to inflate,” right?

Yourri:
Yeah.

Scott:
And either way the Roth becomes the winner unless the tax brackets move as part of that, right?

Yourri:
Okay. It makes a lot of sense.

Scott:
And so that’s another one to think about.

Yourri:
Okay. I think that’ll be another change. I mean it’s easy at work. I just quickly pop into the Oracle system and then just do the quick change. No, that’s something I’ve been wondering about and just my loose research came to the conclusion that maybe Chad was just a better option for now and I wasn’t 100% certain with it, but then I listened to more personal finance stuff and I was like, “Yeah, I should probably just do the Roth regardless of how much I’m paying.” Okay. Well, perfect. Thank You.

Mindy:
Yeah. So listen to episode 200-

Yourri:
Will do.

Mindy:
… and let Kyle give you the rundown. Okay. Yourri, this was fantastic. This was so much fun. I’m excited about the solar panel thing because we’re getting ready to put solar panels on our house. And I know I have credit exchange with my utilities, so I am going to… This is a research opportunity for me to look into that and see what options are available for me.

Yourri:
Perfect.

Mindy:
Thank you so much. And the whole Bitcoin thing to heat your house is the most ridiculously fabulous idea ever. I am-

Yourri:
Yeah. I love that.

Mindy:
Yeah, that’s awesome. But I really do appreciate your time today. This was so much fun and I know that people are getting a lot out of it just by, “Oh, that’s an option. I’ve never thought about that before. Here’s the other ideas that I can think of too.” And I really like the spark of the outside-the-box thinking that you created. So thank you very much.

Scott:
You’re rocking it.

Yourri:
Well, you’re very welcome [crosstalk 01:20:56]. Thank you so much for the assistance.

Mindy:
Okay. And we will talk to you soon.

Yourri:
We’ll do.

Mindy:
Holy cow, Scott, that was Yourri and his amazing brain and his super think-outside-the-box mentality and his I’m-going-to-crush-life story. What’d you think?

Scott:
I thought it was great. I love the energy, the passion, the thoughtfulness. He’s clearly dived very deeply into a lot of these areas of finance. He’s clearly got a lot of ideas. He’s clearly got a great start to his career. He’s going to be very wealthy and his goals are super compatible with long term financial planning and those types of things.
And I think he’s going to be very successful and we just need to simplify a little bit. And I think he should feel free in this particular case to maybe pursue a little bit more of those interests on the side like that pilot’s license or some of those things as well, given the crazy strength of the basics in his financial position.

Mindy:
Yes. I 100% agree. He’s doing really well, and I think that a lot of people get so focused on the end goal they forget to live from now until then. So absolutely agree that he should get his pilot’s license, he should get a motorcycle, he should go do a lot of fun things and enjoy what he’s doing while also keeping in the back of his mind, “I need to save money for the future, for my rescue ranch at age 55.”

Scott:
Now, I do want to acknowledge one thing here where he and I are probably wired a little differently with that. When I was just getting started out my career, it was consuming to a certain extent. I wanted to become financially free early in life. I did not want to amass millions of dollars by retirement age and realizing at that point.
And so I took a completely different approach and was all out and deprived and went after it… Not deprived, but certainly had a very low cost, very frugal lifestyle that was much even tighter than what Yourri describes here in a lot of ways and that kind of stuff. And that was appropriate for me at that point in time.
So it’s not wrong. It’s not right for any of these approaches and that approach can get you to something that’s beyond that, where passive income exceeds lifestyle expenses sooner in life, but it’s not necessary if your goal is not what my goal was with that. And I think that highlights that and where that extreme factor is very powerful if you want to get over the hump as soon as possible to financial freedom. But if that’s not your goal, then don’t do that, because that’s going to set you back in some ways.

Mindy:
You know what, Scott? That’s a really good point. Once we discovered the concept of financial independence, we pursued it very vigorously. And what’s the difference in one more year of work with a much more enjoyable life along the way. We don’t spend a lot of money anyway, so it’s not such a big deal for us.
Our life wouldn’t have changed so much, but we would’ve stopped the hard, hard, hard slog. And even now I’m constantly telling Carl, “Just slow down. Just take a breath. Just stop.” So I think we’re finally starting to figure it out. But yeah, definitely don’t forget to enjoy life.

Scott:
Yeah. I think we just hear all these stories and that sense of urgency is so powerful in a lot of ways, but if it’s not cool, don’t do it, because it’s not necessary in cases like yours.

Mindy:
Exactly. Okay. Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
From episode 236 of the BiggerPockets Money Podcast, he is Scott Trench and I am Mindy Jensen saying we’ll be back in a pinch pinch.