Frugal Lifestyle - Scott Trench Podcast

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Frugal Lifestyle - Scott Trench Podcast

Rustin Dowd
Real Estate Agent · Olathe, KS · Member since 2015 · 11 posts · 7 votes

@Scott Trench, loved your podcast. Our values and beliefs are identical. I am turning 26 this year and actually have been going through the same thing you outline in podcast and I believe you go over in your book. I loved what you said about the "default" mindset. It's a lifestyle and that doesn't mean it's not fun or cool but our default action is not always go out to eat. I actually think this life style goes much deeper than real estate. I think having this frugality mentality helps in so many other areas of your life. Yes, finances are a big part of it. But it also impacts other areas of your life like the mental, emotional, social, and physical. Mental: Do you spend your free time learning or binge watching the latest Netfilx series. Emotional: Do you spend too much time on social media getting caught up in the "daily drama". Social: Are their people in your life that you need to cut out of your life that are holding you back from reaching your full potential? Physical: Being frugal will help you eat healthier, have more energy, workout more often etc. 

I have been trying to get my friends to buy into this smart lifestyle that will set us up for success much earlier than the majority of people our age.

I have been called cheap and have even lost friendships over this. It can be hard when most of your friends do not have the same thought process that you share. I am not sure if you cover in your book but I think a big part of this lifestyle is learning how certain people in your life has expiration dates. Not trying to be harsh but if you have a goal and your are surrounding yourself with people who are not dreamer and do not support you in your goals then its time to slowly distant yourself from them. I actually played professional basketball in Australia and cam back to the states and got a Sales job. Made decent money and then jumped in to Real Estate Full time after I got cashed up. I am going to recommend all of my friends read your book. 

Thanks again for the great podcast,

Rustin

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Linda WeygantPro Member
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
9y

There is a huge difference between frugal and cheap.  Make sure you know the difference and try really hard to be one and not the other.

Frugal - somebody who goes out to eat at a moderately priced restaurant, doesn't order an appetizer, dessert or drinks.  The restaurant either has counter service or the frugal person tips their server appropriately.  Doesn't do this very often, but gets good value when they do.

Cheap - somebody who goes out to eat, gets good service from the wait staff, pays with a coupon and either doesn't tip at all or tips based on the discounted amount.  Not tipping on the full value of the ticket is a sure way to be called cheap.

****

Frugal - somebody who goes out to eat with a bunch of friends, orders conservatively, asks for a separate check and pays themselves.

Cheap - somebody who goes out to eat with a bunch of friends, pays on a group check, but then sits with a calculator for 30 minutes to save $2.

****

Frugal - the landlord that orders supplies (like furnace filters or batteries for smoke alarms) in bulk to get a price savings.  Swaps them out regularly to maintain their furnace and property and avoids costly repairs

Cheap - the landlord that won't fix or maintain anything,  Pays big bucks for big repairs because there was no maintenance along the way.

****

Cheap - borrows a friend's truck, doesn't refill it with gas.

Frugal - saves up a bunch of heavy chores so that when they borrow their friend's truck, they get it all done at once, making the refill of the gas tank a good investment.

****

Frugal - waits til movies are out on streaming services before seeing them.

Jerk - complains on social media that all the movies were spoiled by their friends talking about them (this is a pet peeve of mine - if you're going to wait a month to see something, then stay off of social media and avoid spoilers.  Or don't b**** about spoilers).

****

Frugal - shops for an inexpensive, but well qualified place to do oil changes and regular servicing on their car.

Cheap - doesn't maintain the car, never changes oil or anything else.  Can't understand why they have to replace their car every 6 years.

****

Frugal - brings a Buy One, Get One coupon to a group dinner.  Offers to split the price of the "Buy One" portion with somebody else.

Cheap - brings a Buy One, Get One coupon to a group dinner.  Insists on piggy backing on somebody else's full price meal in order to get their free one.

****

Frugal - takes their kid to the museum on free days.  

Cheap - tries to convince the minimum wage employee at the museum that their 12 year old is really 5.

****

Frugal - goes to an all you can eat buffet.

Cheap - tries to smuggle out food in tupperware containers.

****

There are a lot of people that are frugal, but get called cheap and that's a shame.  There are a ton of people out there "wasting" money and complaining they never have any.  There are a lot of people who get called cheap who really are.  

Podcast Guest on Show #244
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  • Scott TrenchPro Member
    Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
    9y

    @Rustin Dowd Thanks so much for the kind words here and I think we share a lot of similar mindset traits. I definitely think that it's all about the default option - in fact, I suggest that it's ridiculously difficult to try to break habits with your spending, so the best option is to spend as little as possible in the fixed expense areas of your life, and enjoy the small stuff from time to time, but not as your "default" like you say here. 

    I hope you enjoy the book even more than the podcast. I believe that it will be really helpful in affirming much of what you say here and I hope that it is full of plenty of new ideas for you as well.

    Podcast Guest on Show #223
    BiggerPockets
    1Reply
  • Rick Novotny
    Investor · Kansas City, MO · Member since 2015 · 128 posts · 89 votes
    9y

    @Rustin Dowd Are you buying properties in the KC area? I am originally from Overland Park, I lived there all my life. I moved to Denver last year for a huge career opportunity. I have one property here in Denver which I am househacking and I have two rentals in Raytown.

    0Reply
  • Rustin Dowd
    OP
    Real Estate Agent · Olathe, KS · Member since 2015 · 11 posts · 7 votes
    9y

    @Rick Novotny No my properties are just south of Johnson County (Paola, Ks) However I am looking to invest in the KC area as well as Johnson County. I have also looked at the Raytown area, how are your rentals doing there? Would you invest there again? 

    0Reply
  • Rick Novotny
    Investor · Kansas City, MO · Member since 2015 · 128 posts · 89 votes
    9y

    @Rustin Dowd I like Raytown because the properties are pretty cheap and the cashflow is nice. I will definitely be continuing to invest there. I am only involved in the purchase process and then I hand everything over to a property manager to deal with the day-to-day business while I focus on my career. I simply collect checks after the purchase process is complete.

    0Reply
  • Linda WeygantPro Member
    Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    There is a huge difference between frugal and cheap.  Make sure you know the difference and try really hard to be one and not the other.

    Frugal - somebody who goes out to eat at a moderately priced restaurant, doesn't order an appetizer, dessert or drinks.  The restaurant either has counter service or the frugal person tips their server appropriately.  Doesn't do this very often, but gets good value when they do.

    Cheap - somebody who goes out to eat, gets good service from the wait staff, pays with a coupon and either doesn't tip at all or tips based on the discounted amount.  Not tipping on the full value of the ticket is a sure way to be called cheap.

    ****

    Frugal - somebody who goes out to eat with a bunch of friends, orders conservatively, asks for a separate check and pays themselves.

    Cheap - somebody who goes out to eat with a bunch of friends, pays on a group check, but then sits with a calculator for 30 minutes to save $2.

    ****

    Frugal - the landlord that orders supplies (like furnace filters or batteries for smoke alarms) in bulk to get a price savings.  Swaps them out regularly to maintain their furnace and property and avoids costly repairs

    Cheap - the landlord that won't fix or maintain anything,  Pays big bucks for big repairs because there was no maintenance along the way.

    ****

    Cheap - borrows a friend's truck, doesn't refill it with gas.

    Frugal - saves up a bunch of heavy chores so that when they borrow their friend's truck, they get it all done at once, making the refill of the gas tank a good investment.

    ****

    Frugal - waits til movies are out on streaming services before seeing them.

    Jerk - complains on social media that all the movies were spoiled by their friends talking about them (this is a pet peeve of mine - if you're going to wait a month to see something, then stay off of social media and avoid spoilers.  Or don't b**** about spoilers).

    ****

    Frugal - shops for an inexpensive, but well qualified place to do oil changes and regular servicing on their car.

    Cheap - doesn't maintain the car, never changes oil or anything else.  Can't understand why they have to replace their car every 6 years.

    ****

    Frugal - brings a Buy One, Get One coupon to a group dinner.  Offers to split the price of the "Buy One" portion with somebody else.

    Cheap - brings a Buy One, Get One coupon to a group dinner.  Insists on piggy backing on somebody else's full price meal in order to get their free one.

    ****

    Frugal - takes their kid to the museum on free days.  

    Cheap - tries to convince the minimum wage employee at the museum that their 12 year old is really 5.

    ****

    Frugal - goes to an all you can eat buffet.

    Cheap - tries to smuggle out food in tupperware containers.

    ****

    There are a lot of people that are frugal, but get called cheap and that's a shame.  There are a ton of people out there "wasting" money and complaining they never have any.  There are a lot of people who get called cheap who really are.  

    Podcast Guest on Show #244
    2Reply
  • Ted Lanzaro
    Fairfield CT · Member since 2017 · 63 posts · 77 votes
    9y
    Please let me provide an alternate viewpoint from a successful CPA, business owner and investor. Do not concentrate on being frugal. Concentrate on education and providing as much value to others in whatever your chosen field. We live in an information world and to be successful, you need to be an expert at something valuable. Then, you can make a great living way above your expenses, invest your free cash flow but spend generously on yourself and enjoy life. You only live once! Nobody likes frugality and getting a reputation for being frugal or cheap is not a good idea. Plus, you have to have an abundance mentality to create wealth. No offense to Scott but I know what I am telling you is a much better life approach. Good luck! Ted
    1Reply
  • Rustin Dowd
    OP
    Real Estate Agent · Olathe, KS · Member since 2015 · 11 posts · 7 votes
    9y

    @lindaweygnant I love that, it is a very fine line but after you create the lifestyle habits I think it is easier to stay on the right side!

    @tedlanzaro I agree to a certain extent. As a business owner and investor I agree you should always be learning and providing value. Part of that in my opinion is being smart with your money. The problem I see with so many people (friends, friends parents, previous co workers) is that they see being frugal as a bad thing. I love my life and I live a rich life. By being frugal I will be able to continue to live a great life that I love as well as setting my family up to continue to enjoy all that we have been blessed with. It is a mind shift from I "need" to spend money on this brand new car, or I "need" to go out to eat because I "Deserve it" and I work hard. I love eating home cooked meals with my family, going out on date with my wife and driving a nice vehicle but I don't NEED those things to be happy. This addiction America has created of needing all of these materialistic things is something I am not buying into. I need my family and I always want to be growing (Education), and lastly I need to use what I have been blessed with to bless others. 

    Thanks,

    I appreciate all of the feedback!

    1Reply
  • Justin KurpiusPro Member
    Rental Property Investor · Member since 2017 · 84 posts · 41 votes
    7y

    @Scott Trench @Mindy Jensen

    Scott,

    I, like u, am a “money nerd”! I am responding here to your challenge in the bigger pockets money podcast (Show 81) on cash flowing gold. So here goes:

    Strategy: Selling covered calls

    Example: buy 100 shares of GLD (Gold ETF). After u acquire the shares, sell 1 Call option against your shares.

    What does this mean: you are holding the GLD shares in your brokerage account. Buy selling the call, u r giving the market the market the opportunity to buy your GLD shares from u at price defined by the strike price of the call....which will typically be higher than the going price.

    Live example of a trade I made:

    Reasoning for trade: real estate is high. Bonds are risky given interest rates. Stocks are high. Emerging markets are volatile due to trade. To me, gold is the only asset underpriced while hedging against a stock sell off or uncertainty. But I wanted cash flow.......

    All of this was done in Traditional IRA:

    I bought 500 shares of GLD @ $121.40 = $60700

    I sold 5 Call Options with a strike price of 132 set to expire Sep 30 @ $135.00 = $675.00

    675/60700= 1.1% cash flow for 6 months

    Possible outcomes at Sep 30:

    GLD is below 132, the calls expire worthless. U turnaround the following trading day and sell more calls.

    GLD is above 132, the call options will be executed and your shares are automatically sold at @ 132. Your account would now have $66,675 in cash, a 9.8% return in 6 months

    As it stands the day of this post, I will make 9.8% :)

    Let me know if you have questions.

    -Justin Kurpius

    0Reply
  • Scott TrenchPro Member
    Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
    7y

    @Justin Kurpius - I believe you are not conducting a thorough enough analysis of a possible way to lose badly on this investment approach, and are not giving enough weight to perhaps the most probable outcome of this bet:

    How to lose badly:

    What happens if the price of gold falls substantially? 

    Yes, your calls will never get executed and you get to keep that $675. But, for every 1% drop in the price of gold relative to the dollar, you lose effectively $607. Your approach only works if gold appreciates at least 1% every year, and it is a poor return except in the lone case where gold appreciates considerably. You only win relative to the long-term averages of the stock market or real estate if gold appreciates on the timeline that you predict, and only if you are remarkably. Gold is, contrary to popular belief, a fairly volatile asset and can rise and fall in value in multiples of 2, 4, 5, or more - it certainly has in the past 100 years. 

    Second - the most probably outcome:

    Remember reversion to the mean. From 1915 to April 2019, the CAGR of the price of gold is 1.06%. This means that most likely, you are going to experience 1% nominal price gains on gold per year, on average, over the long-term. This means that while anything could happen this next year, most likely, the annualized appreciation on your gold holdings will be 1%. In this case, you make a 2% return with your approach. A poor alternative, IMO, to the long-term averages real estate investors and index fund investors can expect. 

    Podcast Guest on Show #223
    BiggerPockets
    0Reply
  • Justin KurpiusPro Member
    Rental Property Investor · Member since 2017 · 84 posts · 41 votes
    7y

    @Scott Trench

    Great callout. I should have mentioned this is a short term position. And this is also a speculative play that works for my situation.

    But looking at it differently, if someone has Gold in their portfolio, why not sell some covered calls for income? Not for everyone I know, but a thought.

    -Justin

    0Reply
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