Transcript of Scott Trench: How to Fast-Track Financial Freedom and Early Retirement | Finance | E367

People hate their jobs a lot of times in this country, and that's a powerful motivation to get started on the journey to financial independence.

Scott Trench, real estate investor, best-selling author of Set For Life, and the former CEO of BiggerPockets, Scott built a multimillion dollar portfolio and achieved financial independence by the time he was 27, all through frugality, house hacking, and smart investing.

Frugality is extremely powerful, even if it It sounds unappealing at first. It both increases the amount of capital you can accumulate in your personal portfolio, and it reduces the amount of wealth that your portfolio needs to generate for you to live off of.

Seven years into being the CEO, you decided to step down. Now you're a full-time creator. What was really happening there, and why did you decide to do that?

I had set out to achieve fire, to retire early and enjoy my life, and I had done well past that point. I want to practice what I preach a little bit.

For people who want to start a fire lifestyle, what are some key savings hacks?

The best answer to that, I think, is to YAP, are you grinding at your 9: 00 to 5, wondering if financial freedom is even possible before retirement age?

Well, my guest today is living proof that it is, and he cracked the code before hitting 30. I'm talking about Scott Trench, real estate investor, best-selling author of Set for Life, and the former CEO of BiggerPockets, which is the world's largest community for real estate investors. Scott built a multimillion dollar portfolio and achieved financial independence by the time he was 27, all through extreme frugality, house hacking, and smart investing. In this episode, we'll explore Scott's journey from corporate analyst to CEO, why he stepped down to focus on financial education, and how Scott is reshaping the FIRE, Financial Independence, Early Retirement Movement, and also how you can start building wealth, no matter your starting point. If you're new to the show, don't forget to hit that follow button. You guys are going to love this episode because it's going to completely re-imagine your view on financial independence. Scott, welcome to Young and Profiting podcast.

Thanks so much. I'm super excited to be here.

Yeah, likewise. You are an expert on finance, on real estate, and I found out that you actually didn't found BiggerPockets. When you were first coming on, I was like, Oh, my gosh. He founded bigger pockets. Then I found out that, no, you were just CEO for seven years, and you actually were their third employee. It all started when you decided to take a big risk. You were in corporate, in finance, and you weren't really happy in your job, and you decided to take a risk on this startup that wasn't the big, bigger pockets brand that we know today. Talk to us about why you decided to take such a risky leap when you had everything going for you. You had a cushy job, you were in finance, and you could have just stayed in corporate where it was safe.

Sure. You go back into 2013, and I'm making $48,000 per year with an entry-level finance job, which is good for a kid just out of college at that point. When you talk about risk, the clarity of my career progression, had I stayed in this corporate job, was a much bigger risk to me than taking a chance on something. If I were to stay there, I would have gone from financial analyst one to financial analyst two to finance manager to senior finance manager to finance director. Senior finance director, you got the picture there. In 20 years, I would have been, if things had gone really well, CFO of a large public corporation. Most people don't ever even get there. To me, that was just not fast enough for my ambition and perhaps the yearn for freedom that I had. And so I began studying, what do I really want here? Well, I want time freedom. I want the ability to direct exactly how I spend every hour, every waking hour of my day. And the fire movement became very attractive to me at that point in time. I actually stumbled across two resources that guided me my thinking back in 2013 on my journey.

One was called Mr. Money Mustash, funny named financial blogger who had a really big impact on me, who retired in his very early 30s, and then bigger pockets. I was going to combine these two schools of thought, or that was my plan, that's what I did. As I was frugal my way to financial freedom, frugality is extremely powerful, even if it sounds unappealing at first as a financial lever, because it both increases the amount of capital you can accumulate in your personal portfolio and it reduces the amount of wealth that your portfolio needs to generate for you to live off of. My plan wasn't necessarily to be frugal forever, but it was to start with frugality to get the compounding approach working. We can talk about that later if that's interesting. The real estate component was the other path to this. I just thought real estate offered a chance for better returns and more stable long long term returns than other areas to invest, which can support time freedom. The cash flow from a paid off rental property, for example, is a very reliable relative stream of income compared to other investments, very inflation adjusted.

I decided I was going to house hack by move into rental properties one by one and be really frugal to save up for those to get the snowball rolling.

You basically were a fan of bigger pockets is what I'm hearing, before you actually got your first job there. You were third employee, director of operations, and then you rose up the ranks as CEO. Since you were so ambitious, did you ever feel like you were building somebody else's dream during these years at BiggerPockets?

It's funny with this ambition thing because, yeah, sure, if you go and start your own business, you can always do better than even joining as an early employee. But Bigger Pockets, when I joined, I was a fan of it. I already had the playbook. I knew that if I followed this, maybe I wouldn't be a multi multimillionaire, but I'd be really well off in 5, 7, 10 years. It was so obvious to me how special the company was and what Bigger Pockets was doing for me and likely for other people. I didn't even really put an analysis to it. It was like, Obviously, I want to be a part of this company, this mission of what's going on over here. And so I just threw myself into it when I joined in 2014. And by 2017, I ended up leading the company as the founder stepped back.

I'm asking you all these questions because I'm starting to feel like entrepreneurship doesn't necessarily mean that you have to found a company. I feel like with the creator economy and more creators, the lines are blurring in terms of what it really means to be an entrepreneur. For example, when I hear your story about being employee number three, becoming CEO, scaling the company, I think of you as an entrepreneur in the context of bigger pockets. I'm sure you're an entrepreneur, probably in other ways, but I actually feel like you're an entrepreneur. Would you agree?

I consider myself an entrepreneur at this point for sure. I have a different path around it. I didn't found a company, but I have other advantages, too, where being in a private equity-back business, I had two very powerful mentors. First was the founder, Josh, who I learned directly from for three years. He taught me the concepts of growth hacking, of how to be scrappy, how to build up things. Another great mentor was a man named Mike Zawalski, who was the chairman of the board, very traditional private equity operating partner. And that's a very powerful There's another set of systems that one needs to scale a business, which include the ability to hire and fire, to actually manage, to actually deliver quality performance reviews, to put together a real strategy. What is a strategy? What does that look like? What does a real annual operating plan look like? These are things that don't make sense for a very small business with a handful of employees most of the time. It provides a great deal of inflexibility and can actually constrain growth. But they're absolutely essential to go from a startup or a small business to something with significant revenue and significant market capitalization over time.

Those gave me a really unique toolkit that I think the true entrepreneurs who found companies and retain 100% control will actually struggle to develop in some ways in a privileged way, because you can only get some of those lessons if you have a true boss with positional power over you. And of course, I continue to learn these lessons with our next partners at the Churnin Group, with folks like Maureen Sullivan. And so getting those playbooks was very powerful. I feel like I got a pretty cool playbook here of both the lessons from a classic founder and the traditional corporate private equity playbook that I can merge and be fun to see where that takes me in the next 30 years of my career.

I'd love to dig deeper on some of the things you just mentioned in terms of what your mentors taught you. You mentioned the founder taught you how to growth hack, taught you to be scrappy. The motto at my company, our team motto is we're all scrappy hustlers. We love being scrappy, I'm scrappy. What were some of the scraffiest lessons that he taught you?

I think it was just the rate of experimentation. It's a rapid application of the scientific method It, and everyone terms it differently in terms of what they're doing. But it's how quickly can you get something out to market, test it in front of folks, and move on to the next thing? We tried so many things so quickly as individuals in those first couple of years at bigger pockets. A podcast was one of those things. A YouTube channel was one of those things. What was that social media platform that came up that was all audio? Clubhouse? Yeah, that one. Clubhouse. Those types of things. You're just always trying experiments and there's a high rate of failure, and they're shutting down. And that never ends, but the prioritization, I guess, shifted later. It was those types of experiments that we're coming out with. Artifacts, documents, webinars. It was just an amazing rate of testing.

Yeah, wherever the audience was, you guys were leaning in, testing it. If it was good, sticking with it. If not, getting out.

I'm missing so many times, too. It's like this thing nine out of 10 businesses fail. See, start 10 businesses. That's a big path of entrepreneurship or getting things started in a small business.

This is a pretty personal question, but I feel like it's important for the podcasters who are tuning in. You're employing number three. Did you get equity? Did you profit share? Did you negotiate for that? Did they give it to you? How did that all work?

It's funny. In the entire time I worked at BiggerPockets, I never asked for a raise. I don't think I ever asked for a compensation adjustment or anything. I just said yes to essentially all the opportunities that came my way for the founder. And in those early days, I was 100% loyal. I've always been 100% loyal to shareholders, but it was 100% loyalty to Josh as an individual in the company at the same time. And it was just, how can I help? What can I do here? I I also just love the mission. So I would work all day at my job as director of operations, which at a startup means you get the coffee and you do revenue and all the other things in between. And I would just say yes to those opportunities and things began to develop. Would you like to do this? Hey, there's a sales thing here. Sure, I'd love to go and sell this revenue and earn more money. And eventually, come 2017, founder had to step away. He said, We're going to sell the company, which makes a ton of sense because you're not going to leave your large company in the hands of 27-year-old Scott at that point.

So we decided to go through this sale process in 2018. And of course, I get an equivalent to equity at that point. There's a whole bunch of ways to structure. I got an equivalency to that. That was based on the valuation of the business at that point. And I was like, I love this company. I love what I'm doing. I love the mission. And someone's going to buy it. I don't know who it's going to be, but whoever it is, I don't think I'm going to be able to fool them. I'm this 27-year-old kid. I have to do whatever I can to become a quality President or CEO candidate for this this new company because I don't want someone else to lead the business. I want to do it. I just threw myself into it for that entire year to that effect. I guess I did a good enough job to get a crack at it where certainly a mentor, a boss was brought in as chairman of the board. But I was able to get that opportunity to lead the company at that point for the next five, six years.

I'm hearing so many lessons. You always said yes to the opportunities. You just proved your worth. You weren't somebody who was always asking for stuff without proving your worth. You were scrappy, you were loyal. What are some other lessons that people can take from this that are trying to climb up the corporate ladder or a growing startup?

I always had in the back of my mind, financial freedom was the overall goal. Then along the way, I fell in love with the mission of the business. I think that underlying all of what you're hearing here was a very intentional goal setting and time management process that governed everything around this. I've always been very intentional about, I have this little stupid journal that I do that plans out my year. It has my big goal categories. It has the most important things I need to do for each quarter, the most important things I need to do for each week. And I'm looking at this thing constantly to update my plans for the coming week. And so that kept me on track this whole way, because during that whole process, I'm constantly thinking, okay, the goal is this. What is the thing that needs to happen this week that actually moves the needle towards that? And I think that that scaled the whole a full way from being a very early employee at a tiny company to the CEO of a fairly large business, because that's the job of CEO is you apply yourself to the most important task whenever that it becomes not the most important task, you delegate it or shed it and move on to the next item there.

That was really the underlying current that I think has been very powerful for me over the years.

You took this role 29 years old, which is just so young to be CEO of a company. Help us understand what What was bigger pockets like when you took it over? And then seven years later, what was it like?

In 2017, 2018, I'm having that same conversation in my head, how do I become this great CEO? I was also like, well, smart investors are going to come in. I don't know anything about this private equity space, but somebody smart is probably going to be the person who has enough money to buy this business. So they're going to go in and they're going to say, what do all these people do here? And I was like, Well, I need to make sure that that's super clear. So I assigned everybody a metric. That was the way I organized the business. You're on this metric. You're on this number. You're on this number. You're on this number. I think it was accidentally correct with that approach in 2018 in terms of organizing the business. And that was enough to turbocharge a couple of those things and put up a really great year in 2018 and add a lot of value, I think, to customers at the same time. Over the next five years, really that evolved into a strategy. Here is the market that we serve. The market is this retail real estate investor, this person one to 10 properties.

They're special because they dominate the rental real estate market. These are the people who own 90% of single family rentals. It's not Black Rock or Blackstone. It's not any of these major REITs. It's not institutional investors. They own apartments. They do not own a meaningful portion of the single family rentals, except in specific geographic areas that give headlines. These people are special because they go through a very particular journey. They spend several hundred hours learning about real estate investing before they pull the trigger and buy what to them is the most meaningful financial or investment decision of their lives. It's often something that takes multiple times of their income. These are very frugal people. That's how they have money to invest in real estate. They do not They're not fancy-schmancy things. They're not willing to take out their credit card and pay for things. But when it's time to buy property, major money changes hands. That's when an agent gets paid on both sides of the transaction. That's when a loan is originated or a property manager is hired or a software system is set up. That's when an accountant or a lawyer is needed at that point in time.

We got very crystal clear about this journey that our customers were going through. I was both well positioned to do that and trained to do that over those next couple of years. From there, that understanding of the market, the customer, the customer's journey, and the monetization points within that journey, I was able to organize the business according to those opportunities in the market. And then my work product was not so much around or the specific work streams that were going on for the business, but I was able to organize the business in a way where all of the work output began to flow through my leadership team. That was the big change. Is at first, and I think the right way to do it is when you're under even 20, 25 folks, there's a centralized strategy and you are driving a lot of those operations. Everyone's in one team. You can have really one communication style. But as you get bigger, it really needs to flow through your leadership team. Then it needs to flow from that leadership through to their directors and reports. The work streams and the timelines get a little longer. You lose the scrappiness to some element, but you gain scale.

There's money, more advantages of being big than small in the end.

I like what you're saying here because it's so true. When you're a couple-year-old company, you're trying to prove product-market fit, you don't really know who your audience is or what your product is, you can be scrappy fast. But then once you understand who your customer is and you have a real strategy, you've got to drop the scrappiness and have more strategy into your point scale and think things through and delegate and you have more team leads and all of that good stuff. We'll help us understand the growth, though, of bigger pockets over that seven years. You did all those things. You changed the strategy. You put in a real strategy like you had mentioned that was appropriate for a company of your size. What happened? I think you grew it to like 3 million community members. Tell us where it was to how you scaled it.

I don't know if I can share the specific revenue numbers. I will share that we grew revenue by over 40X. We were profitable the entire way through and very profitable, very high EBITDA and free cash flow margins. We grew the user base from less than 100,000 members to, this is a real-time ticker behind me, of the total number of BiggerPockets members who have ever signed up to what is a 3. 19 million today. Amazing. So that's been really fun. There's been huge metrics, like our podcast the 150 million download mark. We sold 3 million books across four different titles. There was never an event. It was never like, oh, everything exploded at this point. It was just one % better every week on average, with plenty of hiccups and other things along the way. But I remember the moment that I realized, wow, this thing is huge, is when we had a conference in Orlando, and I look out over the sea of 2,000 people, and we do a podcast all the time like this. And there's There's no nerves or jolts or anything like that when you get on the air for a conversation, for example, with you.

But I'm just shaking. I'm like, this crowd is enormous. When the heck did this happen? When did this tiny little company with this casual meetup get to this level where we have this huge resort that is completely filled up with real estate investors?

Yeah, fam, I love fashion, I love clothes, and Skims is a brand that I've been using for a long time. I love their travel outfits, I love their leggings, and I recently tried their Fits Everybody collection. Now, I'm a type of girl that wears the same types of underwear all the time for my day to day, and I thought I knew what I liked, but I tried the Fits Everybody collection, and now suddenly I want to replace all my thongs and underwear and bras with the Fits Everybody collection. It's funny how that happens. You think you like something, and then suddenly, nothing ever feels comfortable again. That's exactly what happened with the Fits Everybody collection because it's so light, it's so soft, it molds to my body, and I especially love their Dipped Front Thong. That is my favorite product so far. It's seamless under my leggings. If you're a girl, I think you know what I'm talking about. When you're working out, you don't want your leggings bunching up and twisting. You don't want to have to think about your underwear while you're working out. Now that I wear the Fits Everybody collection, I don't think about it at all.

It just feels like I'm wearing nothing under my leggings. The Brawlett is another one of my favorites. Now, I'm part of the Itty Bitty Titty Committee, and I always thought I needed to wear Underwire for that push-up look. But now with the Fits Everybody collection Brawlett, I get that push-up without any uncomfortable Underwire. Guys, if you're tuning in, Skims Fits Everybody's collection makes an incredible gift for your wife or your girlfriend. Shop the Skims Fits Everybody collection at skims. Com. And after you place your order, don't forget to let Skims know we sent you. Select podcast in the survey and choose Young and Profiting from the drop-down menu that follows. This episode of Young & Profiting is brought to you by Bitdefender, a global leader in cybersecurity. Most small businesses think that they're too small to be targeted, but the truth is, we're prime targets for cyberattacks. One breach could derail everything that you've worked for. But here's the good news. Protecting yourself doesn't have to mean becoming a tech expert. That's why I turned to Bitdefender's ultimate small business security. It's a powerful all-in-one cybersecurity solution for small businesses. It's designed specifically for business owners who don't have a dedicated IT team.

It protects all of your team's devices, scans for phishing and scams, manages passwords, and even checks the dark web for leaked info. Unlimited VPN allows your team to work securely from anywhere. The dashboard is super simple. I set it up in minutes, added my whole team, and now everybody is covered, whether they're in the office or working remotely. No IT staff required. Bitdefender makes cybersecurity so easy so you can focus on what really matters, growing your business and serving your customers. See if Bitdefender ultimate small business security is the a fit for your small business. Save 30% when you go to bitdefender. Com/profiting. That's bitdefender. Com/profiting for 30% off. Yap, gang, if you truly want help gaining power at work, getting That promotion, that raise, that big project, you first need to understand the rules of power. If you don't, you'll watch less talented colleagues get what you want and be left behind. Discover how corporate America's most powerful executives really rise to the top in a new series on Masterclass, The Power Playbook: How to Win at Work. Use Stanford Professor Jeffrey Pfeiffer's strategic power moves to accelerate your career and gain the influence you need to succeed.

In bite-size sessions, you'll learn how power really works, not how you wish it worked. You'll discover how to align with key decision-makers, command respect through confident body language, and communicate with authority. Plus, you'll uncover proven strategies to land promotions and raises that you deserve, and so much more. The Power Playbook: How to Win at Work, will be available exclusively on Masterclass starting August 21st. Right now, our listeners get an additional 15% off any annual membership at masterclass. Com/profiting. That's 15% off at masterclass. Com/profiting. Masterclass. Com/profiting. So let's talk about the different revenue streams that are involved with BigerPockets. We're both in the podcast world. I know you're getting podcast ads and things like that. Talk to us about all the different ways that Biger Pockets makes money, made money, so people understand what the opportunities are in a media educational type platform like Biger Pockets.

I got to tie it to real estate, specifically in this context, because it all comes back to that user journey and our strategy. What does the customer need, fundamentally, to buy a rental property? Well, the real estate investor will spend several hundred hours educating themselves on buying a rental property before they purchase, as they should. So we provided that education for free in real-time through podcasts, the stories of interviews with investors, and all of the little individual or solo shows that were workshops to help build those frameworks. The second thing they needed is, at some point, maybe after six months or a year, it's time to actually buy the property. And that's a major moment in the world of bigger pockets, not even the actual purchase, but the decision to buy, because that's when a customer begins seriously analyzing deals. That's when they begin interviewing agents or lenders to begin working with. They even might be thinking about their property manager or contractors to bid out on properties. After they purchase the property, then what happens next is very little. Ten years go by and the customer is typically only thinking about the property when something's going wrong or when it's time to get a new tenant or there's a major repair.

So when you think about the dynamic of the industry, that's how we built our business, to serve those problems and solutions to the customer. So our media business, which I would include podcasts, YouTube, social, books, conferences, events and meetups, webinars, and all those types of things. Those were designed to serve really this educational phase for this real estate investor. And my rule for this business was it had to make money. It didn't have to make a ton of money. It wasn't a profit, but you can't scale a negative cash flowing item indefinitely. You can invest in something that might generate cash flow, but the podcast didn't have to be a major profit driver for bigger It just had to drive profit, so it was sustainable and scalable over time. So there's unit economics associated with this. If you have below a certain listenership level, then you can't pay a talented person to show up and record for an hour. You can't pay people to edit and produce the videos and all those types of things. Then you can't sell enough advertising inventory to cover those costs. So that was it. We set up actually a number of shows.

Some took off and are very successful today, and some dwindled, and we had to shut them down over time. And that's the nature of that. And that was just the rule on that front is, are enough people gathering and listening to this or the audiences, there could also be a combination of value times volume. A audience of very experienced business owners, for example, might be small, but they're very valuable to certain advertisers. So there's a component there. But as long as those criteria were met, we just continued to scale the operation with them. If they weren't, we would slowly, quietly shut them down or spin them off. So that was the media business. The next phase was this subscription element where customers would purchase our subscription tools, and that was really geared towards beginning to analyze properties and get going in that purchase decision. And that product over the five-year period evolved to also include an end-to-end solution. So you would analyze properties, you could manage those properties We had leases in landlord forms. We had discounts with big box retailers like the Home Depot. And that was really a recurring value for our customers.

And then the big growth engine in the last several years for bigger pockets, and what I think is really exciting, has been what we call the marketplace. An investor needs an agent, needs a lender, needs a property manager. And there's really nowhere to go online to find investor-specific professionals. And so that's what we focused on building in the last few years.

I love the fact that you've created this audience journey and then aligned products to that actual journey, when you were trying to research this audience, were you deciding who your audience was and then targeting those people and tailoring it, or were you actually doing research on your existing customer and their journey? Talk to us about that.

It was research on the existing customer and journey. I would not have been able to articulate this to you seven or eight years ago, but I had the advantage in building it. There is no substitute. You cannot run a survey and get these insights. I got these insights because I met with literally 2,000 customers over my time at BigerPockets one-on-one. There's 700 of them are recorded on the air for BiggerPockets money. And that enabled me to get a very clear picture of who the people on our platform were. And then you can design the surveys. I meet somebody, I hear something, I'm like, is that actually at scale a problem in our community? Then you put the survey out and you can say, yes, no, maybe so. So I think it's almost impossible, for example, for a consultant to come in and tell you these things to use your business. You have to learn it for yourself over a reasonable period of time. And that scrappiness period where you're almost strategy free in the beginning, I think is absolutely essential to figuring this out and building that base. Then you can begin to refine your understanding of the market more scientifically through the work of a crystal clear strategy, I think.

Until you gain that market understanding, it's just really hard to even begin to position the research.

Yeah, it's like solve a problem, get some sales, and then, okay, let's figure out more about this audience and their journey and their struggles. If somebody was trying to build the bigger pockets of some other industry, what would you say the blueprint would be?

I think it's the same thing. It's understanding your customer and customer journey, sizing up the monetization opportunities along that journey, and then building an incredible product by obsessing over that customer journey for a decade or more. So for example, let's use the business buying space as a fun one because I can more naturally extend that over. There's a big interest in buying small businesses out there. And so before anybody buys a small business, they're going to spend, same as a real estate investor, they better spend several hundred hours learning about how to run and think about operating a business. Then they need to go and actually browse live businesses. Then they're going to need to purchase that business and they're going to need a broker or some qualitative quality of earnings, due diligence on that business. Then they're going to need a lender, and then they're going to need support to actually manage that business, like some product business management system, if they're smart, like an entrepreneur operating system or four disciplines of execution, or pick your one. And so those are going to be your major money makers along that journey. There's also plenty of software systems systems that people can use to run the business.

And you'd say, okay, how do I build a business that maps to that customer journey and solves all of those problems one by one? And then where do I start? And you can start really in any one of those categories. You can start with the high margin software or content behind the paywall solution, you're going to be paying to acquire your customers at that point. Or you can start at the beginning building community where you potentially don't have to pay to acquire customers, but you can spend a lot of time building up that audience as an investment in another form. And you eventually look to build a complete end-to-end solution and master as many parts of that or partner with as many masters in parts of that as you possibly can.

Such good advice for our listeners. I feel like you're just dropping so many gems. So seven years into being the CEO, you decided to step down, and now you're a full-time creator. You've got BiggerPockets Money, I believe is the name of your show, right? Mm-hmm. And you're crushing it there. Talk to us about the decision of stepping down from CEO What was really happening there and why did you decide to do that?

Yeah, well, a couple of things. One, bigger pockets was and is, you can see even now, is an obsession of mine to an unhealthy degree. I mean, it was just my whole world. I would wake up in the morning. I would be thinking about this at night, into the evenings. I would perseverate over these decisions late into the night. I had set out to achieve fire, to retire early and enjoy my life and those types of things. I had done well past that point by the time we hit that decision It was also a very big and stressful job on top of that in combination. So one, it was, I want to practice what I preach a little bit and enjoy my lifestyle a little bit more here. The second was, I think I have some good strengths as a leader in certain of these areas that we talked about here. But some of the areas that I was not strong in at Baker Pockets or that I thought we needed a new leader with those strengths were the technology world. I'm not a technologist by trade. Building incredible products. We built some incredible products, but Building that next level personalized data-driven experience with the true underpinnings of a scalable technology platform, that was something I felt that we needed a new leader to achieve, and similarly, driving that database component.

And the second piece was we did a really good job at BiggerPockets of helping our members get started building their real estate portfolio, is really helping new investors buy one, two, three, four properties. But the professionalization of a real estate business was not not something that I had focused on as part of our strategy and not something that I had a specific skillset in. That's where we found this new CEO, Ale, who has that deep technology and management experience. And the last part is, I love real estate, but real estate is like the drill. People don't want real estate. They want the whole financial freedom. And real estate is a very good way to achieve financial freedom, but it's part of a broader toolkit. And that is really where my passion lies. And so that's what I've been focusing on the last few months in particular. And it's the same framework we just discussed here. What is the journey to financial independence that people are taking? Who is the typical person that is going along that? How do they get there? There's a dive in period, and then there's a grind for 10 years where people work their jobs or their businesses and just maintain a big gap between their income and expenses to accumulate a big enough pile of assets to retire early.

And then there's an actual transition to retirement. How do we actually solve problems for folks in a really interesting way over the next couple of years and build something world-class there? And that's a particularly fun challenge for me that I feel really well-equipped to go after.

So you're broadening out just outside of real estate is what you're saying?

Yeah. Real estate is one component of the journey to financial independence, and only about 27%, that's a pretty precise number there, of the fire community use real estate as part of that journey. And so it's a tool, but it's not the main story for a lot of folks that go about it. It's not one that everybody uses. But I think that by being strong in real estate, that will help me think about the other ways to help people achieve FHIR and how and when to incorporate it.

We've mentioned FHIR quite a lot so far. I think it's worth it to define it and start going down this path so people understand what it is. Fhir stands for Financial Independence, Retire Early. It's a concept that really blew up 2010-ish with a lot of millennials where people were practicing extreme frugality, saving, and the goal was to retire at 35. There was lots of principles that went along with it. Talk to us about what was the first wave of fire like that you were involved in? What were the principles? And then now, how do you think about fire as time goes on?

I would say that this wave of fire influencers in the 2010s, early 2010s, which I'll throw The Mad Scientist, all these funny names. Mr. Money Mustash was in there. There was an earlier Retirement Extreme blog out there. It really reset what is this American dream? The American dream, I think, used to be house on a hill with white picket fence. And I think that that shifted around that time to this concept of some level of financial independence and time freedom, and it's continued to shift in that direction and evolve since then. I think FHIR at that time also was grounded in savings rate. It It was as simple as you're going to just save a tremendous percentage of your income by cutting back your expenses. Some people took that to the point of such extreme that it was very off-putting to a big portion of the population. I think that that is beginning to shift to a large degree. The spending is still a central tenant in this. But I think that what I'm learning and I have observed is that it's really important at the beginning of the fire journey. If you actually want to retire early, yes, you do have to adopt these extreme low spending principles for the most part, or you have to be an outlier on the income production or entrepreneurial side.

But you only have to do that for maybe two, three, four years to get on the other side of the capitalism snowball. And from there, your asset base begins to expand, and often your income opportunities begin to expand. So for example, I'm able to spend much more now. If I had saved 10% of my income starting in 2013, I would be spending much less today than I currently can because I was able to amass a big asset base, turn that into large piles of passive income, turn that into opportunities like being able to take a lower paying, riskier job at a company like BiggerPockets, for example, and use that to explode my income and asset base, which now supports a very high standard of living. I think people are starting to realize this phenomena of how by moving into a dumpy duplex house hack for a few years, you can begin to compound the amount of cash you can accumulate and deploy it to get other side. So all these other new acronyms like Chubby Fire, two and a half to five million dollar portfolio, or a fat fire, five to 10 million or much greater portfolio, are starting to come into play.

Where folks are like, No, I want to retire early. I don't want to spend this little, but I'm willing to put in a couple of years of grind in order to flip the script so I can do that for the rest of my life. That was more appealing to me, and that's what I've been able to achieve.

Basically, FHIR is saving a huge portion of your income, building up a nest egg so that you can pull, I think it was 4% out is what they always recommend, pull 4% out of your nest egg per year so that you can live passively on it when you retire.

Yeah. What is FHIR? It's when you have enough passive cash flow from your asset base to cover your standard of living, most commonly defined as a $2. 5 million portfolio, distributing 100 grand at the 4% rule. Like you said, 4% of the portfolio per year.

Now you suggest flow-based financial independence. Can you talk to us about that?

I didn't suggest that one. We talked about that in a recent podcast. Okay, sorry. Great research from you on there. But a friend of mine put into ChatGPT a new concept where he was going to cash flow. His portfolio is going to cash flow enough. So the FHIR community, last thing it needs is more acronyms. Flow is not a real acronym, Jim. I don't know where you're going with that. But yes, there's a concept I think that's emerging in the space of people don't actually do this. I spent a lot of time talking about Fire and how you can build a a two and a half million dollar portfolio and withdraw 4% a year. But the research shows that nobody does this. Traditional retirees, they cannot bring themselves to sell off a portion of their stock market index funds, for example, or stock holdings, sell a principle and use it to fund consumption. People just can't mentally do this. It's a very key problem in financial planning. I can't do this personally, and I spent my whole career studying this. That's one of the reasons why I like real estate is because it generates cash flow, and for some reason, cash flow hits different.

My rental properties are spitting off a lot more cash flow than a good lifestyle cost for me. That's something that's very comfortable. It's something that I really can just enjoy my time. I can spend three days doing nothing here in two days on the podcast and feel comfortable with that in a way I wouldn't if I had a traditional stock bond portfolio. So that's a really interesting problem that I'm trying to explore in this space. I think I'm annoying people as I share this problem because you spend 15 years trying to build a portfolio where you can distribute at 4%, and then you learn that you can't bring yourself to do it in the end, or most people can't. What does that say about the FHIR community and the goal that we've set for ourselves in this space.

Yap, gang, as a business owner, I know the pain of missing a crucial customer call. In today's world, that's not just an inconvenience. It's a lost opportunity and money left on the table. That's why I recommend Openphone. Openphone is the number one business phone system that streamlines and scales your customer communications. It works right from your phone or computer, so no more having to carry multiple devices. Your team can share one number, pick up conversations conversations seamlessly and keep response times lightning fast. Plus, with Openphone, their AI agents handle all the after-hours calls. It answers questions and captures your leads, so you never miss a customer even on off-hours. At Yapp Media, we recently implemented at Openphone in a really innovative way. I have a social media agency and I have a podcast network and lots of really high caliber clients. They don't want to go into Slack. They want to text us. Now we use Openphone to manage all those communications. See why over 60,000 businesses trust Openphone, including YAP Media. Openphone is offering my listeners 20% off your first six months at openphone. Com/profiting. That's O-P-E-N-P-H-O-N-E. Com/profiting. If you have existing numbers with another service, Open will port them over at no extra charge.

Open phone, no missed calls, no missed customers. Yeah, fam, have you ever been shopping online ready to buy that thing you really want to buy? But then you've got to go find your credit card You put in all your information, and then suddenly you forgot what you were even doing, and you end up abandoning your cart. Well, if you're like me, that happens all the time. And that's why I love seeing that Purple Shop Pay Button, because with one click, you're checked out in seconds. That purple button means the store is powered by Shopify, the commerce platform that's behind 10% of all e-commerce in the US. Shopify makes it easy to run everything in one place. Inventory, payments, analytics, plus built-in tools for social media and email campaigns, so you can find new customers and keep them. Want to sell globally? Shopify works in over 150 countries. If you prefer in person, their award-winning point of sale connects online and offline sales seamlessly. With 99 1. 99% uptime and the best converting checkout on the planet, millions of businesses trust that Purple button. Millions of businesses trust Shopify. Stop seeing Cards going abandoned and turn those sales into...

Sign up for your $1 per month trial and start selling today at Shopify. Com/profiting. Go to Shopify. Com/profiting. Again, that's Shopify. Com/profiting. This podcast is brought to you by Mercury, the banking product businesses like mine used to simplify their finances all in one place. You guys know me, I'm all about working smarter, not harder, and that includes my business finances. And that's why I bank with Mercury. Running a business is tough, but managing your money shouldn't be. Mercury makes it effortless. You get banking, credit cards, spend management, and invoicing all in one intuitive product. No clunky banking sites, just a clean, easy to use experience. It's helped me streamline everything from paying contractors to organizing cash flow. If you want a better way to handle your business finances, you'll love Mercury. Ready to see what powerful banking can do for your business? Visit mercury. Com to apply in just 10 minutes. Disclaimer, Mercury is a financial technology company, not a bank. For important details, check out the show notes. I know you were mentioning that things are evolving. You mentioned fat fire. I actually have a quick fire, pun intended, segment on the hybrid fire models that are out I want you to talk to me.

First of all, do you agree with the definition that I got? I'm obviously not an expert. This is a definition I researched. Would you recommend it? Are there any key considerations or drawbacks? Okay. The first one is COASTFIRE. Save aggressively early on so your retirement accounts can grow without additional contributions, allowing you to Coast into retirement.

Coastfire is a young person's acronym. It's for someone in their 20s or 30s For the most part. Yes, it can apply to everybody. But it just says, use the rule 72 and you compound money, you double money a couple of times. You need a surprisingly small amount of money to set yourself up for traditional retirement. That could be like 300 grand for a year old, basically. And it could be 150 grand for someone who's 23 to achieve a $2. 5 million portfolio, give or take, if you assume anything close to historical rates of return. I think that for some people, when you get started in the fire journey and you're like I was. So one thing I didn't tell you is the company I worked for at the beginning of my journey was rated the worst company to work for in the United States of America at that time. So that was a huge advantage for me. That's a really powerful motivator to retire early. And people hate their jobs a lot of times in this country. And that's a powerful motivation to get started on the journey to financial independence. Powerful enough to get people to spend very little for a chunk of time.

But almost nobody who has a high savings rate is stuck in that terrible horrible environment for long periods of time, 5, 10, 20 years. You mass a million bucks in assets or several hundred thousand dollars in assets, and you're working a job you absolutely hate that also doesn't pay well, something's wrong. And that's a you problem. You can fix that. At that point in time. And so Coast Fire, I think, is a response to that dynamic. I got started because I hated my job. Now I'm worth $300, $500, $300, $500, $600, $1,000, and I'll retire on time just fine. Why am I grinding it I like my job now. My circumstances have changed. Maybe I can take my foot off the gas a little bit and give myself permission. I think that's what Coast Fire is a response to.

Barista fire. So reach partial financial independence, then take on a part-time or low stress work to cover living expenses while enjoying more freedom.

That's something that sounds so great. It's something I'm not wired for, but a certain type of person absolutely can. You just travel the world and make enough money to cover baseline expenses expenses, and you know you're probably Coast fire or ready to be able to hit the rest of retirement or can supplement the rest of your that small amount of income on that part-time work to enjoy life. That's a wonderful way to go through life, but something that I, as an optimizer, a min-maxer, could not personally do.

Slow financial independence. Prioritize balance and purpose over speed, intentionally slowing the journey down to financial independence to enjoy the ride.

Much healthier than what I did.

Okay. Fat fire. Retire early with a high standard of living, typically $3-$5 million in assets for people who don't want to budget or downsize their lifestyle.

This is an entrepreneur or executive's world, so I'm privileged to be in this bucket personally, and I think it will become an increasingly more popular goal among the millennial generation, especially as wealth transfers from boomers to some of those millennials. Essentially, everyone wouldn't mind being fat fire. It's what's the cost to get there going to be on To your point, you usually have to be some an entrepreneur, make a ton of money in order to save that much money.

Lean fire. This is the opposite of fat fire. Retire early on a minimalist lifestyle, often with annual expenses under 25 to 40K. Very frugal and focused.

Yeah, typically see that in more rural areas.

Now, one question that I have, since you were very extremely frugal, we're opposites. I was never frugal. I always spent a lot of money, but I am really good at making money, and I always had the opposite. I'm just going to make more money so I can buy whatever I want. I'm just going to make more money so I can buy whatever I want. Ended up launching YAP Media. We're going to hit eight figures this year. Doing really well. Do you ever feel like having a frugal mindset or saving a lot really is just a scarcity mindset or might prevent people from having abundance because they're just so scared of spending money that they might be attracting money?

Yeah, this is a huge problem in the FHIR community for a lot of folks because if you want to retire early, retire early is a fundamentally different goal than build an eight-figure business for most people. Some people will go on to retire earlier than build an eight-figure business, but it's a fundamentally different goal. You and I, we're fundamentally different people in the way that we view some of these things. I was very uncomfortable spending money, and there's a huge hoarder problem in the FHIR community for a lot of folks. I think I've largely escaped with the worst of that. You certainly would not visit my house and say, What a chipscape here at this point. You would have said that about me seven, eight years ago. I didn't install a heater in one of the duplexes I lived in for my section of it until the winter came because I wanted to accumulate wealth there. But I also think that the goal was never to live frugally indefinitely. It was, I'm living frugally for a reason right now because there are levers on this journey. I can spend less, I can earn more, I can create, or I can invest.

And I had no assets to invest. I didn't have an entrepreneurial skillset to create. And I was maxed out on the income front for what was impossible to me in the immediate future at each point in those first three, four, five years. And so for Legality was my lever in order to accumulate wealth at that point. And as that has no longer my key lever, it's much more important for my financial position for me to build my business or manage my investment portfolio than it is to save a dollar or save $10,000. It's just so much more important for me to focus on these other levers that I stop worrying about it and I spend pretty freely at this point. I feel very comfortable doing that from my asset base in a way I wouldn't from business or earned income.

Was there anything that was a mindset shift with that? Maybe something you recently bought or something that you bought that you would have never bought before that now you purchase?

There's a number of things. I've got some fun toys in the house. I've got a home gym, I've got a sauna. I bought myself a Tesla Model Y. I probably could have gotten an X or something even more fancy, but that was fancy to me. The one thing that I feel like, wow, this is ridiculous. How far have I come on this journey? Who is this guy? Is when I drive my golf cart around to the pool or take my daughter to the playground or around the neighborhood to the coffee shop in our little golf cart. That one, for whatever reason, makes me feel particularly like, wow, I made it.

Driving around in the golf cart, that's so cute. Being able to spend daytime with your daughter, though, especially, right?

Yeah, daytime with my daughter and then playing tennis during the day with my wife or going on a walk or hike. This winter, I'm excited to go skiing many work days. I drop kiddos off at daycare, go up to the mountains, ski, come back. That's going to be a really exciting thing for me as well. So that time freedom is absolutely a piece of it.

Okay, last question on savings. For people who want to start a fire lifestyle, what are some key savings hacks? Where can people save the most money, especially in their 20s and 30s?

This is a little different from folks listening to Young and Profitable. You're not going to be at a median income for long. If you listen to a podcast like this, you may be there now, but you do this for three years, you're not going to be there for a long time. I always start my observations with what does the median American spend money on? So the median American household, a one person American household median is about 43,000. And about 60% of that is going to be between housing, transportation, and food. Many people have said, historically, the best way to do this is to control variable expenses like eating out, entertainment, those types of things. But it's obvious if you want to actually retire early, that housing and transportation are your two biggest lovers. And the best answer to that, I think, is to put yourself in position to house hack, where you buy a property and rent out the other rooms, even for just a year or two. If you can do it for a couple of years, you're going to get rapidly on the other side of this financial, the capitalist snowball here. Even if you never make it in business or your career never really takes off on the income front, this can be a very powerful way to build a multimillion dollar retirement portfolio and/or thousands of in cash flow.

On the transportation front, it's drive a beater, drive a paid off economy vehicle like a Carola, a Civic, or something like that, and do it for a number of years until, again, you get on the other side of the snowball. After that, you can double your spending in some of those entertainment categories and come out way ahead. And I did this for my 20s. If you visited my house, you'd have been appalled, but you wouldn't have known that if you saw me out with my friends downtown or in Denver or going out on trips or whatever, I was still able to spend on those things. I just could accumulate so much faster because my housing and transportation expenses were so low. Then I meal prepped most of my meals the rest of the time. If you do those three keys, you're going to come out way ahead financially, and you don't have to do them forever. You just have to do them for a couple of years to get on the other side of the snowball.

Looking back, if you were in your 20s again, would you have done it exactly the the same or would you have done something different?

I would have done it almost exactly the same. I talked to a friend recently, we're both dads now, both have mustaches. He has a full one. I have two mustaches because I don't grow any hair right there. We're talking about it and he's like, Gosh, I wish a house hack. We did the same stuff there. You partied just as much as we did. We had fun there and I wouldn't have changed a thing there. I wish I could have brought a couple more friends along with it, too, so they'd be a couple more hundred thousand or a couple of million more ahead.

Let's talk about real estate before we go. Of course, I've got ask you about real estate. You talk about how real estate is not a get-rich-quick scheme. What do you think are some of the common misconceptions from those people that are tuning in? Now, I've got a lot of, I would say 20 to 40-year-olds average age is probably 30 years old who listens to this podcast. A lot of us are scared of buying real estate. Talk to us about some of the misconceptions.

Let's just zoom out and think about what a rental property is. If I buy a $500,000 duplex, some people say that's crazy cheap, some people say that's crazy expensive, depending on where you're listening from. But buy a $500,000 duplex and it generates $40,000 in income, what I'm buying is an inflation adjusted store of value and an inflation adjusted income stream. In 30 years, it's going to be roughly worth $500,000 adjusted for inflation, and it's going to generate roughly $40,000 adjusted for inflation at that point in time. If instead of buying a $500,000 duplex, I buy a $2 million apartment complex and put $500,000 down, I'm buying a $2 million asset that will be worth $2 million in 30 years and a $160,000 income stream adjusted for inflation. That's, I think, the starting premise. You might do a little better if you're buying in an area you think is going to grow over a long period of time, you might outpace it by one or two percentage points adjusting for inflation. So that's the game here. Real estate's great because now with portions of my portfolio paid off, I have a very high probability, if I don't screw things up, of having an inflation adjusted income stream that much more than covers my expenses for the rest of my life.

It's not a very good way to get rich quick. If you want to get rich quick, buy a business or build a business or advance your career, become the best in the world at whatever you're doing. But then you can take that money and put it into something like real estate, you're going to generate cash flow. You can achieve real estate outcomes with a stock bond portfolio or REITs, these other types of things. But I like to have the complete control that comes with real estate. And I do think you can accelerate what I just discussed by a couple of percentage If you buy right in certain of these cases, you understand what you're doing, you keep your properties fully occupied and well maintained, and you bother to invest in those mental models. So I think that's the core component. And then, of course, at the beginning of a journey, what real estate really is powerful for is the leverage component. All those returns are amplified because of that leverage. So that by buying four times the property instead of buying a paid off property, if I get 3% appreciation, I'm going to actually get a 12% yield on my equity component.

I'm going to be paying down the mortgage at the same time, and I'm going to be harvesting any cash flow that comes out of the property. But again, it's not going to produce a 30 or 40 % compounding annual return like you can get in business, but it can do better than the stock market, especially with leverage. And at the end of your journey, you may find it easier to spend cash flow like I do from the portfolio compared to other alternatives. So I think those are the cases for investing in real estate. And then the last point I'll make is if you're a median income earning American or upper middle class American, you want to jumpstart your wealth creation, you're going to find it really hard to do entrepreneurship or really make significant side income. The best part of your day is spent on your work for the most part. And housing is one of those few levers that can really amplify this journey. And two great tools are going to be the house hack, where you move into a duplex or whatever and have your rent subsidized portion of the mortgage, or the live-in flip.

If you want something a little nicer, for example, you can move into a property, fix it up, and let's say you buy a $600,000 house that needs a lot of work in Metro Denver, for example. You put in $100,000 of work over the weekends and evenings, and two years later, you sell it for a million bucks. Well, that $300,000 gain, if you're married, is tax-free. And that can absolutely turbocharge your journey. Imagine doing that two, three, four times. That can complete the play without ever having to start a business towards a traditional retirement or financial independence journey. Those are the big pieces of the real estate journey is how it impacts the spending on the largest bucket of expense, which housing for the average American, and then how it can be both a leveraged wealth builder or a stable income stream in store of value.

You mentioned the house hack. Do you believe that your first investment should be a house that you live in and also try to monetize? Or do you feel like you should rent and then buy? What do you think the first play should be for real estate for everyone?

Let's make sure we're talking about who we're talking about here. You should not invest in duplexes. That would be silly, right? Because you'd have to pay the price of several hundred hours of learning about real estate investing, which would take you away from your eight-figure business. That'd be an extraordinarily expensive sideshow for you. But for 23 Scott, who's making $20 an hour, $23 an hour, spending 250 to 500 hours learning about real estate is a very good ROI for me at that point in time. And I'm developing that skill set. Absolutely, I should be moving into my first property. I get better financing. I can use a lower down payment. I'm taking way less risk because I'm right there. I can fix things up. I'm at no more risk than any of the 80 million homeowners in this country who have bought a primary residence. I'm actually at less risk because I have at least a chance of getting income from a tenant in that property. I get to know the area that I'm living in. And for the rest of my life, I don't have to pay that price again. I know that area, I know that property.

I know the properties like it. I know how to value them, and I can drive excellent returns at that point. So I Active real estate investment is a really, really powerful tool for this median or maybe even upper middle class income earner who wants to get ahead. It is a very unpopular tool, and you're going to see doctors and lawyers and dentists and entrepreneurs lose their shirts if they try to actively invest in real estate with anything close to max leverage because they can't justify paying that price and taking that away from their business for most cases.

Let's talk to entrepreneurs who are listening to this show, probably high income earners. Where should they start?

I think an entrepreneur should be a passive investor. If you're saying, what should you do with your money here? I would be shocked if you're doing anything other than building a pretty conservative investment portfolio with stocks and bonds and maybe a small allocation to REITs. Everything else allows you to spend 100% of your time building your business and serving your audience, which is your highest and best use. And I would imagine you have a very large cash or liquidity position on top of that, which synergizes well with entrepreneurship. That's what most entrepreneurs should do. If you have a bug for real estate investing, then you can consider passive investing. So this is for people who are passionate about reviewing deals, and a lot of entrepreneurs consider themselves angel investors or want to get involved in other things. A great outlet for that is to look at pitch decks for syndication offerings in the real estate space. So someone's buying an apartment complex or building a ground up development, whether it's single family or whatever, start looking at those. That's going to take time, but some people really enjoy that. And there's a great outlet for that at BigerPockets.

We have a platform called passive pockets, where you can... It's just one deal after another. We provide an opinion Yes, no, maybe so on that one. Here's what I like about it. Don't love that area. Don't love that developer. They don't have their numbers straight, that stuff. And you get reps on that, you'll make reasonable decisions over time. I would do that if you love it and are interested in it and want some diversification.

What if you got a small business that makes $500,000 a year.

I'll even go a little smaller than that for a second. Mark Cuban is a great example of this. He is a house hacker. He did exactly what I did with these duplexes. He bought a house and rent out the other bedrooms, and he kept his expenses absurdly low, which allowed him to dive into entrepreneurship much sooner. That allowed him to feel comfortable with that dynamic. So if you're really serious about going into business, getting your expenses super low so that you have all this runway and all this time to begin getting your business off the ground can be very powerful. And that's a great use case for house hacking or buying a business. I don't know what he invests in now, but I'd be surprised if he was buying a duplex. This wouldn't be surprised if he had some allocation to real estate in a general sense as a result of his training wheels in his duplex all those years ago getting started. But I think you'll find a surprising number of self-made, very wealthy people actually did something like having a bunch of roommates or even buying a property and letting out a few of them to take a little bit of cash flow to free them up to actually spend the rest of their time not working a job, but working on their business.

Well, you're absolutely right. I have not bought anything yet because a lot of the times, historically, anytime I had a lot of money, I'd use it to grow my business, grow my brand, grow my podcast. But now I'm sitting on a lot of cash. Even today, I'm actually, after all my interviews are done, I'm going condo shopping, and I'm thinking about buying two condos in one building, one to live in, one to have my studio, like a podcast studio in the same building. Thoughts on that? Do you feel like it's stupid to buy condos that you live in and use for work?

I live in a nice house, and the house specifically has the toys that I told you about. It specifically has this bedroom, which was perfect for an office and a podcasting studio. It's not an investment. This is why I worked to generate this wealth, is so that I could spend it and live a fire lifestyle the way I wanted to. I think that at this point in your life, you should buy exactly where you want to live. You should get all the things that help your business be convenient and successful. That's a great use of funds with it.

Do you feel like it's better than renting? I'm buying because I have the cash, why not? It's an investment. I live in Austin. It's cool, hotspot. I'm going to get condos on the water. I think it's going to be worth more if I ever want to move over time. Or do you feel like renting is smarter?

I would say that in your situation, it probably doesn't matter too much. It will depend, in your case, less on the actual financial model and more on if you rented it, would your landlord be cool with you actually making this other property into a podcast studio and decorating it the way you want. You buying it and having that flexibility may completely overwhelm any other math on the buy versus rent decision. But I would bet that if you ran a, should I buy or rent on the condo, that it would say you should rent instead of buy, unless your timeline for ownership is at least 10 to 12 years. That'd be my guess without knowing anything else about what you're asking.

That's what I thought. I still might buy it.

That's great. Again, if I rented this house, I'd be way better off. But I bought the house. And why did I buy the house? Because I planned to be here through my daughter's two, my other daughter's four months. I planned to be here at least through their high school graduation. I wanted to live a certain lifestyle. I can't get my own grill at a rental. The way I want and set it up. I can't install a sauna in my basement at a rental. I can't install a home gym, or I wouldn't feel quite as comfortable with that. I couldn't build a custom office. So there are other considerations besides the financial that overwhelmed them, and in my case, obviously pointed to buying, and I think that could be true for you as well.

You were mentioning that there's multiple routes to financial independence, and that you've been doing a lot of research and thinking about this. Talk to us about some of the ways that you're seeing that are really hot right now in terms of achieving financial independence aside from just real estate and saving?

I think it really does come down to your savings rate. The FHIR community is typically going to be people who are committed to the 7-15 year grind that is keeping my spending at a pretty controlled level, watching my career blossom. I think people wake up over time and they're like, Oh, I'm actually fairly close to this fire number. What do I do? I don't think that there is a hot new way to get to fire. The obvious component are keep your housing expenses low through house hacking, starting a business. But these are nothing new. What I think is new to the community is we're seeing a huge population in this country that are actually millionaires. I think there's 22 million millionaire households in this country. And there's a big wealth dichotomy. There's plenty of people at the bottom, too. But this surge in the millionaire population and people who are technically at this fire level of wealth, I think, is really catching a large amount of people by surprise. And from there, I think what's emerging is, oh, I'm so used to investing very aggressively. If you talk to most people listening to this, they probably have 100 % stock portfolio and no diversification outside of that asset class.

Maybe they're in stocks in Bitcoin, or maybe they have a highly leveraged real estate investments, but nobody has a conservative portfolio in this space. And I think a lot of people have this stated goal of time freedom, and the cost of time freedom for most people is going to be a less aggressive investment portfolio. So I think that's what's really new in this space is huge chunks of the community waking up and being like, I'm actually rich right now, but I'm so used to hoarding. I'm so used to spending very little. I'm so used to investing aggressively, and I can't shift my brain to actually putting together a conservative portfolio and spending anything close to what I'm capable of. And that's a It's a really interesting problem. It's not what anyone would have expected. It's a very first-world problem. But that's the fun one I think is actually new.

So when you say conservative portfolio, you mean taking out your stocks and making it liquid so that you could spend your money? What are you saying exactly?

Well, for example, Retirement research, retirement planning research, typically uses an example of a 60/40 stock bond portfolio. Do you own any bonds?

No.

Neither does anybody else, right? I pull our community, third of which say that they're at their fire number. 90% of them own no bonds. Almost none have anything close to traditional allocation. That makes perfect sense. Bond yields are so low. But that's a conflict with this perception of to actually spend money from a portfolio, you have to build a portfolio that is capable of supporting those distributions. And that involves moving from aggressive allocation to more conservative allocations. And that's a problem people have. It'll be very difficult for everyone in the community. It may be very difficult for you as well whenever you decide to shift to a more conservative portfolio Because you're so used to- It's too slow growth, right?

That's right. That's the problem. We'd rather be risky than have such slow growth. I would never do that. I think I'd never put my money in bonds, I don't think.

But your goal is not fire, right? But people who say, My goal is to spend Tuesday on my mountain bike at age 35 instead of in the office. You cannot do that with a all-stock portfolio unless you're so rich that it doesn't matter. You can withdraw 2% a year or whatever. And the problem is because you're so far past what you need to spend. That's the difference between a two and a half million dollar portfolio and a five million dollar portfolio, for example, for someone who wants to spend $100,000 a year. They all stock portfolio because it can crash 50 to 80 % once a generation and take years to recover does not support the actual distribution of those funds from a portfolio. And that, I think, is the problem that the community is grappling with is they're so used to aggressively building a portfolio, and they've trained their brain for so long and grinded for so long on that. That shifting to actually selling off the stocks, much less even moving to a more conservative portfolio allocation is just impossible for them. It's not happening in large numbers.

Then with inflation, do you find that that is messing with everyone? Because if people are pulling out 100 grand a year, nowadays, that's not even a lot of money.

All the retirement rules of thumb are inflation adjusted. It's like the 4% rule is automatically adjusted for inflation and assumes that's the real amount. If you're going to withdraw 100,000 in year one, you're going to increase your distribution in year with inflation and withdraw 4% of your portfolio.

I end my show with two questions that I ask all my guests. You can just answer from your heart. The first one is, what is one actionable thing our young improfitors should do today to become more profitable tomorrow?

Some goal setting or time management system that says, Here's what I want in some reasonable period of time, one to three years. Here is what I need to do in the next 90 days to get there. Here's what I'm going to do this week to get there. Bonus points if you do today. If you do that and you it for several years, it's going to feel slow in the moment and you're going to look back and be like, Whoa, wow, I made a ton of progress. That's the first answer I'd give.

What is your secret to profiting in life? And this can go beyond business, financial.

I'm going to cheat and say, I think it's the same process for my life. My first two goals are be a superstar husband and father, and I have a fitness goal of various benchmarks of what I hit next month by the time I turn 35. Then it's my business goals, and I treat them first. Monday morning, I am planning a date For that week, I am planning the development activities for my daughters, and I'm getting my workout schedule done before 9, 10, 11 o'clock before I actually turn it to work and actually building the business.

What advice do you have for all the young entrepreneurs, young people listening out there that want the same freedom that you have in your life right now?

The wealth creation journey, if you're not already earning a huge income, begins with frugality. Don't live a life of frugality where you're just miserly the whole time. But if you never actually dial it back and get started, you may find it very hard to get on the other side of the equation and actually have the opportunities to build wealth. With an example, if you spend $50,000 and make 55, it's going to take you nine years to save one year of spending. You're never going to feel comfortable taking a $30,000 a year job, for example, that could be at a startup that could be worth millions one day. If you spend $25,000, a very, very frugal lifestyle, you're terrible for that. A huge sacrifices compared to what you're capable of. Well, if you do that for just one or two years, you're going to rack up 50, $60,000 in cash. And that job that I just discussed is going to look like a real opportunity rather than a risk or threat. And so I think that's the biggest one I'd have there. It does not preclude you from building more income, time management, scalable careers, becoming the best in the world are more important than that.

But many will find that that's the true blocker to actually jumpstarting their path to being world-class.

Scott, this was such an inspiring conversation. I I feel like everybody learned a lot. Where can people learn more about you and everything that you do?

You can find us at BiggerPocketsMoney. Go to YouTube and type in biggerpocketsmoney wherever podcasts are downloaded. You can find us on Apple Podcast or Spotify. And then I'm at scott_trench on Instagram.

Thank you so much.

Thank you.

Well, guys, I really enjoyed this conversation with Scott, and there were so many gems, but what really stood out to me was how clearly he broke down the realities of the fire movement. He doesn't sugarcoat it. If you want financial independence early in life, Scott believes that you have to be willing to adopt extreme frugality for a few years at least. That's not just budgeting a little tighter. It means living entirely differently. It means how House hacking, driving a beater car, meal prepping, and aggressively cutting your expenses. That's exactly how Scott saved over 50% of his income in his 20s, and that discipline laid the foundation for everything that came after. But what I appreciated most was his warning to not let frugality become your identity. Use it as a tool to build your freedom. But once you've built a solid foundation, let yourself graduate into abundance thinking. Fire isn't just about freedom from a job. It's about freedom to choose what to do, who to work with, and how to live. One line that stuck with me was this, You can't afford to hate your job if you don't have savings. You also can't afford to become an entrepreneur if you don't have savings, so you're going to need to save at some point.

And that hits hard Because without savings, you're stuck. You're forced to stay in environments that drain you just to survive. You're forced to stay in a job that you hate. But when you start building that financial runway, you open up the door to bold decisions, getting a new job, starting a company, starting a side hustle. You open the door to your full potential. Yeah, fam, that's it for today. If you guys enjoyed this episode, make sure you drop us a review on Apple Podcast, Spotify, wherever you listen to this show. If you guys want to check out all of our videos, you can find them on YouTube Our YouTube channel is growing really fast. You guys can also follow me on Instagram at @YAPwithhala or LinkedIn. Just search for my name. It's Hala Taha. And of course, before we go, I've got to shout out my amazing YAP production team today. I want to specifically shout out Jaurine. She's a new hire, and she's been crushing it on the scripting, researching side. So thank you so much for all that you do, Jaurine. You've been really picking it up. I really appreciate you. This is your host, Halitaha, a.

K. A. The Podcast Princess, signing off.