Get and Stay Money Fit – House Hacking


The housing markets seems crazy now but it may be as good of a time as any to reevaluate what you’re doing for housing. Should you keep renting? Should you sell your house? Should you move to a lower cost of living area (maybe with your new found remote job) and buy something? I think many people are asking themselves these questions.

I was listening to a stressed caller on the Dave Ramsey Podcast explain that her rent was now over 50% of her take home pay. She was making 40k gross working at an insurance call center near Phoenix, AZ. She didn’t want to go too far away because of her child’s father, her family, and questions over certain surrounding areas’ safety. This type of story seems to be becoming more and more common, fears of inflation and stressed out over what to do to get some breathing room.

Stories like these make me feel very grateful that I discovered house hacking when I did. “House Hacking” is when you use your primary residence also as an investment, through renting room(s) out to offset one’s normal living costs. It allowed me to greatly lower my living expenses, create a more robust life, and put those savings into passion projects that will hopefully flourish into something great down the line. I’m a huge fan of house hacking. I know it’s not for everyone but think everyone can learn something from the concept. If nothing else, it can at least give you a moment to pause and evaluate whether certain things are needs… or just wants.

Todd Chistensen, of The Money Fit Show, was nice enough to let me come on and describe my experience with house hacking. We explore the good and beneficial knock-on effects, like learning more about real estate as well as the bad, like hours spent cleaning the pool and having to go to a mediation.

Listen to the show: https://open.spotify.com/episode/7y3hNjOzk9CzYeDL8KdAWP


If you want to get connected with cool people like Todd, whether you’re a host or a guest, Podmatch has been the best I’ve experienced thus far: https://podmatch.com/signup/mbb

I LOVE ME SOME MATCHA! THE SAVINGS AND RATE OF RETURN OF MAKING YOUR OWN DRINKS

I admit I was sucked into the Starbucks life while studying. I’d get bored of being in deathly quiet environments, like the typical library, and would need a change of scenery, and some matcha… I’d go through phases where I’d be getting matcha frappuccino’s every day. Those frappuccino’s today cost just south of $7.

After I passed my last actuarial exam and received my FSA my wife got me a matcha starter kit as a present. This included a matcha mixing bowl and a whisk, and of course some matcha from the matcha cafe. At first I was only using it for regular tea, nothing fancy, and I noticed the quality was really quite excellent. I then thought maybe I could make the frappuccinos myself. I found some recipes and started experimenting.

Since I’ve started making the frappuccinos myself I’ve noticed a couple of things. I spend a lot less money, both in the actual frappuccino cost and the gas that I was spending every morning driving to and from Starbucks, and the quality is much better. Some of you may be rolling your eyes and saying, “well duh dude.”

Sometimes we get caught up in habits, and I originally got sucked in because Starbucks was the only place I knew that had matcha, and they’re hard to break. Sometimes we need an outside force, like a matcha starter kit, to generate a change in mindset. This did get me thinking though, how much money is this change in habit worth to me today?

For this analysis I’m assuming I’m saving $7 each day from going to Starbucks but need to pay the following over time to make my own frappuccinos (these are estimates as I haven’t been doing this for long). I’m also assuming all costs go up 7% each year:

My question is what is this habit worth over say a five-year period?

Cash flow:

Cumulative cash flow:

If we were to discount these cash flows back to today at 7% the net present value would be $7,036 and if you think I should be discounting at a higher rate, say 15%, the net present value would be $5,900. Regardless this is a lot of money. I did exclude blender costs and the savings in gas but I would guess for me that would only cause those estimates to increase.

This change in habit is worth a lot to me today! The IRR is out of this world, albeit on relatively small amounts. In fact I feel so much richer that I may go put 5k into something useful, maybe a course or two:)

New Goal Needed

I’ve gone a few weeks now, after getting COVID again, we’re I’ve had little to do with any real goal setting, and I think every so often one needs a break. I typically use a journal I made, 15 Weeks to Pass an Actuarial Exam, that asks questions oneself questions while (hopefully) reaching a goal every 105 days. Two goal journals ago I wanted to get another rent property, and we did exactly that in Myrtle Beach, SC right as my 105 days were coming due. This past goal journal I made it my goal to reach out to 100 different podcasts to try to get on their shows and provide value to their audience. I can happily say that I was able to do that and in the process got to talk to some very cool people. When I broke the goal down to just reaching out to two podcasts a day it was a cinch. “Inch by inch is a cinch, yard by yard is hard.” I even included some of these episodes below:

I’m still tinkering around in my head with what I want the next goal to be. One thing I know for sure with dealing with myself is that journaling, and keeping myself responsible daily, has truly had a life changing impact.

If you have a goal you’re working towards please share with us in a comment. If there’s anyway I can help you attain your goal let me know, would be glad to help:)

Change Your Mind, Change Your Future

Apologies for not posting in awhile but I’ve been on a reading rampage. I wanted to share links to some of the material I’ve been looking at. My last post was a summary of Garrett Gunderson’s What Would the Rockefellers Do? I have a link to the last post here and below it a video summary of my big takeaways.

Second Change by Robert Kiyosaki was also a great mindset shift book. It talks of how what worked in the past may not work so well going forward and the “rich” could end up poor while those who understand the changes and incentives could profit heavily:

Hopefully this unlocks some thinking to pursue what is possible. It’s all in your head…

What Would the Rockefellers Do?

I just finished reading What Would the Rockefellers Do? by Garrett Gunderson. This book talked about how the Rockefellers banked and how they preserved their wealth going through generations. Gunderson speaks on the overfunded whole life policy concept, or what we’ve called the infinite banking concept. It’s the concept of putting money, instead of into a traditional bank, into a whole life insurance policy. These are best utilized through a mutual insurance company, as opposed to a stock company, because the policy owners share in the profits of the company, in the form of dividends. One can put money into the policy and then take a loan out against the policy. The cool thing is the original money in the policy continues to grow with uninterrupted compound interest, as the loan you’re taking out is against the policy (used as collateral) NOT from the policy!

This is a total game changer as it provides another asset to borrow from and is super liquid. If you’re like how I was and thought it was wise to pay cash for a car, and it may still be for some, you might start thinking differently. When I paid the 11k for my last car the money was gone like that! Poof! The future interest that that money could have created has now vanished, never to be seen again. If I would have financed it I’d be paying the principal back to the lender with interest, but a pro in this case would have been that I wouldn’t have needed the cash at the start.

With one of these banking policies one does need to save up the money but once it goes into the policy the future opportunity cost is no longer lost. It keeps growing with uninterrupted compounding interest. If one were to die the outstanding loan amount would just be deducted from their death benefit. See it as an advance of your death benefit.

I actually just started my first Mass Mutual high early cash value whole life policy through the help of Chris Naugle and his Money Multiplier group. It came at a good time because we have been thinking about refinancing our house but wanted to update some things in the house first, including a new kitchen and new paint, to be able to (hopefully) pull a bit more cash out during a refi. I deposited 15k into the policy, which I’m scheduled to do for the next nine years, and immediately borrowed 13.5k against my policy. If I had just paid the 13.5k for the start of the kitchen and paint the future earnings of those dollar soldiers would have immediately evaporated but now that earning potential has been locked into the policy and will grow with a guaranteed 4% (by law), and more typically around 6% with dividend.

One thing I have loved about this experience so far is just how easy it was to request the loan. It was literally a button push and in about 48 hours I received the loan right into my bank account. No dealing with banks and/or underwriting documents. No fees or closing costs. It was easy.

Another aspect I like from this book is that Gunderson really comes from an abundance mindset, not a scarcity mindset. He talks about not restricting yourself so much, and putting the things you love and enjoy into your “spending plan”. Don’t feel bad about spending and living for today, but at the same time have a respect for your future and legacy that you’d like to leave.

One aspect of the book that I hadn’t really thought of is trusts. He talks on this mechanism that helped the Rockefellers control the wealth that was originally created by John D. Rockefeller. From the explanation it sounds like one could setup a governing body, or board, that is in charge of allowing disbursements from the trust. For example you probably wouldn’t want your grandkids taking out money to go do drugs and harmful activities, so that might not be allowed. Alternatively if they wanted money for a trade school education or were seeking capital for a business venture, maybe with approved business plan, that might be allowed by the trust.

I definitely enjoyed the book. It’s a quick read but I definitely appreciate what he’s getting at now that I have some hands on experience with dealing with these overfunded whole life policies. I honestly think I should start another one soon.

Here’s our discussion with Chris Naugle where we get a brief look into the infinite banking concept:

Going to The Moon Eating Tendies; A Review of WallStreetBets by Jaime Rogozinski

While WallStreetBets, the Reddit group, started in 2012 by Jamie Rogozinski it was really the GameStop short squeeze in the third quarter of 2020 that brought it to primetime. Tendies, diamond hands, degenerates, apes… These are some of the terms that are frequently used on the reddit group. I went into this book thinking it would be around the fiasco that was the GameStop short squeeze but I was wrong, and pleasantly surprised.

While other investing groups are very conservative, with a long-time horizon, WallStreetBets fills the void for many risk-taking hombres who want to make a short term, oftentimes highly risky play, in search for equally crazy high returns.

What I liked about Jaime’s approach with this book is that he paints a picture early on for what has cultivated such an environment of risk taking. I would summarize as the following: Many of the people in this group look at Wallstreet as an exclusive casino, which most of society is not invited to. Secondly, taxpayers had to bail out the banks in the great financial crisis in 2008. Lastly there are “safeguards” that have been put into place, like the classification of a “pattern day trader” which requires 25k in an account, which create an access issue while not really saying anything about the knowledge of the trader. And that’s not even with the trillions of dollars that are being printed as a macro backdrop, causing inflation and, once again, incentivizing excessive risk taking.

You want to make a bet? What better way to go all in than with options, the leverage instrument of choice it seems for the members of WallStreetBets. Options are instruments that derive their value from an underlying asset. The option to buy a 100 shares of Tesla in one week’s time at a price, referred to as the strike price, of $1400. That option there is what the industry calls a “Call” option. The option to sell is referred to as a “Put” option. These can be very safe or very risky depending on the type of option one is buying or selling, and many cool combinations can be put together for intricate payoff diagrams. Can you scream Iron Condor?

One thing about WallStreetBets is that people share a lot, many people would characterize as excessive. It’s not uncommon for members to share five and six figure losses, referred to as loss porn. While those people often get ragged on it creates a forum for members to seriously learn strategies and methods of investing, and dealing with the psychology of money, which I don’t think gets talked about enough.

I thoroughly enjoyed this book and I hope that you’ll listen to The Brothers on Books Podcast review of it:

I will also leave you with an epic compilation of YOLO bets performed and then shared on WallStreetBets:

Student Loan Debt through Jason Brown’s Book, IT IS POSSIBLE!

We had Jason on the podcast recently and I thought I’d share the outline of his book:

INTRO

  • 45 million borrowers
  • 1.7 Trillion in student loan debt in the US (behind only mortgage debt)
  • 1/4 of 1.7 Trillion is in deferment, forbearance, or default

Part 1 The Problem

  • Largest form of debt, behind mortgages
  • over past 45 years gas prices are up 300%, gold is up 1200%, but college is up 1600%!
  • 70% of students take out loans to help pay for college
  • 40% of students drop out before completing degree
  • US has worst college dropout rate of any developed country
  • Birth of a crisis
    • 1957 US loses space race
    • Eisenhower embarrassed and turned focus to scientific education
    • Dwight Eisenhower created first federal loan program for science, math, and engineering
    • 1965, Lyndon Johnson expanded it outside of science nerds
    • 2009 US government took over student loan industry
  • Other externalities
    • Depression
    • Divorce, 13% of divorces blame student loans
  • Standard College Expenses
    • 2017-18 Tuition and fees
      • 34k at private school
      • 10k at public for instate residents
      • 26k at public for out of state residents
    • Housing and meals ~11-12k
    • Books and school supplies ~1.2k
    • Personal and transportation 2.7-3.2k
    • Tuition tends to increase about 8% per year

Part 2 The Stories

This part went through various different paths to either get through college completely debt free or very close to debt free. Most of the stories involved living at home, getting scholarships, and working jobs.

Part 3 The Solutions

  • Work to make money
  • Employer tuition reimbursement (Starbucks, Best Buy, Home Depot, etc.)
  • 100M in unclaimed scholarships each year because students don’t know they exist or think they’re too hard to get (can find locally, scholarships.com, fastweb, chegg, etc.)
  • Dual enrollment
  • Take AP classes
  • Internships
  • Ditch car, ~9k per year
  • Use used textbooks
  • Maximize campus amenities
  • Student discounts
  • Learn to cook
  • Attend community college first (~1/3 of cost of in state public 4 year school)
  • MOOCs – massive open online courses

I enjoyed discussing some of these ideas with Jason and will take away many points. One is that the government is making money of many going into debt for school. Don’t be a blind sucker that just takes the money! Do your own cost benefit analysis and if you decide to go to school apply to all the scholarships you can, because there are a lot of dollars that go unclaimed.

Podcasting

Howdy everybody, I’m sorry I have not posted in a bit but I’ve really been trying to get the word out on house hacking and its benefits! I thought by going on some podcasts I could get the word out, meet some cool people, and all while improving my public speaking skills.

Today Mike Swenson released his new episode on the REL Freedom Podcast where we discuss house hacking:


https://open.spotify.com/episode/2CSZ9kQLf7GVrNAvR06TLA

We also may have gotten detoured and talked about Make Better Bets, which I’m making free today on Amazon in e book version:

Early Retirement Extreme Review – Day Six

Unfortunately this will be the last post on this book for now. What a book! More personal thoughts will be in bold below in the outline. For those that want to listen to The Brothers on Books Podcast discussion with Jacob Lund Fisker I’m attaching the link directly below:

BOBP 17: Early Retirement Extreme

Chapter 6: A Renaissance Lifestyle

  • Substantial improvements don’t happen incrementally by patching existing methods; They require a complete redesign
    • Earn more or spend less
    • This is not rocket science, you can do this! What I will say is cutting down your expenses can only get you so much more each month, so you may get more bang for your time by trying to increase your income or income sources. There is a limit to the amount one can spend. Even if your skills immensely improve so you don’t have to outsource many things there is a limit. At an extreme one could barter for everything and spend $0.
  • Things
    • The most expensive tool in the tool box is the one that never gets used
    • Depreciation schedules
      • Annual cost = (your cost – used price)/(years in service)
      • Many people understand this for cars but it’s important to know market prices for all your things
        • I recently sold the only NBA jersey I still had, a Miami Heat Lebron James jersey. I bought it for about $80 in 2014 and got $35 in 2021. Thus the annual cost for this jersey was (80-35)/(2021-2014) = 45/7 = ~ $6.43.
        • One could view depreciation slightly differently by looking at cost per time used.
        • Reframes how you purchase things. One item might have a much bigger price tag but may keep it’s value much better than a competing item, resulting in an annual cost that is actually less.
          • Item A: $800 now, estimate still worth about $700 after 5 years, thus annual cost = (800-700)/5 = 20
          • Item B: $400 now, estimate only worth about $100 after 5 years, thus annual cost = (400-100)/5 = 60
          • Invest in great things!
    • Get rid of your things! I’m going through the process of getting rid of unnecessary things and while I’m doing it I’ve been regretting many of the purchases I’ve made. Hopefully this feeling with stay with me when I think of making another impulse purchase.
  • Health
    • Form follows function
    • supercook.com
    • Lots of food can go without refrigeration, read books on boat provisioning
      • This is something I literally would have never thought of
    • Staples for cleaning: ammonia, baking soda, borax, chlorine, soap, and clear vinegar (never combine chlorine and ammonia)
  • Transportation
    • Touring bike, steel frame, is ideal for commuting
      • don’t be afraid of spending 1,000’s, it’ll last a lifetime

Early Retirement Extreme Review – Day Five

More personal thoughts will be in bold below in the outline. For those that want to listen to The Brothers on Books Podcast discussion with Jacob Lund Fisker I’m attaching the link directly below:

BOBP 17: Early Retirement Extreme

Chapter 5: Strategy, Tactics, and Guiding Principles

  • “Only the combination of skills and coordination will unleash the creativity of an expert.”
  • “Doing the right thing is much more important than doing things right”
    • I love this quote so much. I view it in the same vein as there’s a difference between important and urgent. Stop thinking what things have deadlines that you need to work on and instead thing of the big ticket items that are really going to move the needle in your life.
  • Outsourcing has gone extreme, why?
    • Misinformation
      • “We need an expert to do this!” syndrome. Many people are fed the information that they can’t do something and they need an expert. One thing I’ve found a godsend is YouTube. You can learn virtually anything, short of brain surgery, on there.
    • Lack of personal skills
    • Lack of choices
  • A good strategy solves multiple problems at the same time
    • This is touching on synergies. What things can you incorporate that solve many issues with one swoop? I think of when I built my calisthenics park in my backyard. It gave me some experience building with wood, drills, concrete, and paint from a skills perspective. It also allowed great time outside in the fresh air. It has saved me great time and energy going to and home from the gym, and thus saving gas money and mileage on the car.
  • To solve the problem, the cause of the problem must be understood.
    • What comes to mind are people that claim they’re not cut out for one profession or another for whatever reason. They say they’re not smart enough but oftentimes they just are underestimating the effort or time it takes. Maybe moving closer to work would allow them an extra hour to study each day, which could be all the difference they need to get over the hump.
    • Guys are saying they aren’t dating women that they like. Well maybe they’re not even asking out any of the women that they think they might like…
  • Building Blocks
    • Blocks + instructions -> model (think Legos)
      • But the blocks can be combined into new models, where as most just strictly follow the given instructions
      • This seems like it takes a lot of experience
    • Can turn microwave oven into welder
    • Can use aluminum foil to remove rust