Why Rent vs. Buy Is the Wrong Question with Jeremy Schneider
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The math changes dramatically when it's an investment, not your primary home. If you're living there and not sharing an income, not a great investment. If you buy a piece of investment real estate, have renters or buy a REIT or other sorts of investment real estate, then it can be great. You can have 10% plus returns per year. But if you're just living there and no one's paying you rent, then it's not so great.

Welcome to the Stay Wealthy Podcast. I'm your host, Taylor Schulte, and today I'm joined by one of my favorite new friends in the personal finance world, Jeremy Schneider. Jeremy started his first company at age 22, and he sold it in 2014 for $5 million. In 2017, he quit his job, he made work optional, and then he launched the Personal Finance Club. And he's a

In today's episode, you're going to walk away learning three main things. One, how to think about renting versus buying both as a working professional and in retirement.

Two, Jeremy shares his two-step plan for reaching your retirement goal in 12 years. And then three, he's going to be sharing a handful of actionable tips and tricks that you can implement immediately to improve your financial situation and change some of your behaviors towards money. For all the links and resources, and there are a lot of them today, head over to youstaywealthy.com forward slash 64.

Okay, so I just shared in the introduction, Jeremy, that you started your first company at 22 years old and you sold it in 2014 for $5 million. So at age 34, you became a millionaire and you're very open about sharing this. But one of the questions that I've never had a chance to ask you and I wanted to kick things off with is like,

How did that feel? What was the first feeling when you saw $5 million or whatever you netted after taxes? How did that feel? It was weird. I actually took a video of the moment that I became a millionaire.

I had a checking account with Fidelity. And I know that when they send you a wire, they send you an email. And so the day of the close of selling my company, I literally opened up my bank account website and just had it sitting there open in a browser. And then my phone buzzed. I got this email. So I clicked refresh and my net worth at that point was about $100,000 just from

normal try and true investing in my Roth IRA. And I refreshed it and I went to over $2 million on one click of the browser. And I don't know, it was weird. It was just kind of surreal. And you don't really... It took probably a few years to sink in that I was a rich person, essentially. And it's all relative. I'm not even in the 1% now, as crazy as that is. It still sounds crazy to me that there's 1% of people are that much more rich than me. But yeah, I went from just kind of being like,

a broke person. I was driving a 99 Ford Explorer. I was living in a one bedroom apartment to being a millionaire in a second. So it was more surreal and weird and kind of took a couple of years before I was like, wait a minute, I can spend way more money than I have been. And my net worth really doesn't even move. So, but it was definitely fun too. What kind of made you decide to be so open about your financial success?

We don't know each other that well, but you seem like a pretty humble guy and you're just very, very open from, I guess, I mean, you recorded the video of you becoming a millionaire. And if people go check out your website or your Instagram page, you're very open about your net worth and your investments. What made you decide to be so open about all of this? I'm sure you've caught some heat and get some pushback from people, but yeah, what made you decide to be so open about it?

I think it's kind of funny that in our society, talking about money is such this big faux pas, like saying what you make or how much you have or even how much you've spent on things. It's this secret thing. And I don't know necessarily why, but transparency has always been one of my core beliefs. When I ran my company, I was transparent about all of our books to all of our employees, about what people made, about our strategy. I just think it's much easier to go through life being honest and transparent rather than keeping track of the...

secrets that you're telling or whatever. And then also, I really am passionate about personal finance and investing. And when I marry those two things, I think it's really helpful for people to see someone who has money and has made money and what it really looks like. I feel like there's such this like

There's like this secret current, the Wizard of Oz behind the current or whatever. But when I'm like, nope, this is what it looks like when you have $4 million in your bank account. This is how I spend money. This is where I live. This is because I don't post my address. But other than that, I basically literally post screenshots of my bank account, things like that, without anything that's going to allow me to be hacked or whatever. I just think it's helpful to people who are...

starting out on their journey or in the middle of their journey to see, oh, it's not all rappers making it rain. It's not just NFL stars. It's actually people who drive reasonable cars. They rent apartments. They still hunt for deals when they're getting flights because

Because they can't just spend indiscriminately or else they wouldn't stay a millionaire. They would lose all their money. So I think it's both. I'm a fan of transparency and I think it's helpful to people to see what one example of a millionaire looks like. I've shared on the podcast a number of times that your habits and behaviors towards money start at a really young age, say seven or eight years old.

What was it like growing up for you? What were your parents like with money? Were they transparent? Did they teach you a lot of these habits and traits and behaviors? Talk to us a little bit about that. I mean, I think that's something I've learned throughout this life is that people kind of are often products of their experience. And I was fortunate. That's my story is I was fortunate. My parents weren't uber wealthy or anything, but we lived in like a middle class, upper middle class family.

neighborhood. I went to a very good public school. And yeah, my parents talked about money. I think one kind of funny story is my very first job ever, I think I was maybe 13 or 14 when I

Took home my first paycheck. I worked for a summer camp and I worked all summer and I think I made like $1,200 for the summer or something. And so then my dad, one of the rules of the Roth IRA, as I'm sure you know, is that you can't contribute more than this year's $6,000, but you also can't contribute more than your earned income.

And so if you have no earned income, you cannot contribute to a Roth IRA. And so for the first time in my life, I had earned income at 14 years old of $1,200. And so then my dad opened up an IRA in my name, and he was very generous to take $1,200 of his own bucks and basically max it out to the maximum legal amount.

allowable limit and then let me spend my 1200 bucks. But then he was basically transparent with that about me and said, hey, this is what I'm doing. You now have a Roth IRA. This is a long-term investment. We're going to buy mutual funds inside of this Roth IRA. It's going to sit there for a long time. And it was 1200 bucks. It's not like a million bucks now. It might be like

10,000 bucks or something, which is great, but it didn't make my retirement. But it did create a habit. As a 14-year-old, that just kind of became normal to me. And even now as a 39-year-old, when I see other people my age or older, younger, that don't know what a Roth IRA is or don't know how to buy a mutual fund, I was like, you don't know how to buy a mutual fund? Weren't we all doing this as kids? And for sure, it's an unfair advantage that I had that most children don't get. But if you're a parent out there listening and

I think that might be a cool tip for your kid. When they get some earned income, go open a Roth IRA, sit down with them at the computer, show them how to create the account, how you're choosing those mutual funds, how to invest. I think that has made a big impact on me. Well, if somebody is listening to this and they're at a later stage in life and like, I already know that I have bad habits with money. My parents didn't teach me these things. Make sure you stick around to the end because Jeremy has some really good action items and tips for people to get control of some bad habits and make some changes. So I'm

Make sure you stick around to the end. Really quick, before we get into today's main topic, which is renting versus buying, I'd love for you just to share a little bit about what you're doing with the personal finance club that you recently started. That platform is really blown up. I love following it. And then maybe just share, is there anything that we can do in the Stay Wealthy community to support your efforts there?

Thanks for letting me shout out right at the top of the podcast. So most of the magic is happening on Instagram currently. A little bit over a year ago, I started Personal Finance Club, basically with a mission to help inform and educate people on personal finance and investing. Every single day I post to Instagram with kind of like a very punchy, actionable, shareable message.

infographic usually that shows how to invest, how to make money, how money grows, different types of accounts, all these types of things. And so, yeah, if you want to go to Instagram, check it out. I also have a YouTube. I've got a website, personalfinanceclub.com. And still in the building phase, I just want to kind of get the word out and help people learn about this stuff. After I made money and I eventually quit my job and kind of like retired young, even though I'm not going to stop working, I was thinking about what I love doing and

It's hard to motivate yourself when you don't need the money to eat like I used to, which used to be my motivation. But now every morning I wake up and I still get so pumped about helping people learn this stuff. Whenever I can sit down with someone and walk them through the 30 minutes or an hour they need to kind of understand compound growth and how to click these buttons on a website to actually realize that in a practical manner.

It changes their financial future. And that still makes me so amped that like an hour of my time can maybe make someone else a millionaire over the course of their career. So that's what I'm doing. And yeah, if you want to check it on Instagram at Personal Finance Club, that would be awesome. Awesome. Yeah. I mean, it is really neat. What I love is that the information you're presenting is nothing new. Like this is stuff that we've been taught through books and great investors for the last hundred years. But

What I think is really clever and unique is how you present the information. So if you're listening to this and you're not on Instagram or you don't use Instagram, that's fine. But go just check it out and see how Jeremy's presenting this information, a lot of which we talk about here on the podcast. But I think it's just really clever and unique. And for those that don't know, Jeremy produces all these graphics on his own using Photoshop. He's not outsourcing it or anything like that.

And I think that's the reason why it's gained so much traction in such a short period of time. So I really enjoy it. I really enjoy people breaking down complex things in a simple, easy to understand format. So keep it up. Let's get into the good stuff here. Speaking of Instagram and posts, you put out a post, I don't know, not that long ago about renting versus buying, which always triggers people. So I know you got a lot of feedback from both camps.

Let's just start off like, what is your general opinion on renting a home versus buying a home? And then we can kind of dissect and go a few different directions here. I love this question. And every time I post about it, it's always like a flame war in the comments of people in both camps and like our days of tribal warfare, us versus them. I don't know.

I didn't even realize it until I started posting about that this was such a hot button issue. But in the rent versus buy question, my strong opinion is that it's the wrong question. I think people get so focused on which one is financially better that they're missing the bigger issue, which is how much you spend either way. Either one could be better. So if you buy a house and your mortgage and all your housing expenses all in are $1,000 or you go rent a $5,000 penthouse, buying would be better. Yeah.

or if you go rent, you get a roommate and you have $500 a month in rent, but then you decide to move and you buy a mansion that's $5,000 a month for a mortgage, then renting would be better. And I think people kind of excuse themselves on how much they're spending trying to get which one is better, right? When they often buy or rent way too much either way. And

And so I think that's kind of like main point, which I get across. And it's usually people who buy homes that make this mistake more. It's the person who's like, they got roommates or they're living in a one bedroom apartment paying 800 bucks a month for rent. And then they say, okay, time to buy. I'm going to go buy a $400,000 house with a $3,500 mortgage. And so when they go from $800 a month in a one bedroom to a $3,500 mortgage, rent buying becomes a terrible decision because they're just plowing all

all of this money month after month into their primary home, which does not provide them any income. It goes up in value very slowly, but it has huge expenses associated with it, including tax and insurance and maintenance, realtor fees, mortgage interest, all the stuff that's totally sunk cost, totally throwing money away in the exact same way that renting is. But they've excused themselves from that because it's an investment. I'm making air quotes right now. When it's not really an investment, it's a place you're spending money on to live. So that's

That's my answer. Spend less money. I think it's interesting. I think one of the biggest misconceptions that people just gloss over is that homes aren't really a great investment. From an investment perspective, the rate of return is not that great. Over the last 100 years, physical real estate, or I should say residential real estate, has barely outperformed cash in the bank on a national level. And people just don't look at the numbers. And I feel like

I always hear these blanket statements like, I bought this house for $500,000 20 years ago, and now it's worth a million dollars, right? And like, I doubled my investment. But I've never seen somebody who's actually tracked all of their expenses year over year, everything that you just talked about from taxes, to insurance costs, to realtor fees, mortgage, all that stuff. I mean, don't forget general landscaping and things that go wrong and home improvements.

Nobody I've ever come across has tracked all those numbers and accurately shown me their internal rate of return on their home. I think if they did that, they would see for themselves that owning a home really isn't a great investment. And so I always like to bring to the surface is like,

That doesn't mean you shouldn't go buy a home. There's probably just other reasons why you should own a home and that you shouldn't fool yourself into thinking that you're buying a home because it's a good investment, because usually it's not. You bring up such an amazing example. You said you've never met someone who's done that, but I have.

And I can give you those numbers right now. And to be totally fair, I didn't buy a home 30 years ago because I was nine years old. But I did go back to 1989 and basically kind of in a very detailed manner, look up average home price, average home price appreciation, mortgage rates, insurance rates.

insurance, maintenance, taxes, and basically take an average across the nation. Of course, every single home is different and everyone knows that their uncle bought a property in Silicon Valley in 1982 and it went up a million times. That's the exception. But if you just go on average, and I think average is a good way to look at it when projecting going forward. Here's the numbers. If you bought a home for about the average price in 1989, that was about $100,000. If

Today, or I actually did this just before the end of the year, in 2019, it would have sold for about $278,000. So that's kind of the same example you gave. Almost tripled in value. And when people look at those numbers, it sounds really good. But wait, here's a problem. You had to pay for them in that time. When you paid at mortgage payments, you were paying $222,000 in mortgage payments over those years. And

And a lot of that went not into the principal, but into interest, right? Also, you paid $28,000 in homeowner's insurance. You paid $113,000 in maintenance, all those fixing the driveway and the roof leaking and that remodel that you had to do. All that stuff wasn't free. And if you want to get that resale value, you have to do those remodels too.

Property tax, average property tax across 30 years across the nation, $56,000. Realtor fees, buying and selling, another $18,000. So when you sold it for $278,000, the total amount you spent on it was $439,000. So when you put that $439,000 in and you get $278,000 out,

The net result is a savings account with about an interest rate of about negative 3%. So it's not going up in value. It's just going down in value kind of slowly. And people just love to gloss over all the money they're burning. And then just look at the, it's kind of like looking at if you run a business and you're like, Ooh, we made a million dollars this year.

but you spent $1.1 million on the product. So you actually lost money, right? You can't look at the revenue without looking at the expenses. And so just like you said, it's not an investment, it's an expense. Two quick questions. One,

Thank you very much for sharing that. Is that published somewhere, those numbers? And then two, did you also run the numbers assuming someone bought that home in all cash and didn't have a mortgage? So this is assuming a mortgage, assuming the average 30-year mortgage with 20% down. I kind of did like the typical purchase.

Things on my website, it's definitely on my Instagram. If you scroll on a bit, the title says owning for 30 years and breaks down all these numbers. And in the caption, it goes into even more details. And I know I haven't done it buying in cash, but buying in cash isn't all that much better. You still have to pay for the house and you still have to pay insurance, maintenance, property tax. And also buying cash, there's another big hidden thing, which is the opportunity cost of not investing. So like you said, the actual physical residential real estate barely...

outpaces inflation. But if you had that money in a index fund, in fact, I think I didn't clear the caption. I basically said, if you had that money in an index fund or a mutual fund over those same 30 years, instead of having $278,000, you'd have $2.6 million. It's just so dramatically different how much money you would have if you had that money working for you instead of just sitting in a house, not generating income.

Yeah. And remember too, I mean, if you want exposure to real estate, you don't have to go buy a residential home. You can get access to real estate through some very low cost publicly traded REIT, ETS or mutual funds. So there are other ways to access real estate in your investment portfolio than going and buying an expensive home.

That's a great point, which is the math changes dramatically when it's an investment, not your primary home. If you're living there and not sharing an income, not a great investment. If you buy a piece of investment real estate and have renters or buy a REIT or other sorts of investment real estate, then it can be great. You can have 10% plus returns per year. But if you're just living there and no one's paying you rent, then it's not so great. And I really like house hacking too. Sometimes people buy a duplex and rent out the other half or they

buy a house and rent out two rooms or something, that can also dramatically change the math. But if you're generating no income from it, then it's just an expense. Yeah, you bring up a good point. I don't want to say that real estate is always a bad investment. You can make money investing in real estate. It does take time and extra work involved. I mean, some people do that for a living and they do have healthy rates of returns. But

But again, we're just talking about your average person buying a home to live in, not renting it out, not flipping it, anything like that. I think we just need to be real with ourselves and be honest. It's just not a good investment. It's not the best place for our money. Again, there are still reasons why you might buy a home and we'll touch on that in a minute. But yeah, I always like to bring that to the surface. I'm sure we're going to get some hate mail here from this, but.

We'll be sure to link to everything in the show notes. So all of this is backed up with real data and numbers. Really quick before we move on, do you have any thoughts on some of the pushback I get sometimes is that owning a house is a safe investment? Like, okay, I realize it's not the best investment. It's not going to earn me the highest rate of return, but it's a safe investment and I can touch it and feel it. Do you have any thoughts around that? I think there is some merit to that.

If the stock market goes down by 30%, 40%, 50%, you still have a home to live in if you live there, which is good. But safe, there's a group called the Bogleheads named after Jack Bogle. And they have these really, really wise investing rules. And one of them is never bear too much risk.

And another rule is never bear too little risk. And so if you say it's a safe investment and you put every dollar to your name inside your home and you wake up when you're 65 and the only asset in your life is a $350,000 home, you are too safe. And now you're basically a broke person living who has to sell their home and go rent, get roommates and rent an apartment just so you can use the profits from that home to eat. You are too safe. But I think as part of a diversified portfolio, that could have a place. So if you have taxable

10 or 20 or 30% of your net worth in your primary home, sure, I think that's fine. If you have 100% of your net worth tied up in your primary home, then I think you've broken that rule of being too safe because you haven't had the opportunity to

experience some risk and experience the growth that provides over decades of time. Well said. It's a blessing and a curse that we can't see the value of our home on a day-to-day basis. Like we can't our stock portfolio. It's good because we don't panic, but the value of our home does fluctuate technically day-to-day, just like the stock and the bond market fluctuates.

I think that's why some people perceive it as a safe investment because they're not looking at it every single day. But my argument is that when we go through another recession, if the stock market's down, your home value is also down. Maybe not as much. It could be more. I mean, real estate does move in different directions than general stocks. But if the economy is going through a tough time, your house is not worth what it's worth today.

And just because you can't see the value of it doesn't mean that it's a safe investment. And that gets amplified if you have a mortgage. So people think it's safe, but if you buy a house for $200,000 and you put down 20%,

You've got $160,000 in equity and $40,000 down, but then the home price drops by 30%, which can happen. Then you're basically bankrupt. You put $40,000 down and you've lost that amount of money. My brother sold a house. He moved around the time of the financial crisis just because he was having kids and needed to move. He had to write a check. He put down 20% of his house and he had to write a check to get out of his house.

That's risky. No one lost all of their money in the stock market. If you bought an index fund, you lost 40% or 50%, which wasn't fun for a couple of years when it was down. He lost every single penny to his name in that house and had to write a $12,000 check

to the bank just to get out from under the mortgage. So there's for sure risk and that risk is amplified if you're borrowing money to buy that asset as well. Yeah, leverage. What about tax benefits? Sometimes I hear like, okay, maybe it's not the best investment, but the tax benefits are great, right? I can deduct mortgage interest, property taxes, things like that. Do you have any thoughts around tax benefits of owning a home? It's such a weird one for me because people just love, and I think that it's just this

tax refund time. People get a check back. They see TurboTax and they type in how much they paid in mortgage interest. They get this big refund and it just feels like free money. But the real math is you're basically, you know, and I ask when people, I say, hey, would you give me $5,000 right now if I promise in April of next year to give you $1,000? And they usually say, no, they wouldn't. I mean, of course they wouldn't do it because it's crazy. And that's what's happening, right? You're paying $5,000 to the bank to get $1,000 back.

Yeah, that's a great way to frame it. I think that's a great question. 20% tax rate or whatever. And so if that's your reason for buying a house, that's not a good reason. For sure, if you're going to buy a house anyway for other reasons and you can also get a free thousand bucks, sure, why not? But that doesn't make it worth it. You're still losing $4,000 to the bank in interest on that deal. Yeah, we always say, I'm sure I've said it on the podcast, that we don't want to let the tax tail wag the investment dog.

We don't want to hold a bad investment just because there's a little bit of tax benefit or because we're afraid of paying taxes. And so we continue to hold this bad investment. So I think about a home the same way. I'm not going to buy a home just because of the tax benefit. There are

other reasons why I would buy a home, which leads to my next question. You recently bought a condo. You had been renting for a really long time and you shared that by renting and keeping your costs low is one of the reasons why you've been so financially successful. You've acknowledged that owning a home isn't the best investment, but you did recently go out and buy a fairly expensive condo. Share a little bit about why you decided to purchase a home.

I did, I know. And it was not a good financial investment. I am much more poor, I guess, more accurately, less wealthy today for having bought this condo. And so, yeah, I lived in a one-bedroom apartment that was converted from a garage that was attached to my friend's house who owned the house. And I lived there for five and a half years before, during, and after my acquisition.

Finally, I decided to pull the trigger and I basically bought a house that's now about 20% of my net worth is sunk into my house. I paid cash for it. It's a condo. And the reasons are basically just lifestyle. It has an extra bedroom so I can have guests. It's close to the beach and the bay. It's nicer. I'm turning 40 this year and maybe living in a garage stops being cool one of these days. I don't know. And so...

Every reason I did it was despite the financial reasons. And for sure, it still makes me cringe when I look at the math, how much less wealthy I am today already and how much worse it's going to be amplified. And it's not that big of a deal, right? Because I still have 80% of my net worth out there working for me in index funds and in investment real estate. And so when we talk about rent versus buy...

The reason to rent or buy, I think, is which one to choose has way more to do with lifestyle and what you want. If you're someone who moves every year and doesn't want to fix the toilet and doesn't really care about remodeling, then rent. You don't need to buy a place just because people tell you to. It's not going to make you rich to buy a place. Just go rent an affordable place and then you can move every year and you've got no issues. If you're someone who...

wants to nest and wants to paint walls and wants to do remodels and wants to be the king of your own castle and plan to be somewhere for five plus years, then buy. But either way, do it reasonably. And so basically I made the decision. I was like, okay, it's time that I want to, I hate the term settle down, but I guess have my own place and

have somewhere that's like a little easier to host and stuff like that. So yeah, I did it for every reason except for financial. Yeah. I think the best way that I've always summarized it is rent for flexibility and buy for stability. And so my wife and I rented for a while and we decided to buy a home because we wanted stability. We were starting a family. We wanted to be in a good school system, right? The school systems aren't always great and different pockets of

of San Diego. We wanted to be near family. My wife wanted to be able to take down walls and paint and put in a bathtub and do all that stuff and not have to deal with a landlord. And we wanted a community. We wanted a certain community with other people in a similar age group. And so again, all these reasons we bought

It had nothing to do with finances. Like we knew going in, this is not a good investment. Also, we did make a commitment. This is something we didn't touch on that buying a home should be a long-term decision because those realtor fees and all the fees that moving and buying furniture and maybe fixing things. We had black mold in our house. We had to spend money getting rid of that.

So I told my wife, when we buy this house, we're making a 10 plus year commitment. We're not going to buy this house and sell it in three years. So I think that's something to keep in mind too. If you do buy a home that you should take a 10 plus year long-term approach, just like you would with any other investment or financial decision. Exactly. I think there's one really good breakdown in New York times. If everything is equal, I think five years is like the breakeven point where if you move before five years, you're worse off. And if you move after five years, you're slightly better off.

But the big thing that assumes is everything equal. And usually everything isn't equal because people, like I said, rent very conservatively than buy lavishly. But you're exactly right. If you're not going to live there for 10 years, don't even bother. I know this isn't exactly your wheelhouse, but at my firm, we do retirement planning for people over the age of 50. And so this rent versus buy conversation sometimes gets a little interesting for people in retirement. So I thought I'd just share a few things since we're on the topic. And if you have any thoughts, feel free to chime in. But

in retirement, especially, you know, your life can be changing quite rapidly and you may find yourself wanting to move to different cities. And so I think having that flexibility in retirement, especially when the kids are out of the house can be really valuable. So I think that's something to really ask yourself, how much flexibility do you want in retirement? Also,

Owning a home, we didn't really touch on this much either, but owning a home is a lot of work and kind of ask yourself, like, do you want to spend your time playing landlord and fixing things and dealing with contractors and landscapers and all that type of stuff? Like, do you want to do that? Do you want to spend your time in retirement doing that? And some people do, and that's totally fine. But I think those are some questions that you should ask yourself.

And then lastly, tapping into home equity, if it's ever needed in retirement, can be really difficult and really costly. There are these things out there called reverse mortgages, but they're really expensive to secure. So having a lot of your money wrapped up in a home isn't always the best decision, depending on what your entire financial picture looks like.

but something to consider too if you don't have a lot of assets outside of that home you own. So I'll stop there and see if you have any thoughts on renting versus buying in retirement. I love all those points. And I think you're right. I think a lot of people are so tied to this American dream of homeownership that

People might even feel bad or like a failure if the kids move out and they don't own a home. But like, you don't have to own a home. Go rent. Go live your life. Go rent a condo. Someone else can worry about fixing it, painting it, doing all the landscaping. I know my parents, in their age, they're getting less and less interested in all the home upkeep stuff. My dad had some rentals that he's getting rid of because he doesn't want to be going to doing it for anyone else or himself. And as a new first-time homebuyer, my days, morning to night right now, are just consumed by trying to like

get this house ready. And I can see it lasting for months on end. And so I can see myself for sure later on in life

happily going back to the rent side of the equation, again, for reasons of lifestyle, not because I'm trying to maximize a dollar or whatever. One of the other things that you talk about in a lot of your content is paying down debt. And while we're still on the topic of real estate, one of the biggest pieces of debt that our listeners still have as they head into retirement is a mortgage. Most of them that I heard from, they don't battle with student loan debt and credit card debt and things like that, but they do have a mortgage. And a common question that I get is,

Should I be focused on paying down my mortgage as quickly as possible? Or should I be saving as much money into my 401k and IRAs and all these other types of accounts that we talk about here on the podcast?

Have you thought about this question? How do you think about paying down a mortgage versus saving more for retirement, especially for somebody that's, let's say, 45, 50 years old and starting to think ahead about retiring in 10 or 12 years? That's a good question. I also get this question all the time. I think my answer differs slightly from the one that you gave in a recent podcast. And I think

The most important thing is that they're both flavors of good, given the two options, investing or additional mortgage payments. And if you look at the two extremes, someone who just pays the minimum on their mortgage and goes nuts on investing, or someone who minimally invests and goes nuts on their mortgage, those are two people who are going to both be in good shape. And so it's not something that I would

loose sleepover. They're both good things. But my general strategy is to basically pay the minimum on your mortgage first, like don't get foreclosed on. Then the next step, I would max out all available tax advantaged accounts. So a 401k Roth IRA, those are kind of use it or lose it tax breaks. But it's also money that you could later on take out and just pay off your mortgage in one fail swoop if you wanted. And then after

Those tax breaks are, if you've maxed out 19,500 in your 401k and 6,000 in your IRA, you have more to invest than go back to the mortgage. And so I basically do it in that order to make sure that you don't get foreclosed on, you'd max out the tax breaks, and then you can get rid of the mortgage later.

And like I said, if you don't, if you want to be a little bit more aggressive and put more towards investing, or you really like the idea of a paid off home mortgage, and you want to go more towards that, that's okay too. Like they're all good things, but the bad thing to do is to do neither, right? To just barely make your mortgage payment, spend every dollar you have.

Then wake up when you're retirement age and you have no money and you have to sell your house so you can buy cat food to eat. That's what you want to avoid. I can appreciate that. And there's some middle ground here too. Two things that you could consider doing if you don't want to sacrifice your retirement or saving for retirement, if you still have a mortgage is one, you could refinance your mortgage into, let's say a 15 year mortgage to accelerate the pay down, depending on kind of where you are in that cycle.

or if you don't want to refi or you can't refi, you could consider making extra mortgage payments, right? Add a little bit more to every mortgage payment, kind of do the math and figure out how much more do I need to pay every month in order to pay down this mortgage in 10 years or 12 years or whatever your goal might be. So that's something to consider too. You don't have to do one or the other. Yeah. I like the additional payment strategy because you're not

committing yourself to another timeline. And also refis are expensive. I think when people see that their monthly payment changes, they kind of forget that there's several thousands of dollars baked into that refinance itself. And that if they sell within that five-year timeframe again, they're probably going to lose money in that refi.

But if you start making additional payments, there's no cost to that. It goes all towards principal. It dramatically reduces the interest that you're going to pay. And it still leaves you that flexibility of backing off if your financial situation changes, your income drops or something. And so when people talk to me about that, I say, don't necessarily rush out to refi. You can always just start refiing.

paying double on your mortgage just for a few months and see how it goes. And if you like it and the math works out and you plan to stay there for a bunch of years, then refi. Very good point. Really good reminder. While I have you, your wealth of information, I love how you put numbers to different things. Like I said, this is a retirement podcast and I wanted you to share your two-step plan to retire in 12 years.

And here's kind of the way I think about it. A lot of our listeners, again, in their 40s, in their 50s, they're planning ahead for retirement. Retirement is 10 to 12 years away. And maybe there's two scenarios. One is they haven't quite saved enough and they want to kind of make up for that shortfall. So how can I accelerate and save more money and get to where I want to be in 12 years really easily? Or...

yes, I'm on a good track, but I want to create a better buffer. So what does that look like? How can I save as much money as possible in the next 12 years? What do those numbers look like? So I know you have some numbers for us, and I'd love to just hear those and share those with the audience. Yeah, the two-step plan that I have talked about basically assumes you're starting from zero. Starting from zero, this is the numbers you need to do to make this work. And so the first step is to live on 46% of your post-tax income.

which is a dramatic measure for sure. So if you were bringing home $100,000 per year, for example,

you would have to live on $46,000 a year. Step two is invest the remaining 54%. And then you wait 12 years and assuming a 7% rate of return, which is kind of the historical average after coming for inflation, after 12 years, your investments will have grown to 25 times your annual cost of living. So basically that $46,000 a year times 25, that's how much money you'll have.

And the safe withdrawal rate that is kind of like the commonly accepted number that people can take out per year without really risking their nest egg is 4%, which means if you have 25 times your annual spending, you can take out that $46,000 a year now forever. That's like kind of the dramatic view starting from zero. How can you get to retirement in 12 years?

everyone's situation is different. If you're already 90% of the way to your number, then it's not going to take you 12 years or you don't have to live on 46%. So a couple of examples is

let's say you invest $4,700 a month, a big number, but if you're, again, bringing home 10,000 bucks a month and you're investing 4,700 bucks a month for 12 years at 7% return, you'll have a million dollars. That's starting from zero. Very big number. Not everyone necessarily has that much, but also not everyone is starting from zero. So let's say now you have $250,000 saved and you're still going for that million dollar number. Instead of having to invest $4,700 per month

Because you have a quarter of a million started in your investment, you only have to invest $2,100 a month. So it drops by more than half because of that nest dig. And so all these different scenarios are things I talk about a lot on my Instagram. So people kind of get the sense of the power of investing early and often. And everyone's situation is different. If you've got more or less or you're spending more or less, you're in a high cost of living area.

area, et cetera. But it just shows the power. If you can start putting away early and often and let that compound growth take over, even as short a period as 12 years, you can get to a million dollars using a couple of these different scenarios. I love that. And as I've shared a number of times on the podcast, compounding is absolutely magical. So it was really cool to see you put that pen to paper and really show that, that if you just have a little bit of money already saved up, getting to that million dollars is much, much, much easier.

I'm at a loss for words, just the power of compound interest. And I was doing it for a long time, kind of slow and steady where I was doing 500 bucks a month when I was making very little. And I grew my net worth to over $100,000 in my early 30s. Then of course I had my big windfall, but now 7% a year of my...

almost 4 million bucks in the bank is more money than I could even imagine spending based on how I live my life. So it's pretty awesome. Well, as we wrap up here, I love actionable tips and tricks and things people can do to improve their financial life. And I know our audience loves it too. And you're really good at kind of finding these things and sharing them. So I'd love to kind of go through a few of them with you. Let's just start with, I don't think I've ever mentioned this on the podcast, at least I don't remember. Share with us the Unclaimed Assets website, what it is and how people can find it.

It's this really cool thing, and it almost sounds like too weird or too good to be true the first time you hear about it. But there's a law in the United States that says if a company has your money or your asset or your property for over a certain period of time, and it varies based on state, they basically have to turn it over to the government and put you on this list. And it's called a sheet, E-S-C-H-E-A-T. That's the law.

And so basically, if you Google your state name, I'm in California, and the term unclaimed property or unclaimed money. So if I Google California unclaimed property,

property, look for the first hit that's the actual .gov California website or your state. Then you can type in your name and maybe a previous address that you've lived at. It'll come up with, usually, almost everyone finds something. It's crazy. Former internet company had 50 bucks that they never could find you or they mailed to you and you never cashed a check or whatever. Sometimes it's a large amount of money.

I shared this with my followers and I had dozens and dozens of comments of people who were like, I just found 500 bucks. I found a thousand bucks and it's just state law. And it's kind of a political thing. Like should the companies be turning it over to the government? Should the government be taking that property? It's kind of like this weird thing. And I think politically you can maybe come down on either side of the spectrum, but that's the state of the world. So if you just go and Google for your state name, unclaimed property, type in your name, you'll probably find a few bucks that you may have lost.

Yeah, it's free money. I'll be sure to link to that in the show notes, at least the California one, although our listeners all over the place. So it's not going to do them much good, but we'll link to a few of them. I'll find some sort of resource to put in the show notes.

The other kind of hack and tip that I really liked that stood out to me was the text alerts that you set up for spending. And what I love is you've got $4 million in the bank, you're financially independent, and yet you still have these text alerts for when you spend money. So share a little bit about that and why you have that and what it does. I budget every single month. I know every dollar that goes in and out of my accounts. I can tell you what's in it. I keep track of all my accounts separate from the bank websites.

And that's not for everyone. I know that I love this stuff and that's what I do. And it's certainly not for everyone, but I think the key is just visibility and awareness. And I think a trap a lot of people fall into is they just look at their credit card statement at the end of the month and they're

their eyes glaze over and they scan through it and like, yeah, I recognize most of these. This is probably fine. But the thing that I do is when my card gets charged, I want to know about it in that moment. And so what I did is I went to my credit card website and basically every credit card offers this feature now. And you find this text alert section and there's almost always an alert for a big transaction. So

The idea is if there's a big transaction, if someone charges over $1,000 on your card, they're going to text you about it right away. But that number, you can change what counts as a big transaction. So I just change it to like one penny. And then every time my credit card is charged for anything, I get a text about it. And you know, it sounds kind of crazy, but how often is your card charged? Once or twice a day? Like that's not that overwhelming to get a text and

if I give my card to someone in a restaurant, like I know the moment they swipe it, if I'm in a grocery store and I swipe it, it's amazing how fast it happens. The moment I swipe it, I feel my pocket buzz with a charge and you've suddenly realized what's really going on. You're like, Oh, my,

Jim charges me in the middle of the night or, oh my gosh, I forgot I never canceled that subscription or the hotel double charged me. And it's good to know about that stuff right away. And I just think even if you're not budgeting every single penny of yours, like I do, I think just that visibility into what these companies who are taking money from you, like you can know about in real time. I love it. Yeah. Great idea. Really, really easy for all of us to do. And you don't have to do it forever too. You could do it for three months or six months.

and really get some visibility into your spending and change some of your habits or again, catch some things that you forgot to cancel that you need to get rid of. So really like that. We've talked about this before, but it's just a magical savings tool. So talk to us about the HSA and your philosophy there. I think people are always surprised by this one. So HSA is a health savings account. It's a special type of a bank account, which you can only have if you have a high deductible health plan that is compatible with an HSA. But

But if you are one of those people and you have an HSA, the money you put in there, you can actually invest. And so it's almost like another IRA. And it even is better than an IRA in some sense because you can spend, it has most of the benefits of an IRA, which is money goes on tax-free and it grows tax-deferred. It actually converts to basically a regular retirement account after the age of 65, I believe. But then it has this third tax benefit, which is you can spend money also tax-free on qualified medical expenses.

And so when I'm prioritizing which tax advantage accounts I fill up, I actually prioritize my HSA over my IRA. And then inside of my HSA, I keep a few thousand bucks, like two or three thousand bucks, so I can spend those in cash on qualified medical expenses when they come up.

And then the rest, I just buy old index funds. I buy more. And Fidelity didn't used to offer an HSA, but now they do. And so I actually have my HSA through Fidelity and I just buy Fidelity index funds. And that's going to probably grow to another few hundred thousand dollars by my traditional retirement age. Yeah, that's your long-term care policy. For sure. I'm not going to need...

certain types of insurance and stuff because I'm just going to have money right there. There you go. All right. Talk to us about your 90-10 rule. So this is for my traders out there. This is for the people who have this hot stock tip. They want to get in a Bitcoin. They know Beyond meets the future of the world. They know Tesla is going to change everything. My core belief, I believe this to the middle of my soul, is that you will not

do better acting on that stuff over the long term than you will buying and holding index funds. But I know it's tempting. Even myself, I have hunches. I think I have an inside edge. I think I've got good ideas. And so what I say is, hey, do my 90-10 rule. With 90% of your portfolio, buy and hold index funds. Buy and hold just traditional investments for 10, 20, 30, 40 years. Forget about them. Don't check the prices. Let them grow. You're going to be in good shape. And then with your 10%,

Give yourself permission to go nuts. Go day trade beyond meat stock for some reason. Go buy Amazon or go

buy oil futures or whatever you want to do, but limit it to 10% because then when you compare how your 10% is growing with your 90%, you're going to have to be pretty honest with yourself. Are you really as smart as you thought you were? And people, just like we talked about earlier in the show, where people look at what they sold their house for without looking at the expenses, I think a lot of people focus on their winners without focusing on their losers. And when you look at how that whole 10% is growing, you might realize, okay, I had one winner, but I had four losers and the index fund is now kicking my butt over the

the last five years. But even so, if you do my 90-10 rule, then you've kind of given yourself permission to play a little bit and you've kind of like bought your lotto ticket. If you are so smart, you are the next Warren Buffett. Your 10% is going to far outpace your 90% and you'll be fabulously wealthy. Awesome. And then lastly, I know you're really passionate about this, automating your investments. So talk to us about your approach and philosophy there.

This is my one tip. This is the one I'll end with. It takes like 10 or 15 minutes to go online, go to your brokerage account, meet with your financial advisor and set up an automated investment from your checking account, from your paycheck into your IRA, into your brokerage account, into your 401k. Have it happen automatically every month so you don't think about it, you don't have to look at it, you don't have to do anything about it because that...

monthly or weekly or whatever it is, early and often investing is how you're going to get super wealthy over time. That just set it and forget it strategy has been so powerful over the last history of modern investing.

And I think that it will continue into the future. And if you set it so it happens automatically, you're not thinking about it, it's not painful, it's not something that you can forget. And it takes away a lot of typical human mistakes, which is trying to time the market, trying to jump in and out, trying to pick and choose stocks or trying to chase past performance, all the bad stuff that humans naturally want to do. If you just set it and forget it, then it's going to make you more money than ever.

spending all day looking at it. I could not agree more. Jeremy, I really, really appreciate you coming on today and sharing all of this. I think a good place to end is I would love for you to share your two rules of personal finance club, and then just share again where people can find and follow you.

I love talking shop with you and we get into some of the fire stuff like HSA and the 90-10 rule and the safe withdrawal rate and all this stuff. But I think at the end of the day, it's so important to get back to the basics. I have two rules. And if you do these things, you'll be rich. And if you don't do them, you'll be poor. And so the first rule is to live below your means.

Whatever you make, if you make $40,000 a year, if you make $200,000 a year, you have to spend less. If you don't do that, you will be broke. One minus one equals zero every time you do the math. So rule number one is live below your means. Rule number two is invest early and often. That's just what I talked about, the automated investing. Let's say you make $50,000 a year and you spend 40 and you invest 10,000 over a four-year career, you'll be a millionaire. It's really that simple. But if you make 200 and you spend 200, you'll be broke.

So live below your means. That's rule number one. And rule number two is invest early and often. And you can find me, personalfinanceclub.com. Instagram is where most of the magic is currently happening at Personalfinanceclub. I have a YouTube and I respond to almost all my DMs. So if you guys want to send me a message or hit me up on my website, I'd love to hear from you. Awesome. Thanks so much, Jeremy. Really appreciate it. Hope to have you back again soon and good luck with everything. Yeah. Thanks, Taylor. I love your show. This has been super fun.

Hey, it's me again. I just wanted to say thank you one more time for listening and remind you to please, please, please leave a quick review. If you're on an iPhone, leave a quick review on iTunes. If you're enjoying the show, I'm getting great feedback from listeners just like you. And I really want to keep the momentum going. So if you have a chance on your iPhone, leave a quick review on the Apple podcast app. And thank you so much in advance for all of your help and support.

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