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What would you do if you were laid off at 51 right after reaching a $2.5 million net worth?
In this episode of Making a Millionaire, we meet a couple grappling with that exact scenario. They’ve lived through financial mistakes, personal sacrifices, and disciplined savings. But now, the question is real: can they afford to pivot toward a passion-driven life and still stay financially secure?
We explore CoastFI, portfolio drawdowns, budget tracking, and the deep emotional impact of big money decisions. If you’ve ever wondered what retirement really feels like when it sneaks up on you – this one’s for you.
Learn more about how you can incorporate millionaire habits into your own life and master your money mindset. Cultivating a healthy relationship with money doesn’t need to be difficult, but just like any other habit, it must be practiced and perfected over time.
Brian: Give me a gut check. You get this shock and awe news about the job. Are you scared? Are you comfortable? How do you feel?
Heather: Oh, you’re all looking at me. Oh, I get freaked out. I don’t like it. I don’t want to touch a retirement yet. I don’t want to go anywhere near it. I want it to sit there as long as possible because I don’t know what the future brings. And I just want him to work.
Chris: I’ve done software development for 29 years now, I think. She started out just being a stay-at-home mom for most of the time.
Heather: Well, I started out as a florist. Now I work with the city in the gas department.
Brian: Does that stress out Valentine’s Day that you actually had a background in that?
Heather: Hate Valentine’s Day, hate Mother’s Day and not really thrilled about Christmas and Thanksgiving just because of all the work. A lot of bows. Lot of bows. Your hands get really torn up with rose thorns, things like that. Oh man. I told him, “Never buy me flowers. Buy me chocolate.”
Bo: I tell my wife the same thing. Never buy me flowers. Just bring me chocolate. That’s what I tell her. Well, awesome. Well, you guys were so kind. You kind of shared with us a net worth statement of where you guys are presently. I think to kind of level set, we ought to look at where you guys are right now because you have done a fantastic job of building wealth, of building up towards your great big beautiful tomorrow.
Bo: And you can see right now as you guys sit here, you have a total net worth of about $2.5 million. First and foremost, that’s wild, right? Like isn’t that incredible? You can see that you have about $100,000 in cash. You have about $1.7 million in investment assets and another $630,000 in rental properties, which is amazing. So, we should just pause for a moment and say, you guys have done a fantastic job. And so, I think one of the questions that the audience probably has is how did you get here? What’s your story? How did you end up where you are today?
Brian: By the way, Heather’s reaction, do y’all go over a net worth statement every year or did you just figure this out for the first time? Does it shock you to see? Is this a shock in a moment?
Heather: I knew it was upwards, but not—no, I did not know it.
Brian: Chris, what are we doing here? You know, you’re supposed to be having annual net worth meetings.
Chris: It’s not annual. It’s all the time I tell her, “Hey, guess what?” And she just doesn’t care as much as I do.
Heather: How are we doing on a monthly basis? Good. Okay, great. That’s it. Just check in. We’re doing great.
Bo: So, how did you guys get here? What’s the story? Give us the background. How did you get to this spot at 51 years old?
Chris: There’s been a lot of highs and lows and honestly for most of my life I didn’t know what I was doing in terms of money. I started working and it was right before the dot-com stuff started happening and you know it was pretty easy to get good money back then. Right away I made some pretty good money. I bought a house fairly early. But as far as like what to invest in and how much to save, I was just guessing. So right out of my first job, you know, I get a 401(k). I’m like, “How much do I put in?” I’m like, “It says I could put in this much. I’ll just put in that whatever the maximum was.”
Brian: Oh, wow. That’s a good decision.
Chris: Yeah. And so I was living off not very much money, but I thought that’s just what everyone did because it seemed like the smart thing to do. And so that ended up being a lot of what our retirement is, but it just—it seemed like just by luck. I don’t know.
Bo: You didn’t really plan anything. Just, hey, I can save this much. I’m going to start saving. And without a whole lot of strategy, just starting early and saving worked out pretty well, right?
Chris: But it was easy for me because I was just living by myself and I could live on $20 a week of food and stuff like that. We got married. Then she’s like, “Yeah, we’re not changing anything.”
Heather: Things change a little bit.
Chris: Yeah. Investing—it was difficult to know what to do. And so there was a lot of just luck as far as—you know I got into the real estate at the right time but then my dad would help me with investing and I just kind of let him—you’re the finance guy. You just take control of it and it turns out he didn’t really know what he was doing very much. So I don’t know how much my money grew and how much I put in or anything back then because I couldn’t tell you.
Bo: You were just saving. You weren’t focusing on a whole lot other than I’m just—hey I know I’m saving for the future. I’m just kind of let the money do what the money does.
Chris: Yeah. Exactly.
Bo: What I want people to hear is you didn’t have to know exactly what you were doing and you didn’t have to get every single decision right, but you got one decision right. And that one decision was, hey, we’re going to start saving pretty early and we’re just going to let that money work. Am I accurately encapsulating what the story was?
Chris: And even in the leaner times, like the messy middle times, we were still saving I would say around 10% or so, maybe 13%. Sure. And so there was always—we’re always putting something away.
Brian: A lot of people go—wait, he said he was maxing it out. But I could tell by the tone. Were there some mistakes? I think it’s always good to share because I know I made a ton. Look, I wrote a book and half of the book is all the mistakes I made and how not to make those for yourself. Were there any mistakes at the beginning also, Chris?
Chris: Yeah, we took a big hit right around the time of the 2008 great recession. And I had loaned my dad a big sum of money. It was over $100,000 and he lost it all. And so we basically had a rental property. We took out a mortgage to give him money with it. And now we had this big payment and he wasn’t paying it back. And so it was pretty lean at that time.
Brian: Yeah. Heather, how does—because I know families are tough. Your parents especially, they give you life. So that puts you in a certain status. But here you are the spouse. I mean, how was that season?
Heather: Well, I felt horrible for him because it was his dad, so it was kind of like my experience wasn’t his experience for sure. And so it was just trying to support him and all that and just okay where do we go from here type attitude because yeah it was hard because it’s sticky because it’s family—messy, real messy—and then with him having regrets about things. And so it’s like no but where do we go? What steps should we take? And I knew he’s a very logical person so he looked at data and so I kind of just followed where he led. So it’s like okay, what’s our food budget? What can we afford? What can we—you know, what steps do we take? Can we stay in our house? Can we—you know, and so he was really good about just guiding us along there. So, I just kind of leaned on him too with that because I mean, he could talk at me all he wanted, I suppose, but it was just like I knew he had a better picture of our finances than I did at that time.
Chris: Well, not really because that’s actually when we started—we started actually figuring that out.
Bo: Is that what caused you to start thinking about—you said early—think about it. Is that the thing, the catalyst that made you start focusing on it and taking it seriously?
Chris: Well, when we first got married I wanted to do a budget and so I developed my own budgeting software.
Bo: That’s what I did when I wanted to do a budget—I’d build my own.
Chris: It was horrible. It was so hard to use that I ended up not using it and that was kind of the end of the budget. It was like this is so difficult to get anything done. And then when this happened, I had thought that we had been living pretty responsibly and just when I started going through the numbers, I’m like, man, there’s a lot of inefficiency and waste and things like that that we can figure out. And so we just went through all the expenses and just started like we can cut this, we can cut that. This is wasteful. And we got to this barebones budget and we’re like, all right, if we do this, we’ll be okay. Like we can get out of this hole. Yeah. It’ll be difficult, but it’ll be fine.
Bo: You had to make some tough decisions, but you did and were able to crawl out of it.
Brian: What I think is amazing is that even with that hardship and that hits you to the core because it’s family, it’s your blood, but yet here we are. We’re about to have a discussion on your multi-million dollar net worth with zero debt. I mean that is amazing and I think that is so good for anyone to hear is that this journey doesn’t have to be perfect. That’s right. You can make lots of mistakes and still come out on the other side because the thing that you said was luck, you know, at the beginning you weren’t giving yourself enough credit. And I keep hearing this theme. You’re very disciplined and discipline is that first ingredient to wealth creation and just the wake up and utilizing that is pretty amazing.
Bo: So, as you guys sit here today, I mean, you mentioned it, you don’t have any debt on the books. So, obviously that $100,000 home equity line that was taken out and then lost got paid back and now you actually have rental properties that you own. As you guys sit here today and you’re trying to think about your path forward in the future, what are the things you’re looking for help with? I mean, what are the things? What was the thing that made you come on Making a Millionaire? Hey, I want to know if I can answer this question or what would the Money Guys say about this? What are those things for you guys?
Chris: I’ve been doing software for a long while and you know recently I started coaching competitive robotics and it’s been a lot of fun.
Bo: You just have these throwaway statements. When I started budgeting I built my own software. Oh, by the way, I coach competitive robotics. It’s just a thing that I do. That’s unbelievable. Chris is the most interesting. That’s cooler than anything on my resume. That’s awesome.
Chris: I just—you know and I’ve always coached things like youth sports, coached all our kids’ youth sports and everything and I’ve just really enjoyed it. But especially with this robotics thing, it’s been amazing and I can see how much kids learn and get out of it and I would like to be able to do something along those lines at some point for kind of a second career. And trying to figure out when can that—when could I do that?
Bo: Is a safe assumption based on the way you frame that that if you were going to go do that, it’s likely going to create less income than your current career. Is that the idea around making that shift?
Chris: Yes, it would be. Well, that’s one thing with competitive robotics is really expensive to get into. And I would like to be able to find ways where I could help kids who, you know, they don’t have as much resources to be able to get into it. Even because even just to start getting into it, if you haven’t known anything about it, it’s just expensive to get into.
Bo: I love it. All right. So, how can we make maybe a career shift to maybe not focus on the things you have to do, but do something that you enjoy more like competitive robotics? What else? What are some other goals, financial goals that you guys have or things that you’re looking to lean in on?
Chris: So, we have three kids. One of them’s out of college, one of them’s in college, one of them’s in high school. And so there’s college to pay for and we kind of have a pretty good idea for that. But we just want to make sure that’s taken care of.
Bo: Love it.
Chris: And then also just as the kids get older, you know, things are getting expensive like housing and stuff, being able to help give them a little bit of a jump start perhaps.
Bo: So help kids out with like future needs like housing and that kind of stuff. Heather, what about you?
Heather: The budget that we have. It’s like I still kind of in my head fall back to where we were at and that was a long time ago, but the remnants are still—they sit with you. Yeah. We have our little budget app that we use and sometimes I get really bad at it and I don’t put my receipts in. And so my goal right now, which sounds silly, but it’s important to me, is to stick with it because we are not on as strict of a budget as we used to be, obviously, but it’s still important to know what you’re spending. We thought we were doing it right. We thought we were doing good. And then, so that’s why when you just look at your receipts, you know, okay, this is how much we spent on gas this month. This is how much we spent on groceries this month. This is how much we spent on Heather’s fun things. You know, it’s like there’s budgets for everything. So, it’s not like you don’t get to do things. It’s just knowing where it’s going.
Bo: Yeah. I love it. Having a purpose and a reason behind your dollars.
Brian: I do want to share though. I think that without a doubt, I love budgeting, especially starting out. But it’s also—I’m okay that as your life progresses and as your net worth grows, you can add some slack in the system. So, I think I want to give you permission that that’s okay. But there is something under the surface that I do think when big life things come your way, it sometimes can be a jolt to say, “Oh my gosh, yeah, let’s get back to the basics of what kind of created.” I know. And I wanted to just give you guys an opportunity. Was there—is there anything that’s made you specifically, Heather, where you said y’all need to start tracking this more? You feel like recommitted? Is there anything else going on?
Heather: I guess in the past we had money set aside for a new car and all of a sudden Chris was like, “We’ve been spending—the money isn’t there anymore.” We had to re-save for that. It was earmarked but then those earmarked funds kind of got—because we needed to pay bills and so that kind of was kind of like, “Wait, we can’t do the new car now.” And so they’re just like the ripples of life that just kind of stick with you. And so it’s like we aren’t as—I don’t want to say strict, but we’re not as—
Chris: Like if we go over budget on something, we’re just like, “Oh, that budget needs to pop up.” So it’s more tracking.
Heather: Maybe I should say it that way. We have everything in like categories and so it’s like you know you have extra money here and you have extra money here and then you have extra money here and then like I have like my little fun fund that I get to have and he has—and so you know you can be splurging but you’ve accounted for the things that you spend and so that’s when I say keeping track of your receipts. It’s just so I know where those things go and it’s like we’re not as strict as—I mean I guess it sounds strict but we’re not as strict as we used to be.
Bo: You’re more just keeping an eye on it, keeping track. Maintaining. So a lot of what you’re focused on is kind of like immediate—like right now how are we tracking? I noticed you didn’t mention financial independence. You didn’t mention retirement. You didn’t mention any of that kind of stuff. Is that a goal that you guys have? Because as you sit here at 51 with $2.5 million, a lot of people are going to see this and say where are they? Are they financially independent? Is that not something on the radar for you guys?
Chris: Yeah, that’s part of what we’d like to find out. I—I mean I would like to change careers at some point and that timeline’s actually been accelerated. Just yesterday I found out I got laid off and so I only have till, you know, June with this current job. And so it’s been something I’ve been planning like, oh, could I retire at some point soon? And so now these questions come up a little bit sooner than expected. And it’s like, well, do I get another job? Especially because our youngest is going to college. I was thinking it might be a good idea to have a regular job during college or you know could I do something else and just make some money between now and whenever? I don’t even know what that number would be.
Bo: First of all… wow, right? That’s a huge change because I think about—in like a small—you know, we were saving for a car and then when it came time to buy the car the money wasn’t there and that was like, “Uh oh.” And now here we are—oh I’m kind of thinking about financial independence and now this thing happens yesterday where it’s like, “Oh, wow. Are we there? Is the money that we had for retirement going to be there? Are we going to be okay?” I got to believe that’s some of the stuff that’s like rumbling around in the car as you’re driving here, right? Like what’s this going to look like?
Chris: I’ve been kind of expecting it, but it came out somewhat all of a sudden. And so, just trying to think about how much money do we actually need like in the immediate right now? What do we need to get by? Then for what’s in retirement, like how much more do I need to keep adding to retirement? Or is it good where it is and can we just hang out where we are until we can access the retirement funds?
Bo: I love this. Well, let’s talk about what you guys have been doing because you said, “Okay, how much have I been saving and where should I and how much we need to keep saving?” Let’s talk about what you guys have currently been doing because we know that you’re at a $2.5 million net worth, which is amazing, but it’s not like you took the foot off the pedal. You guys are still great savers. When we look at your savings priority, how you guys strategize, you’re still saving about 21% of your gross income. You’ve got about $8,550 going into your HSA. So, you’re maxing that out. We love that. That’s a solid step five. You’re both maxing out Roth IRAs at $16,000 each. Again, another step five.
Brian: By the way, congratulations for being in that post-50 group as a fellow person. Makes Bo feel like the only person that doesn’t get the catch-up contributions.
Bo: And then you’re also putting money in your 401(k). So it’s 18% of salary, Chris, $22,500. So you guys have been saving about $47,000 a year. A little bit more than that.
Chris: We actually maxed—we did the full maximum this past year.
Bo: Awesome. Wonderful. Awesome. So you guys have been fantastic savers. So you’ve again you’ve done some things well. You started saving early. Maybe you had some hiccups along the way. Then you started paying attention to it, started tracking it, started seeing where your money, and then you figured out how can we improve our savings? How can we continue to make sure we’re putting money aside for the future because who knows when on that random Thursday a phone call is going to come in that says, “Hey, circumstances are changing.”
Bo: One of the things that we love to be able to do is get to sit in this seat and tell people, “Okay, well, let’s look at where you are today. Let’s look at what you’ve done so far. Let’s really analyze and assess. Are you at the financial independence point? Or if you’re not at the financial independence point, what steps are required or what would you have to do to be able to get there?” Does that sound like something that would be interesting and helpful for you guys to walk through?
Chris: Yeah.
Brian: Awesome. Wonderful. Give me a gut check. Because I mean when I see $2.5 million, I feel pretty good about that, but then you get this shock and awe news about the job. What’s your baseline right now? Are you scared? Are you comfortable? How do you feel before we get into actually showing you some numbers?
Heather: Oh, I get freaked out. I don’t like it. I don’t want to touch a retirement yet. I don’t want to go anywhere near it. I want it to sit there as long as possible because I don’t know what the future brings and I just want him to work.
Brian: Well, you got kids that are about to go to college. I get that. I get that.
Heather: I don’t feel old enough yet to even be like looking at even touching anything on that. Retirement’s for the old people not the 51 year olds—that’s what I’m hearing you say. I don’t feel ready yet so I don’t know.
Brian: I got it and how about you?
Chris: One thing happened when the thing went south in 2008—you know we learned a really good lesson as far as relying on money and it was a scary point in time for us back then. And because I realized we did put a lot of security in our retirement and our money situation and really I just realized our faith is the really important thing through that whole thing. That was what got us through. And I just thought, you know, if we have us and our family and we live in some dumpy little apartment, you know, who cares? We’ll be okay. We know the things that really matter to us. And so like with the stuff right now it’s like well we have enough money—like if we bought like a very small house we would be fine. It’s just how much extra would it be? I guess.
Bo: I love that. So I love that. It’s a great perspective to especially going to an unknown like this to figure out okay well what’s the minimum threshold? But again, you guys have done a lot of the hard work of saving and building. And so, one of the things I want to answer is, okay, well, we can answer the minimum threshold, but are you at the point where you could maintain the actual desired standard of living, the desired lifestyle that you have? And I think it’d be super fun for us to dive into those numbers.
Bo: I’m no robotics expert. I want to be very clear, but I would imagine when it comes to robotics, the quality of the materials that you’re using to build the robotic thing probably improve the robot that you build. Is that a safe analysis? Like if you have good materials that you’re using, you get a good outcome on the back end. Well, personal finance is no different. So when we think about you guys, I want to run through the assumptions, the inputs that we’re using for your retirement plan because the outcome, the analysis is only going to be as good as the assumptions we put in. So I want to make sure that all of this is accurate and representative of the life that you are currently living and the life that you want to live. So, we know that right now both of you are 51 years old and we’re going to assume in our base case that we’re going to have an age 65 retirement for both of you. So, we’re going to work to full retirement age in our base case. We’re also going to assume an expiration for you guys of age 95. So, we want to have like a nice long life, a nice long retirement that we’re going to be planning for. When we think about the money that we want to spend, you guys have told us, you put together budget, you said, “Hey, our base living expenses to live the life that we want to live on our terms is $9,000 a month.” Is that accurate?
Chris: It’s pretty close.
Heather: Yeah, it’s pretty close.
Bo: Because when we looked at the numbers, nine was in there, but it seemed like there were a lot of months where it might have actually trended closer to 12. And what I want to do is I want us to be very realistic around what our living expenses are because you said, Heather, you said this comment—I put asterisks by it. You have to know what you’re spending. You have to know where your dollars are going. That is so true in the accumulation and building phase, but it is even more true in the de-accumulation financial independence phase because the viability of a long-term plan is very much going to depend on spending. So, I want us to be so accurate with what we model so that you understand and recognize what you’re actually getting into. Because while you can cut to the quick and you can cut all your expenses down, I think for most folks that’s not the goal of financial independence. The goal is to live the life that you want to live the way that you want to live it on the terms that you want to live it. So we’re going to use $9,000 as our base case, but we’re going to deviate from that pretty quickly. Okay.
Bo: You guys also said, “Hey, there’s this idea that we might want to buy a future house.” So, we’ve got this money that we’ve been saving up about $400,000, a little over $400,000 that might be for a future home purchase. The way that we wanted to think about this in the plan because you didn’t tell us like when that house might happen or what that might look like. We just assume that that pot of money is already earmarked for that house and we had to arbitrarily pick. So, we just said in 2030 whatever that pot of money has grown to, we’re just going to use that to go buy the house. So, that’s your house fund and in 2030 you’re going to buy a primary residence. Does that sound like a reasonable assumption?
Chris: Sounds about right.
Bo: Awesome. So then when we think about the resources with which you have to work, we know that you have your cash reserves at about $108,000. We know that we have this home buying fund that right now has about $416,000 in it. And then we have all of your various investment accounts. We have the Roth 401(k), the SEP IRA, the traditional 401(k), traditional IRA, all the HSAs, and then we have all of your rental properties in Alabama. So, if we look at you guys, you are at about a $2.4 million total net worth. That’s the net worth with which we have to use to provide for financial independence. You don’t have some crazy big trust fund account that’s left off of this, right?
Chris: No.
Bo: Okay. Awesome. So, this is what we have to work with. These are the numbers.
Bo: So, then when we think about, okay, well, what are the resources you have to use? We know that right now or as of a few days ago, Chris, your salary and bonus was about $125,000 a year. Heather, your salary and bonus was right at $50,000 a year. So, as a household, about $175,000 household income. So, we’d assume if you were going to pivot to a similar career, you would make around that income. That’s again, that’s our base case scenario. We also know for each of you, you’re going to get Social Security benefits at some point in retirement. For our base case, we’re saying, “Hey, what if they wait until they hit full retirement age?” So, you’re going to work till 65, pay into Social Security until 65, and then at 67, you’ll begin drawing a benefit. Well, based on your income and what you’ve paid into the system, we’re estimating, Chris, that your Social Security will be a little under $47,000 a year. And Heather, yours will be right around $23,000 a year when you get to Social Security age. We also know that you have some rental income coming in from all these Alabama properties. It’s about $50,000. And then Heather, you have a pension that’s going to be about $8,400 that will start when you get to age 65. $8,500 annually, not monthly. But we want to make sure we factor that in. From an income standpoint, is all of this accurate?
Chris: The pension might not—well, no, the pension. Yes.
Bo: Is that good? Okay, great. Because again, the quality of the output will depend on the accuracy of the input. So, we want to be as accurate but also as conservative as we can. And so what we said also is, okay, if you’re working, we imagine that you’re going to continue being a saver. So you’re going to do things like max out your HSA. You’re going to do things like put 18% of your salary into the 401(k). We’re going to max out the Roth IRAs. Chris, your current former employer was putting money in. So there’s an employer match that we were including in this. So as long as you’re working, we assume that you’re going to be saving. So what we said is with all of those assumptions about your unique scenario, what does this look like if we have a 3% inflation rate? So that $9,000 a month is going to grow at inflation and our cash will grow at inflation and our property values will go up with inflation. So that way we’re tracking that appropriately. And then what’s it look like if just on a straight line basis the money that we’re investing can grow at 7.4% annually straight line. And the way we came up with that is that’s just a 60/40 portfolio. Average historical return on a 60/40 with appropriate standard deviations. All right? So 3% inflation, 7.4% long-term rate of return. Make sense?
Chris: Yep.
Bo: All right. So let me show you what the plan actually looks like. This is where it gets exciting. What you can see is each one of these bars is an individual year of your retirement. So you can see that every year the bar kind of goes up. We get almost to 2030 and you can see that your consumable portfolio will have grown to about $2.4 million. We then go buy that house that we’ve been saving for. You guys continue working all the way out until age 65. And then at 65 when you retire in today’s dollars, because we’ve brought all this back into present value terms, in today’s dollars, you would retire at 65 with about $3.5 million. Your portfolio would start providing for your living expense need. And what you notice is the portfolio continues to go all the way up until you guys leave this earth at age 95 and you leave behind about $8.3 million in today’s dollars for the kids. Right. So $8.3 million—think they’d be okay? Is that like an okay inheritance? Think that would work? Right now I do want to deviate one iota here because I don’t think that $9,000 is the spending number we ought to be using because again we look at your budget. It looks like $12,000 was probably closer to the actual spend to maintain the standard of living that you guys want to maintain. Does that feel right? Does that feel right?
Chris: Yeah because with $9,000 we have like a little wiggle room. But with $12,000 that’s when we can afford to upgrade vehicles or go on vacation stuff.
Bo: Yeah. Live the life that you ultimately want to live. So watch what happens when I change this to $12,000. As you would expect, there’s a meaningful impact to the plan. Right now, instead of you leaving this earth with $8.3 million, you leave this earth with $5.4 million. So, that additional spending did cut out about $3 million out of the plan, but it’s still pretty solid, right? But we know we do know that the market does not give us 7.4% rates of return every year. So, one of the things that we have to do is we have to run this through a Monte Carlo simulation. And what this does is it runs a thousand different iterations of a thousand different possible market outcomes. Some of them really positive and some of them really negative. And the way the system works is it says of those thousand iterations, how many got us all the way to age 95 without us running out of money, without us having to change our behavior, without us having to cut back. And what you can see is if you were to work the way you’re working right now all the way till age 65 and then retire, you have a 98% probability of success of not having to change your behavior. That means that 980 of the thousand scenarios got all the way into the plan with no behavioral change. Sounds pretty good, right? Sounds pretty comfortable. But that’s if you work till 65.
Chris: Yeah, that’s not going to happen.
Brian: That’s not like—Chris, like this is cool. I was letting Bo set it up, but we all know life has happened and there’s all kind of other things. So, we needed to plan for other contingencies.
Bo: So, then the question becomes, we’ve had this thing happen now where employment has changed and we’re unsure exactly what future employment may look like. And so, whenever we plan, we think about what’s the worst case scenario. And worst case scenario would be this is it. You are done. Today starts your retirement. So, if today were to start your retirement, we have to adjust some of our assumptions. So one of those assumptions is we’re not going to be working out till age 65. We’re also not going to be saving the same way that we were saving because now when we go down to one income that’s going to have to provide for living expenses. And then the other change that’s going to take place is Social Security was built as though we were going to pay into the system all the way until 65. If you stop working now, well, you only paid into the system until 51. So your Social Security benefit would also have to decrease. So if you were to retire today and your Social Security also decreased—okay. Now we have some problems. Yep. Right. Like this doesn’t look ideal. You can see that even on our straight line assumption by age 84 the portfolio has been depleted. It’s now gone to zero. For good measure we have to look at the Monte Carlo simulation again to see what the probability of success is. You can see that now it’s dropped to 37%. Right? So, what that tells us immediately is we have a problem. So, I’m going to pause there for a moment. Tell me where your mindset is right now.
Chris: Spending $12,000 a month. I mean, that’s a lot for us. Because we have that excess wiggle room. We basically, you know, we want to save 25% of our income. So, we put that away. And then beyond that, it’s just, oh, this is money that we can use for whatever we want. So, in some ways, it’s not the amount of money. We would just do less things.
Bo: Yeah. So, imagine one of the questions you’re trying to ask is, okay, well, $12,000 doesn’t work. Is there a number that does work? I mean, you tell me if that’s a question you’re curious about.
Chris: Well, I’m just trying to think how much do I need to keep saving now for retirement because that will help me determine what kind of a job that I should get. I guess that’s the main question. How much money should I be making right now until I can access retirement?
Bo: I love that because whenever we face problems, there’s always—there’s only two levers that people have to work with. And Brian, you say this all the time. There’s two levers, only two things you can do when you’re trying to solve a financial problem. You can make more money or you can spend less. Those are the two levers.
Brian: This is what I call the doo-doo plan. You know when we’re putting on the 3D glasses—and I say this for you. Well no but because I can see—you know even our discussion as we were walking into the studio. Heather is probably a little nervous about this just from some of our discussion. So that’s why I’m telling you this is as bad as it gets on the doo-doo plan. But the good news is this isn’t actually what I think the down-to-earth plan is. I think that there’s lots of alternatives, some levers that we’re going to be able to pull. And Bo kind of laid out the dream plan. That was the 65 and all the other things. So, now we’ve kind of given you if you worked until 65 and all this, you’re going to leave the earth with a gazillion dollars, which was somewhat unrealistic. But now we’re giving you this baseline of the doo-doo plan because life has happened. I’m excited for Bo to fill in the gaps on kind of what the down-to-earth plan is because that’s where we start building this thing back. So hopefully you leave here feeling like we at least paid respect to what opportunities you guys have.
Bo: So let’s think about this, right? You said there’s two levers. I can spend less or I can make more—increase my income. And you just said, “Hey, it’d be great if you could just tell me if I got to go get another job, how much do I need to make? Like how much do I need to save? What does that number look like?” Okay. Well, what we figured out—and again, I’m going to go back to our illustration because you can see we have this issue where we’re kind of running out of money in our 80s if we just got the straight line, right? And it’s a pretty low probability. We were actually able to go back door into the math and say, “Okay, if Chris were to be able to generate some sort of income and that income could provide for their living expenses, might you guys be in what’s known as Coast FI? I’ve done enough saving up to this point that if I can just create enough income to cover my living expenses, I don’t really have to save a whole lot more. I can just let my money continue to grow. And if I let my money continue to grow for a certain amount of time, it will grow to the point to where then it can provide for me.” And so we said, okay, what would their coast number be? If we’re going to assume that Heather keeps working, how much would Chris have to go out and make so they don’t have to save anymore, but they could just live off of their incomes and provide for their living needs? And what we found was if you could get a job that pays $60,000 a year, or if you could side hustle and make $60,000 a year, you notice that on our straight line, it kind of flattens out that, you know, you start retirement, you have today a consumable portfolio of about $1.8 million. You live this life that we’ve laid out at a $12,000 a month burn rate. And you can see when you leave this earth, you leave behind about $1.8 million. It’s kind of like you’ve lived off of the interest.
Bo: So if we take this and we run it back through our Monte Carlo simulation, just assuming that you can bridge that gap, earning $60,000 from today until 65, well now all of a sudden you’re at an 81% probability of success. Just so you know, when we are doing assessments for clients, we say, “Hey, if we can get you above 80%, we feel really, really comfortable.” Because what this is saying, it’s not saying that in those 19% of scenarios, people ended up homeless on the side of the road. That’s not what it’s saying. In 19% of the scenarios, you might have had to tighten the belt a little bit. You might have had to do naturally—instead of staying at $12,000, you might have had to go to $10,000. You might have—in the Great Recession, maybe you didn’t buy the new car. You didn’t go on the expensive trip. You just tighten the belt, which we all do when those sort of things happen. And there’s also the go-go years, the slow-go, and the no-go years. So, you don’t have to hit 100%. You don’t have to hit 98%. I think I would feel good at 81%.
Brian: Okay. So, that actually changes things. Now, we still have more levers to pull, but before we do, give us feedback on these numbers.
Chris: Yeah. Well, $60,000—that’s not a big deal. I could make that.
Bo: You can make that. So, that sounds like a pretty attainable goal based on your skill set.
Chris: Yeah.
Heather: So, in this scenario, for like him doing the $60,000, that would be until 65.
Bo: That’s what we modeled right here. Him earning $60,000 until 65 and then fully retiring. And then both of you fully retire.
Chris: Well, hopefully if I’m earning that much money, it’s doing something that I really—I imagine I’d be doing that past 65 also.
Bo: Yeah. This may not be retirement. This may be next endeavor. It may be the next thing.
Chris: That’s what I’m looking for.
Brian: I also heard you share earlier your heart of an educator is you do this. You just threw it out there on the download about advanced robotics and stuff like that. And then you’ve even shared with us that you’ve done some teaching to like a cohort of homeschooled kids and other things. Is this something that I mean could that generate $60,000 or is it going to take something plus that?
Chris: It could generate—I don’t know if I could—the part—robotics is really expensive and I would like to be able to help people who don’t have as much money to be able to participate. So, I don’t want to necessarily make a lot of money, but you know, I can program and I can do contract work and I don’t have to work full-time and I could still make pretty good money doing that.
Bo: Okay, love that.
Bo: So, one of the things I think we ought to look at is what if you don’t earn any more income? What if you actually have to figure out, okay, what is our real spend number? So, what I want to do is I want to take away you working. Let’s go back to the doo-doo plan where you are not in a good spot where the portfolio does not have a high probability of success. And we said, okay, well, what’s the spend number? How much could we actually spend starting right now every month for the rest of our lives and still have a high probability of success? And we were pretty excited to see that if you could drop your spending from $12,000 a month to $10,500 a month, the plan actually works. Again, you can see that you go from $8.3 million on the dream plan to now you’re still leaving behind when you leave this earth about $1.5 million for the kids. So, you have some cushion built in. When we take this and we run it back through the Monte Carlo simulation, looking at those thousand different scenarios, thousand different iterations, you can see that we’re right there close to that 80%. Right? Like we are right there within a stone’s throw. So, if you guys could say, “Okay, well, yeah, $9,000 was pretty lean and $12,000 is doing all the things we want to do. Maybe $10,500 is that happy medium.” Maybe that’s somewhere that you could land and say, “Okay, well, I don’t have to go work anymore. We don’t have to generate income, but if we can spend at that level, it opens some doors, opens some opportunities.”
Chris: A lot of our spending right now again comes from robotics. Robotics is just really expensive. We have one more season of it and then that kind of goes away. So that spending goes down. We don’t spend a lot. We don’t really—like for vacations. I like to read books. It’s not—
Bo: Have you read any really good ones in the last year? Is there like a book that you’re like this book in the last year was just so good?
Chris: Brandon Sanderson.
Bo: That’s awesome. That’s great. And what I hope what I hope you’re recognizing is we’re laying out individual scenarios. The real answer for you guys probably isn’t one of these distinct scenarios. It’s probably some combination therein. You may go make some income and you may make $30,000 a year and you may not spend $10,500. You may spend $11,000. But the combination of those shows you where the guardrails are. All we want you to—because you’ve had this incredibly uncertain thing happen in the last 24 hours and what we want you to know is where the guardrails are. Okay, based on what we’ve done so far, what are the pieces and parts we need to know so that we can continue on the path that we’re on and pull and adjust the appropriate levers. That’s the peace of mind we want you guys to walk out of here with.
Brian: I want to make sure I’m giving you guys enough space to kind of process and then even share what seeing these actual numbers does not only to know it mathematically but even as the relationship side of things.
Heather: Oh, it’s definitely peace of mind knowing the route isn’t all uphill.
Bo: Yes, you have options. Yes. And good options.
Heather: Yeah. Not hard options either.
Brian: Yeah. This isn’t like, oh my god, we got to boil a bag of potatoes and that’s what we’re going to be eating for the next week. You guys rock and roll for all the sacrifice early on. Yeah. You got good options.
Chris: Yeah. And you know, I look at the numbers a lot and it is nice knowing that it’s not just me that—because I can look at the numbers like I think we’re okay, but you know, I don’t do this for a living. So yeah, it’s kind of good confirmation.
Bo: I don’t imagine if I were to ask you a week ago, hey Chris, do you think in the next week you’re gonna get a call that’s gonna rock your world. You wouldn’t have said that. But because you guys did the thing early on, because you saved 25% of your gross, because you practiced deferred gratification, because you thought about the future, you are in a position right now that when life threw an unknown unknown at you, it threw a grenade. It didn’t derail you. It didn’t throw you off. And you guys are far enough in the journey that you get to choose what your next pivot looks like. Yeah. Are we going to just track better and figure out what our spend is? Am I going to go find another job making the same income and do that for a few more years or am I going to go find a job and a hobby and a passion that I love and do that forever? You guys kind of get to be in the driver’s seat defining what the next phase of your life looks like.
Brian: I want to give y’all credit. We talk about different phases of wealth building and I think for a lot of people and this is why it’s so important when you’re young, you have to kind of have the make the wealth phase whereas I feel like sometimes young people when they start making good money—you admitted, Chris, early on in the ’90s it was easy to go make good money. Yeah. I think a lot of people just assume forever they’ll be in this type of scenario. So if you disrespect the make wealth phase where you actually use the ingredient of discipline, then when you get to, you know, post-45 where you kind of need to be in the maintain wealth phase, you’re kind of struggling or scrambling to play catch-up because you skipped all the make wealth phases. You’re maintaining even with a grenade thrown in the middle of this. I felt so happy because the good news is Bo and I had already run through some of this thinking we were gonna talk about a normal retirement and then that’s when Megan came and gave us the news. I already had this piece of mind for you guys because we were like, “Oh my gosh, the timing couldn’t be better for y’all to come on the show because I think now y’all’s journey back home is going to be—y’all get to have discussions and I know Bo’s about to share your homework with you but I think a big part—y’all’s homework is different than a lot of our guests is because a lot of our guests was like a checklist of this, this, and this. You guys is more of the journey now of all of the sacrifice and discipline of the good years is now bearing fruit that you get to kind of think about what is life, what’s the life we want to live from this day forward. And that’s kind of exciting.
Bo: Ready for the homework?
Chris: Sure.
Bo: All right. Here’s the homework. First thing I have for you, you said this was one of your goals. I want to track better. One of the things I want to do is track better. Well, this is a wonderful time to start doing that. So, as you go home, figure out what’s your system going to be for tracking better. Are we $9,000 spenders? Are we $12,000 spenders? Are we $10,500 spenders? Are we somewhere in between? So, one of the homeworks for you, figure out what system you guys are going to implement together so that you have confidence around the tracking that you’re doing. The next thing you got to do is figure out based on the 3Ds that we laid out, based on the doo-doo, based on the dream, and then based on the down-to-earth, which option are you going to pursue? We have a favorite, and I don’t want to lay this on you, but I’ll tell you our favorite. We love the idea of you going out and making not the same income that you were making, but if you could go out and make an income of like $60,000 doing what you love, and you allow those dollars to continue to grow from now until you get to normal retirement age, you just have to get a whole lot less creative. Because we didn’t talk about this, but we could look at your account structure and where you have to pull dollars from right now. And you could do it—there is a scenario, but you have to do stuff like tap into your Roth IRAs and that sort of thing. And man, if you could just let those dollars grow from 51 where you are now to just 59 and a half or maybe 65, it just makes it a whole lot—I don’t want to say easier, but it makes it a whole lot easier. So, it’s one of those things I think that’s a great scenario for you to consider, but you guys have to figure out what do you ultimately want? What do you want this next phase to look like? And then your last thing is build the next steps. If that’s the case, what is the first next thing that you’re going to do? Is it brush up on your resume? Is it begin making connections? Is it start looking for the opportunities that can give you paid gigs right now? You’ll know that better than anyone else, but you have to start the process of moving in that direction. And you guys get to define what are the next 40 years look like now that we’re at this pivot point.
Brian: Everybody assumes that things are easier, especially when they see success. But the reality of that, and we see it all the time with our clients, is that man, it’s not the straight line. The Financial Order of Operations isn’t even a linear process. There’s going to be steps back. And there’s even times where you have to dust yourself off and figure out where you go. But I mean, I got so excited just knowing that we got to have this conversation, have this discussion about how you can live your great big beautiful tomorrow. I just feel so fulfilled knowing that y’all made the sacrifice early on. And that’s why anybody who watches our content and even for people who get a late start, just do something. Today is the day to make action happen so you can start building your great big beautiful tomorrow. And that’s why Bo, if others want to join and come on or even know how to become part of Making a Millionaire, what do they need to do?
Bo: Yeah. If you’d like to be on Making a Millionaire, you can go to moneyguy.com/apply. Or if you want to access any of our free resources, you can go to moneyguy.com/resources.
Brian: Thank you. Thank you. Thank you for coming on. Y’all been great. I’m your host, Brian Preston. Mr. Bo Hanson, Money Guy team out.
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