The Messy Middle of Financial Independence (How to Stay Motivated)

0:00Mindy Jensen:Every business owner hits a point where they need more expertise than they can handle alone, but another full-time hire isn't always the answer. That's where Upwork comes in. It's where growing businesses find highly skilled freelance specialists, not just for one-off tasks, but to build an entire team, fill critical skill gaps, launch projects faster, and scale support up or down at a fraction of the cost and without the commitment of permanent headcount. Visit Upwork.com right now and post your job for free. That's Upwork.com to connect with top talent ready to help your business grow. That's U-P-W-O-R-K.com.

0:35Mindy Jensen:Upwork.com. When you're ready to start your business, Northwest Registered Agent helps you do more than just file paperwork. You get all the tools to build a real business identity from day one. A business address, website, phone number, operating agreement, free guides, and more at no extra cost. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They are the largest registered agent and LLC service in the U.S. with over 1 ,500 corporate guides. These are real people who know your local laws and can help you in your business every step of the way.

1:10Mindy Jensen:With Northwest, your business is set up to stand on its own from day one. That means your home address, personal email and phone number stay private. Don't pay hundreds or thousands of dollars for what you can get from Northwest for free. Visit northwestregisteredagent.com slash moneyfree and start using free resources to build something amazing. Get more with Northwest Registered Agent at northwestregisteredagent.com slash moneyfree. When spring hits, some people suddenly just want to declutter the garage, clean out the closets, and get everything all organized. Whether or not that hits you, Monarch will do your financial spring cleaning for you.

1:48One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place. One of my favorite parts is the Sankey diagram. Every month I open it up and literally watch the flow of money. It shows exactly where every dollar is going from income to all of my spending categories. It makes it so much easier to spot what's working and what needs tweaking. Get your first year of Monarch for half off just$50 with the promo code POCKETS. Use the code POCKETS at Monarch.com to get your first year half off at just 50 bucks.

2:22That's 50 % off your first year at Monarch.com with the code P-O-C-K-E-T-S. Mindy and I are so grateful for the following sponsors who make BiggerPockets money possible.

2:34Mindy Jensen:Everybody talks about the beginning of your financial independence journey or the end where you're actually retiring early, but nobody talks about the hardest part, the messy middle. It's that phase where you've done everything right. You've already discovered financial independence. You're earning more. You're investing consistently. Maybe you're even hitting six or seven figures. But financial independence still feels years away. So today we are breaking down exactly how to navigate this stage, which is really the longest stage of your financial independence journey. We're going to talk about what actually matters, what doesn't, and how to make sure you don't burn out before you ever reach financial freedom.

3:19Mindy Jensen:Hello, hello, hello, and welcome to the BiggerPocketsMoney podcast. My name is Mindy Jensen, and joining me again while Scott is off playing hooky is my husband, Carl. Hi, Carl. Hello. So I admit when I saw the title of this, I was a little bit afraid because I thought you were talking about me, the messy middle. I have a lot of white shirts that are now living in the landfill or the walls of our house as noise suppression because I'm pretty messy. Yeah, literally, we stuffed these shirts into the house that we are building right now. I saw a tweet. It said, bad news. I forgot to put on my spaghetti eating shirt.

3:54Mindy Jensen:Good news. Now I have a new spaghetti eating shirt. And that's Carl. But that is not what we're talking about. Carl has a lot of spaghetti eating shirts. But we are talking about this segment of your journey where you are just doing the slog. Let's define what the messy middle actually means. It is not your shirt. It is the portion of the journey where you are already started. You have begun investing. You're doing everything right, but you're not there yet, and you're not really even close. Out of a 10-year journey, this is year like two or three. You've still got a long way to go before you reach financial independence.

4:34Mindy Jensen:It can be a little psychologically demeaning or damaging to be like, I've done everything right. I've started saving. I'm on the path. Why am I not even close? Maybe you have had some setbacks. You know, your emergency fund is to be used for emergencies, but right after you deplete it for an emergency, it feels like you're back at stage one. No, you're not. You've used an emergency fund for what it's for. So now you build up your emergency fund again. And this phase can feel awful, but it doesn't have to be awful. Before we get into that, I think we should be the poster children for this. We discovered financial independence when I was 37.

5:21Do you remember the house that we lived in before we discovered financial independence? Describe that house really quick, the other one south of Denver.

5:28Mindy Jensen:So when we discovered this, we were living in a city south of Denver that shall not be named. and we lived in a neighborhood where conspicuous consumption was the theme. Everybody had newer cars than we did, except for the one kid down the street who had like a collectible truck from the 50s. The twins across the street had brand new cars and we had a car that was like 12 years old and another one that was two years old. And then one of the twins destroyed their car. So their parents went out and bought them another new car like the next day. And everybody had so much stuff. Our oldest daughter was five at the time.

6:08Mindy Jensen:She went over and played at a neighbor's house and then came home. And I remember she said to us, why do they have more toys than I do? And I'm like, well, because their parents never spend any time with them. So they buy their love. But you can't say that to a five-year-old. And what was our house like specifically? Where I'm getting at this is I want to describe the house pre-financial independence and the one we moved into after we discovered post-financial independence, because we used to play those sounds from horror movies with the ee, ee, ee, ee, because the house we moved into after, when we went into our messy middle, was drastically different.

6:43Mindy Jensen:Yes. So the house that we were living in, in the city south of Denver, was four bedrooms. It was completely finished. Big ceilings. What was it? Like 3 ,500 square feet without the basement? a full basement, corner lot in a neighborhood filled with other houses just like this. And what do we pay for that? Like$400 ,000? Yeah, it was a little bit over$400 ,000. And then we moved into something completely different. Yeah. So then we discovered financial independence and we moved to the great city of Longmont and we bought a house that was$140 ,000, two bedrooms, one bathroom. And we proceeded to add a second story to that house and change it to a four-bedroom, three-bath house, all while living in there with two small children, and Carl was working full-time.

7:32Yeah, and that house came with bonus ants and mice. So at that time, we discovered Mr. Money Mustache Financial Independence, and we went into full-on optimization mode. We need to sell this nice house, buy the cheapest one we can in the nicest neighborhood, and then fix it up to put sweat equity into it and build up our financial independence number.

7:52Mindy Jensen:How much money did we put into that house? Oh, I don't even know. Let's ballpark it at like 200 ,000. The real question, the more important question is, and that relates to the messy middle, is how much time did we put into the house and how much of my blood, like real blood. Remember that one time I plunged a knife into my hand in the crawl space? That was unpleasant. Yes, yes. We had to go to the emergency room. Lots of tetanus shots. Yeah, you got two tetanus shots when we lived in that house. So we went full on into the messy middle because all of a sudden we wanted financial independence and that was it.

8:26Nothing else was supported.

8:28Mindy Jensen:Yeah. And what was our happiness level at that house? I don't want to say it was unhappy. I think when you're in the trenches fighting, you don't realize that you're in the trenches and you only realize once you've climbed out of there what you're doing and how it might have been a suboptimal idea. I mean, it was a really good idea from a money perspective, a really bad idea from a life perspective. Yeah. Yeah, we sold that house for almost$600 ,000. Yes. And that part was great, but the slog to get there was not. And I think that there's a lot of people who discover financial independence and make their lives suboptimal, to use your favorite word, in the pursuit of financial independence.

9:10Mindy Jensen:What we should have done is incorporated joy, incorporated happiness on purpose into our journey. so that perhaps our journey would have been a little bit longer, but the entire thing would have been far more enjoyable. I'd rather have a fun 11 years than a really hard nine. Okay, so this show is not just about us. We also need to share some lessons that we've learned. So let's talk about some of the levers that still matter on the journey to financial independence when you're in that messy middle. So number one is going to be income growth. You want to be pursuing a higher income, not so you could spend more, but so you can save and invest more.

9:55Yeah, absolutely. Increase that savings rate as much as you can within reason, within happiness, but that's what you should be working on.

10:02Mindy Jensen:In the shockingly simple math behind early retirement on Mr. Money Mustache's blog, he's got a great chart that talks about your savings rate and how many years you'll have to work until retirement. So if you are saving 20 % of your income, you are going to be working about 37 years. If you flip that and save 80 % of your income, you're gonna be working five and a half years until you reach retirement. There's, of course, there's all sorts of levels of savings rate between 20 and 80%, but that's a huge difference. 20 % is 37 years, 80 % is five years. So every percentage point that you can increase your savings rate, you are exponentially reducing your time in the workforce.

10:52Mindy Jensen:So focus on getting your income as high as you can and saving as much as you can. I think you should ask Scott for a raise after we're done recording. Yeah, Scott's going to love having you on the show. This will be my last show. Thank you. It's been great. But while you are focusing on saving as much as you can, also keep in the joy. Keep in the things that you enjoy. Cut ruthlessly when there's something you don't care about. Carl doesn't really care about his clothes. That doesn't make him a bad person. That makes him somebody who doesn't care about fashion. So he's not out there buying really expensive clothes because it doesn't matter to him.

11:34Mindy Jensen:What are some things you do spend money on? Wait, you don't think my style is awesome? You don't think this is like... No, I think your style is great. I could be in Milan and one of those like fashion things, right? I could be on the runway right now. Do you know what a runway is? So what was your question? What do I really care about? Yeah. What do you care about that you will spend money on? Ooh, I care about maximizing joy with the family. So the way we travel is different. I don't want to spend a lot of time commuting once I get to a place, for example. So now, I like walking a lot too. So now when we travel, we'll pay up to get a nice Airbnb or hotel in the center of town where we can walk or take public transportation.

12:12I'm trying to think of times. We've clearly done this wrong before. New Orleans, we did it wrong where there was a big walk to get anywhere. Well, we'll save a little bit of money, though, especially on a vacation because your time is limited. You're only going to be at that place for a short amount of time. So pay money to, I'm going to use the O word again, optimize the time that you have there.

12:29Mindy Jensen:Yeah, I think that's an acceptable use of the word optimization, even though Ramit told you never to use it again. One other one is I can work on cars. I've rebuilt engines, but I really, really despise it. So I'm happy to pay other people, unless you want to take up auto repair. You could do that as a 10th career. Yeah, no thanks. I think you'd be great at it. I would be awesome, but I'm not going to do it. Okay, we'll start with an oil change after the podcast is over. No. So you want to focus on income growth. You want to focus on your savings, right? You want to focus on investing consistently.

12:59Mindy Jensen:When you are saving a lot of money, you aren't putting it into a savings account. because that is not where the growth comes in. Putting it into solid investments like index funds or heavily researched individual stocks or into a business that you're starting, into rental real estate, whatever you're investing in, invest consistently. Invest a set amount every single week or every single month, every time you get a paycheck, every quarter. Whatever your investment philosophy tells you to do, make sure you're following that as closely as you possibly can. And I think this next one is pretty important.

13:36You don't have to make big moves, especially when you're young. Like, don't feel bad if you don't feel your portfolio doubling every year. I remember I was thinking about my first job. I would check my investment balance every day. I don't do that anymore, do I?

13:49Mindy Jensen:Yes, you do. Yeah, I probably do it multiple times per day. But I remember one day my portfolio had gone up like$100, and I was so happy about that. And now that would not make me nearly as happy. But the beauty of this is you don't have to make big moves because allowing your money to grow, give it enough time, your money will make the big moves for you. So you don't have to. And this goes back to your consistency point. As long as you're putting the money in there, it's going to snowball. It's the magic of compound interest. Before you know it, the money is going to be making more money than you ever could at your job, which is a pretty magical thing.

14:22Mindy Jensen:Yeah. And all of this, as much of this as possible, should be set it and forget it. So your savings rate, your consistent investing, set it and forget it. Make the decision to do it and then set it up so it's automatic and you don't have to make that decision. Because let me give you an example. So I have a salary of$2 ,000 a week and I have decided I'm going to put$500 a week into my investments. I put my$500 in, but I haven't automated it. The next time I get a paycheck, I have to make that decision to put that$500 into the investments. And the next time I get my paycheck, I have to make that decision again.

15:05Mindy Jensen:But maybe I was online and I found a super cute dress and I don't have that$500 anymore. I only have$400 because I already spent$100 of it. I wouldn't have that$100 to spend if I had taken that$500 and automatically set it up with HR so that it doesn't even hit my bank account. It automatically goes into my investment account. That's what I'm talking about with automation and with making the decision once. I have decided I want to put$500 in, so I talk to HR and they do it for me. I would have to make another decision to not do it in order for that to change, as opposed to every single week making the decision so that it stays consistent.

15:44What is number three?

15:46Mindy Jensen:Number three, avoid the optimization trap. So this is right there headed towards you. What is the optimization trap? Oh, the optimization trap is when you let efficiency rule your life. I've never done that, have I? Only every single day. We should think of a new example. I've got plenty of them. Like, I still over-optimize. Yes, you still over-optimize. Case in point, the electricity for the other house. You have the ability, because your father was an electrician, you have the ability to wire an entire house. You could have done that and saved us$20 ,000. Yeah. I was just thinking of the small, ridiculous ones.

16:30Like I want to be at Lowe's at 6 a.m. when it opens or like 8.59 when it closes because there's no one else there and I won't have to wait. So that's pretty silly to wake up at 5.30 to avoid two other humans in front of you in line.

16:43Mindy Jensen:Remember that time you saved$20 and cost us several hours of layovers flying from Denver to Jacksonville and stopping in Minneapolis and Chicago? So I'm one of those people who like to sit, have a window seat and look out the plane. I remember that flight. I remember looking at the beautiful snow out the window. So I think that flight was worth it for me. Well, it wasn't worth it for me. And also you could have seen the snow if we flew from Denver to Jacksonville. I'm just kidding. It was not worth it. There's no need to be overly frugal. And I think one of the points about the optimization trap that people fall into in this community specifically is, well, I could save$5.

17:26Mindy Jensen:Sure could, but it's gonna cost you hours of time. Look at the time value of the money as well as the money value of the money. The plane trip that I love to tease Carl about, we always had one stop. It was not a nonstop flight, but adding a second stop to save$20 cost us, I think, an hour and a half or two hours. My time is always going to be worth more than $10 an hour. You don't need to be overly frugal, but don't spend a... Sounds like you almost said a naughty word then. I did. You were going to say you almost spent a Scott ton of money. But that kind of throws Scott under the bus too. I don't know.

18:11Mindy Jensen:Scott is much better at not being overly frugal than we are. Do you have a blooper reel? Can all this go in the back of the podcast? No, they'll just leave it in. Oh man. Okay, good. Sorry, Scott. I didn't mean to throw you under the podcast. Yeah. The ultimate optimization should always be for happiness and ease of moving through life. You know how the change in seasons hits and suddenly you just want to declutter the garage, clean out the closets, and get everything all organized? That same feeling hits me with my finances every spring. I used to have accounts scattered everywhere, making it hard to stay on track with my money goals.

18:45Let Monarch do your financial spring cleaning for you. One dashboard that gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place. One thing that really surprised me was pulling up the cash flow view and seeing what percentage of my income was quietly going to lifestyle creep. Dining out and subscriptions I barely notice. It motivated me to make some quick adjustments. Get your first year of Monarch for half off, just 50 bucks, with the promo code POCKETS. Use the code POCKETS at monarch.com to get your first year half off at just$50.

19:19That's 50 % off your first year at monarch.com with the code P-O-C-K-E-T-S. If you've been putting off life insurance, I get it. The old process was miserable. Phone calls with an agent, a nurse coming to your house for a blood draw, then waiting weeks to find out what you'd pay for. That friction is exactly why so many people who should have coverage don't. Here's what I believe. Most BP money listeners need term life, and the right move is to build a ladder. A few term policies of different lengths stack together so your coverage steps down as your mortgage shrinks and your kids get closer to being financially independent or you get closer to hitting your financial independence number.

19:54The thing that makes that practical now is Ethos, a platform that helps you find life insurance all 100 % online. Same day coverage, no medical exam. You just answer a few health questions online, up to$3 million in coverage, some policies as low is$30 a month. So building a two or three layer ladder that used to take a month of appointments is something you can knock out before your coffee gets cold. Get your free quote at ethos.com slash bpmoney. That is E-T-H-O-S dot com slash bpmoney. Application times may vary and rates may vary.

20:26Mindy Jensen:Number four, design the life that you want to retire to. The messy middle is a nice long section of time. You have time to think about how you want to be spending your days. And sure, going on vacation and sitting at the beach sounds awesome for a couple of days. I don't want to live on the beach and go and lay on the beach every single day. But what I do want is to be relaxed. So I'm not taking on more hassle. And that's something that we have learned rather recently with the building of the house and the finishing up of the house that we are still in right now. It's a live-in flip. We've lived here for six and a half years and we're still not done yet.

21:10Mindy Jensen:Almost. Almost, yes. We're always almost done. We'll be done right before we put it on the market. Yeah, and I would take this designing word. I would take this to the next level and I would say, start living the life you want to retire to. You might not have time to live in Portugal for a month. Your boss might get angry at that. You might not have time to pursue all your hobbies, but you can start doing it on a small scale. And what that's going to do, it's going to make the transition to retirement much less abrupt because you've already been doing it. Now you can just expand those things. What are some things that you would have done during our messy middle if you had taken the advice and designed the life that you wanted to retire to?