Why $500K Is More Important Than $1 Million (Coast FIRE)

14:40Evan Lawler:Do you think that's realistic? I think that's realistic. I mean, looking at kind of the long term broad market historic averages, if we continue to see similar returns as we saw all over the last 20, 30, 50 years, we could expect to see something like that. However, I did build, I think like a lot of people built a solid amount of margin into my plan. So with a$200 ,000 per year income, currently I spend about$36 ,000 per year. So I have a lot of margin in there. So even if we saw lower than historic market returns, my hope is that I'd be good.

15:14Mindy Jensen:I really like that your current expenses are not what you are factoring your FI number to be. Because at$36 ,000, all you need is a million. You're almost there. Why not just push that? And that's a mistake that my husband and I fell into as well. We're like, well, we spend$40 ,000 a year. It was like 36 or whatever. We spend really low. We just need a million. And then we reached our fine number and we looked at each other and we're like, maybe a little bit more. He wasn't ready to retire and quit his job at that time. And around the same time, I started working again after being a stay-at-home mom to raise my kids until they got into kindergarten.

15:52Mindy Jensen:And then we had an amazing stock market year, I think maybe two years. And we had doubled our initial 1 million FI number to 2 million. And it was still like, well, is this enough? And I think that at age 25, spending$36 ,000 is awesome. But I'm going to point out that you're not married. You don't have kids. Are you renting or do you own a house?

16:17Evan Lawler:We're renting a super cheap apartment. I'm driving a really old used car. So definitely a lot of room for my expenses to grow.

16:25Mindy Jensen:Yeah. And I think that as much as the FI community preaches, don't fall victim to lifestyle creep, a single guy versus a family, there's just going to be a lot more expenses. And there might be more income. Perhaps you get married and your partner has the same income that you do. That's great. But also now you have two people who are paying expenses and then you throw a couple of kids in there. And now there's four people that are, you know, kids can be cheap, but they can also they need stuff. They need to eat food.

16:56Evan Lawler:Again, the option to kind of stand on the shoulders of people who have done financial independence before, reading the stories of people who are pursuing that like fine number that they're going for. And they reach it at age 30. But then by age 40, they realize, hey, I actually think that I want to spend a little bit more money, even though I'm a frugal person, even though I'm somebody who is against lifestyle creep. These things happen, right? As life happens, as it evolves, these things happen. So that's exactly why I kind of set this ambitious retirement income goal, because I think that it's an income that I can kind of grow into over time.

17:32Evan Lawler:I agree.

17:33Mindy Jensen:And we're in an inflationary period right now. Inflation doesn't typically go down and then expenses are like they were five years ago. They just kind of keep going.

17:43Evan Lawler:100%.

17:43Mindy Jensen:I love that you're thinking about this so far down the road. So how aggressive is your savings rate right now, given that you spend $36 ,000 a year?

17:55Evan Lawler:Yeah, my savings rate currently using my W-2 job is about in the mid 40s. So about 46 % or something like that, including my company match, which I think is a pretty aggressive savings rate. But you know, we've all heard the case studies of people that are in the high 80 % savings rates. So I think that it's aggressive, but it's not super uncomfortable right now.

18:18Mindy Jensen:So we had a fairly aggressive savings rate. Honestly, I don't even know if we tracked it or not, but my husband was making a lot of money and we weren't spending very much money. I think it was like 50, 60, 70 % savings rate, but also we weren't living. We were nose to the grindstone, head down, save as much money as you can, spend as little as you can. And it wasn't, I mean, we still had fun, but we didn't have nearly as much fun as our money would have allowed, which has been kind of a double-edged sword. Like it allowed us to get to financial independence pretty quickly. But also our children's childhood was spent working and not playing and going on vacations and having fun and doing all these fun things.

19:02Mindy Jensen:So the ultra aggressive savings rates, I don't think are always serving you so well.

19:08Evan Lawler:And when did you realize that, Mindy? When you guys, had you reached your FI number and kind of looking backwards, you were saying, okay, maybe that was a little bit high or was it somewhere along the journey that you kind of realized that?

19:19Mindy Jensen:Oh, like three years ago. Okay, okay. We did an interview with Ramit Sethi on his podcast. That was when we had started thinking like our money isn't working for us. We are working for it. We are financially independent. Carl had already been retired for years. I could have quit my job, but I didn't want to. I enjoy what I do, but we were still very cheap. We weren't even frugal. We were cheap. And a conversation with Ramit was really, really helpful. We're still working on exercising our spending muscle. That's another thing I like about Coast Phi is that you are exercising your spending muscle because you're not so hyper-focused on Phi as fast as possible.

20:01Evan Lawler:Yeah, 100%. And spending is totally a muscle. And I think Ramita has done a lot for the community and kind of bringing that to everybody's attention. So are you frugal or are you cheap? That's a great question. I like to think of myself as frugal and not cheap. I heard a great example a while ago. I'm not sure who said it, but they said like to be frugal is to take the train maybe instead of the Uber home from the baseball game. To be cheap is to take the Uber and not tip the driver. So like kind of inconveniencing others and kind of being a pain about it. Whereas being frugal, it doesn't hurt anybody if I make coffee at home instead of going out and buying it from a coffee shop.

20:40Evan Lawler:So I would say that's a frugal decision. So I like to think of myself as frugal, but maybe I've made some cheap decisions too.

20:47Mindy Jensen:So I think that's a great example. Shout out to whoever said that. I'm going to credit Evan because it was the first time I heard it was right from heaven. There we go. How does one on the journey stay frugal without veering off into cheap? Because it's so easy to be cheap. I mean, it's easy for me to be cheap and I'm trying really hard.

21:05Evan Lawler:Yeah. I like to think that it's about not inconveniencing others. Now, if you have a bunch of friends that like to collect rare diamonds or something like that, then yeah, maybe you would be inconveniencing them by not participating. But like, you know, we've talked about a bunch, you know, it's the big three, it's the housing, it's the transportation, it's the food. So if, you know, it doesn't inconvenience my friends or family, if I live in cheap, a cheap apartment or drive an older used car, but it saves me a ton of money, it really moves the needle. So I would say that's something that's frugal.

21:36Evan Lawler:But, you know, if my friends have a birthday party, and it's out at a restaurant, and you know, we're going to go out and spend like $100. So be it, right? You know, I'm saving all this money each month on those big things. And so I'm happy to go out and enjoy those things with my friends. So that's where I would say the balance is, is being cheap versus frugal.

21:57Mindy Jensen:I love that so much. Yes. Save money where you can to quote Ramit again, save money where you can so you can spend it where you want to. I want to celebrate my friend's birthday. And if I have to drop$100 at a restaurant because it's my meal plus a portion of their meal because you can't make your friends pay when it's their birthday, that's okay. because A, you're not celebrating your friend's birthday every single day. And B, keeping friendships going is really kind of hard. And if you can throw a little bit of attention, a little bit of money towards celebrating your friends in such a way, I love that.

22:32Mindy Jensen:I really do like that a lot.

22:33Evan Lawler:Yeah. And something that we like to do is try to host people as much as we can. So me and my buddies, we'll play Dungeons and Dragons sometimes not to get too nerdy with the with the nerds out here. Too late. Yeah, yeah. So we'll do that. And so I posted a video of I had my buddies over and I made everybody breakfast sandwiches. It was like a breakfast for dinner kind of thing. I love that video. Yes, yeah, yeah. So it was awesome. And, and you know, the all in cost was maybe like 50 or$60 to get all the ingredients and whatnot. And but we all had a great time and everybody nobody had to bring anything.

23:06Evan Lawler:We all ate, we had a lot of fun, to be hung out for hours and it didn't cost us much money. So that was awesome.

23:12Mindy Jensen:And to be cheap, you could say, hey guys, I would love to host you at my house, but I'm not going to give you anything to eat. So you can have water and eat before you get here.

23:20Evan Lawler:Absolutely. Exactly right.

23:21Mindy Jensen:We are talking about$500 ,000 is the new million, but for some of the people in the fire community, $500 ,000 might only be 25 or 50 % of their total FI number. Why do you think 500 ,000 is a better target versus a higher FI number?

23:39Evan Lawler:Like we were saying, like beginning with the end in mind, that I think that if you're somebody who is like, I really do not see myself ever earning an income, the things that I want to do day to day will never, ever earn me money. You know, maybe a traditional FI number for you is the right way to go about that. But I think that if you're somebody who is maybe a bit more balanced in the sense that, yeah, I don't like my job, but I don't think that I would never want to work ever again, kind of acknowledging, well, maybe there's like an incremental goal, right? Maybe there's something where I can coast-fy a portion of my portfolio.

24:14Evan Lawler:And I love something that Andy Hill talks about. And he talks about building up that coast-fyre portfolio and then also building up kind of that FU money that it's like a big savings. And then maybe you can go take a risk. Maybe that's a new job. Maybe it's starting a business. Maybe it's getting into real estate or something like that, but can give you an opportunity to earn income and cover your day-to-day expensive. But Coast Fire gives you that peace of mind that you've basically bought yourself a traditional retirement already.

24:41Mindy Jensen:Yeah. I think when people talk about Coast Fire, they talk about, I've got enough money so that when I reach traditional retirement, I'll be set. And I think that there's not enough focus in the Coast Fire community on the, okay, I'm set for traditional retirement and I don't have to put any more money in, but if I do, this day gets shorter. So I put a little bit more and you're already used to putting money away. You said you're putting away$3 ,300 a month. I just did super quick math. That's$39 ,000 a year. You're putting away every year what you're spending in this current year. Like you're putting away, okay, now it's not 65, it's 64.

25:23Mindy Jensen:Next year, okay, now it's not 64, it's 63. And next year, so you're like moving these numbers closer if you continue to put money away at the same rate. But let's say you don't. Let's say you get married and you have kids. And now instead of$39 ,000, you're only able to put away$25 ,000 because now you're spending more. Okay, so now it's not a year for every year. It's a half a year for every year. You're still moving these barriers closer together. And it's just optionality that you're giving yourself.

25:54Evan Lawler:Yeah, you're buying yourself freedom. And I think in the FI community, we're all acknowledging the fact that it's, yes, I want to buy freedom for tomorrow. But also, can I buy some freedom for today? Can I buy some spending freedom? Can I buy some flexibility? I think also building in some margin to my plan, I ran the number. So$500 ,000 at$30 ,000 gives me about$200 ,000 in retirement income at$65 ,000. But at$59 ,500, if I were to pull that forward as soon as I can access my retirement accounts, would still give me about$140 ,000 per year. So maybe I get to$59 ,500 and I'm only spending$115 ,000 in inflation-adjusted dollars.

26:31Evan Lawler:And I think, OK, maybe I'll retire now.

26:34Mindy Jensen:You can just keep doing this math. I think that a lot of people do the math once and they're like, OK, that's set. Play around with it. See what the options are. Maybe you do want to absolutely stop contributing at age 30 and just live like a king. You can do that or you can decide, you know what, this year I'm not going to save anything, but next year I'll start again. Or, you know, it doesn't have to be so absolute. And I think that this could be a super fluid journey and you can save and spend and be fluid, be financially independent. And then all of these different options just present themselves.

27:09Evan Lawler:You mentioned, Mindy, on your journey, was it called the Death March to Fi? Is that have I heard you say that? OK. And so I recently made a video and I called it like meandering to fi. So rather than marching or running or walking, you know, kind of stopping and smelling the roses here and there, still making my way towards my goal. But, you know, in a more lackadaisical way, kind of meandering my way there.

27:30Mindy Jensen:Evan Lawler just coined a new phrase, meander fi. Yeah, I like that. I like that. So you're very publicly talking about your finances on your channel. What's been one of the most surprising things about the journey so far that you didn't see coming?

27:47Evan Lawler:One of the most surprising things about sharing my numbers online is first off, how supportive people are. They love that people are nosy, I think a little bit, right? They love to hear about the numbers. They love to hear about what you're saving and investing. And it's been really gratifying to see those people who take an interest in maybe what I'm spending or what I'm investing. And then they kind of get interested in their own numbers. So that's been really interesting that people are more willing to dive into their numbers and kind of start considering these ideas of financial independence than I initially thought.

28:19Evan Lawler:I kind of thought that I was a part of a very small and radical group pursuing financial independence. But people learn a lot from this kind of stuff. And so that's been something that's really surprising is that people are kind of willing. And then the other thing is the different spending understanding psychology that is out there. And like, you know, there are the people on my end of the spectrum and Mindy, your end of the spectrum that are, you know, frugal by nature. And like, you know, we might struggle to spend. And it's like, maybe you would categorize that as a good problem to have. But at the end of the day, it's still a problem that we need to acknowledge and overcome.

28:54Evan Lawler:And then there's other people who are on the other end of the spectrum, you know, they get$100 and they spend 110 before it even hits their bank account. And so it's kind of acknowledging both those realities and trying to understand the psychology to find a more happy medium has been super interesting and fulfilling for me. 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. One 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.

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31:04Mindy Jensen:I was probably 49 or 50 when I discovered that I need to start flexing my spending muscle and make my money work for me in a way that is enjoyable. I'm not just spending money willy nilly on things that I don't care about. My husband and I are building a house right now or having it built for us. I'm not swinging a hammer at all, which is a departure because we usually do all the work ourselves and our live in flips, but we're having it built. and every time a decision comes up, what kind of countertops do you want? What kind of cabinets do you want? You know, all these little things. We have decided that we are taking price out of the equation.

31:43Mindy Jensen:That's not the first thing we look at. So we went with the cabinets. We went to Ikea. I've done two Ikea kitchens in the past. I've had a great experience. Their cabinets are great. And I went there and I don't know if I got like the worst cabinet designer ever or somebody who just did not care, but he designed probably the ugliest kitchen I've ever seen. And I'm like, thanks. And we left and my husband was like, well, I guess we can talk to the people at Home Depot and look at these other cabinet lines. And I'm like, I'm not buying Ikea kitchen cabinet. This kitchen is not going to be what I'm doing in this house.

32:19Mindy Jensen:And he's like, well, I mean, I don't want to spend twice as much. The Ikea kitchen was$14 ,000 and we ended up spending, I think,$35 ,000 on the cabinets that we actually did get, but they are so much better and so much more beautiful and they fit in with the thing. And five years ago, I would have had the ugly Ikea kitchen and just been done.

32:41Evan Lawler:Right. Actually, on Monday, I bought a brand new espresso maker. I love coffee. I love espresso. Bought an espresso maker,$500. And I talk about spending psychology all the time. I talk about money every single day, encouraging people to save and invest for tomorrow while enjoying today. But I will tell you, Mindy, when I was checking out and I saw after tax$529, a cold bead of sweat rolling down my face. But I think it's like anything else, right? It's like public speaking. It's like going to the gym. It's about learning a new skill. Everything feels uncomfortable at first. And so it's about kind of pushing through that discomfort.

33:24Evan Lawler:and it's cool to hear, I'm sure it was a similar situation for you that you're looking at these newer, more expensive cabinets and you want them and you know that it's the right decision to make, but there's a part of you, right, that is a little uncomfortable with it and pushing through that is huge.

33:39Mindy Jensen:Yeah, it wasn't just twice as much. It was more than twice as much and they're beautiful and I'm so happy with them now. I actually just bought an espresso machine too and it was$700. I went to my friend has a huge espresso machine set up at his house and he's very into coffee. So I went over there and I talked to him about his setup and I started looking at the same type of machines. Like his is like$3 ,000 or something. I'm like, I don't think that I enjoy coffee that much, but I did a lot of research. I decided on the$700 machine and it's been perfect. I had a$20 crappy coffee maker that I've had for 15 years or whatever.

34:22Mindy Jensen:It wasn't bringing me joy anymore. Now I am so excited to make espresso every single morning and it's delicious and it makes my heart sing and I'm glad I spent the money. But five years ago, I would have looked at that$700 price tag and been like, oh no, just because it was$700. $700 compared to my net worth is nothing. It's like a rounding error. It's like I dropped a$700 bill out of my pocket when I pulled out my wallet to pay for something else. But why am I so fixated on the price? It's hard to get over that. So I think one of the best things you can do when you're trying to exercise your spending muscle so you can use your money to make your life better, not just so you can spend money willy-nilly, is to experiment.

35:06Mindy Jensen:What is something that you think is great? Oh, I think that I would really enjoy having an espresso maker at home. Look, I was right. Evan, what do you think is the single biggest lever that someone can pull to get to$500 ,000 faster? Savings rate, income, investment return, something else?

35:25Evan Lawler:I think that the biggest lever that most people can do is their savings rate, which is made up of two parts, right? Which is your spending and your income. And I think a lot of people, maybe they feel as though their expenses are fixed in a way and they can't possibly do that. I would say that's not often the case for most people, especially people my age that are renting different places or, you know, they are maybe leasing a car or something like that. You can kind of confront those big expenses. And I think that if you're a young person and you can reduce your fixed expenses and move into the cheaper apartment when your lease ends or consider the used car instead of the new car, that will have huge impacts on your financial journey throughout the rest of your life.

36:11Evan Lawler:However, if you're someone who reviews your expenses, maybe you have a mortgage, maybe you already have the cheap car and your savings rate is still pretty low. Maybe it's single digits, five or six percent, but you want to get into this financial independence world. I think it's reasonable to acknowledge the fact that maybe you need to go pull that income lever and you need to go out and consider different jobs, work a side hustle, do some job hopping, build up the thank you inbox or folder that I think you talk about, Mindy. And so then go ask for that raise from your boss can really make a big difference.

36:48Mindy Jensen:Evan, I did some quick math and assuming a 7 % return, your 500 ,000 will bring you a little over 5 million at age 65 with a 10 % return. Do you know what that number is? I have no idea. 14 million. Wow.

37:05Evan Lawler:Is 500 ,000 still the right number? I think that it might be the right number for me, kind of just using the math as far as the 10 % versus seven, we're looking at like a nominal versus a real rate of return. Nominal being not considering inflation, real being considering inflation. So that$14 million, that's really exciting. And that will, you know, using those historic returns, that would be the number that I see on my screen. But, you know, maybe a cheeseburger from the local restaurant costs $48. So, you know, in real dollars, I think that the 500k still holds out.

37:39Mindy Jensen:I think it's a great goal for age 30. I did just Google what's the average stock market return over the last five years, they said 13 to 15%. And I don't think that's realistic. I'd love it. Hey, if you want to keep bringing back 13 to 15 % S &P 500, I approve. But I like that you aren't being super aggressive with your projections. Conservative projections, and then you get a really aggressive return. Awesome. You came in low, like we said, 5 million versus 14 million. If you get to age 59 and a half and you have$9 million, I mean, are you going to stop looking at it? No, I promise you, you will continue to look at your stock market return just as much at age 40 as you are doing right now.

38:26Mindy Jensen:You're just curious. Oh, what's it at today? Oh, I'm at 5 million. Awesome. Or hey, it's been kind of a low couple of years with all this inflation. So I'm at 2 million right now when I thought I was going to be at 3. Either way, you're growing your net worth and you're watching your retirement date still come closer than 65. So I just, I love the concept of COSFI so much. Evan, I really appreciate you joining me today. Where can people find you online?

38:53Evan Lawler:Thank you so much for having me on. I think it was an awesome conversation. You can find me online across all social media platforms at the underscore financial foundation.

39:02Mindy Jensen:All right. Do you want even more financial independence information? Hop on over to our website, biggerpocketsmoney.com, where we have resources, templates, and all sorts of calculators to help you on your financial independence journey. You can also follow us on Instagram, Facebook, and YouTube at BiggerPocketsMoney. That wraps up this episode of the BiggerPocketsMoney podcast. He is Evan Lawler from the Financial Foundation. I am Mindy Jensen saying gotta fly, Sky.

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