465 | Jonathan Returns: Upside Down Economics and the Priceless Value of a Great Question

23:43It's always the small things. And you can do the small things for very cheaply, very inexpensively, very free. And then it frees you up when that moment is right, when the opportunity is there, frees you up to crush the big things when the time is right. Yeah, I love that. The small things are the big things. I know I've used that quote numerous times over the years because I think it gets at something fundamental about life, right? And it does cut to just the fundamentals of any aspect. We could talk about personal finance, right? Like the small things are the big things. It's, as you would say, it's playing the ground game, right?

24:22Like, okay, obviously, right? You need to have a savings rate. You need to be saving money. You need to set things up on autopilot. You need to not be paying fees. You need to invest with a long-term mindset, right? Like there's no guy behind the guy. I think this is what everybody thinks is like, there's some secret for, oh, once you become wealthy, then everybody lets you into this secret party and there's some massive secret that you're going to get 20 % returns every year by finding some super complex derivative nonsense. It's just not true. There's no guy behind the guy. There's no secret to anything.

24:58The secret is simplicity. The secret is cutting to the essence of something. The secret is practicing the fundamentals. I mean, Jonathan, it reminds me of the story of the famous UCLA basketball coach, John Wooden, who would literally take the best high school players in the country, bring them to UCLA and start off the first practice teaching them how to put their socks on. Right. I mean, literally that is the, the epitome of the small things are the big things it's getting the fundamentals. It's dribbling properly with your right hand, dribbling properly with your left hand. Again, these are the best high school players in the country.

25:33He brings them to UCLA. They're expecting to learn some crazy behind the scenes thing. And they're learning how to put their socks on properly. If that doesn't describe it to you, I don't know what will. I always love the analogy in David Bales and Ted Orland's book, Art and Fear. Did you read that, Brad? I did not, actually. No. So you may have heard this. It's a parable before, I believe is my understanding of this. But basically, a ceramics teacher announces on opening day that he's dividing the class into two groups. You have all those on the left side of the studio, he said, will be graded solely on the quantity of work that they produced and all those on the right solely on the quality.

26:10So this procedure is simple on the final day of class, you know, he's going to bring in these bathroom scales and he's going to weigh the work of the quantity group. So 50 pounds of pots rated an A 40 pounds, I would get a B and so on. So those graded on quality, however, needed to produce only one pot. I'll be at a perfect one, the big one, right? To get an A. Well, it comes grading time and you have this curious fact pattern that emerges the works of highest quality they were all produced by the group being graded for quantity yeah and it seems that you know while the quantity group was busily churning out piles of work and learning from their mistakes insert failures here the quality group just sat theorizing about perfection and then in the end had a little more to show for their efforts than the grandiose theories and piles of dead clays where your dream goes to die.

27:04What are you taking action on? You're going to fail and it's wonderful. All right. I am perfectly fine with those of you that listen to this and say, I really don't like the word failure. That's fine. You can use a different word in my world. I'm okay with it. Cause in my mind, I'm like, you can use it to push you forward. You're failing. Good. This is good. This is good. You just remind yourself it's good. If you don't use the word failure, use something else. And like in this calibration I'm using, I'm probably not trying hard enough. Man, today, how was today? It was easy. What are you doing with yourself?

27:36What a waste. Oh man. Yeah, no, it's, it is true. It's such an interesting thing because I think so many of us are locked in that, that fixed mindset where failure, like I said, you just kind of bristle at it originally, but I think any type of introspection on it comes to this conclusion that you have to be trying new things. You have to be trying more and more difficult things, right? It doesn't mean try the most difficult thing tomorrow. You're going to throw your hands up, but there's like a series of iterative steps of learning a skill. And it's just, it's leaning out over that edge just a little bit to try something that's five, 10 % too difficult for you now, but then you lean into it, you learn, and then you master that and you move on.

28:18And I mean, Jonathan, for all the people in the audience here who frankly are brand new to choose a via in the last 15 months, which has got to be a pretty significant amount. I mean, obviously I imagine most people have gone back and listened to prior episodes, but for people who don't know you, yeah, we're talking about here. You've spent 2000 hours learning how to code with the help of, of chat GPT, which is remarkable, but let's not have anyone forget seven years ago when I met you, you were a pharmacist working in a big box retail pharmacy, and you were still paying off student loan debt.

28:52You had very famously, you had$168 ,000 of student loan debt that you paid down with crazy intensity. And then you became a podcaster on what wound up turning into one of the biggest podcasts, I guess, in the world. And you left pharmacy, right? And you learned all of these other skills in podcast creation, podcast editing, podcasting generally, website creation, and just like a series, hundreds and hundreds of unique skills. And now you're on something totally different. Obviously it's tangentially related clearly, but just again, hundreds of new skills. And I think most people get caught up in, I am X, I am an accountant, I am whatever.

29:35And I mean, just the number of transformations I've seen you make in these seven years, I literally met you almost seven years ago to the day. That's what's wild. There's probably seven years and two months. And the transformation has been amazing. You can always tell, dude, when you're like, when we got video on the back end and you're like, oh, dude, I'm setting up. This dude's about to get started on the monologue, right? You know, it's crazy. I don't have an identity statement and I'm a pharmacist. I'm sure there was a time when I did, but I think every pharmacist that works in retail right now can probably identify with the statement that they know that they know that 90 % of what they actually do with their nine to five or eight to eight or 10 PM to 8 AM or whatever, whatever crazy shift they got.

30:1890 % of what they could do can and is done far better by a computer using an automated system. What they do, what they actually do with their time, which basically looks like have text on a screen, match up a pill image, fix the printer, adjudicate the insurance, ring up people at the register. I'm not saying this is what pharmacists are trained to do. I'm just saying in a retail setting, it's like the lowest common denominator of your skills. You're a very highly paid widget and a very, very expensive machine. And you should feel very threatened because you are, your job will be automated out.

30:55It will, because there's just, there wasn't much being brought to the table. What you were being compensated for had nothing to do with your knowledge base and entirely to do with your license and separation and the big box store pharmacy's ability to figure out how to automate you out. There were some laws that kept them from doing that every day. They've got lobbyists and they're trying to figure out how to, you know, squeeze you a little bit more, get you out of the way a little bit more, how to increase their own profit margins for their share, which, okay, I'm not, I'm not, I'm just saying this is a reality and it's a reality in all of the medical industry.

31:27And so what I'm saying is right now with what's happening, people that held onto these identity statements based on this degree that was very hard to get based on a bunch of knowledge that was stuffed in their head are actually the ones that are highest at risk right now for being replaced. I'm talking to a radiologist friend of mine. He's talking to me about how GPT and AI is doing a actually really, really good job with diagnostics and images and all. Yeah, you better believe it. You better believe that if your identity statement is wrapped up in a bunch of knowledge that you learned over the last 10 to 15 years, and you're just paid because you theoretically have this knowledge, you are at risk.

32:06And for you to tie your life to that static identity statement, it's not going to end well. It's not going to end well. The people that are going to be the most secure are not the ones that are paid based on a degree or a title, but are based on skills and implementations and solutions. Notice I'm not saying that they're based on their ability to use GPT. Although I'm sure as we proceed into the future, this way I'm saying your ability to do something, not your license, not your, you know, long degree. Most of us know that the educational process is bloated, overly long, filled with like regurgitation of stuff you learned at high school, which is filled with regurgitation of stuff you learned in elementary school.

32:48How many times do you need to take world history? I get it, right? Like this is the reality of this four years in college after 12 years in high school. And then now for a official licensing degree, another four to eight year track before you're allowed to earn a dollar to start paying off your student loans, 15 years to climb out of that hole. And now you're making the big bucks at the ripe young age of 42. Are you insane with how fast the world is moving? Now, for those that are in that position, you caught it right now. This is still early, early days. It has never been easier to make a pivot, but you need to start thinking in terms of what exactly would you say you do here?

33:26And if you're thinking, well, the only reason that it works is because of my license, because of my legal, whatever, because of my, this is what protects me. You need to be, just take a hard look in that and say, well, what's going to happen as this proceeds? If you're a lawyer, right? And law has been pressed really, really hard. What's going to happen as people start to realize they can take their questions to GPT and they don't need as much counsel. And so all the junior law stuff kind of gets sold out. What are the lawyers that are safe? The ones that are bringing in the bucks because they're closing deals, right?

33:56But again, that's a solution. And there's a lot of overhead and a lot of corporations. You just really need to take a hard look at how is my industry going to be affected? And then again, what would I say I do here. Yeah. I think to me, a lot of it is just not going off of assumptions, assumptions that, right. And this is where it can be both job related or just life related assumptions that buying a home is the American dream or your path to prosperity or your biggest source of net worth, or that like you're saying, going to law school is a guaranteed path to wealth. Well, anybody paying attention for the last handful of years, even before child GPT have seen that.

34:39I think it's the, they called the T14. So the top 14 law schools are like the creme de la creme. And those students are still thriving, but everybody else is languishing because frankly, a lot of law firms are just not hiring full-time associates on a partner track like they used to. And you have people coming out of law schools that are even reasonably well-regarded law schools that are just doing hourly work for dramatically less than what they thought. And to your point, okay, you're going to, again, 12, 13 years of regular school, four years of college, in this case, three years of law school.

35:14You're coming out at 25, 26 with a boatload of debt, and you're so far in the hole. And this is not just about lawyers, certainly, but I think it's your argument about college generally is to come out a hundred thousand, and$200 ,000 plus in the hole, and then have to dig your way out before you even get, as you love to say, back to broke, back to net worth zero. My least favorite thing you've ever said, but yet, but it's still a good one. I do. But it stuck with you, right? Like that nagging song. This is the song that will not end. Yes, I just did that. I went there. I did it. Yeah, thanks, bud.

35:48And I think the picture you were painting about people in the medical profession, right? You could be in your mid-30s or later before you start, whereas, And this is getting back to the fundamentals of five for a second, which is if you have a 50 % savings rate, you will reach five in about 14 years. Okay. This is for everyone. And that's a really remarkable thing, right? 50 % savings rate equals a 14 year working career period, end of story. Now, if you can get that knowledge in the head of a 17 year old before they go to college, that can be a life-changing decision for them, a series of life-changing decisions.

36:29So if you have curiosity, right? You have a growth mindset, you have curiosity, this appeals to you. You're actually kind of relieved to hear that the path to success is not a 16-year track and$200 ,000,$300 ,000 a student a day. If that was like, oh, okay, well, that's that glass is half full there. The one thing you need to have is on top of what we just said is time. It is your most precious non-renewable resource. It was my advantage with what I wanted to do. I remember going to just an event that we had and it's just kind of a meet and greet out at a barbecue or whatever. And it was just something my wife wanted me to come to.

37:05And so I'm talking with this fellow that I've seen a couple of times and I'm telling him about what I'm working on. He's like, man, that's really cool. I think this guy has a job with really a tech company, I think even one of the big, you know, fanging companies. And, you know, I'm telling him how I'm building out some of these things. And he's like, man, I just don't know. You know, I used to love, I was learning Swift and I'd done that in college. And I just don't know how I would even have the time to go back. Right. I hear you. Time is your most precious non-renewable resource. What are you doing to claw back your time?

37:37Right. That's kind of, we'll pick up this conversation and do another day, but I just want to leave people and I'll give you final thoughts on this, but I want to leave people with that as well in that everything we're talking about on the show is predicated on getting you more of your most precious non-renewable resource. You can have a second, a third, a fourth, a fifth act, but all of that is predicated on if you don't have time now starting to make simple choices, aggregated together to give you back some of it. And then what are you going to do with that? Some of it, well, let's leverage that.

38:07Let's invest in that. Even if we fill up our free time, Let's fill it up in a way that we can then repeat the process and get more. And that's that kind of flywheel effect for increasing levels of freedom all along the path to complete financial independence. Yeah. Yeah. I love that concept of freeing up time. And I think this does, my mind is going a million different places because I think one thing I've introduced to the community here is something that Mr. Money Mustache brought to us, which is a phrase called the skill of spending. Okay. And to me, this is one of the most interesting phrases I've heard in a while as it relates to five, because I think there's, there's this dual aspect of the skill of spending.

38:50So on the front side, at the beginning part of your journey to five, it's about, it's about becoming more optimized. And again, nothing about five is depriving yourself or shaped around deprivation, but you have to be clear that if If you're living paycheck to paycheck or you're going into the red every month, you need to stop the madness basically, right? You're in a, your hair is on fire type situation and you have to become smarter with your spending. Of course, you can always earn more money, et cetera, et cetera. We have plenty of ways to do that. But realistically, the low hanging fruit is you're spending like a drunken sailor and you have to make changes, right?

39:25So you have to be smart with that skill of spending. And then also, like you're talking about with time, Jonathan, is you have to put things on autopilot. You can't be constantly focused on your personal finance. I don't spend that much time on my finances at all because it all operates. It's this wonderful, smooth operation that's happening in the background. And I take my little tiny lizard brain out of it and don't let emotions come into it. And it just works. I don't have to spend time. But then interestingly, Jonathan, and this is something I've been talking about a lot here on the podcast the last year is getting into this skill of spending on the backside, or as you approach FI, once you've reached FI and becoming more open with spending.

40:13And for me, a lot of it has been to free up my time. So it's so interesting that you said that in a different regard, but it's something that's so top of mind for me of, okay, look, we've talked for years about how you can save a boatload of money cooking at home. And I will go to my grave saying that, That is one of the absolute best ways to become optimized on that front side, the skill of spending part of FI at the beginning. Because I think people leak hundreds plus dollars a month on their food for just not being intentional. But frankly, we're now at a point where our lives are busy, our kids are going constantly to and from, and to cook dinner all the time and then to clean up.

40:55Even when you're optimized, it's taking up time that we don't have. and now we're at a point in our financial lives where we're able to save from a position of strength. And Jonathan, that's the important thing. This is not just, hey, we're listing to and from and we're just spending wildly. We're saying very intentionally, okay, that$2 per person per meal that we used to spend, which is now probably inflated to maybe$3 per person per meal, let's say, we're okay without being$4 or$5 per person per meal if it means it buys us back some time. We're okay with hiring a cleaning service for the first time in our lives at like 44 years old to have cleaners come in the house once a month because those couple of hours are worth that money offset to us.

41:40So Laura and I have been looking for ways to buy back our time because that truly is the one resource you cannot get back. I've been resistant on the home cleaner thing. Not that I like have a leg to stand on in terms of my own personal participation in the home cleaning process. I get that, but I've been like resistant to it. And my wife was wanting to have someone come in as we're going to have someone come in, you know, over the holidays there. And I remember us just kind of going back on forth on that. So I appreciate you giving me license to consider that Brad. It is interesting though. The point is never to deprive yourself of anything.

42:14It wasn't the point. It was like, what do you value? And is all the things you're doing now, are you extracting enough value from that to justify what it's going to, it could potentially complicate things later on. And then from a place of abundance, realize because we did X, Y, Z steps over this period of time, we have a lot more options now. And so there's seasons, there's like, there's seasons inside of seasons, but there's a very intentional period of time where you're automating these things. You're focusing on the small things and you realize you've done that and you have this legroom, you can decide whether you're going to double down on that or whether or not you're at the place where you can kind of open up a little bit, expand to some additional things.

42:52The parallels there are very much the same. It's this flywheel concept. I think I've heard you talk about this on the show a couple of times. In fact, I think you brought Nathan Berry on. Yeah. Episode 455, which was a really great one. And I remember the first version of that concept I heard was a Zig Ziglar quote where he used to talk about when you're pumping the well, you're pumping the well. And the first couple of times you pump it, nothing comes out, nothing comes out, nothing comes out. And then you get a drop and you get a drop and then you keep pumping and then suddenly it's flowing and you don't have to do anything about the flow of that.

43:21You're gonna have to shut it off. That's what we want. That's what we want everywhere. But we're going to start with these small things. We're going to get these things automated. We can be talking about our money. You got a bunch of extra money. Is it just sitting in your bank account doing nothing? I mean, you'd be getting 5 % right now. Chooseify.com slash CIT. Check it out. It's a variable offer. I remember when it was down to like 0.05. Well, yeah. Isn't that wild? It's funny because I know when I graduated college, there was the first online bank, ING Direct, and it was like 5%. And then we've been in the wilderness for 20 years now, which is crazy.

43:54I never thought, I always thought I'd look back and like, oh, remember the days. And now, yeah, I mean, I think, so we're recording this on November 16th and yeah, CIT's platinum account has 5.05%. I mean, that's the account that I use now. It's amazing. So yeah. All right. We got to do this, Matt. I was just, I was having this conversation with my wife in the car. I was like, you know, pay off the mortgage, not pay off the mortgage. You know, that sort of thing. One of those types of deals. You guys have always gone back and forth with this, right? I've always thought that, of course, I'm going to pay off the mortgage.

44:21You know, at my heart, at the very core of the core, prior to FI, coming out of like a Dave Ramsey kind of mindset, financial peace, university, graduate over here. You know, I was thinking, going to pay off the house. It's one of the baby steps. Got to pay off the house. And all right. You know, if you're still there, I'm not, I'm not saying I'm even opposed. I'm just saying, let's say you are a$350 ,000 mortgage. Now let's assume, just really solidify this, that you itemize your taxes. All right. Now that's, that might be a leap. That's not going to apply to everybody, but let's say you do, you itemize your taxes on top of this.

44:52So in this scenario, you're not doing the standard deduction. You're itemizing your taxes. Yeah. And Jonathan, just to be clear. So you're talking about basically the standard deduction. Let's say we'll talk married filing joint. So for 2023, the standard deduction is$27 ,700, which is actually really pretty remarkable. And that means if you add together all of what would be your other possible deductions that could go towards this, like mortgage interest, state taxes, et cetera, there are a whole bunch of things that go into itemizing your deductions. Basically, if when you add all of those things together, if it's under that amount for the standard deduction, $27 ,700, then you'd rather just take the standard.

45:36So forget all that other stuff and I'll just take that standard deduction. But I guess you're saying in this scenario that you're going to mock up here, all of your itemized deductions put together get you right there. And now you're talking above and beyond that is potentially additional, let's say mortgage interest in this case. So we're setting up an interesting hypothetical, but I think it's important to just be clear of what we're doing. It's an interesting one. I don't think it's a total straw man for various people out there. Like there's people in the audience that are probably had versions of this, but I just kind of took it a little bit farther than my wife.

46:09And I just wanted to tell her in this hypothetical scenario, paying off your mortgage would cost you quite literally cost you more each year than it would to not. Yeah. And if I could just jump in real quick. So the big one that I left out was charitable contributions. So that goes in there. And that is realistically, especially when you're thinking about either a tithing a significant amount or for a lot of people in our community, the donor advised fund. If you do this very intentionally where you put all of your charitable giving into a donor advised fund, let's say maybe you're going to put it in for a two-year period, let's say in December or something.

46:48So, hey, for 2023 and 2024, I plan on giving$12 ,000 a year, which I'm making this up, that you could put that$24 ,000 all in your donor advised fund and you get the tax deduction for the entirety of it, even though you don't release the other, let's say$12 ,000 that you're going to do in 2024 until sometime in 2024, you actually get the deduction when you contribute it to your donor advised fund. And Jonathan, just another reminder is one of the biggest hacks for donor advised fund that I think a lot of people forget is you can contribute appreciated stock. So stock that has an unrealized gain and you get the deduction for the current value and you never, ever, ever pay taxes on that unrealized gain.

47:37So this is actually just let's dial in on this real quick because this is critical. So I remember the days when I was going to give you all a tip around the home mortgage deduction. That's all right, no, Brad. We'll go down this path instead. We'll have to come back and do another episode to talk about the mortgage deduction. Sorry to hijack it, but This is important because I've been thinking about this recently. Let's say just hypothetically, you bought a stock for a thousand dollars. Okay. Years ago, you bought it for a thousand dollars and now it's worth today,$24 ,000. So normally what I think a lot of people would think they had to do was sell the stock.

48:10They would have to pay in this case, long-term capital gains on the$23 ,000 gain. So the sales price less the basis of a thousand dollars. So you'd have to pay let's say 15 % tax on$23 ,000, right? So we're talking almost$4 ,000 in tax. And then you'd make your charitable contribution from either that, let's say 20 ,000 that's left over in cash. And then you'd maybe have to pony up another 4 ,000 from your bank account if you truly wanted to make this$24 ,000 charitable contribution. But realistically, you'd have to pay in that scenario, Like I said, 15 % tax on a$23 ,000 gain. Now, what's great about donor advised fund is you can actually just contribute that appreciated stock, the$24 ,000 of appreciated stock to your donor advised fund.

49:03And Jonathan, this is music to your ears. That$23 ,000 capital gain that was unrealized and built in there, poof, it's gone. You never have to pay taxes on it. Never, ever, ever. It's just gone. And so anyone who makes significant charitable contributions, which is a lot of people in our community, probably most people in our community, this is the hack to end all hacks. Because if you have any type of unrealized gains in your stocks, I believe you could do this with mutual funds. I don't see why not, but I don't have any personal experience with that. But man, this is an absolute no-brainer. So let me ask a question about that.

49:36So that would be much easier if your appreciated stock is in the same account, whatever provider as the donor advised fund? So for instance, your stocks are held at Vanguard, your donor advised fund is Vanguard, your stocks are held at Fidelity, your donor advised fund is at Fidelity. Would that be the implications, right? Yeah. So it is much easier, dramatically easier, but my very strong understanding, almost certainty is that it is doable otherwise, but you have to a lot more time. So if you're thinking about doing this on December 27th and you're going from Vanguard to Fidelity Charitable, probably not going to work.

50:17If you started in November, then I suspect it's very doable and pretty easy. Do you think, and I'm not going to pin you this, but for that sort of thing, right? Because you can imagine someone has their very, whatever, regular investments that predictably happen at one institution, then maybe they have the more speculative ones where they you know, invested a million dollars to make, you know,$10, you know, that sort of thing over here in Robin hood, whatever it is, they have their speculation. And, but anyways, they had this runaway and they're like, yeah, this is the one, this is the one I want to put over there.

50:48Does that sound or feel like that's going to be more like a paper process where you're going to go to fidelity, you're going to get the form, you're going to fill all this out. Or do you think that's something that can be handled, you know, via transfer? I suspect there's an electronic way to do it. Yeah. We're, as the audience can tell, we're doing this off the top of our heads, but you guys didn't do some deep preparation for this. It was a sidebar. It was a sidebar for a sidebar. Seven sidebars down the road, but it is really critical information. And yeah, I have my donor advice fund through Fidelity because that is the least expensive fee version that I found.

51:25Fidelity's making things crazy easy. I mean, they just work really, really, really well. They do really, really work. Health savings accounts, donor advised funds, investment accounts. In fact, with their sweep accounts, I think they even have access to like nine different. So if you're trying to like work around that whole, you know, it was in the news a while back around all these Silicon Valley banks being over the 250K. So when the bank crisis was happening, they were all going to theoretically lose their deposits. So the billionaires told us that we all needed to save them and do a once in a lifetime or whatever, whatever.

51:58Anyways, so when that happened, one thing that I became aware of is Fidelity actually has nine different products that all are loosely in this thing. So if they had known about that, they could have gotten that$250 ,000 limit times nine spread out over the various products. Now, this is a sidebar for a sidebar for a sidebar, but I read it somewhere on the internet, so it must be true. That's interesting. I did not know that about Fidelity, but I know companies like Wealthfront, some of these automated investment firms, Wealthfront for sure has it. I'm looking at their website right now. They have up to$8 million FDIC insurance through partner banks.

52:35So essentially they've partnered with a number of banks. So therefore you're not limited to the 250 ,000 FDIC insurance, or I guess it's 500 ,000 for a couple from your one bank. They basically partner with, who knows, it's probably 16 or 32, I guess, depending on which limit they're talking about there, but 16 or 32 different banks. And theoretically, yes, if you had$8 million in cash sitting around that wasn't invested otherwise, you would have the FDIC insurance on all of it, which is pretty great. Maybe Fidelity has it, but yeah, I wasn't aware of that. All right, Brett, can I talk about my little home mortgage conversation here?

53:11Yeah, sorry, man. Let's go back there. All right. I'm sure it's going to be enthralling. It is, it is, it is. All right, so they've done all the things, the monies from donor advised funds, et cetera, et cetera. They meet this hypothetical criteria one way or another, super tither, whatever it is. They have a$350 ,000 mortgage. They have in various accounts, the ability to pay off the mortgage. They can pay it off. It's making 5%. Currently, it's spread out over two savings accounts or one CD in a savings account. They could do it. It's making 5%. They're having the conversation. They're saying, well, all right.

53:47So this$350 ,000 mortgage at our 3.25 % interest rate is costing us in interest. and again, interest rates now are 8%. So if they want to undo this later, they're going to go from 3.25 to 8%. So anyways, second - Right. This is an irrevocable decision. That's the cheapest money you're going to have in the foreseeable future. They've got it locked in for 30 years at 3.25, savings account at 5%, market rate for refinance at like 6 % or 7 % or 8%. Okay. They're paying though each year,$11 ,375 in interest. That's a 3.25 % interest on a$350 ,000 mortgage. They have the$350 ,000 making 5 % guaranteed in FDIC insured banks.

54:33So$17 ,500 in income a year on that 350K, not insignificant. So there's a profit there. So there would be the loss of that$6 ,000 in income, right? For that decision. But on top of that, because they itemized their deduction, super tied, their donor advised fund, whatever it is, they got a mortgage interest deduction, their marginal rate, which Brad, I think that would be federal and state combined, right? In this case, let's just throw something out there, but it's not hyperbole to say somewhere over 30%, maybe approaching 36. Would that be reasonable, Brad? Yeah. I think it's probably reasonable.

55:10Yeah. 30 % fed in state for marginal rates. So marginal is the next dollar. I think most people are probably without looking at the tax brackets in the 22 or 24 % marginal tax bracket. A lot of people are. And then you add state in, I know our state is, you're in the five, 6 % for state. So yeah, it's not unreasonable to say 27 to 30%. So just for the ease of your calculation, say 30%. All right. 30%. I'm going to make one adjustment. And my 30%, if they pay off that mortgage, I mean, this is now literal. They have to pay an additional, on the same income, they have to pay an additional$3 ,400 in taxes.

55:48Their tax burden just became$3 ,400 more. So that has nothing to do with what their savings rate was. That had nothing to do with the savings got. They just had to do with their tax burden because now they don't have a mortgage on that same income just went up by$3 ,400. The combination of those two decisions, that is a$10 ,000 a year financial swing, $10 ,000 of money you do not have access to just based on this conversation in guaranteed numbers, right? Variable interest rate on the savings account. Guaranteed numbers though. Right. So Jonathan, you're saying, okay, there's two different scenarios, right?

56:24So the one is you do not pay off the mortgage. You have$350 ,000 sitting in this 5 % interest bearing account. So that's earning you$17 ,500 worth of interest income. Okay. That's guaranteed. And then you're actually getting a tax benefit on top of it because you're keeping the mortgage, So you're paying$11 ,375 of mortgage interest, which actually gets you 30 % of that as a tax benefit. So you're getting an additional, that's$3 ,400 less tax you're paying that year. So you add the$17 ,500 of interest income plus that tax benefit, and that gets you to$20 ,900 of total benefit from not paying off the mortgage versus, hey, I'm just going to pay off the mortgage.

57:14All I'm getting is foregoing paying$11 ,375 in interest, basically. So it feels good psychologically, but you're costing yourself well over$9 ,000. Like actually costing yourself. We're not talking about the potential for future returns. In the past, it's always been what might happen now, but what might happen later, well, the money can predicted 8 % to make your XYG. This has always been the past case of the people that have said, don't pay it. That's not what this is. This is guaranteed math, depending on what variable rates, right? But if the rate changed back to zero, you can pay it off because it's FDIC insured.

57:53I know there's someone out there who said, well, the FDIC insurance is capped at 250. You can split it over two accounts. That's what we were just saying. You can have the insurance on all of it. You can get the interest rates. It's a guaranteed equation. So you can imagine if I'm this enthusiastic. I was basically nearly there when I was talking to my wife and she asked me to roll up the windows. And can we turn the music back on? So I take it you're not paying off your mortgage at this point? I don't think we are. I always thought I would. I always thought at some point I would, but I cannot in good conscience do it.

58:25I can't in good conscience do it. You're like, well, that would be giving extra tax money to our government and you know they need it right They can print it if they need it that much.

58:36That's on them. I'm not going to do it. Yeah. And that's obviously you're making a joke, but right. Like our responsibility as individuals is, hey, these are the rules and you make the best decision for you and your family or whatever it may be. And yeah, it's so interesting because for as long as I've known you, paying off that mortgage was top of mind. but it is very hard to justify in this interest rate environment where we are locked into these like absurdly low mortgages and you're getting a guaranteed return just for putting in a regular old bank. I mean, it's, it is a wild time personal finance wise to be alive.

59:14I mean, this is something I never thought I'd experienced living in the upside down. All right, my friend, well, this has been a lot of fun to be on the show with you today. Yeah, this has been great. We had a whole laundry list of things. So maybe, uh, maybe we do around two. Sounds good, man. We'll go ahead and start thinking about how to knock that out. Nice. Awesome. All right, my friends, the fire is spreading. We'll see you next time as we continue to go down the road less traveled. Thank you for listening to today's show and for being part of the Chooseify community. If you haven't already, the best ways to get involved are first subscribe to the podcast.

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