JF2186: How Do You Know When It’s Enough | Actively Passive Investing Show With Theo Hicks & Travis Watts

August 27, 2020 | Joe Fairless | 00:24:38

JF2186: How Do You Know When It’s Enough | Actively Passive Investing Show With Theo Hicks & Travis Watts

Today Theo and Travis will be sharing their thoughts on the topic of “knowing when enough is enough”. There are some who are on the side of “always continuing to grow” and others who are in the group of “at some point, I want to retire”. 

We also have a Syndication School series about the “How To’s” of apartment syndications and be sure to download your FREE document by visiting SyndicationSchool.com. Thank you for listening and I will talk to you tomorrow.

 

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TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks. We’re back for another episode of the Actively Passive Investing Show. With me today, as always, is Travis Watts. So Travis, how’s it going today?

Travis Watts: Hey, doing well. We finally got an official background for those tuning in on video; there it is.

Theo Hicks: That’s amazing. Maybe I’ll see if I can figure out how to edit my background, but I don’t have a green screen like you, so…

Travis Watts: That’s true.

Theo Hicks: It might look a little weird. I might morph in and out the video. But yeah, so today we’re gonna be talking about another one of Travis’s blog posts. It’s a deep topic today, so I’m really excited to dive into this with Travis and the blog post is entitled, How to Know When To Retire – How Much Is Enough?

Now before I let Travis describe it, I don’t see many people asking this question. I haven’t seen many blog posts covering this topic, and I think Travis did a really good job explaining what we need to do in order to number one, just be aware of this concept in general, and then number two, what we should do to figure out when, if ever, we have reached the point of maybe we don’t need to work as much, or continue that grind. So I’ll let Travis take it away and then we’ll have our back and forth. So go ahead, Travis.

Travis Watts: Sure, awesome. I think you hit the nail on the head there. This is an awareness blog, and it’s really not talked about a lot especially out in the real estate space, not that I’ve seen anyway. So what I wanted to do is paint a picture maybe from a different perspective that not a lot of folks have thought about before. So in this blog, I use this story of a CEO of a tech startup company, we’ll call it Silicon Valley startup. So it starts with the tail end of this guy’s career, saying he just took his company public, he’s got stocks that are going to vest over the next five years; once they do, it will be estimated this guy will have about a $5 million payout.

So that sounds like the ultimate American dream. The ultimate solution that we’re all after. But as we dig a little bit deeper, we get a little more into this story, and we figure out that number one, as I mentioned, this is the tail end of the story. So the way this journey started was this guy worked at a Fortune 500 company for the first decade of his working career, had a high salary, had some stock options there as well… So in those first ten years, walked away with approximately $2 million in total investments, had paid off home, things like this, and then launched his own company afterwards, went into business for himself. So he had actually previously sold a company; that was his second venture in the second decade of his life, and then here, we’re taking a look at the third.

So the question really is, is as much as that looks like an amazing success story to a lot of folks potentially, how much is enough? Was it possibly enough when he had a couple million dollars and a paid-off home? Could he have potentially retired in his 40s, maybe in his 50s? So now he’s 60 looking at– okay, 65 is the target, got a couple of kids in their 30s that he wishes he could have spent a lot more time with in his life. I know you and I, Theo, have talked about the previous blog I wrote about the top regrets of the dying, and Bronnie Ware’s story. Bronnie Ware, for those that may not know, was a nurse working in a terminally ill patient care unit, did a poll or survey on people’s top regrets before they passed, and the top two were, “I never pursued my dreams and aspirations and I never spent enough time with my friends and family.” So that’s a lot to think about.

To your point earlier, this is a deep topic if you take it that direction, but if nothing else, I just wanted to inspire the thought that a lot of people get caught up in these success cycles. It’s just one business to the next to the next to the next. I made $1 million now, I need to make $2 million; I made $2 million, I need $4 million, and I made $4 million, I need $8 million, but where do you stop? Do you one day just pass away like Steve Jobs, $10 billion in the bank, but a lost family by the wayside and possibly some regrets there? So that’s really what the topic’s about.

Theo Hicks: Yeah, I remember when I initially read the blog post about the top two regrets of the dying. So one of them is essentially career-focused and the other one is more family-focused. When I first looked at it, I was like, “Oh well, are these two mutually exclusive or can they both be used together?” Because in this story with George, we’ve got George, who I’m sure it was his dream to do a start-up, but at the same time, he in the story neglected the other regret. So I think what he’s saying here is that it’s not necessary that you’re gonna have both of these regrets when you die, it’s just you might have one or the other. It’s finding that balance. It’s finding that “Okay, well, I’m going to do this career thing.”

I’ve got a couple of things written down, because obviously, a lot of people expect if you’re the person who is able to grow that much success, it’s gonna be very difficult for you to attend to anything, so there’s obviously some options you can do in order to continue pursuing a career without having to work 120 hours per week. But when I  heard that at first, I thought, “Well, is it possible to have neither one of these regrets?” and then I think the reason why this blog post is important, especially for people who are just starting out who have no money at all and they’re like, “What are you talking about? It would be awesome to have $5 million in the bank” start realizing you need to be aware of this upfront, so that you can create your business plan on maybe not having these two regrets. So an example would be, I was talking to someone– I can’t remember what his name was; it was maybe two weeks ago on the podcast, and he literally had an exit plan right when he started; he knew exactly how much money he wanted to get in real estate before he fully stepped away. I think for his game, he was just gonna sell everything, right?

Travis Watts: Yeah.

Theo Hicks: So obviously, that’s one option, [unintelligible [00:08:38].11] okay, so let’s say I know what enough is, then what? What do I do after that?

Travis Watts: This is how I see it – identify first what is important to you, what are the most meaningful things in your life, what is the purpose of your life. If you had that ultimate life, reasonably speaking, what does that look like? What brings you the most fulfillment? This is something that — you’ve gotta write this stuff down. This can’t be just done in your head one time; just setting goals for a lifetime, 10, 20 year plus goals.

Number two is then you have to reverse engineer now. So how much is that going to take to afford that type of lifestyle. And I think what a lot of people find, myself included, is when you really nail this stuff down, you might find it’s a lot less expensive than you might think, when you really get down to it. I think the problem is in general, in society, is that we don’t stop to think about these things. We just think “I’m working now, I’m going to work forever, I’m going to work till my 60s”, whatever, and we don’t give it much thought, and we just go on the treadmill. And then one day, you’re waking up in your 60s thinking maybe either a) I have a few regrets about some of these things or b) like in George’s case in the blog, maybe I could have actually pulled the plug back in my 40s or my 50s, spent more time with my kids, maybe traveled a little more, had less neck and back pain, and those things; a lot less stress, if nothing else.

I think the purpose is not to say “Quit working” or retire in the traditional fashion, especially if we’re talking about someone in their 40s. I think it’s about finding what you’re truly passionate about. And maybe for George, this truly was his passion, but that’s why I point out in there that he’s got kids in his 30s he wishes he would have spent more time with, so obviously, there’s a level of possibly some regret in there. So just trying to find the balance and optimize your lifestyle. That’s really what this blog is all about.

Theo Hicks: Yeah, I totally agree. I think a good question would be again, where this is from – this is not from me, but ask yourself the question, essentially, what’s the job I’d be willing to do for free, is basically what it is. What I’d be willing to do, that I enjoy so much – work-wise, obviously; not like you sit there and watch movies all day or something, but maybe that’s what it is. [laughs] But what kind of job would I do? How many hours per week If I could do it for free, and then that would be what you do once you retire.

This also reminds me of what we talked about last week, is obviously how you get to this point. So there’s a million different ways to get to this point, and one of them would be making sure you’re focusing on not overspending in those main areas – the vehicle, the house and the food last week, and then doing some positive things as well. But I did have a few things besides that what I’d do for free, that you could possibly do once you’ve hit your goal. Obviously, the most important one is gonna be passively investing.

Some people’s goals in real estate is to actively invest, build up a large enough nest egg that they can passively invest with someone else, and then live off of that interest. So that would be probably the strategy that resolves it most times for you, because you’re just checking– Travis would know more about this than me, but you’re just checking the monthly reports and looking at deals, and it’s not gonna take more than a few hours a week.

There’s someone named Holly Williams, she’s been on the podcasts a lot. I interviewed her last week, and she is someone who is a professional passive investor. All she does is passively invest, that’s her job, and she’s been on the podcast a bunch of times. So if you want to figure out what that life is like, you can listen to her podcast. So that was one, and Travis, any thoughts on that?

Travis Watts: No, that’s exactly– yeah, that’s my big message to the world, too. Obviously, I’m a huge advocate for passive income and passive investing; that’s my story. The point is, you and I, Theo, are very fortunate. We’re very grateful, obviously, to have jobs and careers that we genuinely enjoy. We like to be creative and expressive, we both write blogs, we both do the podcasting stuff in various outlets, and that’s amazing, but you also have to remember most people can’t do that. Most people aren’t doing that. Most people are caught in the golden handcuffs, either a 9 to 5 situation or they’ve climbed this corporate ladder so high that they make a really nice salary and there’s really nothing else that they could do, so they’re trapped.

So until you start putting some of your income towards investments, whether it be passive investments or not, it’s hard to branch away and have this balance that we’re talking about, no matter what your approach is. But I think we all get there at one point or another. I think maybe we talked about that before. What’s the average American retirement like? 67 retirement age, or I don’t know; something like this. So you’ve got social security, you’ve got possibly a pension or your 401K. This is passive income at that point. You’re not having to exchange your hours and your labor in exchange for money. So we’re gonna get there somehow, at some point, hopefully. It’s just a matter of if you focus on this stuff earlier in life, you can get there potentially a whole lot faster than perhaps your 60s or your 70s.

Theo Hicks: Oh yeah, exactly, and there’s all those examples if you can invest $1 every day or whatever, for 20 years, you’re a gazillionaire, or something like that. So I 100% agree.

The other one, I’ve gotten this from– I do eight interviews every single week with people, and every single person obviously works — most of them, probably nine out of ten people were not born into a real estate family, and just were raised in it from birth. For example, I talked to someone last week, – he is a physical therapist, that was his full-time job, and he was doing some form of physical therapy that was very flexible. I think he go to people’s houses or something, and so it was very flexible, and then he got a promotion and he was a corporate physical therapist, and so he was traveling everywhere, he was working 60, 70, 80 hours a week, and during this job is when he had gotten in real estate, and he’s making six figures… And he asked himself, “Okay, well, I can continue to grind this 80 hour a week job, not be home with my wife, and make a lot of money, or I can go back to my old job, have more flexibility, so that in between the clients or at the beginning or at the end of the day I can work on my real estate business, so that I can get to the point where I can have my own physical therapy company” or whatever he wanted to do. But the point is, you don’t have to just once you catch the real estate bug, quit your job, and just be like “Well, I’m done”, without having an option. So one option would be to get a more flexible job, so that you can focus on pursuing your dreams and aspirations so that you can quickly get to this point where you’ve reached enough and then can transition into something else.

It’s funny, because I’ll talk to one person and then someone else who proves what the guy said to be true, and this guy had a job and he got into real estate, he completely neglected his job for real estate and got fired a few months later, and then it ended up working out for him. But if he would have gotten a more flexible job, he could have kept that job and then scale even faster, because he’s used that income to grow his active or passive investing business.

Travis Watts: Yep, exactly. Also, I was introduced to this video maybe a year ago. I came across it on YouTube, and unfortunately, this is on the fly right now, I can’t remember what the guy’s name is, but if you type in, I think, “retire at 36” or something like that, “retired at 36”, there’s this guy who had a passion for boats and sailing; that was really his life purpose. It was his hobby, it was his everything. Well, he was a consultant, if I remember right. An IT type consultant, made really good money, worked full time, grinded it out, up until 36. Ended up just buying this sailboat and just living out on the boat and in the Caribbean. He “retired” at 36 because– and he’s the one that introduced me to this concept of enough. He said that’s the hardest thing to do is pinpoint that number, “This number would be enough for me” and then take action when you hit it… Because that’s the scariest part, is taking the leap and saying, “God, I hope this is enough. I hope I’m right.” But it was for him, and this guy’s, who knows, in his 50s now or something, but it’s an amazing story just to hear about this guy’s adventures in life, and with his wife, and all the memories and moments that they’ve had, because he could identify that. His alternative was just more and more and more and more money, but then that would have kept longer and longer and longer away from sailing, and what if he had passed away or came with a debilitating disease or something? You never know, right? Life is short. So yeah, something to think about.

Theo Hicks: Yeah, that story just brought up another thought in my mind, which is why this topic is even more important the younger you are, because enough is gonna get bigger and bigger and bigger the older you get and the bigger your lifestyle gets. We also talked about this last week, about the three main areas of life, and the bigger your house is, the more expensive your car is, the more you’re used to these things, when you’re sitting there saying, “What’s enough? Well, I want to have a BMW and I want to have a million-dollar mansion and I want this,” which is obviously fine, but that enough number is gonna be way higher than if you just graduate from college and you’re in an apartment like, “I really just want a three-bedroom house and it’d be nice to have a car and to be able to go out to a restaurant once a week”, and then that could be your number and that’s what you can start working towards. Obviously, it might not be exactly that. It might grow a little bit, but you’d be in a lot better situation if you started thinking about these things earlier. It’s easier the earlier you do it, for that exact reason.

Travis Watts: Yeah, that’s a great point, and I know that we did talk about that previously. But again, for those that may not have heard the episode, as far as the things like talking about a BMW or a ten-bedroom house, or this, that and the other, you’ve really got to ask yourself, “Why are you doing that?” Is it because you genuinely, wholeheartedly love BMWs and you’re passionate and you’re a car fanatic, that’s your hobby and interest and everything in life to you, and it brings so much joy? Or is it because you’re keeping up with the Joneses? Or is it because you think, “Well, society expects this of me. I’m a dentist or a doctor or a realtor. I’ve gotta drive this really fancy car. What will people think of me if I don’t?” So you’ve got to really understand this takes a lot of soul searching and looking deep, but at the end of the day, it’s probably the latter in most cases for most people… And nothing wrong with those vehicles. I’ve owned nice vehicles, like we talked about before. I chose to buy them pre-owned and I don’t think I’ve ever spent more than 13 grand on a vehicle, but I have owned luxury vehicles. So there’s ways to go about it, but it’s to recognize that you’re doing it for yourself, and not trying to impress other people. So good point, though.

Theo Hicks: And then the last thing I had on here was — probably the most common transition that I see from people I’ve spoken with, what they’ll do is they’ll have this business, own this big business, maybe they’re fix and flippers or whatever, and they’ve gotten to the point where “I’ve got enough” or “I’m ready to have more time freedom”. So what they’ll do is rather than just sell portions of it and transition over to something else, they will completely automate the company, hire a COO… I was talking to one guy, he said he spends a few hours a month on his business that he used to work 100 hours a week on. And then he can take that money that he’s making and obviously grow that business, but also passively invest in other things. But then from there, he can just do really whatever it is he wants to do, and for this particular person, he started a mastermind group. So he’s still passionate about real estate, he just didn’t really want to do the day to day stuff anymore, and so he started a mastermind group and he was teaching other people how to do what he’s doing. So automating your business is another way to slowly get yourself out of it once you’ve hit that enough number.

And then I just wanted to mention one more thing, because we were talking earlier about pensions and how once you retire, it’s not like you’re just going to do nothing. My dad, for example, he retired, and he is a bus driver because he loves talking to people, and so every morning he will — not now, but before COVID, every morning at 6 am, he’d go to the bus shop where the buses are, and all the retired bus drivers are, and they just talk about whatever for two hours, and he really enjoys doing that. So it could be something as simple as “I like talking to people, so I’m gonna do a part-time job where I’m doing something as simple as driving a bus or being a cashier where I get to hang out with people all the time.” I thought that was really interesting.

Travis Watts: Absolutely. I know we’re getting towards the end, but I do want to share this one thought that you just made me think of it. I know we’re both Tim Ferriss fans. I forget which book, 4-Hour Workweek or one of them, but he’s sharing this story of the New Yorker business guy that goes down to Mexico on a fishing trip, and this guy takes him out on the boat for a few hours, comes back, and he says, “Alright, thanks. That was great. It was amazing. Do you have more customers today?” He said, “No, I only do the one trip a day and get some fish for my family and do this.” He says, “Well, why don’t you do more? Why don’t you do five trips a day? You’ve got plenty of time to do it,” and he’s talking about, “Well, I like to come home, take a nap, visit with my wife, play with my kids in the evenings, have some tequila or whatever, and then play music with my friends, and that’s my life.”

And he goes, the New Yorker, “Well, can you imagine though, what if you did more of these trips, made more money, you could buy two boats, then you could hire employees to run those boats, and then you could have a whole fleet of ships, and then when that gets successful, you bounce out of the business, then you could headquarter in the States, and then you could run this big operation, and then you could franchise it…” And then the guy keeps asking, “And then what? And then what? And then what would I do? And then what would be after that?”, and he goes, “And then, you can retire and come down here and have a quality life and spend time with your family and your friends and play money.” It’s like, the guy already had all that. He already had the quality of life. That’s one more example of having enough. This guy already had that. So something to think about, just an awareness article in general.

Theo Hicks: Oh yeah, that’s a perfect example of someone who’s just starting out and just getting a few rental properties or passively investing in a few deals, and then just using that income, and then essentially you don’t need to, as you mentioned, franchise. That’s a perfect story to definitely end with. So is there anything else you want to mention before we sign off?

Travis Watts: I guess, for anyone listening, just think about this question – are your goals and your aspirations more set around a quality of life, or having quantity, meaning money and numbers? I was guilty of this early on when I would set goals, it was always money goals. One of my first goals – I want to be a millionaire; I want to have $10,000 a month passive income. But when you dig a lot deeper, it’s what do you really want out of life? Who cares about the money aspect? What if that wasn’t the factor, how do you want to live your life? So that’s really what the question is and that’s how I end the blog, on that note.

Theo Hicks: Perfect. Let’s end the episode on that note as well. So thanks, Travis, again for joining me for the Actively Passive Investing Show. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

Travis Watts: See ya.

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