JF2200: The Truth About Financial Freedom & Retirement | Actively Passive Investing Show With Theo Hicks & Travis Watts
Today Theo and Travis will be sharing the truth behind what financial freedom and retirement is like, and how many successful individuals still “work”. Most of us need a purpose or mission to feel fulfilled and happy. The idea of sitting on a beach every day and sipping your best cocktail sounds great but will get old very fast.
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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Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks, and I’m back with Travis for the Actively Passive Investing Show. Travis, how are you doing today?
Travis Watts: Yo! Doing great man.
Theo Hicks: Well, thanks for joining us again and looking forward to our conversation. So today, as usual, we’re going to be diving deeper into one of Travis’ blog posts that he wrote that are geared towards passive investors who are ultimately wanting to become full-time active passive investors, hence the name of the show. And the blog post today is entitled, Financial Freedom Doesn’t Mean Stop Working. So we’re going to talk about what financial freedom actually means, what it looks like on the other end, and then some of the things you can start doing right away before you get to that side to prepare yourself. But before we get into the details of the blog post, Travis, do you wanna, as usual, let us know why it is you decided to write this particular blog post?
Theo Hicks: Yeah. So this blog was actually inspired by one that we covered a couple weeks ago, which was called How Much is Enough? Essentially, how much is enough to retire, how to figure that out and that kind of stuff. So a lot of digging deep and soul searching, but it’s very individual. But this blog really piggybacks that one. So now we take it from a new angle, which is, okay, so you’ve gotten to the point of, let’s say, early retirement or retirement, in general. Does that have to mean that you don’t work anymore? What happens when you retire early and you’re in your 30s or 40s? Does that mean that it’s time to go move into that retirement community and start playing pickleball? In most cases, not. So that’s what inspired me to write this one. And yeah, looking forward to it. I think this one’s a fun topic.
Theo Hicks: Yeah. I loved reading this, and it reminded me of when I first became interested in real estate and you would read the blog post or listen to the podcasts, they would talk about the goal is to ultimately retire, and then you even have it in this blog posts, hang out on the beach and drink piña coladas or whatever. And at the time, this sounded amazing. This would be a great life – every morning, waking up and being drunk all day. I don’t know what the exact plan is. But you start to mature a little bit, and actually think about what is it that I enjoy doing right now and would I truly enjoy doing the exact same thing over and over again, every single day – going to the beach, pina colada, and not, as you mentioned, doing some of the things that you’re going to mention in this blog post. So I definitely fell into this early on, for sure. I think I’m slowly getting out of it, and your blog post definitely has solidified some of those things in my mind. So with that being said, let’s get to the blog post. I’ll let you lead the way.
Travis Watts: Sure. The idea here is that we all have a lot of preconceived ideas about what retirement is, what that means. And to your point, a lot of people in the very beginning of this whole search and journey and thinking about retiring early, that’s what comes to a lot of people’s mind is “I’ll just be on a beach, kicking back and really not doing anything”, but the fact is anyone that’s tried this… If you’ve gone up to an all-inclusive resort– I remember being in Cancun and by day four of piña coladas on the beach, I’m about ready to go home. I’m about ready to puke, quite frankly. So maybe you could hold out a little longer than I did, but inevitably, I think that we all want to be contributing in some form or fashion. So sometimes, I think that gets disguised as work.
Travis Watts: So I point out how many successful individuals that are far beyond what they need financially to retire, but why is it that they keep “working”? Well, it’s because they have a mission; they have a purpose. They have the ability to switch from trading their time for money like I used to do. I used to be in an oilfield gig that I really didn’t like, I wasn’t passionate about, I didn’t enjoy it. So really, all I was doing was trading my time for money, and that was a very sad existence. So as I built up the financial independence to be able to say, “Hey, I don’t need to be doing this anymore, but I still want to work. I’m still young,” I was able to pivot and go try out some new things. It’s been a soul searching journey. I worked for a brokerage firm right off the bat to learn stocks, bonds and mutual funds. I could care less what the salary was or if there even was a salary. That’s just what I wanted to learn at that very moment in my life, believe it or not; that’s what I was passionate about. And as that passion wore off and I realized how that industry works, I pivoted back to real estate and sharing my experiences and trying to help other people, which led to working with Joe and Ashcroft and the team there. So the point is, that, to me, is really what financial independence is all about. It’s having the option to work, but not the obligation to work. I think I put that in the blog. So that’s the whole basis behind what this is all about.
Theo Hicks: [unintelligible [00:07:59].04] intro spiel I mentioned that some of the things in this blog post are going to help you right away, and other ones will help you afterwards. But then you mentioned something that I really liked about this, which is the difference between the option to work and then being obligated to work. And then again, you talked about what work actually means, but I’m gonna keep using the word work. I don’t want to keep saying every single time exactly what you mean by work – but having the option to do something, as opposed to being forced to do something. You mentioned that you can start introducing this before you retire. You mentioned that you wanted to learn a certain skill that would help you to do what you’re doing now, and that was working for that brokerage and, of course, you got paid in return for your time, but you weren’t necessarily approaching it as “I’m just going to do it for eight hours or whatever per day and then get paid, and then do something completely different”. You picked a job that was part of your larger plan, which I think is something that people can do right away.
So if you want to ultimately become a full-time passive investor, then ask yourself, what are some of the skill sets that you’re going to need now that’s going to make you a better passive investor? So you talked about how you learned about other types of passive investments. It’s gonna make sense to know about whatever type of investment you plan on investing in, so apartments… So why don’t you find a job now that allows you to gain knowledge on that while you’re still obligated to work, get the information, and then while you’re working, while you’re spending the majority of your time at work, you’re able to move towards that goal faster than if you had to do some non-related job, and then do that all after work? Now obviously, I’m not saying that quit your job and get into real estate, but this is more for people who are earlier on in their careers and aren’t necessarily happy in what they’re doing, and as you mentioned in the beginning, they hate what they do for work. Well, then maybe rather than just quitting and going in real estate full time, try to figure out a way to transition into a job now that will help you reach your long-term goals.
Travis Watts: Yeah, and there’s usually two types of people. There’s those that love their career and they’re passionate about it, and then there’s those that really despise what they do. I was in the latter part of that initially, and then the passionate side later. But the point would be this – if nothing else, for either side of that, just get started. Again, to the whole theme of this blog about not having to quit work – it doesn’t have to be so extreme like I work a W2 job today and tomorrow, I quit and go full-time real estate. Just start. Just have a rental property. REITs on the stock market; you can get in with $10.
I helped my nephew… I don’t know if we talked about this on the podcast, but he’s 18 and obviously, he doesn’t have a ton of money. But I opened a brokerage account for him for graduation, put a few hundred bucks in there and we went through finding some high yield dividend paying REITs and stocks and things like that, and I was helping paint the picture of passive investing. So he’s already on the right road. He gets the concept, the philosophy, why this would be important, and he’s got a starting entry point at 18 years old. All he’s got to do is just pour more money towards that; not a ton, but just some, as you can, here and there, and while he’s in his 30s, he’ll have quite a portfolio built up. Hopefully, he sustains that and that becomes part of his whole thing.
But in either case, I was on the phone the other day, I do these free Q&A calls with folks to network, and there was a lady, 19 years old, California, and she tells me, “Six months ago, I just had this epiphany, just this mind blowing thing that real estate is my calling”, and she’s getting all enthusiastic on the phone – beautiful call; it was amazing – “but I just want to start building passive income streams as early and quickly as I can”, and she’s saving all of her salary, and she’s so dedicated to it, and I think that’s the solution.
So when we talk back to the preconceived ideas that I mentioned, let’s take retirement, for example. When the word retirement — and do this exercise, everybody listening. What comes to mind? Here’s a retiree. Well, what is that? Most people think of someone in their 60s, maybe 70s, did the corporate world thing. Now they’re living on their social security and their pension and whatnot. It’s our grandparents’ idea of retirement. Got my gold watch and my pension and I’m off to the races. But the fact is, you’re so fortunate in today’s world to even have a pension, and even if you have a pension, it doesn’t mean it’s going to be there in 10, 15 years. Most of them are going bankrupt or already bust today. It’s a horrible thing that’s happening.
In fact, I want to read this real quick. Before our call, I got on the Social Security Administration, ssa.gov. I was just reading this. This is right from the government. I won’t read this whole thing, because it’s long, but I’ll read this first sentence or two. It says, “The concepts of solvency, sustainability and budget impact are common in discussions of Social Security, but they’re not well understood. Currently, the Social Security Board of Trustees projects program costs to rise by 2035 so that taxes will be enough to pay for only 75% of scheduled benefits.” They’re telling you right there – your taxes are going up, and we’re gonna pay you less in the entitlement. So I guess my point being, you’ve gotta rely on yourself at the end of the day. When I started doing research like this and understanding 401Ks and retirement plans, Social Security, I just got so disgusted with the concept that I thought I’m going to put things in my control and I’m going to take action sooner than later, and I’m not going to hope that one day I wake up, I’m 65, and that all this stuff is just here to bail me out… Because clearly, all of these programs are failing and going bankrupt [unintelligible [00:14:07].01] what we’re talking about. So I switched my mentality. This is important; I don’t think this is in the blog.
Most people think of investing in terms of capital gains, in terms of equity, in terms of fix and flip a house, in terms of buying a stock at 10 and hope it goes to 15 and sell. That’s how most people associate investing. But I flipped that into passive income; cash flow, specifically. Living on cash flow and creating multiple income streams early in life to where you’re actually putting yourself in the situation that statistically 60 and 70-year-olds are in, in retirement a whole lot sooner than that, if you dedicate to this concept and philosophy.
So in that– hence, again, this blog and this topic… What happens when now you’ve done something like that and put in the work and now you’re in your late 30s or 40s or 50s and you have a sustainable income? You have more income passively than you have lifestyle expenses. What do you do? This is in the blog. I’m just pointing out how many people in my network are financially independent, financially free, whatever you want to call it, they have the time freedom, but they continue doing projects. They’re writing books, they’re launching companies, they’re launching charities, they’re still being productive. Use the celebrity examples, like Bill Gates and his charity foundation. That guy works his butt off. He’s not doing it for money. It’s a mission and a purpose, and I think that’s the whole concept that I’m passionate about helping people reach those levels, so that they can do essentially their highest and best work.
Theo Hicks: Yeah. So a few follow-ups on that. So we talked about your cousin and that reminded me of other preconceived notions that people might have about passive investing, is that it’s not extravagant. You gave him a brokerage account and he’s gonna be as a computer doing things for an hour, a month… I’m not exactly sure how that works. But it’s not this super extravagant, epic music playing in the background. I guess technically, you can do that, but… So that’s one thing too, it’s just a consistent grind. You could do things on your computer like buying properties and things like that, but if you’re doing that, extravagant parts are just once in a while, most of it is just the constant grind, which of course, most people listening to this know.
The other thing you said too that I wanted to also mention before we move on to the last part of this blog is, you said that you know a lot of people who are financially independent and that you want to surround yourself with these types of people, talk to them on a consistent basis, so that 1) you can absorb the knowledge that they have, how they were able to become financially independent, but also 2) to get the understanding of what we’re talking about today that what retirement actually means. Is it just doing nothing? It’s continuing to do something that you want to do, which is the last part of the blog post. You gave some examples of what people can do once they are retired. But again, you also gave some examples of things that you’re doing now that anyone can really do now to start to figure out the type of life that they should be living once they retire. So do you want to talk about that, too?
Travis Watts: Yeah. A lot of passive investors, I’ve come to learn, are just simply highly paid professionals doing whatever it is they do, and they’re looking for a place to park capital that’s not going to require their time. Think about being a dentist or a doctor, and then taking two days off a week, Saturday, Sunday, and going and trying to fix and flip houses. You can’t even day trade stocks; it’s the weekend.
So a lot of this act of stuff just doesn’t make sense for certain types of people. So what I outline in the blog and I’ll read it here, just three common examples that I talked to – these folks are in my network and I have these calls weekly – a doctor and or medical professional, an attorney and an engineer. “So when a doctor, an attorney or an engineer reaches financial independence, what they have is an option to”, and here’s the three things I point out – “An early retired doctor might set up a smaller practice, which operates without the pressure of optimizing profits and without dealing with the hassle of insurance companies; one of the biggest headaches in the industry.” So just more of a work-life balance and fulfillment from their work, not being tied to the structure of what that industry is all about. “An early retired attorney might refuse all cases that are based on questionable ethics.” You have just an option to say, ‘I’m not going to do this work. I’m not going to take on stuff like that.’ You can be a lot more picky and choosy with what you do. And then the engineer might continue working. For example, they might contract instead of being a W2. They might go to part-time instead of full time, or they might be compelled to create a new invention or a new software with their newly freed mind. So those are just some things to think about, of what we’re talking about. None of these folks in these examples stopped working, despite their age, but they were able to move on to something that was more fulfilling and brought more joy into their life.
Theo Hicks: Yeah. And then another example, more real estate related, too… If you are someone who wants to transition from active and retire from that and become a passive investor – I’ve talked to a few people recently who were full time active real estate investors, and then they hired someone to oversee that company, and then– well, I’m sure they took some time off, but then once they were ready to get started again – I think you either mentioned this in his blog post or you mentioned it when you were talking – they started some consulting program or mastermind group where they teach other people to replicate what they did.
So they’ll spend an hour to a month on the business they used to work in a 100 hours a week, and then they’ll spend the rest of their time doing their mastermind group, and then the remaining time doing whatever it is they wanted to do. So that’s just another example of someone who’s a real estate investor transitioning into what they can do when they’re not passively investing.
And then the other thing that I really liked about this blog post that you mentioned, the question you want to ask yourself to figure out what you should do once you retire is what you value. We talked about this in a past episode about stuff and that if you value stuff too much, then you’re gonna have a hard time reaching that number, because you’re going to have this luxurious lifestyle that’s going to cost you a lot of money to maintain, and you’re going to need a higher passive income to cover that. So you gave examples in here about things that were high costs but resulted in low happiness, and the things that were lower in cost that resulted in higher happiness. So we talked about how you could upgrade to a Ferrari or a Lamborghini, but would that ultimately make you happier? Maybe once you buy it, and then when you’re driving it once a month or once a week or whatever, or maybe when you’re looking at it when it’s stored in the winter. But it would bring you, as I mentioned, further away from your financial goals, and then your family goals and your travel goals, because of that reason that “Now I need to make that much more money. I need to invest in that many more deals to cover that Ferrari cost.” So you gave other examples of things that resulted in happiness. So I’ll let you talk about what those are.
Travis Watts: When I was a kid, Theo, I remember… Obviously, I think every, at least male child is into cars to an extent.
Theo Hicks: Oh, yeah.
Travis Watts: Well, cars are just cars, I don’t know. But I remember when I first was learning about money and how much things cost, and I would see a Lamborghini or a Ferrari and then ask or research how much those are and then think, “Oh my gosh, that car is $200,000. I can’t even– that’s not even in my world; that’s not in my reality. That’s insane.” And then as you progress through life and one day, you’ve got a couple hundred grand and now you’re thinking, “Well, I could really buy that car. I could really buy that car, cash.” And then you think, “How dumb would that be?” because it’s how much happiness would that give me versus what if I invested it and I got 1,200 bucks a month in cash flow? What could I do with 1,200 bucks for the rest of my life? That kind of stuff. For most people, that’s Social Security benefit right there – $1,200 a month or something crazy, and maybe less. We just read off the ssa.gov; maybe less.
Travis Watts: A couple things that I put in there that have added some tremendous value at a low cost where my wife and I, we went and we backpacked Europe for our honeymoon, and I bought the custom ordered shoes like a Forever Soles; breathable, washable. They collapse down, you can roll them up. You can almost put them in your pocket. They’re amazing shoes. They were like 100 bucks, and I can’t even begin to tell you how much value that added not only to that trip, but every vacation we take – I’m wearing them, and I love them, and they don’t wear down; they’re just phenomenal. Honestly, I think those shoes have given me more value than a Lamborghini would. All things considered. I truly believe that.
The other thing is my wife’s got scoliosis, so her spine’s jacked up a little bit like an S shape. So I bought her an inversion table. We’re always trying to experiment with things that make her life easier and eases the neck tension and the back pain. It’s just a little table. You strap your feet in and turn upside down and it decompresses your spine. I found that thing used for 40 bucks. I don’t know how much they retail for; probably a couple hundred. And I can’t tell you, man – very time she gets on it, she’s so happy and it’s so fulfilling and physically rewarding, and it’s 40 bucks.
So this whole thing is about finding things that bring value happiness into your life, and to our surprise… We used to be on the rat race thing. We used to want bigger, better homes, the fancy cars, “Oh, my clothes are three months old, I need some new ones”, just crazy stuff like that. But as we began to educate and learn and really think how much value is being created out of all that, with the luxuries, hardly any. And what we really value is travel and vacations and spending time with family and these little things – a nice pair of shoes that are comfortable. So just to wrap it up, that’s the whole point, I think, between this post and the last one that we discussed, too.
Theo Hicks: Alright, Travis. Well, I enjoyed this conversation. I think we gave a lot more information on this blog post. So the blog post is called Financial Freedom Doesn’t Mean Stop Working. So make sure you check that out on our blog. Travis, again, thank you for joining me. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.
Travis Watts: Thanks, Theo. Thanks, everyone.
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