In Today's Episode
What You'll Get Out Of Today's Show
- Brad is still doing cross-fit with the family, but is super impressed with Jonathan's “double-unders.” The lesson: it's okay to fail. Jonathan failed many times and now he can do these. Hard work over time and not giving up paid off. “Every day you cast the vote for the person you want to be” – James Clear
- Jonathan's Health Challenge – Discipline is not Self-Control, the challenge helps to build the self-control. Daily challenge. You can follow along or create your own challenge!
- Feedback on Sean's episode from Monday – The Back Door Roth
- Criticism and Critiques: Data for context is helpful! Debt is personal and we can't judge someone for decisions they made a decade ago.
- ROI is important, look at the cost of a degree first.
Resources Mentioned In Today's Conversation
- Health Challenge
- Backdoor Roth IRA with the White Coat Investor
- Real Estate Investing During a Recession Or Financial Crisis With Coach Carson
- Student Loan Planner With Travis Hornsby
If You Want To Support ChooseFI:
- Earn $500+ cashback with the Chase Sapphire Preferred Card
- Share FI by sending a friend “ChooseFI: Your Blueprint to Financial Independence“.
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You're listening to ChooseFI Radio. The blueprint for financial independence lives here. If you're looking to unlock the secrets to financial independence, and early retirement, you're in the right place. Stay tuned, and join a community of like-minded people who are getting off the hamster wheel, and taking control of their lives in the pursuit of financial independence. ChooseFI, your home for financial independence online.
All right. Lots to cover today. This is our mailbag Friday, and the episode we really try to go back and pull in some of the most popular questions from the week, ones that you've sent us to feedback @choosefi.com, or high value questions from the Facebook group. But this is just an opportunity for us to really highlight what's going on in the community, and the questions that the community has related in many cases to the content that we're covering here at ChooseFI. So, to help me with this, I have my c-host, Brad, here with me today. How you doing buddy?
Hey, Jonathan. I am doing quite well. Yeah. I'm actually still recovering here from a family workout this morning. That's definitely been the highlight of our little quarantine here. It's been a really just like an amazing thing. I know we've talked about silver linings, and I've even talked about this specifically, but yeah, it's really cool. Really, at this point, it's like five times a week. My family heads down to our little basement gym, and we do a Zoom CrossFit class. And it's just been this really fun time. But I have to say I'm very jealous, and I'm very impressed because you sent me a video of yourself doing 30 straight double-unders.
And now for anybody who doesn't know what a double under is, it's with a jump rope. And instead of like a normal human being jumping and passing the rope under you one time, you're jumping and passing the rope under twice. And this is extraordinarily difficult. I mean, Jonathan, after I saw the video, I tried to do them. I've been doing CrossFit for almost three years now. And I basically never even try because I'm like, "That is impossible." And you have given me some courage to try, but I did precisely one, which is pretty pathetic, but man, you rocked it. And you started at zero not all that long ago.
Yeah. I got stuck at doing one to two for a month. And there's actually a lot here, I announced it on the show ... And for the record for our audience, I think they didn't understand this, three years ago, I told you that I could do an undisclosed number of pull ups. I disclosed it at the time, I won't say it now, but I disclosed I could do pull ups. And I sent you a video at that point of me doing these offset pull-ups. You were not impressed at the form. Is that accurate?
Yeah, I think that might be an understatement. These are like-
They were cute.
... Like quarter pull-ups. They were cute quarter pull-ups.
Nice try. But-
But these were legit double-unders.
Legit double-unders. The form was there. The bar had been met.
And my high water mark right now is actually 50, I'll have you know. So, in CrossFit, what I've seen, it seems to be 60 is the number. When you do 60, that seems to be the number they incorporate. I'm getting there. I'm really close, but the double under is the perfect example of something that you can ... There's a lesson here. I want to spend some time here. It's okay to fail, and try again, and try again, and try again. You want to know my secret? That is what I did. I went out every single day, multiple times a day, and I failed over and over and over again until I could do two in a row like, "Oh, I just did two."
And I mean, the form was horrible. I was doing whatever it took to just make the two happen. And then one time magically, I got three, right? I was getting shin splints for a week there because I would go out there five or six or eight times a day. And there's a lot of trauma when you're doing this, I don't know why my legs were in agony for a period of time.
Well, you're also whipping yourself with the rope, right? I mean, not for nothing, but you get whip marks on your arms and legs.
It was. Yes, absolutely. It's incredibly painful. And then one day about a month in I've just only been on a one to two, one day I got eight. I mean, I got eight. Just the one time I couldn't replicate it. That was it. But for a second there, for a split second, I felt like I was in the zone. It worked, right? And then I was back to one to two for a couple more weeks, but I just kept going back out there. Because I had that taste of, "Oh, this could work." This is not one of those things that when you can't do it, you've broken an arm, you've broken a leg, you just have like a whip mark on your arm. It's not the end of the world. And so, I was like ... It's interesting where I'm doing this health challenge.
We can come back and talk to that a second. I was like, a person that's in really good shape, especially, a person at a CrossFit box who's in excellent shape, you're not exactly surprised to see that they can do 60 double under. So, forget the entire process of being in great shape. Let me just focus on doing 60 double-unders. And if I can do that, probably the getting of that health shape, that's going to take care of itself because the process that you had to get through to nail this very objective definable goal of getting to 60 double-unders will be taken care of, but you don't need to focus on that.
The definable goal of hitting the 60 double-unders, this is concrete. I can focus on it. I can measure incremental improvements, and sure enough, then I got 10. Then I got 11. And occasionally, I would taste this like flow state where I didn't have to think about the rhythm anymore. It's just working. And the confidence that comes with that, like this is an achievable 1% increment goal, but to be able to have evidence of that in your life, and say, "Oh wow, I was bad at this. I failed over and over again. And now I can do it." Like you carry that with you into everything else that you try.
Yeah. Jonathan, there's so many lessons here. You're right. I mean, this clearly isn't about double-unders. It's about a process. It's about improvement. It's about keeping going after failure. It's like you said, it is really a lot of things that James Clear talked about when he came on, right? Like it's an identity thing. You're casting a vote every single time you go out there for the identity of the person that you want to be. Right?
And if you're trying to get healthier and again, we will talk about that in a couple of minutes, but if you're trying to get healthier, and you're saying, "I am a healthy person." And in this case, what does a really fit person do? You're talking about this in a very enclosed space of a CrossFit gym, but 60 double-unders, right? Like what would it take for me to get there? It would take me going out there eight times a day and practicing, and that's what you've done. And the proof is literally on the video. I mean, it's remarkable. And I think this is a much larger lesson for people.
It's like humans crave mastery. And so few of us actually do anything about that. I mean, since we're kids, right? Like in your adult life, how many years can slip by without any type of movement towards mastery in any aspect of your life? I mean, I can tell you for me, I lost decades, and not lost, but there were decades where I was just doing the same thing over and over again at my job. I wasn't learning new skills at my job, or even when I get home, right? Because I was too exhausted, and all the other excuses, but I wasn't trying to get better at anything.
And it's interesting that ... Again, the CrossFit is neither here nor there. It's just, we happen to both be interested in this, but for me, it's become physical things as well. Like I am scared to death of that Assault bike that they have there. I'm sure you obviously know that, you've got one at home. And I don't know if I even told you this, we did splurge, and get one of those bikes for our garage. And this thing is, I mean, how would you describe it? Like a torture device, essentially, right?
Yeah. It's straight out of medieval times.
And I was scared to death of this. And I mean, that's pathetic. Like I go to CrossFit four times a week. I'm in, I think by any measure, pretty darn good shape. And I was scared of this thing. And one of my little quarantine goals was to get to the point where I can do this bike within workouts, and not just be afraid of it, or come up with, "Oh, I'll do the rowing machine." Or, "Oh, I'll run." Or whatever it is. And I'm at that point now, Jonathan. I've done the bike multiple times in the last week or two within a workout. And I simply would not have been able to do that mentally, not physically, but mentally, even four months ago. So, it's pretty cool.
Yeah. I like that. Like, this is a mental game, a couple weeks ago I referenced, David Goggins, and he really inspired me. David Goggins whispered in my ear, "Be somebody." But I had this idea, "What if you could emerge from COVID a savage?" Right? That you could take this thing, get into a very intentional place, and just master this, build some mental fortitude. And the example I gave probably a month ago in that clip was, Goggins is talking with this individual he's working with, and he gets the guy to do 100 pull-ups, right? And the guy can only do five, or six. And he keeps going for the other attempts. So, I thought, what would that look like for me in the context of both this health challenge that I want to go through, but also these double-unders, this very definable objective that I have to be able to do these 60 double-unders?
And you can only do one or two at a time. There's a lot of space between one, or two, and 60. I was like, "Well, what would it look like for me on a given day to go out and do 100 double-unders?" No matter how many attempts it took. If I can only do one or two at a time, all right, then that's 50 sets, right? You get 50 sets, you're going to get to 100. If you can do that, you're not walking away. You're not leaving the gym until you've done your one or two times 50, you're getting to 100.
So, I remember when I stumbled out of there that day, I had done 100. I'd done 100 double-unders. And you know what? You're so tired that the form isn't there, you're just stumbling your way through, and you're barely ... But then when you come back fresh, you've actually built this muscle memory, which makes you not have to think about it quite as much like these small movements, your brain has actually taken off of your active process, and active thought process, and now your subconscious handles it.
And that to me, there's a stoicism lesson in there as well. Like what if we can get our stupid lizard brain out of the way, right? To focus on our intentions instead of maybe how we feel at any particular moment. And so, now, if you translate this into this health challenge, I don't know what it is, but since the birth of my daughter last August, straight through winter, and then now going into COVID, I've just let myself go, man, like in a really, really bad way. I look back at it, because I track my weight, just automatically when I step on a scale, it uploads to ... I think I have a [inaudible 00:10:26] scale maybe, it uploads to some health app.
And I can just see that trend pattern from like last September to like now just up into the right. And so, what I want to see my net worth do, unfortunately, it's what my weight is doing. So, I look back and I'm like, "You got to reel this in, man. This trend pattern is going to a really dangerous place. You got to get in front of this now." And I had that wake up call. And for me, I like these sprints. I think life, and health, and fitness is a marathon. But for me, I have always benefited from a radical change, a radical pivot.
And I like to think that after you get done with that transformation, you can maintain it at some degree, it's a different skillset. But for me, I have always said this, I have lots of discipline, but no self-control. And so, for periods of time in my life, I have to make something Uber important. Right? So, if it's a frugality challenge, let's do a no spin month. Let's do a challenge here. If it's a weight loss transformation, or health transformation, let's go all in on it, right? I mean, I need to be all consumed, focus on this for this period. And I need to get those results. I need to get those results quickly to keep myself engaged, and stimulated by it. Otherwise, there's just too many distractions.
Life gets in the way. So, I like had this, "All right, you're going to emerge from COVID a savage." You're going to build a lifestyle over the next six months that will allow you to transform your health. What would that actually look like? And how can you keep it mentally stimulating? Like to the point where every day you wake up and you realize, "All right, I'm in the game." Right? I'm in the game, it's a priority for me. That's actually what I'm building. And I'm documenting that on our YouTube channel. I've released my day one, which sets the frame of, but now I'm a couple of weeks in, and I'm looking forward to doing the update. One of which will include these double-unders.
But also like the weight's coming off, man. The water weight's getting shed, my energy levels are higher. My sweet tooth has been cut. And I can't believe how many popsicles and pizza I was consuming over the last month. And it's cool to see all these things coming together at the same time. It's like imagine being the hero of your own story, and putting that together over like a definable 12-week period. Who are you going to be on the other side of this? Whoever you want.
Yeah. And that identity is huge. I mean, don't discount that, right? I mean, we're talking about physical things, but you guys out there in the audience, just try something new, try to learn some new skill. Right? There's so many different things you can do that are difficult. Right? Like don't always just go through life just doing the easy thing. I think that's what a lot of us in the Fi community we're not doing the easy things. We're doing something that is ... Though I think it's ridiculous, it's counter-cultural right. That we're saving our money. We're thinking about financial independence.
If you can do that, you can do anything. Right? I mean, just do something, learn a new language, like try to start running, I don't know, do a Rubik's cube. I'm thinking of something like my daughter, Anna, has done in class. Like she didn't know how to do Rubik's cube, and she can now solve it in well under a minute. And like, that's just like a cool thing, right? Like I've never solved the Rubik's cube, but there are all these things you can do that you can just work on.
And I think that's pretty cool, right? Like just to put your ego aside and just be bad at something for a while. Right? Be bad until you're good. And what does it take? It just takes grit. It takes perseverance. It takes hard work. And there's a lot to be said for them.
And Brad, I'm going to add one little bit on this. I'm actually pushing these out to our YouTube channel. And one of my goals for this was how to do this on a budget. One of the things I'm actually using, we talked about this in the past. You and Laura just released your top 50 meals. And everybody, you can find that @choosefi.com/meals, but I'm actually using your meals as a part of my meal planning for this transformation. So, I think I'm going to include like some of those pictures, some of those recipes on the YouTube channel, like on a document. I will add my rating on your rating.
Like, all right, Barrett said this was a 50 out of 50, giving it a 45 on this one, might add a little more salt, something like that. Anyways, I'm incorporating the Barrett top 50 into my meals for this challenge as well. So, I know there's a whole page around this and for whatever reason, even after we announced it last week, someone messaged us to ask where they could find the meals. I want to be very explicit with this Brad. Where can they find the recipes?
Yeah. So, Laura's recipes are all getting added to the site. And there's a bunch of them up there right now, and more being added every day. But it's @choosefi.com/meals.
All right. And I believe those are available as a digital download. Someone messaged me to say that they tried to access the meals through the Paprika app, and that they weren't showing up in there. I think that is because ChooseFI is not a recipe website. We are a blog that now has a couple of recipes on there. I'm going to look into that. That's a tech thing. You have to use like a plugin, have to have everything formatted a certain way for those recipe scrapers to be able to pick it up. Totally open to it though.
We'll look into it over the next couple of weeks. So, if you're listening to this in the future, it probably will work. I don't think it's working right now though. So, goals, right? Hashtag goals. There's always room for improvement. So, mailbag Friday, listener questions, listener feedback. MK, what do you got for us?
Yeah, well, we had a really great episode with Sean Mullaney this past Monday, going over tax loss harvesting, which is a super exciting topic. I mean, Jason, and I have done tax loss harvesting before, so we were like, "Oh yeah, yeah. Okay." No, but it's really exciting. The first time you hear about it where you're like, "Oh, my losses could be a benefit." So, as a reminder to everybody, we're actually doing a Facebook live with Sean, tomorrow, May 16th at 3:00 PM Eastern. So, you can head to choosedi.com/live to get the details, or just head over to our Facebook page around 3:00 PM Eastern on Saturday, which is tomorrow.
So, definitely check that out. You'll get a chance to ask direct questions to Sean, which is super helpful. And then we also had some really great feedback from that episode too, from Dusty. So, Dusty wrote in and said, "Hey guys, love your show. Especially, through the recent pivots. One minor but important correction from episode 205, which was Monday's episode with Sean Mullaney, the limits express for Roth IRA contributions you discussed are correct. However, for people with a taxable income over the Roth IRA contribution limits phased out from 124,000 to 136,000 for single, and from 196,000 to 206,000 for married.
However, as the White Coat Investor and physician on FIRE have covered extensively individuals and couples making over the Roth IRA contribution limits can still contribute to the Roth IRA via the backdoor Roth." And so, he has a great link to White Coat Investor, Dr. Jim Dahle's information on the backdoor Roth IRA tutorial. So, Dusty goes on to write, "As you discussed, some people are in an income range where they're unable to take a deduction for traditional IRA contributions. So, they're already in essence, contributing after tax money into a traditional IRA. Doing a backdoor Roth ensures that money is only taxed once, and allows that those of a higher income, get the benefits of the Roth IRA, most importantly, the tax free growth at essentially no penalty. Thanks for all you do. And keep up the great work."
Yeah. Now, a couple of extra points that I'll make here. First of all, you did mention a link. So, our audience, we're going back to numbering. You have asked us for numbers. We appreciate that you're asking, and it does make it easier with the show notes. So, this as you're listening, this is episode 207. And for any episode that you're listening to, if you want to access the show notes, just find the number of the episode. So, in this case, 207, and just in your browser of choice type in choosefi.com/207, and it will take you to the show notes to this page. And obviously, any links that we mentioned will be there. So, if you want more information on that backdoor Roth. Well, something worth pointing out here in that the backdoor Roth as Dusty is referencing, it's a loophole that you thought would have been closed with the last big tax overhaul that we had, but it wasn't, which basically means it's fair game.
Due to this loophole, you're going to be able to contribute to a Roth IRA via a slightly more convoluted method, even if you're over those income limits. And Brad, and I don't know if you're going to correct me on this, but I believe when I was checking with an accountant on this in the past, one additional thing they added is well, with a Roth IRA, you can contribute to your Roth IRA all the way up until the tax filing deadline. So, normal years would be April, with a backdoor Roth, due to the paperwork needing to be filed, I think that does need to actually be done in the calendar year. So, your mileage may vary on that way. Check with your accountant. It is slightly more complicated, but just keep that in consideration.
A lot of people have asked me in a world without travel, am I changing my travel rewards strategy? And the answer honestly is yes, I am. This doesn't mean I'm not planning for future travel in 2021, or beyond because clearly that will happen. But in the short-term, I'm actually thinking in terms of more flexibility, and even cash back. And that's where our favorite travel rewards credit card comes in, the Chase Sapphire Preferred. We long talked about this as the best travel rewards card, because these points transfer to a dozen plus different airlines and hotels. And that's still true. You can use these points to book through the Chase travel portal, and that's true.
But one thing that we really haven't talked about is you can turn these points into cash back. So, again, for me, flexibility is the key. I'm storing these points as Chase ultimate rewards points that I hope to use for future travel. But it's cool having that extra emergency fund there that I can turn into cash at a moment's notice. And for more information, check out choosefi.com/csp. That's CSP for Chase Sapphire Preferred. Are you a teacher, an administrator, a policy maker, and you're looking to implement a personal finance curriculum into your school system this upcoming year?
I wanted to let you know that the ChooseFI International Foundation has created a free K through 12 financial literacy curriculum, and it is one, completely free, and it's available. Please just take a look at it this week. If it's something that you think that you could use, if it's something that your school system could use, take a look at it, and share it with someone else. We want you to be aware that it's there, and comfortable using it. And whether or not you take a look at it, and you use it piecemeal because there's a lesson in there that you need for something that you're trying to accomplish, or you're actually looking to implement an entire curriculum in, this would be the perfect choice. For more information go to choosefi.com/K-12.
Brad, going back to those lives. I know that we're talking about the one coming up this weekend with Sean. We're really doubling down on these live events to be able to include our audience and our community in these conversations.
Yeah. There've been a whole bunch of them, and we continue to keep on rolling with these. They've been really fantastic. We've done at least a dozen of them so far. And if you are looking for upcoming events, or if you're wanting to watch past events, they certainly still exist. So, just had to choosefi.com/live, and you'll see the entire slate of all the past ones that we've done. And anything upcoming, you can actually just reserve your spot, and we'll send you out a reminder. And, yeah, we're really trying to put a lot of focus on this because people have questions, right?
And this is the best way in realtime to ask true subject matter experts the questions that are on your mind. And yeah, I know we had a three plus hour one with Paul Merriman in the past week or so. We've had Sean Mullaney, the Fi tax guy on, and just a whole bunch of people who again are just real experts in their field. So, yeah, we're really excited about this.
And Brad, one of the things that we try to do, especially, with our Friday shows is bring in corrections, criticisms, and feedback. Especially, when it will help our audience out going forward. And so, we got some feedback on the episode we did last week with Chad regarding the real estate percentages. And this feedback I wanted to mention only because the data point that was mentioned, it was a pretty dramatic data point. And we want to make sure we're providing accurate information to real estate investors out there.
Yeah. Agreed. And I mean, I fell prey to probably the cardinal sin of statistics, which is there needs to be context. So, Reginald wrote in this incredible email saying, "Basically, I was concerned you mistakenly misrepresented the data regarding the April, 2020 renters that failed to pay rent in your recent episode with Chad Carson." And he said recently that Paula Pant mentioned on her Afford Anything podcast this similar data point that roughly 30 plus percent of American renters did not pay rent from April 1st to April 5th. And now in my mind's eye.
And as Reginald put here saying, "I'm concerned that some of Brad's phrasing, and diction unintentionally misrepresent this as a very large problem." And to my eyes, yes, clearly this sounded like a cataclysmic issue, right? Like 30 plus percent of people are not paying. But what he's saying is that pre-COVID-19 in this time period, that it's normally around 20%. So, maybe that's over the course of the month, I don't imagine the 20% ... And again, I don't know this.
So, I'm just speaking off the top of my head, but I don't imagine 20% of people are not paying simply, but maybe it's during this initial timeframe of the first five days of the month, or regardless, even putting that aside my conjecture, the actual number is 20. So, the increase from 20 to 30% in a economic catastrophe is simply not that significant. And again, I fell prey to the cardinal sin. There needs to be context, right? You need to compare it. Numbers in a vacuum mean nothing. There has to be context. So, Reginald, thank you. This is a brilliant email and I really appreciate it.
Yeah, I love the idea of just when we're addressing feedback from past episodes, just stacking them together. And we got one, it was slightly more critical, but I mean, I think relatively fair talking about our student loan episode with Travis. Yeah, I'll just go ahead and read it. So, this is from Anna says, "There was an idiotic recent episode on student loans." I don't know if I agree with that. Let's read the feedback. "Typically, love the podcast, but this Monday student loan episode was idiotic and irresponsible.
I simply cannot fathom how a show that purports the dream of being financially independent within 10 years would simultaneously encourage listeners to make minimum payments on their loans, and strive for the loan forgiveness payment if the income is low. The podcast guests believes it's "smart" to make small loan payments, and use all of that leftover money to invest in the market."
"Sure. If this country was so brilliant in math, we wouldn't have a national student loan debt problem of $1.6 trillion. Brad, and Jonathon typically do a great job, but you got to get your head out of the sand on this one, paying down debt aggressively is a major pillar in becoming financially independent. For context, my husband and I are in our mid 30s with a net worth in the seven digits, three young kids, and no debt. We haven't inherited money, just earned good income, and saved. I've been home with our kids since the eldest was born. We were definitely blessed with fiscally responsible parents who saved for educations, and allowed us to get through college without loans."
"We've taken it from there, and paid cash for cars, paid off our hopefully forever home in under five years. Tell the truth, guys, debt is not smart." You actually love it. This is probably my favorite one star review I've ever gotten on iTunes. I don't normally take the time to read one star reviews on the podcast because you're just going to be mean like, okay, whatever. But this one, this is legitimate feedback, and I am totally open to criticism.
Now, I'm not saying I totally agree, but I think my strong bias is this position you take out the loans, you should pay them down, or don't take out the loans to begin with. Having said that, Brad, I would like to add my opinion onto this and let you just generally react to it, and see where you land. So, if you'll let me just continue talking for another 30 seconds or so here. I see you.
I'm used to it at this point.
All right. Here's my take on this.
Take five minutes.
Yeah. Right. I personally paid down my debt super aggressively. And I did not have a small amount. I had $168,000 in student loans. That is my strong bias to pay down debt. Having said that, I have a friend, I have a buddy ... Nobody teaches you this stuff before you take it out. They'll sign you a blank check to go to school. Like whatever you need, we'll loan it to you. Get the degree at any cost with no ROI calculation, no financial real planning to tell you what your outlook is to pay it off. It's negligence to give the students the ability to hang themselves financially with this debt.
That's a front end. I hate that. I loathe that. We need to change that. We've got to stop it there. Having said that, you don't get to like replay the last 10 years, the choices that you made 10 years ago. So, if you're waking up now, and you have 100,000 in student loan debt, and your job that you got this degree for pays 30 or 40, I'm sorry, I'm going to look at all my options. And I don't care what your opinion is over here about whether or not you think I should do it or not. Like this is an option. It's there. It's the law, it's legal. This could be a great plan for you. And there's a calculation there.
So, I would basically say, if you're like a one to one ratio, your income is this, your debt is this. And they're about one to one. Then you should crush that debt. If you just made some financial mistakes when you were a young kid, and now you're waking up, and your debt to income ratio, and your public loans is twice what you make, look at all the options available, and make the choice that best serves you. And it's not black or white, but there should be a nuance here. And wouldn't it be nice if there was a financial planner that could look at it through the lens of what is your objective to get to financial independence?
And then what are your options available? And pick the most strategic option. For the vast majority of people, I think it's going to be just to pay off your debt aggressively. I would encourage you to do that. But if you feel overwhelmed right now, if you feel stuck, like get a consult from someone who understands it. And Travis knows the math, he gets the numbers. And you're not a bad person because you go and get a consult, and find out how to best plan with the options that are available to you.
Yeah. I agree. Completely. And yeah, I mean, I did enjoy this review. I mean, she certainly took a stand. And it's pretty clear where she comes down in that, but the beautiful part about personal finance is that it's personal, right? And Jonathan, you paid down $168,000 of student loan debt in just a few short years. You believe that debt is not smart. You believe that for your family, you didn't want debt. And certainly nobody, not least the two of us are advocating for debt, right? Like it's such like a misdirection, like nobody's advocating for debt.
To your point though, you have to see reality as it is. Right? Many of these people have taken out student loans before they came to financial information that have made them see the world differently. And okay, you can't undo decisions that have already been made. So, what you have to do is you have to look at the rules of the game, and you have to determine what is your best decision moving forward? I think that's pretty much in every aspect of life. So, you can criticize them for taking out debt. You can even criticize them for taking an option that you don't agree with morally, or intellectually, or whatever you want to say, but that person needs to make the best decision for them.
And if they are mired in a situation where having student loan forgiveness is their best option, and they've looked at all the array of options, and determine that that is the best one for them personally, you have to be, I don't know ... I mean, I hate to say, pretty small-minded person to castigate them for making a decision that is in their best interests. Those are the rules of the game. And as long as they're doing this with eyes wide open, and making the best decision for themselves, I think that's fantastic.
Now, having said all that, and being totally on the same page with you on that, Brad, let's talk about the counterpoint where I totally agree with Anna. And that is the perverse incentive of these programs, generally. We talk about it, it's episode 98 of our podcast. It was titled hyper debt. It was looking at Sam who was going to dental school. And the average cost of his dental school is $500,000. And not a single student going to that dental program thinks that they're going to be able to pay off their student loan debt. They're going into the program with the mindset that they're going to be able to use this subsidy program.
They're going to be able to take advantage of this program, and that in my mind, that needs to end. Like that's why this program needs to go away. We should not be letting students take out $500,000 in debt for a job that pays $120,000. Like that's crazy. These schools, they need to go bankrupt if that's what they're trying to charge for it. They should have no one signing up. No one should sign up for tuition that's going to cost $500,000 for a degree that's going to make $120,000 a year.
You should just see that and then not say, "Well, I wonder if there's a government program that will allow me to like over 20 years subsidize that cost and get ... " No, that's bad. This is what you're doing, you're looking at these programs to fix a bad choice that you made five or six years ago, and come up with a less bad option. You're not going eyes wide open to a school that's charging $500,000 for tuition promising you a job that pays 80, 90, 140, and saying, "Oh, but the government's going to solve this on the backside." So, I think Anna, to your point that I agree with, that has to end, completely.
Those schools need to start lowering their tuition. And they will as soon as these programs go away, or at least they get limited severely, I'm all in on that. I think there's the nuance there. Are we looking at someone who's trying to fix a mistake they made a long time ago? Or do you have like ... My kid, if they want to go to dental school, we're going to look at all of our options, we're not going to pay $500,000.
I don't care if there's an assistance program out there, there's zero chance that that's on our list of options. Right? And I think that's the mindset that if you're in the Fi community, I think you would have that. Brad, do you agree with that? Did I miss something? Too harsh? I feel good about that statement.
Yeah, no, I think that's pretty spot on. And MK looked like you wanted to jump in with something.
Yeah, I absolutely agree. I don't know a single person who has taken out debt, and has happily just said, "Okay, now I'm going to hack the system and boop, boop, boop done." For the people that I know who've had to go to these programs, it is a decision that is steeped in emotion, right? Like we talk about the numbers all the time. But so many people that I know take pride in, "I can pay my bills. If I put my name on a piece of paper say I'm going to pay it, I pay it." And so, I know people who actually should have taken advantage of these programs, knew about them, and said, "Well, no, I won't take the easy way out." Because that's how they viewed it. That was the lens they're reviewing it through, and actually hurt their financial future by being stubborn, and not taking this option. And it actually hurt them.
And to Jonathan's point, I think it's absolutely the institutions that are perpetuating the need for more debt. And that's where we need to put the onus on those institutions to set better incentives. And to go back to the schools and say, "You're only charging this much because you know that the government is going to fund this much. That's not how this should work. That should be based on the value you are providing." And therefore, we should not be putting the burden emotionally, financially, or the guilt even on the individual. It should go to the institutions that caused this cycle to happen that put people in these bad positions, because that's how we can fix this longterm moving forward.
And I don't have a solution for it. I don't have a better idea, but I've seen firsthand what that guilt, and that messaging does to people who would otherwise have taken advantage of these programs, who now have not been able to save for retirement because they're 20, 30 years on still paying off debt where they could have gone with these programs a decade ago and been done.
Yeah, I think there's actually ... If we are going to spend any more time on this, not so much on the student loan repayment, it's actually like how much is a degree worth? And like, what's the max you would pay for a degree? And I think this is a conversation every parent that has a kid going to college should have. You have to look at ROI. Now, you may not have your job picked out, but like have a sense for the different types of jobs you would be interested in, and what the expected pay is in that field. Like that's just a little bit of prep work. You're putting all this time preparing to go to college. Maybe colleges prepare you to get a job, maybe think a little bit about your career options. You don't need to wait until you're a senior to do that, and your debt is already completely baked in.
You could start front-loading some of that thought process. And if you do so I think that one to one ratio is like the high watermark on what you should look at. And I was a little bit over that if I look back. So, I made anywhere from 106 when I started out as a pharmacist, and I peeked out around 125ish, somewhere in that range, my student loan debt was $168,000. That's a little bit above, but in my mind for my kids, it's like a one to one. Like if you're going to get a job making 40K the absolute most you're going to want to spend on that degree is 40,000. That's the cap there, and so on. Right? And then we're going to try to do it for a lot less.
We're going to try to figure out how to do it for a fraction of that. But if you're going to get a job making 100,000, 120,000, you sure are not going to be spending 200,000, $300,000 on that degree. That's not the budget. That doesn't make sense. So, just this back of the envelope number that I keep in mind is one to one ratio there, your annual income, and your total cost of college, they should be on a one to one basis. There's some flex there. It's not a dogmatic line, but certainly if you're three to one, or four to one, and you're eligible for these programs, like on the front end, before you even get started like, "Oh, I'm probably making a financial mistake."
Well, it's a good shorthand, Jonathan, right? So, again, this is all personal, but what we're talking about, even when we go back to like the 1% rule, when it comes to real estate, it's a way to just have a mental shorthand instead of having to go through a calculation every time. I haven't put any thought into what you just said, but that's a cool shorthand that you use, right? Like I suspect very strongly when it's time for my daughters to go to college in a handful of years that I'm going to have to think about this, right? But again, to have some type of shorthand, maybe that we can all as a Fi community can come up with.
That would be a cool crowdsource project to, what is the ROI? That would be pretty neat to get a bunch of people's opinion because, again, I have never put any thought into that, but it is nice. Going back to the rental real estate, if you know the 1% rule, that in an ideal world you'd like to get 1% of that house's cost in monthly rent, or you probably shouldn't consider it unless there were extenuating circumstances that made it an attractive investment. Okay. That's a good starting point. So, yeah, maybe we got something here.
And Brad, I think all of this is steeped in like, what's the ROI? Right? I mean, what is the ROI? If you're going to spend four years, and multiple tens of thousands, if not hundreds of thousands of dollars getting a degree, what is the ROI on that? And having those types of conversations, it's just a part of your planning. You just can't ignore it. There's just too much at stake, there's decades of your life. And so, much money at stake here. It's not something that you can just not think about or not have that conversation. So, all right. Anna, thank you so much for the feedback. And to our audience, thank you for the feedback. Just generally, it's what makes this show possible, and what's allows us to get better and fine tune our messaging. So, thank you so much for that.
All right. An MK, it looks like we have a frugal win of the week.
We do, and this one was pretty unique. So, this was, Will wrote in with a frugal win for his brother, Matt, which I thought was really nice. So, will writes in, "My brother, Matt, turned me onto your podcast towards the end of last year. And I've been hooked ever since. The topics you cover are so useful. And I've been able to find an actual tip in almost every podcast. My brother and I are both from England. So, we spent time together translating five principles for the UK. And I think it has brought us much closer. In addition, it has inspired me to optimize my money, and my life so much so that I've been telling everyone who will listen about the principles of Fi."
"I was just writing to tell you about my brother and his fiance's frugal win using Geoarbitrage, they were based in London, and paying extraordinary rent for a modest sized flat. They both love living in the city, but do not want to continue paying through the nose for London accommodation. To pivot around this, they have gone through the lengthy process of moving to Ottawa in Canada. This is still providing them a city lifestyle, but they can now afford a house rather than a one bedroom apartment. Not only did they manage to make the move, but Matt managed to get his company to let him set up their brand new Canadian branch once he had moved. London wages, but not London property prices, what a move."
And then he goes on to say, "Matt and Hannah, his fiance, moved to Canada on the 24th of March two days before Matt's birthday. And they stayed briefly in an Airbnb. They're moving into a rented house on 1st of May, the day before Hannah's birthday. I miss them both so much. I was just hoping you could pass on my birthday wishes to them both to congratulate them on a house, and thank them for introducing me to the world of Fi. Please keep up the awesome work on the podcast. Even though I'm still working my way through the back catalog, I listen every time you put up a new episode, it has really helped me stay calm, and collected through the difficult times we were seeing at present. Thank you." Thank you, Will. That was awesome.
Happy birthday guys.
That is awesome. Yeah, Matt, and Hannah, Happy birthday. And WIll, thanks for the message. That is incredible.
Brad, someone was suggesting that you should register an account on Cameo [crosstalk 00:40:11].
Yeah. You could do more birthday wishes.
I'm doing quite well. If anybody would pay for that, they're out of their minds. [crosstalk 00:40:23]-
I don't know, man. We had a request that's not made up.
We did. Yeah.
Brad, I would love to see your account on Cameo. I know that would be ... Yeah, we'll look into it.
That's funny. And actually it was from Paul who I met at the Berkshire Hathaway annual meeting in 2018. So, that was a cool blast from the past email. So, thanks, Paul.
All right, everyone. So, again, follow up an interactive virtual summit with Sean Mullaney, the FI tax guy, that is a Saturday at 3:00 PM, tax planning during a financial crisis. And if you love the episode this week, and you have followup questions, you need to be there. To register for that event go to choosefi.com/livereserveyourspottoday. All right, my friends, hope you got value from today's episode, stay tuned, stay subscribed. You're listening to this on our website, or a podcast player pressing subscribe just lets the provider know you're getting value from the show, you want to be here when we produce additional content. We are on all podcast players, including iHeartRadio, Spotify, Apple Podcast, Stitcher, Overcast, DoggCatcher, Google Podcast. Oh, we have so many. Subscribe. We'll see you next time as we continue to go down the road less traveled.
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