Two-Retirements Strategy For Financial Independence, Chat With Alex | Main St. Finance

Yasi: Welcome to Fast track podcast, Alex. 

Alex: Oh that’s great to be here. I got my coffee. I’m ready to talk about money. Although to be fair, I talk about money all the time and I love that. 

Yasi: Yeah. You have been talking about it for like more than two years, on your podcasts, which we will talk about it later.

So to start with the first question, I’m very curious, because you are very active on Twitter and you have a personal finance podcast, but since when and how did you get interested into this whole money management investment, this topic? 

Alex: At first, I think it started off as just an interest in finance.

You buy this thing, this stock and it can go up, it can go down. Like how does that work? I remember it was, I believe it was my 13th birthday. My aunt took me to one of my favorite bookstores and told me to pick any book and I can have. And the book, I actually still have it’s on my bookshelf behind me, but something like an introduction to mutual funds.

So then naturally when I got to college I decided to pursue a degree in computer science.

Yeah. Clear, straight trajectory right there. But after three years of that some things happened. I needed to change my major. So I decided, you know what, let me take a summer class because that’s just kinda where I was and the college career where it’s okay, I’ve got this this summer semester coming up, let’s take an introductory finance class.

See how I like it. And then maybe I’ll change my major. I changed my major, got an A in that class changed my major, ended up graduating Cum Laude with a 4.0 in finance and what really got me excited on personal finance and really money man. Was, I believe it was my second or third personal finance class where we’re talking about the time value of money and the calculations of you go in Excel and you set it up.

Okay. What if you save a hundred dollars a month at 5% per year? How much would you have after 10 years? Okay. I’m doing it, it’s study guide. Here’s how these calculators work. And then naturally I’m like, okay what if I save 200? What about 400? What if I can get a 7% return?

What if I did this for 40 years? And then you start coming up with, wow. If I save ’em don’t quote me on these numbers. I say $500 a month for, 25 years. That’s a million dollars. So I was like, wow, like you don’t have to work until you’re 65. Look, I built this calculator. I did it myself.

And so I started doing some Google searches to go deeper into that. And then I discovered the FIRE community. And now fast forward, probably six years now, here I am a podcasting. 

Yasi: , okay. Fire stands for financial independence and retire early in case some of the audience have not heard about it, but we have mentioned it many times already in the podcast, and it’s a great community where people share their personal experiences, how they achieve financial independence.

So that was six years ago. I wonder have you ever made any money mistakes before all this happened? 

Alex: Yes. Uh, almost immediately before which I call it my biggest mistake, but I also like to refer to it as like my last big mistake, but so I told you it was a summer class.

I decided to take that first personal finance class. Two months before the first day of that class. My car uh, what the mechanics called it was, it basically went off like a frag grenade. There was a part in the engine compartment that literally exploded and sent fragments and all kinds of other bits.

So I had to get a new car. So I’m shopping for a car, looking for this $20,000 car. And then my mom gives me a speech. Now in my podcast episode is coming out tomorrow. I go into a thing about my mom and her whole history with cars, but right, as I’m about to sign on the datablind for this car, my mom says, Alex, You got to know, everyone has this one thing that they really want in a car.

They either want it to be, really fuel efficient. They want it to have the best sound system. They want it to be able to fit all their friends and all their stuff. Everyone has their one thing. So Alex, if this car doesn’t have that one thing, you might need to rethink what it is because otherwise you’re going to be back here in two years and you’re going to buy a new car.

Um, I’m a 22 year old male. W what do you think I want. I wanted something fast. Sure. So, No, I didn’t get like a Mustang or anything. I just got the same car, but I upgraded to a six cylinder with 300 horsepower because why not? It has more room when you hit the pedal. And I wanted the room. That was my one thing I want that I want to hit the gas and then, zoom.

So that costs me like another $6,000 on top of it. So I think the final purchase price was something like 35, 36,000 dollars. 22 years old. I’m sorry. It’s a brand new. Oh yeah, it was brand new. I had 15 miles on it, so I get that. And my car note was $465 a month. Junior in college and I’ve got a $460. 

Yasi: But how are you going to pay for that car when you are in college?

Alex: I worked, I worked two jobs throughout college. I actually graduated without any student loans because when the semester was in session, I’d work I worked at a hotel and then at a sports store. And then in the summers or when school wasn’t in session I worked both jobs. Sometimes I’d work eight hours in the morning at the hotel and then eight hours at the sports store or vice versa.

So I was pretty flush with cash cause it’d be saving, saving, saving, and then that one major expense of pay for the whole college semester, all at once. So I had the money to do it, but I went from being flushed with cash to. Hey, maybe now I got a budget. 

Yasi: Okay. Yeah. But you earned it at a time.

I have to say it.

Alex: Yeah. I graduated with no student loans, but I graduated with a fat car loan. 

Yasi: Okay. So did you make any other mistakes in the past six years or you are all good with how you are using your money? 

Alex: Do I make mistakes? Yes, I’d say I make them regularly, but. I think as far as magnitude, that’s probably the biggest thing. Cause blow in $36,000 all at once is probably as bad as I’ve gotten.

It’s not nearly as bad as oh, I decided to take my fiance out for a nice dinner and then she’s Hey, can I get a glass of wine? Yeah. You can get a glass of wine and then you get the bill at the end of the day and it’s $140, but. Which I’m not saying taking your fiance on a date is a mistake.

Shoot, I’m just not going to tell her I recorded this. Like, do I make mistakes? Yes. I’m not perfect. I podcast about money. I talk about it, but there’s this tweet out there that I really like where it’s, if you skip your $5 a day latte and you save that $5 and you save that for 10. Um, you will have sucked.

You’ll saved enough money to have sucked all the happiness out of your life. Yeah. So I’m a big proponent of get the big things, and you can let the little things slide. Do you want to get a coffee twice a week? Because you’re exhausted or maybe, the latte you can get at Starbucks or whatever your favorite coffee shop is better than you making coffee at home.

Whatever, I’m a big proponent of let the little things slide, I pay I’m on a 15 year mortgage and I pay an extra $200 a month on it. If I end up with no extra savings at the end of the month, I’m still doing all right. And don’t be too hard on yourself is what I’m trying to tell people and get out of there.

Yasi: Okay. So the big things so in our money course, we talk about the big three, right? Transportation, housing, and food. Can you take us through what is your budget like? Or what is your, how does a money saving tips on saving this big three items? 

Alex: Okay. So how I save money on housing? I have a whole episode on this, but really you need to examine your living situation depending on where you live. There is no solid answer depending on where you live. Renting or buying could be a better option, could be cheaper. Where I live buying my house. If I would’ve did a 30 year mortgage, I could have gotten this house for about $900 a month where renting, you might be 13, $1,400 a month.

So in that case, buying might be better. Now I live in a middle of nowhere, Midwest us. So if you live in New York or Singapore or somewhere bigger, that equation might be different. But it also might be a thing where maybe you can get roommates. And if you’re having roommates, maybe you can do some house hacking by a good size house where bedroom one is on this side of the house and the other bedrooms on the other side of the house.

So that way there’s still that separation, but you also have the roommates, it’s your house. You just rented out or rent out a room to your friends, and then there you go. You can save some money that. also don’t be afraid of a little commute. I don’t commute like an hour, but if somethings 15, 20 minutes and it’s slightly out of town, why not?

I have a 20 minute commute every day, but it’s a straight shot on a highway. So I don’t, I’m not really sitting in traffic, but my house is a cookie cutter house. That’s built by one of these cookie cutter developers. So they had multiple neighborhoods. They had a neighborhood in the city that I actually work in.

And then they had the one where I ended up living, which is a small town just outside of that city. I hope that all made sense, but my same house, cause again, cookie cutter houses, my same house, same floor plan, same number of bedrooms, same everything. But with a smaller backyard in town cost an extra $30,000.

Yasi: Like in, in percentage, how much would that be? 

Alex: I’ll tell you what, I can pull up a quick. I’ll just tell you my house was $160,000 is what I paid. 

Yasi: So it was an extra 30%, actually more than 20%. Sounds about right? Yes. Wow. Okay. Yeah. I have a less of a commute. Yeah. Why are asking for so percentage because 30,000 can, can be a huge amount in some countries can be a small amount in some areas of the world, but 30% is a big difference.

If you put in 20 minutes how to drive to work 20 minutes is nothing right. And you live in a quiet place. You have more space. That’s great. And then what about groceries? Do you have a budget? Do you have some money saving tips on that part? 

Alex: Oh Lord. You do not want to ask me about budgeting, or budgeting about groceries.

Cause my fiance loves to cook, so she’s a big. Let’s go to the store. Let’s I need this and this and this, put it all together. And then I can put together this, that, and the other, like she likes to experiment, do all kinds of stuff. And what that equates to is I got to spend more money on groceries.

I mean, we do. All right. Two adults in our twenties, we spend about maybe $400 a month on groceries. So it’s not too bad. But again, then again, that’s probably why I’m marrying her because I could probably live off of chicken and rice every day. But she’s the one that, I have never in my life bought a clove of garlic, but I swear if we go more than 10 minutes in this house without garlic or onions, she knows about it. And I got to go to the store and go get it. 

Yasi: Oh, I think food is okay. Even though people need to put a budget on it is wise to do it, but I think it’s such an important part in your life or your quality of life.

How enjoy life is the food. And recently we also. I started to buy many bio vegetables because then we find out, wow, the taste is so much better, especially the fresh bio carrots in Switzerland. It is so, so much better. Even the ax, the free range egg is much better. Yeah. That part I think. Yeah. Good. 

How about transportation? 

Alex: So the ironic bit was I specifically made the choice to not buy the house in town to save me some money. And you like, oh, I’ll have a longer commute, whatever. Uh, imagine my surprise when I, so I bought my house in March of 2020. As the coronavirus pandemic was really good, really getting up to pace.

I actually had to do all my docs in my car with no one around me, cause everyone was still really afraid of the virus. So the whole, I bought out of town and I was like, you know what? I’ll just commute, whatever. Now I work from home three days a week. So the irony there is not lost on me. But as far as transportation costs my big mistake, a vehicle that I purchased, I still drive that car today.

Yasi: Yeah. Just drive till it’s dead and take the most use out of it. 

Alex: Oh, I’m driving it. So I made, when I first started getting into financial independence, retire, early fire, it’s oh yeah. The biggest mistake you can make is you buy a brand new car and then, you trade every couple of years, but. Really I’ve come around on this, that if you buy a new car, it can be valuable if you drive it into the ground.

So I bought my car, it was expensive. I paid it off within maybe two and a half years. Cause I was really trying to pay off that loan. I’ve not had a car note in the last four years, so I think I just hit maybe 80,000 miles in it. So I have no plans of getting rid of it anytime soon. You know, if I paid that big expense and then I didn’t have a car note for say eight, nine years because of it.

I think that’s worth it. You buy a house, buy a car, pay it off. You’re the only owner. You know, there’s nothing wrong with it. There’s no prior accident. I’m not saying this is the best tip, but don’t beat yourself up if you bought a brand new car. So I buy a car and drive it forever, drive it till it dies.

And that’s a really good way to, not having a car note, what’s the average car note in America right now? Probably. I want to say the average is like 415, $420 a month. So if you just don’t have that. Oh yeah, it’s huge. 

Yasi: Yeah. Okay. Because oftentimes we, we just see the car is a depreciating assets.

So now I really don’t want to spend too much money a car, unless it’s like a collectible, a lot of people in Switzerland, they like to drive this antique cars. And even a few years later, they can sell it for higher price. But average cars, you just use it for commute. And the price goes down every single day.

Yeah. And then next question is about investing. So this is something I think most of my audience are interested in because they don’t know where to start. They think it’s so complicated, they think is so risky. And then, I listened to your podcast that you are educating people on all the different things, in the financial market.

I’m very looking forward to the next section of this interview. Let’s start with the first one. What is your investment philosophy? Has it changed over the years? 

Alex: My philosophy has definitely changed over the years and I used to be a Bogleheads guy. Where if people are familiar with them John Bogle, is the creator of the index fund. The, by this one thing, and this one thing owns the entire S and P 500, the entire, insert market here.

So I used to be a Bogle head guy and I’ve since evolved beyond that, because you can start with just the three fund portfolio, which is really simple. It really works. It’s very effective, but. Then you start realizing there’s gaps. So it’s okay, well, I’m covered in these three spots, but what about this?

Do I have exposure to this? Do I have exposure? So then you start expanding upon that. And next thing your three fund portfolio has 10 things in it. So I want to say I’ve evolved beyond that, but I still invest in index funds. That’s primarily where I am. I play around a little bit with dividend investing, but.

I always recommend starting with a three fund portfolio and then read some books, get up on your information and then expand from there if you want to. But I understand that most people don’t really care about investing. They want to invest, but they don’t want to read a 10-K. So if that’s the case, just stick with the Boglehead portfolio and you’re solid.

Like you wouldn’t need anything more than that, unless you really want.

Yasi: Okay then what’s your investment strategy right now? If you’ll start it with three fund portfolio what did you do later? How do you decide what to add, what to delete based on your life circumstances? 

Alex: Sure. So I’m primarily based in the U S so everything I’m about to say is probably because of that, I imagine. Cause you’re in Switzerland, you have a lot of European listeners, so be aware, you might have to make some adjustments here. So I started with the three fund portfolio. Honestly, that’s still what I’m doing, but I’ve just added one or two more to it.

So I invest a little differently depending on which account I am invested in. So let’s talk about my 401k. So if you have a bunch of European listeners, I’m just going to make the assumption here in your retirement account or in my retirement account, I still have a basic three fund portfolio. Now that three fund portfolio is a total stock market index.

A total bond market index fund, and then a total. So he’s talks about international fund. I had to think about it for a second there. And really you just wait that depending on your risk tolerance, if you’re someone like me, you’re in your mid twenties, you’ve got lots and lots of time to continue investing.

You can have a lot more of your weight in your stock fund and your international fund, and really not a lot in your bond fund. I honestly, I’ve got 5% of my bond fund, but if you’re someone that’s closer to retirement, so maybe you’re 50, 60 even like forties, but you’re nervous of where we are in the market right now.

Maybe you want to have more of that 40, 50, 60% in bonds and have less than your stocks. Now you are going to get less growth there, but because you have less growth, you get more safety. So it’s a question of priorities. What makes you feel more? 

Yasi: Besides the retirement portfolio, then come to your main one.

What do you do with it?

Alex: Uh, so I have two kinds of investments. There’s retirement and non retirement. I don’t want, I’d hesitate to call my non-retirement my main fund, because as of right now, most of my money. As far as investments is in my retirement funds. So my taxable investments, just what I called it.

It was just because they’re taxable, they’re not in retirement assets. That one is I’d hesitate to call it my fun money account, but it’s my fun money account. For that one, I do dividend growth investing, which for anyone that doesn’t know, a dividend is a cash payment. You get from a stock because you’re an owner, you own this business made money.

Hey, we made money. You’re an owner. Here’s your cut. So that’s what a dividend. I like dividends because it’s all fine and dandy that, you buy this thing, this stock there’s non tangible, you can’t touch it thing. And then, you buy it for a hundred dollars today. And then in 10 years, someone will give you 200 for it.

That’s all fine and dandy, but you don’t get a pay off for 10 years. And that’s something I don’t like, I have some issue with, so I like dividend investing because Hey, you buy this. And every three months you get a cash payment. Hey, Merry Christmas. You own this company made money and you’re an owner of this company.

Boom. Here’s your cut? So I’m a huge fan of dividend investing. Dividend growth investing is a strategy in which you buy companies that only pay you a dividend or that you would expect would shortly begin paying dividends. And then, And then, that these companies typically raise their dividends every year.

So if you have let’s say at and T I’m not recommending you buy them, this is the first one that came to mind. So if at, and T pays you a dollar per year per share today, you’re buying them not only to get that $1 per year, but that next year it’s going to be a dollar 10, the following year, a dollar 25, the next year, a dollar 50, so on and so forth.

So you buy this one. And then that share will pay you every year, but not only will it pay you every year, but you’re actually going to get a raise every year. So my taxable, my main kind of portfolio I have in a bunch of individual stocks that now again, I have a degree in finance. So I look at these companies, I look at how financially viable they are, how well they’re performing, how good their management is.

And I just have that skillset. So I look at them and I pick out, I believe I’ve got about 30 to 35 companies in it and I just let them pay me to do. 

Yasi: Oh, nice. And do reinvest with the dividends income or you use it as also fun money. 

Alex: Great question. I’m planning on using that as a fun money, but for the moment I’m rolling everything back into it.

My goal here is that, so my overall strategy with my two accounts, which I just explained is I’m saving for what I call two retirements now in the United States. I don’t, I have to say that, cause I don’t know how many European listeners you have in the us as well. Oh there you go. I’ll just clarify then.

So in the U S you can access your retirement accounts depending on the account, either 60 or 65. If you try to pull that money out before then the tax man’s going to come up, they’re going to get their taxes. And then there’s penalties involved. It’s a whole lot of nonsense. Now there are ways to get around that, but I don’t want to get around that.

I want that money to be there for when I turn 60 or 65. So that’s retirement. Number two from 60 to 65 to when I die and that’s going to be funded by my retirement accounts, my 401k, my IRA, all that good stuff. My dividend portfolio, my main money. That is retirement number one. So the goal is to build up that dividend portfolio to a point to where the dividends can pay me an amount of money that I can live off of now that determines, or that’s dependent on how much money it takes for me and my fiance while I guess wife at the time is okay with living on.

So if that happens, when I turned 45. Then I want to be able to live off of those dividends from 45 to 65. And if I want to, I could deplete that entire account, but in that time, because why not? And then once I turned 65, my dividend portfolio passes the Baton to my retirement portfolio and that takes me till I die.

So that’s my overall game plan. My two retirements. 

Yasi: I love it. I love it. I think this is a very interesting strategy. I might think about it later, how I’m going to design my retirement. 

Alex: The benefit of it too, is that even before you retire, say you’re in your thirties and then, you have a son or a daughter that you want to help support through school, and maybe you didn’t have extra savings.

Even if the amount of money your dividend portfolio is giving you, isn’t enough for you to live off of, or maybe it is. And you just decided not to. That’s just an extra source of cashflow at any time you can decide, Hey, it’s my daughter’s 16th birthday coming up, 17th birthday. She’s going to be driving to, and from high school, I don’t want to have to keep dropping her off at school.

Maybe it’s time for her to have a car. At any point, you can start using those dividends to pay for things. So it’s like a building an emergency fund or a second stream of cashflow that you’re not trying to live off of, but should something happen? You lose your job or some kind of expense comes up or maybe you want to donate it to charity, whatever you have the second stream of income.

Yasi: Do you put your investment portfolio online? Or you keep it to yourself. 

Alex: Oh uh, do I publish it so I can see what I’m invested in now? I don’t publish it. And that’s for a couple of reasons. If you follow or for your audience, if you follow multiple people, you’re going to see, this is actually a big debate in the personal finance community.

Do you show what it is you’re invested in or do you just show, returns. It’s not, it’s not anything huge. It’s not like people are saying renting versus buying or Bitcoin versus no Bitcoin, all that kind of, it’s not a huge debate, but I’ve seen it between multiple streamers and YouTubers where it’s I publish my portfolio and you shouldn’t trust anyone that doesn’t publish theirs because they’re probably liars.

And then you’ve got other people. And then you got other people that go, Hey look, and this is where I’ve found myself lately. Is that, look, I don’t publish my portfolio. Not because I’m trying to hide something, but because I don’t want someone to go, Hey, I listened to this person talk about finance.

I listened to them. Give financial advice. Asterixis isn’t financial advice. Don’t come Sue me. People have a tendency to find someone they trust about money and copy what they do. 

Yasi: Yeah. Yeah. I think this is one very important thing let’s highlight here again, that anything that you hear about, anything that you read on internet, just don’t blindly copy paste, do your own research.

Then understand, Why you do what you do, understand the why. So I think the point here, you made this not understand because just to avoid this unnecessary lawsuit or blamed. 

Alex: I’m not just lawsuit, but I don’t want to, I know my financial position. I know that should worse. Should the worst case thing happened?

Should I invest my dividend portfolio into something really bad? Or should I want to take a really big risk? I know I’m fine. Cause I’ve got my whole, I’ve got all my retirement accounts separate. I know that. Okay. Maybe I’m not retiring at 40, but I still have this other pile of money. I have my emergency fund.

I know my position and I’m investing with my financial position in mind. The double-edged sword of being somebody that can talk about money is, I’ve said it on this episode, I graduated cum laude and finance. I’ve done this for years. I studied 10-Ks before I buy anything in my investment portfolio.

It’s very easy for a listener to say this guy now sounds like he knows what he’s talking about. He has a degree in it. He’s done it for years. He said he knows what a 10 K is. I don’t even know what a 10 K is. He said he does all this research, I trust him. If he’s invested in it, I can invest in it.

And that’s sort a problem because I’m investing with my position in mind. If someone’s putting their last thousand dollars into what I’m invested in, I’m investing, knowing I can be very aggressive. They might not be able to shoulder a loss. Should that happen? Yes. So this is a very long drawn out answer and walk around.

But in general, no, I don’t publish a exactly what it is. 

Yasi: Yeah. Makes sense. And that’s so interesting about personal finance, because there’s no absolute right, wrong best solution. It all depends on your personal financial situation. And what’s your goal in life, your risk tolerance, everything is personal, right.

Do you have a goal in mind when you want to retire? You know, in the fire community, people usually have a, like fire goal, is that an age you have in mind or? You are happy with where you are now. 

Alex: Well, I don’t want to say I’m happy where I am now because I have a job interview next week to completely change my career.

Uh, don’t tell anyone, but but I don’t always say I’m happy where I am now because things can always get better. And unless you’re Jeff Bezos, but things can always get better. So you might be happy where you are now, but you never know when a new opportunity could arise. As of now, I would love to retire at the time I turned, 40, 45.

Now for me, retirement is an asterix retirement doesn’t mean, wake up, make coffee, watch TV, or read a good book, visit with kids and then go to sleep. Retirement just means, not working a nine to five. Maybe you find something you’re passionate about it, or I’ll probably keep podcasting because what I’m going to do, I’m going to keep talking to people about money.

Cause that’s what I like to do. So at the moment, my goal is to retire at about 40, 45. By that time I’ve got kids in college, so maybe, I’ll have to keep working so that I can finance their shenanigans through college, just like I did. I just don’t. Because you’ll never know. It’s, I’m 25 years old.

I’m planning on retiring in the next 20 years, but there’s 20 years of what if between now and then, so the plan is 45. We’ll see how that actually turns out. 

Yasi: Wow. Okay. When I interview people who are in their twenties and I was like, oh, lucky you are, you get your personal finance or your plans sorted out where you are, your early twenties.

As you said before, then you have time, right? Even you at 40 or 45 years old to retire, you still have 20 years to let it compound. It’s so powerful to have time. Yeah. 

Alex: Absolutely. But then again, time could be great. Time could be horrible. For now I can retire on 40 grand a year. Right?

But 20 years from now, heck I got a fiance talking about having three, four kids. I don’t know if I could retire off all that. She’s talking about it, taking trips to Japan and Europe and all those other to I don’t know if I’m ever going to retire because I got to finance all these vacations.

Yeah, you 

Yasi: will. You will, with all the knowledge, you already have the mindset, you have the investment, you already set in place for sure. You I have confidence that you will. 

Alex: The trick is I got to retire twice. You gotta remember now. 

Yasi: And last question. Where can the audience find you? If they want to listen to your podcast, they want to follow you on internet. Please tell us your, you your domain name, your Twitter, your podcast name. 

Alex: Sure thing. I only have two you know, nice and easy. I’m not everywhere. I good Lord. I could not, man. I don’t know how some of these people manage having 10, 12 different. Oh, I’ve got my website. I got my blog. I got this book.

I’m in the middle of writing. I, the podcast, I got this, that. I’m easy. You can follow me on Twitter at main street money, or I have my podcast, which is main street finance. Unfortunately, someone took at main street finance on Twitter, so I’m main street money. Uh, the podcast is listed everywhere. I’m on youTube Spotify, apple podcasts, pod bean, everywhere. Basically, if it has podcasts, it has me. 

Yasi: I will leave all the links in the show notes. So the audience can follow you online. They can listen to your podcast. I really like how educational they are. They’re not too long, like short and crisp.

Okay. Thank you so much for being here, Alex. It was such a pleasure for me to interview you. Thanks for sharing your personal knowledge with us. 

Oh, thank you. It was no problem at all.

Alex: Look talking about money and talking about me. This is a great, this is great for me too. I had a lot of fun. Thank you for having me.