Can we talk about good debt versus bad debt?
Because I know on some of your stuff I've watched
you really, really do a great job explaining this.
So I think there's a big difference between good debt and bad debt.
So I'm not like Dave Ramsey where, you know, all debt is the devil, you know.
There's smart debt to take on.
I mean, you're coming from a commercial real estate background.
That was my background as well.
You know that your rates of return and your cash on cash returns
and your IRAs are way higher when you take on the right amount of leverage.
Right. A.K.A. debt.
I would say that good debt is putting money down or borrowing money
for something that brings you cash flow or an income or can actually increase
your income in the future, such as taking out a student loan, for example.
My wife is a perfect example. She's a nurse.
She's a licensed nurse and R.N.
she took out a little bit of debt to basically become a nurse practitioner.
And those are allies for the rest of her life is going to be
in the tens of thousands of percent compared to what that debt was.
Now, if you take out a loan to buy, you know, jewelry or something,
it doesn't bring you money.
So you want to buy like a nice purse or a nice clothes or a nice suit.
You know, that's probably in the realm of bad debt, right?
So there's a big difference there, I would consider very
or define it very simply as good debt is taking on debt for something
that'll actually produce income for you or increase your income over time.
Bad debt is typically on consumer purchases,
and that's typically the debt that I talk about that should be paid down quickly.
What's your rule of thumb for how much cash reserves you need
and you know, where should people be generally?
Yeah.
So I like to think of first things first.
So obviously you need to have a roof over your head.
You need to pay your utilities, you need to have transportation.
And in order to get to work, if you make an income that way,
all those boxes need to be checked first and then you can start,
I guess, directing your money in certain buckets.
So say, for example,
you take home a thousand bucks a week just for easy numbers.
You know that, you know, 300 of those dollars is going to certain things.
You know, utilities, you know, groceries, you know, whatever.
Once that base layer is taken care of, then I recommend people start
investing in different buckets.
So you may have a travel fund or a travel bucket,
you may have a, you know, savings bucket, an emergency fund bucket.
You may have a car fund, a bucket
if you want to save for another car or make a car payment or whatever.
So whatever interests you in life, I definitely believe in
spending on those things.
I don't I don't recommend people go through life
as being cheap or being like a miser or like, you know, having like
you can't enjoy life basically,
you know, buy a round of drinks for your friends,
go eat at a nice restaurant, treat yourself if you're working hard.
And as long as you've taken care of those first things, first, I highly recommend,
you know, spending the money because not completely, but it's meant to be spent.
It's meant to be enjoyed as long as you're taking care of all the first things.
Yeah, I know.
On one of the videos you talked about, a way to save money is to get a roommate
and, you know, and can you can you talk a little bit more about that?
Yeah, I think it depends on what type what stage in life you're at.
Right.
So if you're married with kids
and you know, all that stuff, it may not make sense to get a roommate.
But the overarching message there was, you know, if you're in the right type
or right stage of life, you know, that can really offset your mortgage
if you do own the house or the condo or if you're renting, for example.
So some people get sick of roommates by the time they're done with,
you know, school or college.
Some people have them until they're, you know, thirties or forties.
I don't know. It's all personal preference.
But what I meant by that
message was if you can somehow offset the cost of your mortgage,
whether it's by getting a roommate or by house hacking, potentially
buying a duplex, living in one half, renting out the other,
that's the fastest way to build wealth, in my opinion,
is by controlling real estate and reducing your monthly expenses
to where you're either paying very, very little for housing expenses
or even potentially making money based on having a roommate or a tenant
in that duplex.
Yeah, I mentored a kid like this up in Idaho, and that's what he was doing.
He was he was buying homes and then renting out the basement or,
you know, the rooms above the garage.
Yeah, it's it's that. It's that principle pay down.
And it's also, you know, lowering your cost of living
because, you know, let's be honest, I think cars and, you know, housing
is probably the two most expensive, you know, outflows of people's money.
It's either a mortgage rent or a car payment.
So if you can take if you can knock off one of those and cancel one of those
in the form of rent or mortgage payments, I mean, you're going to be able
to fill up those buckets that I mentioned earlier much quicker.
I know you're a big proponent of spreadsheets to budget
your finances, and I know this is a kind of a discipline thing.
A lot of people do not do this.
You know,
can you talk a little bit about that and why you think this is important?
Yeah.
So I'm of to schools and I feel like I'm talking out both sides of my mouth here.
But I feel like the people that are disciplined enough
to have the spreadsheet and be able to maintain it and keep it up,
they kind of nerd out on that. And I'm one of those people.
I like it. It's fun. It's a way to kind of keep track of my stuff.
It's almost like physical exercise, you know, calories in, calories out,
you know, what workouts am I doing? You know, what have I done over time?
I think the spreadsheets are great for people who are going to use them.
However, I don't think they're great for most people because I feel like
people don't have the discipline to keep up with it unless they're really,
you know, nerding out on it or using it as their hobby.
So I think it's great
because what gets measured gets managed and you can visualize, you know, okay,
I didn't realize I was realize I was spending so much money on, you know,
coffee or, you know, whatever eating out or whatever the whatever the case may be.
But I think once you can visualize everything,
you can really start to understand your habits as a person better.
But for the people that don't like spreadsheets, what I recommend
is just getting that baseline of really understanding your income coming in
every month and understanding, you know, the ballpark of the expenses per month
and then understanding to invest that difference.
So I think there's both types of people can win.
If you like the spreadsheets, great.
If you don't look at more like the big picture, if that makes sense.
So now we're talking about budgets.
What are some of the best apps that you like to refer to people
and and give people to manage their finances?
Yeah.
If you can set it up yourself and you know what you're doing,
just a simple you know, Google sheet that's in the cloud,
you can always updated and access it anywhere.
So just Google Drive.
But if you like the actual apps themselves,
what I've used in the past is mint.
Mint is always good.
Like, am I anti like the mint leaf?
And then also you need a budget XCOM
y and AB is also very good those too.
I haven't used as much.
I used to use them more in college and in my early twenties,
but ever since then I kind of started doing my own thing on Google.
And if you're disciplined enough to do that,
I would recommend any of those three.
But when you were doing that,
you know, obviously the apps, you know, kind of came out
and they're getting better and better and better. By the way,
you know what what did that data show you like, what did you learn?
Because it's, you know, a lot of people
it takes discipline to put all that in there.
But then from there, when it's all in there, you know, what are
what were some light bulbs that went off when you when you put all that stuff
in? Yeah. I didn't realize I was spending as much money
on going out to eat as I did.
It just feels like one of those things that you grab real quick
throughout the day, but that stuff really does add up.
The smaller stuff is just, you know, here and there,
the smaller stuff's not really going to move the needle.
But once you start seeing, you know, multiple hundreds of dollars
for going out to eat or, you know, whatever it is, then you really start
to make conscious decisions in person thinking like, oh, you know,
I didn't realize I spent this much money on, you know, X, whether it's,
you know, Chipotle or, you know, a restaurant or whatever.
So you kind of start to scale
back those things if you're really trying to save money.
So yeah, I think going out to eat is the one that I,
I didn't realize I was doing that much of.