Forging Financial Flexibility in an Uneasy Economy (Bestie) #969

Episode Transcript
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Speaker 1 (00:00):
Happy spring break to you, buddy. This is our spring break.
So we aren't actually here at the mics, we or
somewhere else enjoying some time off.

Speaker 2 (00:09):
Maybe Penia Coladas, I don't know.

Speaker 1 (00:11):
We did not want to leave our listeners hanging though,
So we actually do have a besty episode here forging
financial flexibility?

Speaker 2 (00:18):
What was it in an uneasy economy? And that's it's
funny because this came out three years ago, and.

Speaker 1 (00:23):
Doesn't it just seem as relevant as ever, like as
every period of uncertainty and the economy going to make
us think, oh, it's is it different this time? There
are reasons I think that it's different this time.

Speaker 2 (00:35):
What I think perpetual uneasiness exists in an economy, Like
there's always something to point to on the horizon that
could be bad, whether it's a change in who's running
the country or political leadership, right, whether it's uh market conditions.

Speaker 1 (00:50):
Yeah, it's consistently dynamic. There's always mooron.

Speaker 2 (00:55):
Yeah, well there's always something that could go wrong, yeah,
just like in real life. Right, And so you could
either put yourself in a padded room until the day
you die, or you could find ways to kind of
negotiate the reality of human existence. And that's what we
have to do with the economy too, is say, like,
there are these potential things that could happen, I have
to kind of plan ahead for them. How can I

(01:15):
best set myself up for the best possible future. I
like coul choose your own adventure book, like let me
take me to page sixty two. But I'm the most
prepared that I can be. But you also can't be
one hundred percent fully prepared at all times. But hopefully
this episode can help you figure out because there's more
uneasiness ahead, sure how you can be prepared?

Speaker 1 (01:35):
Absolutely, and we did. We were speaking to some specific
things that were going on a couple a few years ago,
but the principles remain the same.

Speaker 2 (01:42):
So, without further ado, welcome to How to Money. I'm
Joel and I am Matt, and today we are discussing
forging financial flexibility in an uneasy economy.

Speaker 1 (02:10):
Hitting them with the old triple F. Joel, we are
talking about specifically flexibility. It's not often that we dedicate
an entire episode to a singular characteristic, but that is
what we're doing today. We think that, honestly, that this
is an underrated characteristic. I think with this one attribute,
you could take somebody who's you know, kind of like average,

(02:31):
maybe even below average with their finances, but if they
have the ability to be flexible when it comes to
the money and the different opportunities that they're presented with,
and just flexible in all the different ways that we're
going to talk about today, that they all of a
sudden go from like zero to hero.

Speaker 2 (02:45):
Maybe not as impactful as grit, because we talked about
that allow for how grit can make like a massive
difference in your ability to make progress with your finances.
Someone with grit but the same income as someone who
doesn't have the grit, well we would say that you're
gonna have a much better chance of sustaining and making progress.
But yeah, all right, person A, they've got grit, but

(03:07):
they're not flexible. All person B, they've got very little grit,
but they're incredibly flexible. I might actually side with.

Speaker 1 (03:15):
The person who's got some flexibility, right because like the
person who's flexible, they're just more resilient. And honestly, that's
a lot of what we're gonna be talking about today
is being resilient. Everybody on a discount grit as well, specific.

Speaker 2 (03:27):
Ways in which you can be flexible in order to
pounce on opportunities, and especially as like the title says,
there's a lot of economic uncertainty right now, but there's
a reality that you can actually use that to your advantage.
That's right.

Speaker 1 (03:38):
Yeah, But first, man, I told you that I'm going
to get the Companion passed next year. That's my goal.
We've got the Chase Southwest credit card. But this is
a new little bit of information. Starting next year, they
increased the number of points that's going to take to
get the Companion pass. They did an all bait and
switch on me because I had already applied. Is it
like one hundred thousand more points now one hundred thousand one?

(04:00):
It used to be one hundred and twenty five thousand
points now one thirty five, So it's not a massive uptick,
but it's still This is one of the ways that
we're seeing inflation impact some of the different rewards that
you earn with different airline, different carriers, but also the
different bonuses that you receive from the credit card.

Speaker 2 (04:16):
You're going to still be able to make this happen.
Are you be so flexible enough to.

Speaker 1 (04:20):
The real question is if I identify that this is
no longer going to be worth it, will I continue
down the path and earn the companion path? Just because
I have stated that it's something that we're going after.
But I think we'll be.

Speaker 2 (04:32):
At all into the sun cost fallacy that three thousand bucks.

Speaker 1 (04:35):
You guys, spend three thousand bucks and you get the
seventy five thousand points plus they throw in like an
additional ten thousand points plus the initial three thousand and spend,
So right out of the gate, you're starting with eighty
eight thousand points. Okay, you're most of the way there,
most of the way there exactly. So this is a
card that we're hoping will allow us to obtain that
coveted companion pass. It's just something that we've never done before.

(04:57):
Me there's how we've talked about it before, I guess,
just but what makes it a companion pass so phenomenal,
so valuable because once you get it, So once I
get it, I can buy a ticket to go somewhere,
to fly somewhere, and then a companion gets to come
along with me for absolutely free.

Speaker 2 (05:13):
Well, you have to pay like the taxes for that
tick where are you taking me? But I guess is
a big question.

Speaker 1 (05:18):
Luckily for you, I can change the companion. You can
change your companion like multiple times in a given year,
and so I can change it from Kate to you,
from you to my daughter. There's all sorts of options available.
Let's start with me and go to Hawaii though, can
we do that? That's one of the Southwest cards where
they're hooking you up with a lot of points. And
by the way, this is a card that you can

(05:41):
learn more about via our credit cards tool howdomoney dot
com forward slash credit cards. And if you are actually
not a fan of Southwest, you can actually sort it
by some of the other airlines as well. If you're
a Delta guy, maybe you're into American airlines, those options
are there for you as well.

Speaker 2 (05:55):
You can check that out straight up cash back to
I mean, Mason, spend this which is going to help
you the credit card that's going to be best for
how you spend. But and Matt, the reality is if
you have a Southwest, if Southwest flies from the airport
nearest where you live, that companion pass can be just
a massive benefit because you're gonna have that for two
years so, yep, it's a really really cool that. Yeah,

(06:17):
it's a really cool perk. We should actually probably flesh
that out and write an article about that on the
website or something like that. But the Southwest Campaigning Pass
is this like perk that's not as well known about it.
It doesn't get talked about enough. But if you can
meet that spend threshold, get those points and get the
Commanding Pass, and if you travel enough to make it
worth it, it can be like one of the greatest values
when it comes to credit card rewards. And that's right.

(06:38):
But let's move on. Matt. Let's mention the beer we're
having on the show. This one is called six. It's
a Sayson style beer by Upright Brewing on a Portland organ.
We'll give our thoughts on this one at the end
of the episode, but let's get onto the topic at hand.
We are talking about the triple fs forging financial flexibility
in an uneasy economy. We just love alliteration. Sorry, we
won't apologize.

Speaker 1 (06:56):
It's kind of our favorite thing, at least for now.
Maybe we'll switch it up. Yeah, well, but if all
of our future titles of our episodes are just all puns,
I think people would hate worse.

Speaker 2 (07:06):
I don't know. It's a good question, okay, but we
might start getting more hate mail, which I think I'm
okay with. But let's thinking about this this topic, Matt.
It made me think of actually our summer vacation this year.
We went to Tybee Island, which is like our favorite
place to go just outside of Savannah, Georgia for a
week as a family. And fortunately it wasn't until right
after we left, but there was this massive swarm of

(07:26):
jellyfish that descended in the water. They're basically right right
after we departed.

Speaker 1 (07:30):
Since it's jellyfish, aren't they wouldn't it technically technically be
a school of jellyfish? Maybe swarm they do sting? Yeah,
I guess why. Yeah, okay, okay, but you're probably right.
But they're not even really an army of jellyfish. Are
they actually fish either? Technically? No?

Speaker 2 (07:45):
Okay, yeah, because they're like blobs. Yeah, I think that's
that's the scientific definition of jellyfish blobs. But there's this
article actually published by the local TV station right after
we left, saying that lifeguards had to treat three hundred
folks for jellyfish things in a single weekend, and it's
not like Tybee's really that bad, but it's like everybody
that was there right exactly, And so we ended up
seeing a few while we were there. My oldest daughter

(08:06):
she even got stung a couple of times. But after
we left, the conditions got worse by a meaningful amount,
which which meant like swimming in the water, it's just
not that fun with all those jellyfish hanging around, And
those changing conditions meant that folks had to react differently.
People coming to the beach that week had to take
a different tactic, had to enjoy themselves on the beach
in a different way, maybe a little less bodyboarding, a

(08:28):
little more BATCHI ball on the beach, Right, So you
have to change your plans just a little bit because
of the environment that you're in. I would say the
same is true for us and for our money, right,
if we want to make the money we're given, go
the furthest It's important to know the basics, but it's
also crucial to get a read on the overall environment
that we're doing business in. And just like you might

(08:49):
need to adapt your vacation plans if jellyfish have taken
over the water, seeing the current trends right in the
in the financial space can help us optimize our decisions
in order to avoid unnecessary pain and you know, grow
our wealth more quickly and more efficiently too.

Speaker 1 (09:04):
Yeah, you know, this is always important to keep in mind,
but even more so considering that we're living in an
incredibly like dynamic environment right now, right like, we've seen
more change in the past two years than we would
typically see in a decade or honestly even longer. And
aside from what we've recently experienced, and I'm talking about
the pandemic, stimmy checks, economic doomsday scenarios which then flipped

(09:26):
into a booming recovery and then again now inflation and
the fear of recession. Like all of these things, the
truth is that nothing ever stays the same. There are
definitely some core principles and fundamentals that are that are
pretty much always going to be true out there, but
everything else around us is going to continue to evolve
with change. It's the only constant, right And if we

(09:47):
decide on a course of action and stick with it,
stick to it, no matter what the market is doing
around us, we're going to be financially worse off and
that's why it's important to maintain a level of financial flexibility,
which is what we're talking all about today.

Speaker 2 (10:01):
Yeah, and it makes me think of Atlanta traffic, Matt.
If you know that going downtown at five pm, clearly
it's going to be the worst possible time to hop
in your car and try to head into the heart
of the city, and so you might want to change
your plans. Accordingly, if you could do a noon lunch
with that friend or coworker instead, you might opt for that.
And so you have to be flexible in order to

(10:21):
avoid pain in this world. But let's talk about how
like something specific in regards to that or that people
have been hearing a lot more lately, is the word recession, right,
especially if you turn on CNBC for any amount of
time or read the financial media. Will we have one?
Are we in one? How bad is it going to be?
Those are big kind of questions that are being talked about.

(10:41):
And I'm sorry if you turn into hear the answer
to that question. We don't have it. We don't know.
But especially when economic storm clouds are on the horizon,
we would say that your ability to flex to be flexible,
is even more necessary. We are seeing some warning signs, right,
layoffs are happening with greater rapidity. We're hearing a hiring
freezes happening at companies like Amazon. Matt, my friend, he

(11:03):
works at a big, major tech company, and he was
like a shoe in for this new position and it
was going to come with a little more pay as well,
and they freezed all sorts of pain increases across the board.
So right as he was on the precipice of getting
this new job, they shut it down, and so he's
gonna have to be content where he is for a
little bit longer. The reality is a lot of this

(11:24):
is happening in the tech sector, and it's hard to
know if we're in store for some incredibly minor economic
pains that are keenly felt in just a few of
these specific sectors, or if the entire economy is likely
going to feel some of the wrath. But yeah, despite
our inability to predict the future, to predict the reality
of a likely recession or not, the truth is more

(11:45):
economic pain is probable.

Speaker 1 (11:47):
Yeah. I mean, what the Fed is attempting to do
by rationing up interest rates is exactly that, right, Like
they're trying to cool the economy off. They're trying to
curb demand and thereby slowing the rate of inflation, and
what that means for a lot of folks. It's probably
gonna mean lost jobs. And so if you're paying attention
to the different macro trends out there, the ritting, it's
been on the wall. And you know, we're not saying

(12:09):
that you need to start watching CNBC regularly or that
you need to read the detailed minutes from each FED
meeting and see what Jaypal has to.

Speaker 2 (12:17):
Say, although you like to do that with your monocolon sometimes.

Speaker 1 (12:19):
In order to know how it is that you should
handle your money and what you should be doing. But
we are saying that getting at least a sense for
which way the economic winds are blowing, you know, just
like lick your thumb, kind of stick your thumb out
there and see which way the winds are blowing, that
can be helpful and it can allow you to use
those winds, those readings to your advantage as opposed to
just getting tossed around by them. I don't know much

(12:42):
about sailing, but you want to face your sales in
a way that captures the wind.

Speaker 2 (12:47):
Well, basically, got airplanes if you're flying across the world,
why is there a two hour difference between your flight
there and your flight back. It's head winds and tailwinds, right,
And if you're using tailwinds to your advantage, you're gonna
arrive your destination more quickly. And I think the same
thing can be true with our money. If we stay flexible,
then we are more liable to take those headwinds and

(13:08):
turn them on their face and actually make them more
beneficial to us while everyone else is just suffering from
the reality. If we can see the direction in which
things are headed and plan and react accordingly, we can
be in a much better position to pounce when things
are difficult, right exactly.

Speaker 1 (13:22):
Yeah, instead of sailing into the wind, figure out where
the wind's blowing and say, well, I kind of want
to go in that general direction, and that I can.
I don't know. Again, I don't know anything about sailing.
You use the rudder and you kind of points your
boat that direction starboard. I don't know, port, I don't know.

Speaker 2 (13:38):
But the truth is that economic cycles are a fact
of life too, right, So that deserves to be talked about.
It's not like these headwinds that we're starting to see
that we've never seen them before, or that they're impossible
to identify, which.

Speaker 1 (13:54):
We just haven't realized them. We haven't experienced them recently
like we have in the recent past.

Speaker 2 (14:00):
Yeah, yeah, And the truth is that the more we
know about history, the more we can see. If you're
only looking at the past twelve years of history, you
have a limited scope, a limited knowledge. That's why what
the folks who don't know history are doomed to repeat it.
And the more we can know about the history of
economic cycles, the more we can be prepared to be
in a position to flourish when the next downward economic

(14:22):
cycle comes along. And the reality is that there are
fluctuations between periods of economic growth and contraction. We've had
a pretty good growth run over the past twelve ish years,
something like one of the longest sustained bowl runs in
history until the beginning of this year. But it appears
that not just the stock market heading for a down period,
which we've experienced in a big way this year, but

(14:43):
then we might be headed for a period of contraction
economic contraction in the near serm future. Part of that
is because our economy at least partially experienced some of
that sustained growth thanks to historically low interest rates which
incentivized that growth. But when you start to see that
these cycles happen regularly, it's easier to see how you
can maybe use them to your advantage in small ways,

(15:03):
making hey while the sun shines and Matt, let's give
one quick example of this. You know, we talked ad
nauseum about refinancing mortgages mortgage debt when rates were historically low.
I feel like maybe it felt like we were beating
a dead horse. After well, like we were the boys
who cried Wolf.

Speaker 1 (15:19):
Yeah, we made a video and stuck it up on
Instagram for encouraging people to refi while rates were low.

Speaker 2 (15:24):
We kept saying, rates are not likely to get much
better than this.

Speaker 1 (15:28):
We didn't know if they're going to continue to go ower.
But I guess what I'm saying is I don't want
to be like, well, we knew that they were going
to go up. We didn't know.

Speaker 2 (15:34):
We didn't know they're going to go up.

Speaker 1 (15:35):
But what we did know at that point in time
was that our rates right now the lowest they've been
in basically the history of mortgages. Yes, and so you
have to take that truth that you know the facts
on the ground, what you know now, and take action
based on those facts.

Speaker 2 (15:49):
Yeah. So while we didn't know what the future held,
we didn't know rates were going to spike in the
way that they have. We didn't know that inflation was
going to do what it's done. We couldn't have predicted
that either. The truth is, you could have locked in
an uber low mortgage rate for thirty years to come,
not knowing what the future holds, but being able to
take advantage of at least what the present's giving you. Yeah.

Speaker 1 (16:10):
And speaking of inflation, I mean we're literally in a
cycle of inflation right now, of higher inflation. Even different publications,
different media outlets out there, like the Wall Street Journal,
they literally created an inflation calculator so that you could
figure out what your specific rate of inflation is. Right,
And so, for instance, did you buy a house this
past summer, Did you also happen to eat a lot

(16:31):
of bacon and then you also bought a new luxury
ev at the same time. Well, if so, then you
experienced peak inflation. Yeah, for a bunch of goods simultaneously
at the same time. But a financially flexible individual instead
would want to make different choices. Right, they would have
maybe opted to have kept on renting. They maybe wouldn't

(16:53):
have bought any bacon, and they they would have kept
driving their old mini van. And so when it comes
to spending, attempting to be financially flexible means adapting your
buying decisions based on what's happening with prices, and so
inflation is one of the major players. It's one of
the big factors that has a dramatic impact on what
it looks like in our current economy, in our current environments.

(17:14):
But we're actually going to talk through some other examples
of what it looks like to be financially flexible in
your life. We will get to that and more right
after this.

Speaker 2 (17:32):
All right, man, let's keep talking about financial flexibility. It's
a really important skill to adopt because when, yeah, those
headwinds are staring you down in the face, if you
don't adapt, you're just going to move slower. It's going
to feel like you're marching up hill like our parents
had to do to school both ways when they were kids. Right,
We heard that a lot.

Speaker 1 (17:50):
But honestly, you know what this reminds me of. It
reminds me of did you ever do, like in school
where you had to create a structure out of either
Plato or something like that, Plato or or something that
was more flexible. I forget what it was, like jelly
or something like that, and you connected toothpicks with those
different materials and I was like, Okay, which one of
these structures is going to be able to withstand shaking

(18:10):
or whatever? And I don't know why, but nobody thought
that the flexible structure was actually going to stand. And
I was like, oh, of course, the one that's solid.
And you slowly shake that one and it falls apart
because there is no flexibility in the joints. But the
structure that's made with the more flexible joints, it shook
around a little bit, but guess what, it did not
fall over. That's basically what we're talking about. When it

(18:31):
comes to being financially flexible. You want to have a
little bit of give in the joints. You want to
be able to be adaptable when it comes to the
different circumstances that we face.

Speaker 2 (18:38):
Yeah, and one of the simplest ways we can gain
more financial flexibility in our lives is by living frugally,
by keeping major expenses in particular to a minimum in
your life, and so the largest sections of your monthly budget,
they're likely housing and cars. And if you act those
two line items in a meaningful way, that's going to
have a massive effect on how flexible you can be.

(18:59):
So let's say you're an house hacking, right, you slash
that expense even more. Like, that's financial flexibility on steroids.
You're able to turn your living situation potentially into a
profit generator, which just gives you an insane amount of
flexibility instead of turning something that is a defis every
month turning it into an asset every month is That's

(19:19):
an impressive way to change your trajectory of your personal finances.
You can become insanely financially resilient doing that. And not
everyone wants to rent out a room in their place
or wants to sleep in the living room, like our
friend Craig Kerlop did. Matt, that was an interesting choice
on his part, but it certainly he would credit that
to a lot of the reasons. He's been able to
accomplish his financial goals a whole lot sooner in his

(19:40):
twenties and early thirties. And I get that that's not
for everyone, but it's important to mention that the more
you can reduce the bigger line items in your budget,
cutting a car out of your life or at least
reducing rent by moving into a smaller place, I don't know,
there are other options out there for you. The more
creative you can get, though, you become so much more
financially limber, and that's going to have a massive impact

(20:01):
on your ability to withstand an adverse or an uneasy
economy moving forward.

Speaker 1 (20:06):
Yeah, and we do like to focus on those big expenses,
right because we want you to get some of those
big wins under your belt before, certainly before you're kind
of just fretting and pouring over these really small expenses.
But like the small things in life matter too. Obviously
they're not going to move the needle quite as much,
but you know, getting those small, specifically recurring bills reduced

(20:27):
is really important. And I think that's the key word,
is the fact that they're recurring. That's how these small
expenses go from being something that seems like you shouldn't
be paying any attention to maybe giving a little bit
more of your time and attention because there is this
outsized impact that they have because the fact that they
repeat again and again and so on one hand, it doesn't
seem like a big expense. But if this is a

(20:48):
recurring expense or like a subscription and you never cancel it,
like we're talking about like a you know, it makes
me think of like scrabble you get like a double
triple word score. This is like a sixty x multiplier impact.
If this is an expense that you have potentially.

Speaker 2 (21:02):
For the rest of your life. And like we talked
about it on a recent Friday flight, people underestimate the
amount of money they're spending on subscriptions and so they
downplay it like, oh, yeah, I know, I've got some
monthly recurring expenditures that I probably could acts, but it's
not that bad. Yeah, But a truth is for most people,
it's it is bad. It's worse than they think.

Speaker 1 (21:20):
Exactly, Like even your self in service, so your internet
bill or a gym membership, what you are paying for insurance,
all of these things matter, even something as small as
you know, trading down from a name brand to a
store brand or opting for like a cheaper cut of meat.
You know, all of these moves are you showing some
flexibility to save when costs are rising.

Speaker 2 (21:39):
Yeah, yeah, that's a good point. Like these are all specific,
tangible ways that you can make yourself more financially resilient
and more financially flexible by cutting spending in the big
ways and the small ways. And that we talked about
creating a bare bones budget back on episode three sixty two.
I think that's an episode that that most folks should
go back and listen to if they haven't heard it,
because having one of those in place is a great

(21:59):
way to be able to pivot if and when you
need to. And so basically what we mean by a
barebones budget is you've got your normal budget and you're saying, like,
this is what I spend typically every month, but there's
a lot of fluff in there. There's a lot of
things that are nice to have a lot of luxury,
but they're not need to have, right the roof over
your head, maintaining insurance, like putting food on the table,
those are need to have. And so creating a barebones

(22:21):
budget that helps you see exactly all the fluff you
can cut instantaneously if the worst possible thing happens. Let's
say you do lose a job or something like that.
If you saw a reduction in income, knowing that you
can immediately pivot to the barbones budget versus the one
you normally use and reduce those expenses in a meaningful way,
basically overnight. By implementing the bearbones budget, that allows for

(22:44):
a whole lot more peace of mind, and it provides
you additional time to find another job or restore that income.
We've heard from listeners Matt who have implemented something like
this and they've said, you know what, and they have
lost a job and they've let us know, guess what.
Having more money and say and having a bare bones budget,
those two things dramatically impacted my mental health while I

(23:06):
was out of work. It made me feel less like
behind the eight ball and more like I had some
breathing room, I had some margin, and I could take
my time to see what was next, as opposed to
feeling like you got to go out there and get
the first crappiest job that you that you get offered.

Speaker 1 (23:20):
Yeah, it's it's a hard financial tool, and that it
allows you to see how much money you're actually spending,
but it's it's sort of like a softer tool as well,
Like it's a boost, it's it's an emotional boost that
gives you the confidence to know that things are likely
going to be okay. And so let's kind of talk
through some different scenarios, some ways where you might see
financial flexibility play out in your life. And like, one

(23:41):
of the ones I'm thinking of is that the more
flexibility you have, the more that you're gonna be able
to pounce on a deal when it comes along budgeting.
It's a great way to play in your spending Wisely,
I always like taking that approach. But what if you
come across a deal that's just too good to pass
up but you haven't.

Speaker 2 (23:58):
Budgeted for it.

Speaker 1 (23:58):
Are you going to be like a hard hardliner? Are
you gonna stick with the budget and be like, oh,
well I didn't budget for it, therefore I have to
pass up on this, right, Well, this is where having
some financial flexibility can come in handy you. Obviously you
don't want to overdo this, right But the truth is
that having an additional chunk of money set aside for
killer deals like a like an outrageously cheap flight or

(24:19):
a mountain bike that's fifty percent off, that can be
really nice and it can allow you to feel like
you can make that a priority when you otherwise may
have just walked away all bumbed, realizing that like, well,
I'm gonna have to maybe I'll budget for that next year.
It's like, no, pounce on the deal. Take advantage of
the situation and being flexible and having that extra cash
on hand is what's going to allow you to do that.

Speaker 2 (24:38):
Yeah, it makes me, But I don't really have to
be saving for those cheap flights, Matt, because I'm gonna
be your free companion from here on out, which is nice.

Speaker 1 (24:45):
Still going to cover the fees and taxes, dul That's.

Speaker 2 (24:46):
True, but those are cheap. Those are very cheap. But
let's talk to financial flexibility. It also means being flexible
with your timeline and your goals based on what's happening
with the economy and with the market in general.

Speaker 1 (24:57):
Yeah, it's like a mental flexibility.

Speaker 2 (24:59):
Yeah, for sure. You can see this really acutely right now.
In the housing market. Let's say that for a couple
of years you've been saving up and looking to buy
your first house, which is exciting, right, That's something you've
been looking forward to. It was exciting, It's not exciting anymore.
A lot of folks, it's actually quite scary now. They're
not excited about it, right because and maybe you're getting
close to that ideal twenty percent down payment amount and

(25:19):
you're like, man, I've been listening to how the money
and I have gotten so much better with my finances,
and I am socking away more and like we are
at this point and we are ready to buy. But
now because of rising interest rates, housing has become way
less affordable. The question is like, should you still pounce?
And so much of that depends on so many specifics
of your situation. We can't speak to that directly. But
highly flexible folks, a lot of highly flexible folks would

(25:42):
opt to wait, hoping to see price declines in the
coming months. But let's say the house of your dreams
comes along, A highly financially flexible person might also choose
to buy the home and then refinance at a later
date when rates do eventually go down. But being financially flexible,
it's all about holding out for a better environment or
waiting for the right thing to come along, instead of

(26:03):
kind of forcing the issue. Opting to become house poor
by overspending is doing the exact opposite of staying financially flexible.
You're you're locking yourself into something that is going to
prevent your financial flexibility in the future.

Speaker 1 (26:15):
That's right, Yeah, changing your spending, changing your financial goals,
shifting your timeline. That'll make sense based on what's happening
in the economy. But how can you be more financially
flexible when it comes to earning money. Let's talk about
that here for a second, because one thing that goes
a long way in that endeavor that's worth discussing is
to focus more on amassing peace out money. I don't

(26:38):
even remember what episode it was, but we'll link to
it in the show notes. When we originally talked about
peace out money. This might even be in the sub
one hundred episodes ranged all the time ago. But some
of our listeners might have their minds entirely focused on
fire on financial independence, retiring early. They want to amass
a bunch of money, They want to stop working way
earlier than most folks. That's not a bad aim, but

(27:00):
the reality is that financial independence it's more on a spectrum,
and it's not only achieved by amassing Typically, what we'd
say is twenty five times your annual expenses and then
quitting your job. Because the more money that you're able
to bank, the more cash backup that you have, the
boulder that you can be in your choices, essentially buying
yourself some freedom. And we would say that having a

(27:22):
fatter bank account, having more cash on hand, can empower
you to do something like change careers, to switch to
a career that might pay a little bit less but
gives you more of what you're now looking for in life.
It can allow you to seek employment just elsewhere, or
to even ask for a promotion or for a raise
that you might be nervous to ask for. All of
these things are more possible when you've got that piece

(27:44):
out money.

Speaker 2 (27:45):
Yeah, and you mentioned seeking employment maybe that might not
pay you as much, or maybe going to work for yourself, right,
that's another thing you can consider. It feels like when
you have more financial flex when you have more peace
out money, more money sitting in your bank account makes
you feel more confident, more run way to go start
your own thing and see what happens. It's also important
to mention that having multiple streams of income is another

(28:06):
way to make yourself more financially flexible. Not putting all
your eggs in one income basket can help you feel
more at ease and offer you more flexibility. Especially when
you're seeing nasty economic headlines and you're worried about your
own financial future. Well, not having it all tied to
one company or one paycheck can help alleviate least some
of those fears. If you lose your main job and

(28:27):
you've got no other income coming in, that can be
really scary. And so that's part of what we like
about owning rental properties, the cash flow that they produce
each year and each and every month. It means that
we don't have to solely rely on our small business income.

Speaker 1 (28:40):
But there are a lot of money may not always
be around. Hopefully it will hopefully yeah, well, and hopefully
please don't yeah right, exactly what if Matt says something
completely ridiculous, which is highly likely, highly unlikely, and then
it's going to be you. If anyone gets canceled, it's
going to be Joel.

Speaker 2 (28:57):
That's probably true, but they're also sorts of things that
could happen to dry up some of our income, like
ad spending could dramatically reduce, So that's true. That's a
big part of our livelihood. But having another stream of income,
having other sources where we make income every month means
we're not as reliant specifically on the podcast to make money.
And so that's something you can implement into your life

(29:19):
as well. And it's important to mention not all the
ways that you can generate additional income streams are not
created equal. But side gigs are one way to do it.
Although here's the thing, you're straight up trading time for
money when you choose to drive for Lift or uber
or something like that. Having a side hustle is kind
of different. It allows you to start building up your
own business, which can be another effective route and it's

(29:42):
often more sustainable, but it often takes a little more
time for that to pay out from a financial perspective.
But we would say building up other streams of income
over time so you aren't reliant on a single job
or a single employer is massively helpful. It makes you
a more financially flexible person. Right.

Speaker 1 (29:57):
Yeah, So on that note, actually, it's important to keep
you your eyes open to where opportunity exists, right and
to be able to strike when you know while the
iron is hot. Weird economic times they have often been
the best time for people to in particular, let's start
their own businesses. This kind of seems counterintuitive, but it's
totally true. We've actually seen the pandemic accelerate the rate

(30:19):
at which small businesses are being created. We think that's
a good thing. Before the pandemic, they were around is
something on average like two hundred ninety thousand new businesses
being formed every month, but then by July of twenty twenty,
that spiked to over five hundred and fifty thousand new
businesses formed in just one month. It's like almost double yeah,

(30:39):
and you know it's leveled off now according to the
data from the Census Bureau, we're holding steady at around
four hundred and fifteen thousand new businesses per month. But
that is a large number of individuals who discovered that
they were either a unhappy with the work that they
were doing and decided to make a change, or b
At the very least, it's a large number of entrepreneurs
who have identified a problem, right they focused in on

(31:02):
a whole in the market that they are seeking to fill.
Anytime there are changes within the economy, there's also going
to be opportunity there. You have to be able to
recognize those problems and how it is that you can
provide value. It makes me think about Joel, like Whenkate
and I started our photography company, oh my gosh, like
thirteen fourteen, fifteen years ago, I didn't can't even do

(31:23):
the math now, but nobody was basically providing the kind
of photography that we knew that we could provide. And
so I say that because it sort of sounds like
a cold, emotionless business decisions like, oh there's a need
in the market, Oh, there's value to be provided, But
that's so important in order for a business to be
able to sustain itself, right. I think a lot of

(31:43):
times when folks talk about entrepreneurship, they use words like passion,
They use word like they try to over romanticize it,
and it's about, I don't know, just like all of
these kind of gooey, mushy terms when it comes to
the business and how it's this thing.

Speaker 2 (31:59):
That they're really excited about.

Speaker 1 (32:01):
There's a lot of emotional words attached to it as
opposed to some of these harder, more business types of words.
But it can't just be about passion and what it
is that you want to do you have to actually
identify a market. And so I think it just really
pays to be aware to the different opportunities that might
be revealing themselves to you in this current economy.

Speaker 2 (32:20):
Possible to be passionate about something that actually loses you
money instead of makes you absolutely that's called a hobby,
yeah right, or internet gambling, which is a bad idea. Well,
it makes me think too. Talking about like flexibility and
kind of pouncing on opportunity, Matt and starting your own business.
That just makes me think of a conversation I had
with someone when we went to FINCN this year, which
is our nerdy financial media conference, and someone told me

(32:42):
about getting a stimulus check and how that revolutionized it
changed her life. And it's amazing how just like this
small influx of cash from the government unexpectedly, when everything
else was going well in her life, she was able
to still meet her other financial obligations. It was like
seed money for her to start her business. Yea, And
now she's massive, like she's making meaningful income from that business.

(33:05):
She's been able to quit her regular job. These are
the kind of things like this is what we're talking
about with financial flexibility. What do you do when an
unexpected sum of money drops in your lap and you
know what Matt coming soon in a few months. A
lot of people are going to experience that with a
tax refund. What are you gonna do when that drops
in your lap? Are you going to use it to
fund your next venture, to start something, or are you

(33:26):
gonna spend it on stuff? We would say the financially
flexible person would take that as an opportunity to start
something meaningful as opposed to just soaking it up and
making some more random purchases. That's right.

Speaker 1 (33:38):
So yeah, these have been a few different examples of
how financial flexibility can manifest itself in your life. But
we're gonna continue down the practical side of things. We
want to make sure that you have some practical steps
that allow you to achieve a financial flexibility and we
will get to those right after this. With all right,

(34:06):
let's keep growing. We're talking about how to become more
financially flexible. And the reality is, like most Americans, the
financial state they're in, they've got no flexibility.

Speaker 2 (34:15):
Right. Their income barely exceeds their outgoing. They don't have
enough margin to be flexible. They're living paycheck to paycheck,
and we've talked about the stats of how even people
making significant amounts of money six figures in many cases
are still living paycheck to paycheck. It's a real problem.
And so what we want for our listeners, no matter

(34:36):
what your income is, we want you to have flexibility
in your life so that you can make choices that
are best for you and your family no matter what's
happening in the broader economy as a whole. And so
far we've painted a picture of what it could look
like if you're financially flexible. Hopefully we've laid out a
few different scenarios that you can grasp onto where you
can see, oh, this is a way in which I
could take advantage of this low rate at this period

(34:57):
of time, or a way in which I could pounce
because I got some extra cash, or a way in
which I could modify my behavior based on what's happening
around me. But let's let's do more. Let's get super
specific and practical. What steps do you need to take
to become more financially flexible in your life? And we
would say having solid savings is a foundational element of
flexible finance. Right Being in a strong cash position is

(35:19):
kind of the bedrock of being able to do so
much what we have already discussed. So whether that's the
ability two pounds on a deal because companies are liquidating inventory, right,
or whether that means having the financial margin on hand
to be able to launch that new business venture, whatever
it is you're looking to do. It's it's crucial to
have at least that basic e fund amount that we
always talk about, twenty four hundred and sixty seven dollars,

(35:42):
and after that you want something like three to six
months worth of expenses in your savings account on hand.
That in and of itself is going to make a
massive difference. And how much, by the way, depends on
your specific financial situation. But getting to that level, getting
to that point, if you're not there yet, you'll be
some prized at just how mentally free you feel and

(36:02):
how much actual backstop you have to make different decisions
in your life based on what's happening.

Speaker 1 (36:07):
Yeah, well, I mean speaking of mental freedom, right, like
having that cash on hand, it has these non monetary
benefits as well. It's going to reduce stress in your life.
More cash equals more peace of mind, and when you
are living.

Speaker 2 (36:19):
Paycheck to paycheck.

Speaker 1 (36:20):
You know where you're on the financial precipice. That is
a stressful place to be, and it can also get expensive.
Folks who have no margin are more likely to overdraw
their checking account, for instance, leading to fees that can
exacerbate the problem. If that's the case, if you're banking
with a bank that is charging you crappy fees, we
would recommend that you bank elsewhere, go with one of
the great online banks that we talk about all the time.

(36:43):
But you're also going to be more likely then to
turn to worse financial products or to even get worse
deals from companies that you end up doing business with,
for instance, payday loans, or if you're in a bad
financial state, let's say your credit isn't so great, well,
you're going to pay more for car insurance in most states,
making it even harder to get ahead. And then, no surprise,
right scrambling to pay all of these additional fees, all

(37:05):
of these new bills, these new payments that you have
every month, is going to continue to take a toll
on not only your mental health, but just the impacts
that it's going to have on your physical well being
as well.

Speaker 2 (37:15):
Yeah, less financial flexibility means just you're beholden more to
companies you're doing business with, and that creates additional financial
hardships and mental stress too. And it's important to note
as well that there are actually some financial tools that
can help you be more flexible. So we would say
savings is a part of that. It's a crucial step
in order to become more financially flexible. But let's talk

(37:37):
about some actual tools you can use simultaneously that might
help you, that might aid you in being more flexible.
Let's start with like, if you own a home, write
a home equity line of credit that can allow you
to reduce the emergency fund that you have to have
on hand, allowing you to potentially invest a little bit
more if let's say all the markets down right. It

(37:58):
still offers a bit of financial backstop at much less
egregious interest rates than credit cards. Because if you don't
pay your credit card bill off on time and in
full every month, we're not cool with that. That doesn't
provide you financial flexibility that makes you beholden to the
banks into the credit card providers. So the goal is
to not tap that helock, but to have it available
should you need it in case of an emergency. And

(38:20):
we don't think this takes you off the hook for
having cash on hand. It doesn't mean we want you
to be comfortable having fifteen hundred bucks in savings like
that's not enough. But it can be an effective backup
to the backup. That's how we think about it. And
the same is true with a roth IRA because that's
actually one of the most flexible accounts you can sock
away investment dollars into. You're putting in after tax dollars.

(38:41):
You have the ability to take all of those contributions
out tax and penalty free because of the way the
roth is constructed, and so if you've been contributing for
a bunch of years some of that wrath money, it
can act as a backup to the backup too. Again,
like tapping that helock, tapping your wrath to pay for
consumption really bad idea. But the fact that you can
have both of these tools acting as extreme backups does

(39:04):
allow for more financial flexibility. It means you do have
a last line of defense basically if something does go wrong.

Speaker 1 (39:11):
But also investing that is important as well. And specifically,
let's talk about being opportunistic because investing more when the
stock market is on sale. That can be a way
to take advantage of some not so great economic news
of a not so great economic cycle. That being said,
it's easier than done than done right. Like some folks,
they will sit on cash for far too long in

(39:32):
an effort to invest while the market starts to sag
at They want to catch it at the bottom basically,
But then that often means that they're missing out on
opportunities along the way if they get the timing wrong
and they're trying to time it perfectly. But in the
same way that we want you to be able to
pounce on a deal when you see an item marked
down or an item that's on clearance, we want you

(39:52):
to adopt that same mentality when it comes to your investments.
And that's great news if you are in the wealth
growing stage of your life. But let's say you're getting
closer to retirement. Maybe you'd love to quit tomorrow, but
you've seen a fairly dramatic decline in your retirement account. Well,
this is where making an intentional effort to be flexible
is really going to pay off. You've got a couple
options here. You could continue to work a little bit longer.

(40:14):
Where you are, you're keeping that revenue stream alive while
giving your investments time to recover. Or you could opt
to reduce your lifestyle right like maybe pushing off some
of the some of the expensive travel that you've been
hoping to do. Either way, that would allow you to
sidestep that sequence of returns, risk that risky face by
immediately taking out too much of your portfolio immediately after retirement,

(40:35):
hamstringing your retirement plans. And you know you do this
by not tapping those accounts, allowing them time to recover.

Speaker 2 (40:43):
Yeah, man, you're what you're saying there too? Is it?
So much of it depends on your specific personal financial situation, right,
how you're able to be flexible and how you're able
to pounce, Because it's going to look different for someone
who's in their twenties versus someone who's in their sixties.
And that's a good point, Like, but what can you do?
I think it feel pretty crappy if you're in your
sixties and you were ready to retire this year or

(41:04):
next year or something like that. But the truth is,
there are options available to you. They can allow you
to be more flexible and it's not always a fun
or easy decision. But the truth is, like you have
more ability, more say over your life than you think.

Speaker 1 (41:19):
Yeah, Like it kind of reminds me of traveling by
car because maybe, like the older school method would be
you pull out the Ray McNally, you look at the
map whenever you print off the directions via map quest,
and you've got all the pages there sitting in your
passenger seat, and you've identified.

Speaker 2 (41:34):
A route, a path that you're going to take. Even
by the we're not old enough to have done that.
So I never did that. I printed out a map
Quest directions back in the day, but I.

Speaker 1 (41:40):
Grew up as a kid sitting in the passenger seat
looking at the alice. Oh yeah, dude, I loved it.
I was like I had the binoculars. I would like
look off in the distance for police, just in case
that happened to be going h going too fast. Never
worked out though, because it's so shaky, But like that's
kind of the old school method, and that's what it
looks like to not be flexible because we didn't have

(42:02):
the information to let us know that there is a
better route. But today what do we have. We've got
ways and all of a sudden, it's like rerouting. By
going this route, you will say, however much time and
tells you when police are on the coming up. But
there's those there is a degree of flexibility when it
comes to following directions like that. But I mean, in
my experience, I have always followed those instructions because they

(42:24):
do get you there faster.

Speaker 2 (42:26):
And so it.

Speaker 1 (42:26):
Takes having a more open spirit, a willingness to try
something different even though that wasn't your original intent.

Speaker 2 (42:33):
Yeah, and by the way, I think it's important to
mention that there are ways in which you could attempt
to be financially flexible, taking advantage of different cycles that
might actually produce the wrong results. Let's say you're like,
wait a second, this stock is down ninety five percent,
Maybe I should invest now because because it's not doing
so hot, But that that would be different than what
we'd recommend. We don't want you to invest in individual

(42:54):
stocks basically, no matter what, unless you're just it's play money,
right that you're messing around with.

Speaker 1 (42:59):
Yeah, but there's a fine line between being opportunistic and then.

Speaker 2 (43:02):
Speculating, yes, speculating being stupid. Yeah, the truth is, like,
how can you become more financially flexible. Well, it makes
me think about just physical flexibility, Matt. My body. I
am not the most flexible guy. I remember in elementary
school my gym teacher would say, like I would be
doing the sit in reach and they be like, really no,
but for real, you should try. I'm like, no, I
am trying. I'm just not flexible. The Presidential Fitness Challenge

(43:22):
is yes, and I was horrible at it, largely because
I'm not flexible at all.

Speaker 1 (43:28):
But it's like you can do a decent number of
jump ropes right or whatever. I can't remember what else
we got the rulers sit in reach thing, Like I
was terrible at your foot against the box, you have
to like reach past. Yes, not happening for Joel.

Speaker 2 (43:38):
I couldn't do it, but I probably could, right if
I started working on it and I wanted to get there,
and I was doing a certain amount of stretching every
single day.

Speaker 1 (43:46):
There's a way that you can forge it, Joel.

Speaker 2 (43:48):
Right, I just need to make it a priority. But
my lower back would probably feel better if I did too.
But as James Clear says, Matt, I love this quote.
He says, the ultimate form of preparation is not planning
for a specific scenario. But I'm mindset that can handle uncertainty.
So we didn't talk a lot about mindset. We talked
a lot about We try to give a lot of
practical advice in this.

Speaker 1 (44:07):
Episode a little bit, just as far as shifting your
goals and changing what it is that's an acceptable financial
goal for you.

Speaker 2 (44:13):
Yeah, And the truth is, you can just shake your
fist at the economic conditions, right or you can adapt.
You can be the get off my lawn type person
who is just angry at the situation, or you can
make a change. And you can't plan for every potential
scenario that might occur. That is true, but most of
us have more wiggle room and more say over where
our dollars go than we think. And the reality is

(44:37):
that all of us can plan more effectively for uncertainty,
which of course is something you're going to regularly encounter
for the rest of your life. Uncertainty change. Like you
said earlier, Matt, is the only constant. Uncertainty is a
reality of life, and so it's worth spending more time
preparing yourself and your finances so that you can be
more adaptable, especially like who knows what the future holds.
We couldn't have predicted a lot of the things that

(44:57):
are happening now. We don't know what's going to be
happening over the next year or two. Will inflation be tamed,
will mortgage rates come down? We don't know. But the
more adaptable and flexible you can be, the more you
can take advantage of economic cycles as they shift.

Speaker 1 (45:11):
And you know it, all right, man, Let's get back
to our beer you and I enjoyed on this episode six,
which is a dark rye Seyson with layered malt flavors,
pleasant stone and mineral notes and a dry finish. I
didn't even launch into my tasting notes yet. That's just
a bottle reading what.

Speaker 2 (45:27):
The bottle said.

Speaker 1 (45:28):
This is by Upright Brewing out there in Portland, Oregon.
What were your thoughts on this one, buddy?

Speaker 2 (45:33):
So when I opened this bottle, I thought, Sayson, great,
I'm looking forward to this one. It was so very
different than I expected it. Actually, I didn't think it
was gonna look like this or taste like this.

Speaker 1 (45:44):
It didn't. Yeah, didn't have those typical traditional season notes.

Speaker 2 (45:49):
That being said, I liked it in a lot of ways.
It was more like Belgian du bell in my opinion,
O it had like some of those spices. It was
actually darker than I expected. Most sexons are are lighter.
It's not my favorite style, but it is a decent
fall beer as kind of like the perfect time to
drink it, if we're gonna drink this beer early winter beer. Yeah,
so I'll say I liked it even though it was

(46:10):
not what I was what you're expecting when I popped own.

Speaker 1 (46:12):
It kind of has like this unrefined character to it,
Like it almost kind of feels like a like tastes
like a really good homebrew.

Speaker 2 (46:18):
I was gonna say, kind of like kind of like
you unrefined, unrefined like me.

Speaker 1 (46:21):
It's so like the the malts. I feel like, are
you I mean you mentioned a double or a du bell?
I feel like it tastes more like a Belgian quad
but then without the big robust backbone, Like it's got
those darker notes and some raisin vibes, totally raisings going on,
but it doesn't have those Belgian yeasts that give it
that super Belgian flavor.

Speaker 2 (46:42):
Just has those darker flavors.

Speaker 1 (46:43):
It's real brown bread raisins. It wasn't overly sweet as well,
so it definitely had that dry character, but simultaneously it
was dark, right, So I feel like you don't often
get dry and dark in the same bottle normally. If
it's dark, that means there's a lot of sugar in it.
And the fact that this is dark and dry, it's
almost as if it doesn't compute, like these two sort

(47:04):
of flavors shouldn't belong.

Speaker 2 (47:05):
Together, like an enigma beer.

Speaker 1 (47:07):
Yeah, yeah, it's it's very very interesting. It's not a
combination that you would expect.

Speaker 2 (47:12):
But I liked it.

Speaker 1 (47:13):
I would say pretty good. And it's always fun to
have a beer, a different kind of beer than what
we're typically used to, as well as a beer by
a brewery that we've never had before. We've never had
an upright brewing beer. Looks like it's got a bass
left on that hop, so it says upright. I wonder
if it's like an upright base or something. I wonder
if that's like the origins of this brewery. But appreciate

(47:33):
you picking this one up, and I'm glad that you
and I got to share it today.

Speaker 2 (47:36):
Agreed, all right, that's going to do it for this episode.
If you want show notes links to some of the
articles or previous episodes we mentioned. You can find those
up on our website at howtomoney dot com.

Speaker 1 (47:45):
That's right, buddy. So that's going to be it until
next time. Best Friends Out, Best Friends Out

Speaker 2 (48:00):
Four

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Hosts And Creators

Joel Larsgaard

Matthew Altmix

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.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Forging Financial Flexibility in an Uneasy Economy (Bestie) #969