ABOUT THE GUESTS

Your Money, Your Wealth guest Nick Loper from SideHustleNation.com
ABOUT Nick

Nick Loper helps people earn money outside of their day job. He's an author, online entrepreneur, and host of the "Best Business Podcast"-nominated Side Hustle Show, which features new part-time business ideas each week. As Chief Side Hustler at SideHustleNation.com, he loves deconstructing the tactics and strategies behind building extra income streams. [...]

ABOUT HOSTS

Joe Anderson
ABOUT Joseph

As President of Pure Financial Advisors, Joe Anderson has led the company to achieve over $2 billion in assets under management and has grown their client base to over 2,160 in just ten years of the firm opening. When Joe began working with Pure Financial in 2008, they had almost no clients, negative revenue and no [...]

Alan Clopine
ABOUT Alan

Alan Clopine is the CEO & CFO of Pure Financial Advisors. He currently leads Pure Financial Advisors along with Michael Fenison and Joe Anderson. Alan joined the firm about one year after it was established. At that time the company had less than 100 clients and approximately $50 million of assets under management. As of [...]

Published On
April 17, 2018
250 Creative Ways to Save and Make More Money with Nick Loper, SideHustleNation.com250 Creative Ways to Save and Make More Money with Nick Loper, SideHustleNation.com

Nick Loper of Side Hustle Nation shares just a few of the 250 ways he’s found that everyone from millennials to baby boomers can make more money and trim expenses in this new era of creative entrepreneurship and freelance work – from shuttling booze to making some bread teaching people to make bread. Plus, Joe and Big Al do the math for a listener who wants to know if they need to curtail some of their spending as they plan for retirement.

Show Notes

  • (01:30) Retiree Side Hustles
  • (10:27) Why Nick Loper Started SideHustleNation.com
  • (19:39) Nick Loper, SideHustleNation.com – How to Get Started Side Hustling
  • (28:02) Email: Are Our Finances on Track or Are We Overspending?

Transcription

So we’re about to get into all the ways you can make and save more cash, and here’s the first one: visit YourMoneyYourWealth.com and hit the “Special Offer” button for a free gift from Joe and  Big Al. Key Financial Data for 2018 – this quick one-page guide has a ton of useful information that will help you organize, plan and save. Download it free by clicking “Special Offer” at YourMoneyYourWealth.com

“We’ve seen such an increase in the rise of even just like the freelance economy. There are some estimates that say by 2020, by 2025, that’s going to be half of the workforce is this freelance economy. And so you think of people learning those skills, to go out and get clients on their own, to bill work, to figure out what skills they have that are in demand – that’s where it’s really exciting. That’s probably the gateway drug to entrepreneurship. It’s like, “OK, what service can I sell, what skill do I have that somebody else is willing to pay for?” – Nick Loper, SideHustleNation.com

That’s Nick Loper from SideHustleNation.com. Today on Your Money, Your Wealth® he shares just a few of the 250 ways he’s found that everyone from millennials to baby boomers can make more money and trim expenses in this new era of creative entrepreneurship and freelance work: from shuttling booze to making some bread teaching people to make bread. Plus, Joe and Big Al do the math for a listener who wants to know if they need to curtail some of their spending as they plan for retirement. I’ve got a feeling plenty of us might want to take notes during that discussion. Now, here are a guy who has that booze delivery app front and center on his iPhone, and another that thought that the side hustle was a dance. Joe Anderson, CFP® and Big Al Clopine, CPA.

1:30 – Retiree Side Hustles

JA: We’ve got a pretty interesting guest coming up here next segment: Nick Loper, Side Hustle Nation.

AC: Yeah Joe, and it turns out that a lot of retirees are now wanting a side gig when they retire, and a couple of recent studies, like a Gallup poll, three in four Americans plan to work beyond traditional retirement age. Which, I’m not sure if that’s 65 or 62, that’s all they said, “traditional retirement age.”

JA: What percentage?

AC: Three out of four, 75%.

JA: Yes, but you know who actually do? It’s like 30%.

AC: It’s not many. At least that’s been the history. And so this says, “3 in 4 Americans plan to work beyond traditional retirement age on at least a part-time basis.” OK, so that’s one thing. Here’s another separate AARP study, found that 37% of working Americans ages 50 to 64 said they intend to work after retiring. So in other words, this first group was everyone. People that would continue to work, versus part-time work. And then they said, “Now, once you retire, are you going to retire or are you going to still work?” And 37% said yeah, they want to continue working, at least on a part-time basis. And about 44% of those are planning to go into completely new fields. It’s like, “all right, I’m done being a doctor. I’m done being an engineer. An attorney, whatever it is, I want to be a fundraiser for charities,” or whatever it may be, doesn’t really matter. So yeah, quite a few people are. And as a consequence Joe, some of this is because they need to financially, because there’s a lot of baby boomers that have not saved enough, and they want to keep up a certain lifestyle. And an awful lot of people want to do this just for the intangible benefits of having something to do, having something to be passionate about, that you’re contributing to. And I think that’s all really important. But not everybody, as you just said, can get work, or continue work when they want to. Because we also know from other studies that about half of the people out there – they are forced to retire earlier than they want to. And that’s because of health reasons, or maybe they’re caring for an ailing parent or an ailing spouse, or maybe the company just gets downsized. Your company gets downsized, you lose a job, you’re 64 years old, it might be more difficult to find a new job than if you were 30, let’s just say.

JA: And you’ve got to be smart about this, too. I mean I hear a lot of different comments – just recently was, “I want to retire. I’m really stressed. I don’t like my job.” But they’re not anywhere near close to the asset level for them to retire given their spending. So the comment was, “well, I love computers. I think I’m going to be a website designer,” I’m like, “OK, well have you ever designed a website before?” “No, but I’m going to take a couple of classes.” What?! OK, you’re going to start THAT type of business?? (laughs)  And Nick Loper is going to join us in a minute here, but what he’s done, it’s called Side Hustle Nation. It’s an interesting website. He has a podcast and a blog. And for those of you that don’t know what a side hustle is, it’s just like a side job, side gig that you can make a few hundred extra bucks a week.

AC: Could be part-time work, it could be steady part-time work.

JA: Or what could turn, actually, into a very thriving business.

AC: Or the word “gig,” maybe not all of our listeners know, a gig basically just means like a one-shot deal. Like a side gig. “Here, I’m going to help out with this. It’s a two-week project and then I’m done.” That would be a gig. Or a side hustle, it could be a gig, it could be a longer-term thing. But here’s another study, Joe. This is from Transamerica Center for Retirement Studies, they found that 67% of U.S. workers said that they would prefer a flexible transition in retirement. In other words –

JA: They don’t want to go to the office.

AC: Yeah. They don’t want to have this hard break where they’re working their butt off, and then they’re not doing anything. They want to have side hustles, they want to have gigs, they want to have part-time work. They want to transition into retirement.

JA: And I think too, they want to work, but they want to work on their terms. “I’ve been working for XYZ Company as an employee for 30 years with deadlines and stress levels. I would still like to be productive and work, and I need the income, but I want to do something maybe a little bit different.” So I found this website Side Hustle Nation very interesting because there are so many different things that you would never think of that people are doing for some cash.

AC: I agree. And you can actually download his 250 Proven Ways to Make Extra Money in 2018. I went through the whole list – signed up for 11 things.

JA: Did you really?? (laughs)

AC: No not really. (laughs) I did go through the whole list. Actually what I did is I sent ideas to my kids so they can make some more money. (laughs)

JA: Yeah, stop asking me. Here, why don’t you do this? (laughs)

AC: That’s right, become self-sufficient. Actually one of the two is, the other one is close.

JA: I have a buddy, he travels quite a bit, but when he comes into San Diego there’s an app called Turo. He hated renting because he didn’t have his car here. And then he would go to Enterprise or all of those car rentals, and he’s like, “just the tax alone is just ridiculous. And so they’re promoting x amount of dollars per day, but the taxes just as much.” So he’s thinking he’s paying X bill, but when he goes and pays it’s something completely different. And si there’s an app called Turo where you can rent your own car out. “Hey, I have an extra car, I’m just going to put it on the app and if someone wants to rent it from me, go ahead.” So you don’t necessarily have to go through the big agencies or the rental car places. Yes, you could just do it from peer to peer.

AC: Yeah. And there’s also one called Getaround which I think is the same kind of thing. So you can actually be a person that has a car that you want to rent out, or you can be a person that wants to rent it. And so that’s just one out of 250 things that you can do, and some of these are related to professional activities, and certainly, if you are a professional in a field that’s going to pertain to you, and if you’re not, you go to the next one. But a lot of them could be anybody – like dog walker dog walkers or baby sitters. There are some obvious ones but then there’s a lot of ones that are less obvious.

JA: So my thought was, if I wanted to do something, I want to retire, I still need an extra couple bucks a month, I want to stay busy, I just go to the list. You know there’s probably 80% of them I would never do. But there could be 20%, “that would be kind of fun.”

AC: Yeah. And probably two or three of you go, “I’ll try this right now.” And they may or may not work, but you go to the next one. One guy sort of caught my eye. It was interesting. He picks up litter.

JA: Really?

AC: Yeah. So he he went to a property management firm, rental property, and said, “you have big complexes, you need someone to pick up litter?” They said, “yeah, as a matter of fact, we do.” And so now he picks up litter at apartment buildings. He’s scaled this, he now makes $600,000 gross a year, picking up litter. And he goes, “this is the easiest business you could possibly have. You need trash bags and a stick.” (laughs) Maybe a truck to put ’em in.

JA: (laughs) I guess the point too is that you want to make sure that you’re on track for retirement, and not use the side hustles as your retirement plan.

AC: True, but I will say this Joe. For folks that they’ve just looked at their budget, they looked at their income, there’s just nothing extra because of whatever – they got three kids and they’re trying to make ends meet. If you have a little side job, why not save all of that money? That could be a potential way to save.

JA: Absolutely. Couple hundred bucks a week or something, you just take that, save, compound interest, it’s a wonderful thing.

So when you’re ready to retire to your litter-removal empire, how will you manage the taxes on that side hustle income and make sure your money is going to sustain you? Find out: visit the white papers section of the Learning Center at YourMoneyYourWealth.com and download our free Retirement Readiness Guide. You’ll learn strategies to control your taxes in retirement, create lifetime income, and protect yourself against market volatility, increased longevity, rising healthcare costs and Social Security uncertainty in retirement. Download the complimentary Retirement Readiness Guide from the White Papers section of the Learning Center at YourMoneyYourWealth.com.

10:27 – Why Nick Loper Started SideHustleNation.com

Your Money, Your Wealth guest Nick Loper from SideHustleNation.comJA: Back in the home studio for this, Alan.

AC: Yeah we are, it’s kind of exciting in this little hotbox. (laughs)

JA: (laughs) I am sweating my…. I’m excited though. We have Nick Loper on. I’ve been trying to get this guy for, I don’t know, several months, but we usually tape the show on Friday. Now we have this in-studio thing in our office so he’s able to join us.

AC: Well he’s got so many side hustles going on we can’t get him.

JA: Right. He was voted Best Business Podcast. How did we fare? (laughs)

AC: We did not make the list. (laughs)

JA: (laughs) We didn’t even come close.

AC: Still working on it. We just have to make the list.

JA: Yes. Now we have him on so hopefully, we can get up the list. Nick, hey, welcome to the show.

NL: Thank you so much for having me. Glad we were able to make it work.

JA: Yeah The Side Hustle Show – tell us a little bit about yourself and what got you into side hustling?

NL: The Side Hustle Show is almost five years old. And that started as a side hustle to my original business that I was running, which of course, started as a side hustle to my corporate gig. That was a footwear comparison shopping site. So it would aggregate the catalogs from Zappos, from Amazon, from all these other stores, and earn a commission when somebody bought shoes through the site. And so I  was running that for several years on the side, decided to take that full time, make that a full-time thing. Quit the corporate job and do that. And then while I was running that, started the Side Hustle Nation blog and podcast, and it’s been a ton of fun since then.

JA: You know when you think of side hustle, when I think of side hustle, it could be something that I make a couple of bucks extra a month. But in some instances, people are making a ton of money quitting their corporate jobs and the side hustle turns into a major enterprise.

NL: That’s the dream, right? Actually, it can go both ways. There are those people who follow the site who are just like, “look, if I can make an extra hundred bucks, extra couple hundred bucks a month to put into my vacation fund, to help pay down debt, to help cover some unexpected expenses, whatever it is, that’s totally fine. And then other people who are sitting in the cubicle, or listening to the show on their commute, and they’re like, “I gotta get out of this thing. What is the escape path for me?” And it’s exciting to try and serve both those audiences.

AC: So what do you think is the likelihood of someone actually doing that? So they try a side hustle or two and actually make this work towards a career for them?

NL: Well that’s the exciting thing because we’ve seen such an increase in the rise of even just like the freelance economy. There are some estimates that say by 2020, by 2025, that’s going to be half of the workforce is this freelance economy. And so you think of people learning those skills, to go out and get clients on their own, to bill work, to figure out what skills they have that are in demand – that’s where it’s really exciting. That’s probably the gateway drug to entrepreneurship. It’s like, “OK, what service can I sell, what skill do I have that somebody else is willing to pay for?”

JA: Why do you think that trend is happening? I mean that’s crazy – half? If you go back 30 years ago, I think most people worked corporate jobs and only a very small handful were freelancing or building businesses. But now I think the trend is totally gone the other way. Why do you think that trend is happening?

NL: Well, probably a couple of factors. One on the on the supply side is, employers have found out they, one, can get away with it, and “hey, we don’t have to pay benefits,” and workers are willing to accept that in exchange for some flexibility in either location or work hours, or whatever it may be. And it’s part of it out of, I guess, necessity. It’s like, “well I don’t necessarily need to hire somebody full time if I can hire an on-demand specialist, or like this hired gun to come in and do a very specific role for me, and I don’t that the overhead of having somebody in my office full time.”

AC: Is this more for millennials would you say, or is it for all age groups?

NL: I kind of expected it to be more on the millennial side, and the demographic data definitely skews that way, especially in the wake of the Great Recession. The lowest people on the totem pole were the first to get the get the axe. But I’ve seen it, really, across all age groups, and even from people nearing retirement and looking for that next thing. It’s like, “I got to retire to something, instead of away from something,” or just to fill in that free time with something more productive.

JA: You wrote, “250 Proven Ways to Make Extra Money.” So 250 side hustles. Do you have any favorites?

NL: The premise behind this post is to go where the money is already flowing, go where the cash is already flowing if you’re trying to start something from scratch. And probably the best example of that is Amazon.com. I was surprised to learn a couple years ago that half of Amazon’s inventory isn’t owned by Amazon. It’s like a giant consignment store. They’ve built is really world class logistics network, essentially crowdsourced their inventory from individual sellers and small businesses, like you and I, where, “okay, you can tap into our fulfillment network, we’ll put your product up for sale on Amazon.com, and of course, we’re going to charge you a fee when somebody buys that, and we’ll ship it out on your behalf.” But that for me, as an Amazon seller, or at least a couple years ago when I was playing around with this, that allows me to tap into their huge, huge audience of buyers, versus setting up my own e-commerce store and trying to drive traffic that way. So that’s one example. There are hundreds of others, and some really kind of off the wall ones there too – there’s a marketplace for everything these days.

AC: Yeah I was just looking at it, I saw there’s like a dating one – like the women could put out how much they need to be paid to be taken out on a date! (laughs)

NL: Yeah, I think it’s WhatsYourPrice.com, it sounds like borderline escort service. (laughs)

AC: It does. (laughs)

JA: Of course that’s what you found. (laughs)

AC: Well, that struck me, otherwise you’re walking dogs or you’re doing web services, which I don’t know how to do. Anyway, I think it’s a cool list. I mean it’s almost anything you could possibly think of. There’s a way to kind of do this on the side.

NL: Yeah, I’ll give you the example, so I was looking for somebody to build a chatbot for me, and I was kind of struggling to do it myself. So I turned to this website Fiverr.com which started out several years ago as like the $5 marketplace – what can you get done for five bucks. But they’ve since graduated to higher value services because it’s in their best interest, they take a fee, a percentage on whatever sells through the site. So I found this guy for $300, $400, built this chatbot. And the idea is people could interact with this and it would ask them questions, and based on their answers it would make recommendations and stuff. Which would, theoretically, save me time like answering e-mails. Fiverr is another really fun site for starting a side hustle, because it gets a huge amount of traffic. You never know what people are looking for on there, and if you’ve got a service, it can be a cool entry point to starting a side hustle.

AC: I think some of these sites, you can you can make a few bucks. But what are some of the ones where you can actually make a lot of money, at least based upon your experience?

NL: So Amazon is huge, Fiverr, we’ve seen people do full-time businesses on Fiverr, Udemy.com has been really interesting, it’s a peer to peer education marketplace, where you can create courses on whatever topic you have an expertise in. We’ve seen people do really well over there. The example that comes to mind is as a woman, she’s like a mother of 10, and she’s kind of like grandma age. But her daughter kind of challenged her, like “nobody can make perfect sourdough bread,” and she was like, “well it sounds like a challenge!” So she ends up, she’s got one of the largest Facebook groups related to bread baking, specifically sourdough baking. When we spoke, she had like 30,000 people in this Facebook group. But she’s making four or five grand a month selling courses on Udemy on how to bake bread. And she had like a dozen courses on different kinds of sourdough, and pizza crusts, and all sorts of stuff. And I was like, “are you worried about running out of content to teach, what happens?” She’s like, “honey, I’m just scratching the surface here!” (laughs) I was like, OK, OK!

AC: I suppose, there are probably lots of ways to make bread, I’ve never tried.

Y’know, I’ve been listening to these side hustle success stories, retirement advice and tales from the financial independence / retire early movement on this podcast for over a year now. And I ended up turning my side hustle as the Your Money, Your Wealth® announcer into a full-time career… I think I’m doing this wrong! Anyway, you can catch up on previous interviews, read the transcripts, watch clips and full episodes of the Your Money, Your Wealth TV show, and take advantage of a huge learning center full of personal finance webinars, articles, white papers and much more at YourMoneyYourWealth.com. Clearly, I need to go back for a refresher course – I’ll see you there at YourMoneyYourWealth.com

19:39 – Nick Loper, SideHustleNation.com – How to Get Started Side Hustling

JA: Welcome back to the program, the show is called Your Money, Your Wealth®. Joe Anderson, Big Al, hanging out with Nick Loper SideHustleNation.com. Trying to figure out a way to make a couple of extra bucks, or learn some new cool things that you can go and have people do for you. I was just thinking, to our listeners, “I’m thinking of starting a side hustle. There are multiple things that I could potentially do. But what advice would you give someone if they’re just starting out, to say OK well, I don’t know, I could rent my car out, or I could be Uber driver, or I could do the Amazon thing. I mean what are some resources? I mean going to your website, start reading your blogs to figure out what would be the best, I guess, side hustle for me?

NL: I’m working on a decision engine or a tool to help you pick that, but kind of along those lines, I think tier 1 would be that kind of sharing economy platform, the Uber drivers of the world, the Airbnb hosts of the world, the Rover.com dog walkers of the world, the pet sitters of the world, where it’s like OK, these companies have built the marketplaces usually on the back of lots of venture capital. So they’ve kind of been able to play up the demand side of the marketplace, and you can put yourself up for sale on those. The next tier would be kind of the freelancing stuff that we’ve mentioned, either Fiverr or Upwork, or even just direct outreach to companies that you know you can serve. The third tier might be kind of like a buy low/sell high model, flipping products. Amazon, eBay, Craigslist. I met a guy who made a full time living just buying and selling stuff on Craigslist, specializing in appliances. It’s like, man, could you imagine something more unwieldy to try and like move around? And he had a garage full of old washers and dryers and stuff. So those would kind of be maybe the three gateways to getting started with side hustles, and then where I see other people really diving into it full time is kind of in authority business model, where you’re either going down like the route of doing some high end coaching, consulting, or you’re teaching in either a one on one or like a group coaching model, or a group online course model. The example that comes to mind is Jacques Hopkins, he is a former engineer down in Louisiana who runs a site called PianoIn21Days.com, where he teaches you how to play piano in 21 days. And it’s incredible. When we spoke he sold $20,000 worth of his course on how to play piano, and it was just mind-blowing that that was something that you could do.

JA: How do you find these services though? I mean there are so many cool things. I’m reading this, it’s like, I can get alcohol delivery right here in the studio! (laughs)

AC: I was trying not to show you that one, Joe. (laughs)

JA: I can get Alfred- he can run errands for me. Turo. I’ve heard of that, that’s the only thing that I actually heard of, because a buddy of mine, he comes into town every now and again, and he just rent a car from someone else – he’s not going to a car dealership. So I mean as a consumer, I don’t know if I’m really ready to do a side hustle, I don’t have a lot of time to do that. But let’s just say I want to consume some of this stuff. Where do you go?

NL: The list of apps or list of marketplaces on SideHustleNation.com might be a good place to start, and then people submit more in the comments, “Have you heard of this one?” So that’s a good place to start. I tend to discover them when we’re traveling, for local tours or local experiences – like viable.com. And I met a gal in San Francisco who hosted urban walking tours, urban hiking tours. She was like, “hey, I love to hike, and I love this city that’s become my adopted hometown.” And so she started charging 50 bucks a pop. “I’ll take you around these neighborhoods that I like.” And that’s kind of how I end up discovering these things or word of mouth as friends start to – like the Turo example, like the peer to peer car rental example. I haven’t tried that one, personally. But there’s a there’s a ton of them out there, and I think you start to see these specialized marketplaces kind of ebb and flow as they either generate a critical mass or die off.

AC: So let’s let’s talk about my generation, the Baby Boomers. So what are maybe some of the best side hustles for baby boomers to maybe make a little extra money in retirement?

JA: Walk a dog.

AC: Walk a dog? Deliver liquor? (laughs)

JA: Bring me booze. (laughs)

AC: (laughs) I can make a lot of money doing that!

NL: Well, if you’re in the in the empty nest phase, you might find your house with some extra space, so there’s the AirBnB angle, or there’s the VRBO angle – and there are other ones that cater specifically toward exchange students or something like that, summer interns, something like that. So if the kids are out of the house that might be an option as well. And then there are some where, “I don’t want somebody living with me. But I’ve got this extra space,” and so there are other companies that will do storage for you. I forget the name. Basically, rent attic space as a way to disrupt the self-storage industry. Those ones are a couple that come to mind. Like my Uber driver on a recent trip to San Diego was kind of a retiree or a recent retiree, and her daughter was going to college, and she’s like, “No no, I want you to focus on your studies.” I was like, “you’re the nicest mom in the world!” Like she’s driving Lyft or driving Uber to help put her daughter through college. “You’re a nice mom!”

JA: SideHustleNation.com is the website. It’s a great website, there are so many cool things there. So if you’re looking at consuming some of this stuff, you’re going on vacation, if you’re retiring, there could be a lot of really inexpensive things that people can potentially do, or if you need to make a couple of extra bucks just to spread the dollar out a little bit more in retirement, you got to check out the website SideHustleNation.com.

AC: Yeah I agree and I went to your “250 Proven Ways to Make Extra Money in 2018.” And the nice thing about it is almost every one has a link to a website. I went out a bunch, because you know, I can make some extra money in all my spare time? (laughs) And what I noticed was that a lot of these were actually for the consumer. There are places where you sign up, but they’re designed for the consumer, so someone at some point is going to have to design a website so the consumer can find all these things.

JA: But I think it also gives people some ideas. It’s like, “they’re doing that, and hey, I’m really good at this. This is my passion and now I’m retired, I have a little bit of time.” Might as well, like with these tours, or hiking tours or things like that – if I go to national parks all the time, hey maybe I could do something there, say “stay at this whatever.”

AC: Any final thoughts that would help our listeners to try to get in the site hustling and make some extra money?

NL: Well there’s definitely no shortage of different ideas, different routes that you can take. So really, the big takeaway it’s worked for me and for a lot of the guests is to kind of enter it with an experimenter’s mindset, and say, “OK, I’m going to try something out, knowing that it might fail, and think like a scientist. It’s like an experiment never really fails, it either proves or disproves my hypothesis. I can learn from it.” And to me, that just lessens the sting of the inevitable failures that come along the way. Because I don’t know about you guys in your business, but I’ve tried a bunch of stuff, some of it works, some of it doesn’t. It’s kind of like the process of dusting off and keeping going.

JA: That’s Nick Loper folks, you got to check his website, SideHustleNation.com. Hey Nick, I really appreciate you taking some time with us. Great stuff as always.

NL: You bet. Thanks for having me.

Southern California, let’s face it, uncertainty about the future is a strong reason to start a side hustle. Creating additional income is one of many Financial Strategies for Turbulent Times. Learn more at a one hour Lunch ’n’ Learn in San Diego, or at our two-day retirement courses throughout Southern California – because planning for your retirement today can help you secure a better future for tomorrow. For dates, times and locations for our live events in San Diego, Orange County or Los Angeles, visit The Learning Center at YourMoneyYourWealth.com or call (888) 994-6257. That’s (888) 994-6257.

28:02 – Email: Are Our Finances on Track or Are We Overspending?

An interesting e-mail, Alan, where it’s almost like a case study. The subject is, “are we on track or are we overspending?” And it was like, “hello there. I’d like your opinion to see if we are on track, or if you think we’re overspending or not. So our household gross income is $500,000. Net income after tax is about $400,000. This includes net income from 10 rental properties. Our necessary expenses are $60K, and our discretionary expenses are $190K.” 190 plus 60.

AC: $250,000 total.

JA: “That includes travel, shopping, kids, private schools, and other activities.” They save about $150,000 dollars per year. “And our current savings are as follows: $2.1 million in retirement accounts, $200,000 in college funds, $200,000 in cash.” They’ve got $1.5 million in equity in rental properties, asset value of about $2.2 million, mortgage of $700,000. And they have a primary residence of around $600,000 and there’s no mortgage on it. So far so good.

AC: I like all these numbers.

JA: “So my question is, is our spending out of line when you take a look at our income and savings we have to date? Are we overspending on shopping and kids? We are committed to paying for private college education, which will likely cost about $600,000 for both kids. Do you think we can afford that? Shall we cut our discretionary spending and save more? So the ages are 48 and 53. And the kids are 17 and 13.

AC: OK. Well, there’s a lot there. So they’re saving about $150,000. I don’t see much money outside of retirement, so I guess maybe that means a good chunk of that’s going into retirement accounts.

JA: Yeah, $200,000 in cash, $200,000 in college funds.

AC: Yeah. I guess there are different ways to think about this, but a lot of times when people tell us what they make, they already net out their 401(k)s, and so we’re sort of going with those figures. And then if they tell us, “yeah, I’ve got $150,000 extra,” and then we look at accounts outside of retirement, in this case, it’s $400,000, it’s like, is it right? It’s just a reality check – if you really have $150,000 extra. And I make an assumption right now that the 401(k)s are already deducted from there, which may not be true. But if you really have $150,000 extra and you’ve had that for 10 years, wouldn’t you have a million and a half?

JA: Right. So 48, 53, so still young. But yeah, I agree with you a little bit. I think they’re spending a little bit more than what they’re stating here. But let’s just say that they’re putting in – husband is 53, so let’s call that $24,500, and she’s 48, so that’s $18,500. So what is that, $48,000 and some change. Call it 50. So then they have an extra $100,000. How long have they been making this type of income, first of all?

AC: Now, they could have been buying rentals, with it so we don’t know, and paying down debt on rentals.

JA: Sure, because they have about $1.5 million in equity in rentals, but we don’t know what the cost basis is of those particular rentals. So how long have they held the rentals? Did they buy them for a couple hundred thousand dollars each, and then they grew over the last 10, 15, 20 years to X? But it might be that they’re paying down mortgages, they don’t have a mortgage on a $600,000 home. So the numbers could jive. We need a lot more information here.

AC: We do. So here’s a quick calculation.

JA: Yeah let’s just do this – let’s just look at, first of all, what they need to have in retirement. So if they’re looking at spending $250,000 in retirement. Do you have your calculator or your phone?

AC: I got my phone with the HP app.

JA: HP12C app? There you go! All right. So let’s say 53, let’s call it, I don’t know, 15 years from now they want to retire.

AC: Okay I’ll put in 15.

JA: So $250,000, 15 years, call it 3% inflation.

AC: (calculating) That says 389. So we’ll round it to 400.

JA: So $400,000, at their age, they’re probably fully maxed out on Social Security. So that’s going to be another, call it $50,000.

AC: Yeah. At least 50, but we’ll go with 50 – so they need 350.

JA: So they need 350, take 4% of 350.

AC: For our listeners, I’m going to multiply by 25. It’s an easier way to say it, it’s the same result. So they would need $8.7 million.

JA: $8.7 million to continue their spending.

AC: Now it doesn’t include, Joe, the rental income. So let’s say, for example, the rental income is $100,000, just to make up a number. So now they really need 250. So now you take 250 times 25. Now you get about $6.2 million would be the new number.

JA: So if we pause there, what we’re doing is some just simple back of the envelope financial planning. If they want to continue with their spending habits all the way through retirement – they might tone it down, who knows. But just assuming that they want to continue that type of lifestyle. So you take that lifestyle, and you use an inflation factor. We’re using 3%. It could be a little bit more conservative and use 3.5%, 3.7%, or you can say, “hey you know what? Inflation over the last 10 years is closer to 2% so we can use that number.” We like to use a lot higher inflation factor, just to be on the safe side. So we inflated that spending out, and so that equaled around $400,000 in 15 years on their retirement date. So then you look at, they need $400,000 in inflated money to continue that lifestyle. But hey, they’ll have Social Security. And if they’re making X amount of dollars, $500,000, they probably maxed out their Social Security, but there’s a lot more to this because he’s only 53. She’s 48. If I go out15 years, who knows when they’re actually going to claim their Social Security benefits? Do they claim it at full retirement age, do they claim that 62, do they claim it at 70? There’s a full discussion, depending on what they want to do. Where should that money be held? When should they start taking those distributions? But do this calculation for me, Al: So we subtract that out, but they got a bunch of rentals. So Alan is assuming $100,000 of income from the rentals.

AC: Yeah, just make up a number. And I think I know where you’re going Joe, I took their $2.1 million that they have right now in the 401(k), I’m adding $50,000 a year at 6%. 15 years from now it’s $6.2 million – which is the number I just calculated.

JA: Right. So they’re pretty close.

AC: There’s a lot we don’t know, but based upon what we do know, it seems like they’re pretty close.

JA: So if we recap that again, you’ve got to inflate out your expenses to your full retirement age. Use whatever inflation factor that you want, we use 3%. so that $250,000 that they’re spending today, in 15 years that’s roughly $400,000. Then you have to subtract out your fixed income sources. So we guesstimated Social Security for the both of them about $50.000. And then they have rental income – so that’s another fixed income component of this equation- of another $100,000 so, $150,000 would be their total fixed income. You take the $150,000 of fixed income that they can count on, and subtract it by what their living expense need or wants is. So 150 minus the $400,000, and then you take that number, and then Alan multiplied it by 25. The reason why he did that is that we’re using the 4% distribution rate. You don’t necessarily want to pull any more than 4% out of your overall portfolio. So you divide your shortfall by 4%. Or an easier way to do it is, you multiply your shortfall by 25.

AC: Yeah, you get the same answer.

JA: You get the same number. And so that shortfall number was $6.2 million. So that’s the nest egg that they would need to accumulate in their overall retirement – $6.2 million. So that’s the goal. I need to get this dollar figure. So let’s just take a look at what they have. They have $2.1 million in retirement accounts. If they continue to fully fund those retirement accounts, we look at that over 15 years, $2.1 million. Right now we’re taking a future value calculation, and you put in your $50,000 let’s say of savings into your retirement accounts. Now, 15 years later if they average 6%, they have $6.2 million. So that looks pretty good. Now the caveat is, they’ve got kids that they want to put through school. So then they’re looking at, “hey we need $600,000 to fund their college education. They have $200,000 currently in college funds. So if they continue to put the $50,000 in retirement accounts, and then the other $100,000 – because they said they’re saving $150,000? If they save that other $100,000 over the next few years, that’s going to probably cash flow out their college expenses.

AC: Yeah because the kids are 17 and 13, so I would agree with you – that would probably cover that.

JA: Right. So one of the kids is going into school maybe next year, but there’s already a couple hundred thousand that they can take from that college fund. And then they could cash flow the rest, or continue to save into that college fund to pay for the other kids. So yeah, I think, looking at the numbers from a high level, I don’t think they’re overspending at all. I think they’re right on track.

AC: I don’t either Joe, and I like the way they did this. Very few people have enough discipline to say, all right, what are my absolute expenses that I have to pay to keep the lights on, and to pay the rent or pay the mortgage or whatever it may be, and then everything else above that – I mean, you’d have to have an allowance for food and a few things like that. But everything else above that is extra. So, in this case, they said 60 grand. So I don’t know if that’s the right number, but it’s a great exercise because what they’re basically implying to me is, we could taper off this $190,000 a little bit if we have to. And that’s kind of what they’re asking right now. Because it’s not essential. They’re living a great lifestyle, they’re spending $250,000 a year. But they’re also saying, “if we need to cut back, we will.” That’s what I get from this. And because they looked at their expenses that way, it’s pretty helpful. And I think if you guys go through this exercise if you can look at what’s essential versus what’s extra, and then understand if you need to cut some back, you have expenses that you can cut back.

JA: So now, another layer of planning of what they should look at is to say, with this $2.1 million in retirement accounts, if they continue to fund pre-tax retirement accounts, they’ll have $6.2 million. But guess what, it’s all in a retirement account that, when they take those distributions to cover that shortfall, it’s all going to be 100% taxable. So then, if I’m looking at creating a $250,000 lifestyle in retirement, and all of my dollars are going to come from real estate, Social Security and my retirement accounts, well I’m going to be in a very high tax bracket in retirement as well. So then you want to look at, over the next let’s say 15 years – I’m just assuming that’s the retirement date, it could be a lot earlier than that or later – is now looking at tax diversification. To say, “hey, should I have everything in a retirement account, or should I start building up a non-qualified brokerage account, where I would be taxed at capital gains rate? Should I build a Roth IRA account by doing some conversions or doing something unique there to start building up a tax-free pool? So when they do hit that retirement date, that they have access to different areas where they can pull from to control their taxes.

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Recapping today’s show, it’s always good to check in with professionals to see if you’re on a good financial track, and all you need to create a side hustle empire is a trusty vehicle, a trash bag, and a really good stick. No seriously – all it takes is a good idea and the willingness to try.

Special thanks to our guest, the Chief Side Hustler, Nick Loper. Find yourself a great side hustle on Nick’s website, SideHustleNation.com

Subscribe to the podcast at YourMoneyYourWealth.com, Apple Podcasts, or on your favorite podcatcher. And hey, have you seen those ratings and reviews on iTunes? Thank you very much! If you’ve got a burning money question for Joe and Big Al to answer live on Your Money, Your Wealth, email info@purefinancial.com, or call (888) 994-6257. Listen next time for more Your Money, Your Wealth, presented by Pure Financial Advisors. Get a free financial assessment, visit PureFinancial.com

Pure Financial Advisors is a registered investment advisor. This show does not intend to provide personalized investment advice through this broadcast and does not represent that the securities or services discussed are suitable for any investor. Investors are advised not to rely on any information contained in the broadcast in the process of making a full and informed investment decision.