The Mad Fientist on Early Retirement in Your 40s and 4% Rule Updates

Mindy Jensen:
Welcome to the BiggerPockets Money Podcast, where we interview Billboard chart topping, musician Brandon, the Mad Fientist, and talk about houses, babies, and the flexibility of the 4% rule. Hello, hello, hello. My name is Mindy Jensen and with me as always is my saving, overspending co-host, Scott Trench.

Scott Trench:
Great to be here, Mindy. I always love to invest my time with you on BiggerPockets Money.

Mindy Jensen:
I like that one. Scott and I are here to make financial independence less scary, less just for somebody else to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.

Scott Trench:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business or become a Billboard Top 100 musician, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.

Mindy Jensen:
Scott, I am super excited to bring the Mad Fientist back for round four of our podcast with him. He is always a delight to talk to. Since we’ve last spoken with him, he has been very, very busy. He’s going to share with us what he was up to in these last few years, but we are here today to talk about the 4% rule, which I love, you love, he loves. Scott, let’s give a quick overview of the 4% rule.

Scott Trench:
Sure. So the 4% rule is a rule of thumb that says that for the periods that we have data on market performance for, if you started with a $1 million portfolio and you withdrew 4% of that or $40,000 per year, in no historical 30-year period, would you have ever fully run out of money over the course of that retirement, if you will? So it’s widely regarded as a very, very conservative rule of thumb for early retirees. If you want to spend $40,000, you need a million dollars and you’re done. You’re financially independent. If you have a 60/40 stock bond portfolio, if you want to spend a hundred thousand dollars a year, you need a $2.5 million portfolio. And so once you know your spending level, you can quantify the amount you need to become financially independent. And today, we’re talking to Brandon, the Mad Fientist as we mentioned, and he really kind of took that analysis to another level here and he broke apart that spending.
So let’s say you want to spend a hundred thousand dollars a year, you want a $2.5 million portfolio, this is a very comfortable financial independence portfolio, but let’s say that half of that portfolio was discretionary spending, so there would be vacations, travel that you didn’t need to do but would like to do. Well, in that case, you wouldn’t quite need two and a half million dollars. You could get by with less, perhaps much less. Perhaps you could get by on a five and a half percent safe withdrawal rate. For example, if you need a two and a half million dollar portfolio to spend a hundred thousand dollars comfortably in early retirement, if you were able to say 50% of that’s discretionary and I’m willing to cut back in down years for the market, you could retire and still spend a hundred thousand dollars with as little as 1.8 million, which is a $600,000 difference. It makes a dramatic difference in a time to early retirement for that individual.
So these rules of thumb are very important and the Mad Fientist brings three very simple rules to executing on what I just discussed there. So once you have quantified your desired spending and bucketed appropriately and realistically into discretionary for you and non-discretionary spending for you, then he has three rules that will allow you to retire with a substantially higher safe withdrawal rate. So first, while in a bear market, which is a market defined as 20% off of previous highs, just withdrawal zero for that discretionary spending. Two, if the market is in a correction about 10% below recent highs, then withdrawal 50% of that discretionary budget. So if it was a hundred thousand dollars in spending, 50,000 was non-discretionary and 50,000 was discretionary, just spend $25,000 on discretionary items. And then the third rule is all other times when the market is not down, more than 10%, withdraw your entire discretionary budget. So very simple rules might shave off years in the journey to financial independence for many people.

Mindy Jensen:
Very simple rules backed by math and data, not only from Brandon’s big brain, but from Nick Maggiulli and his data and big brain too. They’re not just making this up. They have run the numbers, they have discussed it ad nauseam. It is past performance is not indicative of future gain, but these two guys together have a really good grasp on the numbers, the math, the data behind all of this. They’re not just guessing. And they wrote an article together, which was published at themadfientist.com., and we will link to it in our show notes.

Scott Trench:
Nick Maggiulli, for those who don’t know, wrote the book, the excellent book, just Keep Buying, which I highly recommend people go check out and we got a chance to talk with him on episode 347 of the BiggerPockets Money Show Podcast. So go check that one out if you’re interested. And of course, you’ll know Brandon, the Mad Fientist, from his work over at the Mad Fientist or his three previous appearances here on BiggerPockets Money.

Mindy Jensen:
Okay. Now, Scott, we have a new segment of the show called The Money Moment, where we share a money hack tip or trick to help you on your financial journey. Today’s money moment is if you’re trying to book a flight with airline miles but are coming up just a little short, look into purchasing more miles through the airlines’ loyalty program, it is likely going to be cheaper to buy a few more points than to purchase the ticket with cash. I actually did this on a flight a few months ago. I was short like 400 points and I had to buy them in thousand point increments, but to buy it was like $20 or something. So I was able to buy a thousand points. I got the points that I needed for $20 as opposed to paying 150 or $300, whatever, for the flight. It was great. I love this tip.
We are going to welcome Brandon, the Mad Fientist, back to the podcast. If you don’t know who Brandon is, you have been living under a rock. He is the Mad Fientist, a man who delights in reading the overly complicated US tax code and translating it into easily understandable English for all the rest of us. He has a website called The Mad Fientist, a blog, The Mad Fientist and a podcast, the Financial Independence Podcast, where he educates people on financial independence. Brandon has appeared on the BiggerPockets Money Podcast, episode 18, episode 119, and episode 162. Brandon, welcome back to the BiggerPockets Money Podcast. I’m so excited to talk to you today.

Brandon:
Yeah, thanks for having me back. It’s always good to chat to you guys and I can’t believe it’s been that many episodes. I wouldn’t have said it was that many, but yeah, thanks for having me back again.

Mindy Jensen:
I can’t believe it’s that been that long since we last spoke with you. I know nothing has happened since then.

Brandon:
Yeah, yeah, lots has changed.

Scott Trench:
Well, can you give us an update about what’s been going on since we last chatted on episode 162?

Brandon:
Yeah, so biggest thing is we had a kid. So we have a 10 month old son and he’s keeping us very busy, but very entertained as well. So that’s been amazing, even better than I probably would’ve anticipated or expected. So that’s the biggest thing. The second biggest thing is we bought a house. So we had been renting since we sold our house in 2014 in Vermont, and we just bought a house in Scotland, which is where my wife’s from. And that has also been an amazing change, which has been a long time coming. We’ve been looking for a couple years and after selling our house in 2014 and thinking, I’m never going to be a homeowner again, I’m so happy to be a homeowner again.
So just shows you how much things change over the years. Oh, yeah, I think Matt, I can’t remember the last time we talked, but maybe since then I’ve released an album, which was the whole big goal of wanting to reach financial independence was to actually be able to write and release my own music, and I did that. So that feels still to this day, my biggest lifetime accomplishment, just because I know all the torture that went into it and self-doubt, and all the things I had to do to actually release it. But yeah, that’s out too. So there’s been loads of stuff happening.

Mindy Jensen:
Well, I’m sorry you’re so bored in retirement. I love the people that say, “I don’t know what I’m going to do when I retire, so I’m just not going to retire.” I’m like, “Don’t worry, you’ll fill up your time.”

Brandon:
Oh, yeah, no, busier than ever these days. And yeah, now I’m trying to fit all that other fun stuff in between just throwing a ball and chasing around my 10 month old.

Scott Trench:
It’s so awesome to hear that. Congratulations on your album, your little baby boy and your brand new house over in Scotland. We should probably talk at some point-

Brandon:
Thank you.

Scott Trench:
… we could spend a whole episode on how the real estate markets differ in Scotland and the UK versus the United States. But today, we’d like to chat about first and foremost an article that you recently published with Nick Maggiulli, author of Just Keep Buying, who we also chatted with your BiggerPockets Money Podcast, and you guys talked about the 4% rule and how the 4% rule is actually the 4.15% rule and now the 4.8% rule. Could you give us an overview of this work that you did with Nick and the conclusions you took from it?

Brandon:
Yeah, sure. So it all came around because I had read his book, Just Keep Buying, and I really liked it because all his arguments were backed up by data and historical numbers and lots of charts and graphs and things that I love. So he reached out on Twitter and I was going to have him on my podcast, but I’m not doing much podcasting these days. So when we were chatting on Twitter, he’s like, “Hey, if you ever want to run a simulation on something or want me to dive into some data for you, just let me know.” And there’s always been this thing that’s bothered me about the 4% rule for many years, but I’m very lazy. So I never dove into any of the thoughts that I had because it was just something that was just in the back of my mind for so many years.
So when he offered that, I was like, “Well, that’s exactly the thing that we should collaborate on because yeah, the 4% rule obviously is very big for FIRE people because it lets people retire as soon as they hit that number, that 25 times their annual spending, which is 4% of their portfolio.” So it’s a huge thing in the FIRE community, but it’s always bothered me because it wasn’t made for early retirement and it was made for standard retirement, which a standard retiree in my view is very, very different than an early retiree.
For instance, Mindy’s just back from a beautiful vacation in Hawaii with her family, and if the market was down 30%, maybe she wouldn’t take that. And that’s very different than saying like a 75 year old who has fixed medical costs, fixed mortgage, maybe less flexibility, less of their spending is going towards discretionary spending. Yes, they need to have 4% of their portfolio and they need to adjust that upwards for inflation every year. But the flexibility of an early retiree is very different, and I didn’t feel that the 4% rule captured that. So I wanted to dive into the data and see, “Hey, if you do have a lot of flexibility in your lifestyle and your budget, what could your withdrawal rate be?” I assumed it would be quite a bit more than 4%. And in fact, it was.

Mindy Jensen:
You have a really great chart that’s super helpful in this article. Calculate your new withdrawal rate. You talk about your discretionary expenses and it seems like the key here is to be tracking your spending.

Brandon:
Sure. Well, yeah, that’s a given for even retiring early in the first place because you need to know how much spending you need to be able to have your portfolio cover. So yeah, that’s the entry ticket to get in the game at all is to have a good grasp of that and to then be able to break it down into necessary and discretionary that’s important for this particular article I wrote because the more of your spending that’s discretionary, the more you could pull back when times are tough and when the market’s tanked 20, 25% and being able to do that means that your portfolio is going to have a lot more probability of lasting because you’re not going to have to sell when stocks are low and you can maybe ride out a bear market and not really do any damage to your portfolio because the overwhelming trend is up and to the right for the market.
And the only time retirees get into trouble was when they have to sell when assets are depressed. And some of your audience may be familiar with the sequence of returns risk, sequence of returns risk is because you’re withdrawing from that portfolio. So if you’re taking out money this year, you’re taking out a big percentage of your portfolio when markets are down, then that’s going to really make it less likely your portfolio is going to last 30, 40, 50 plus years in an early retirement scenario. So like I mentioned earlier, tracking your spendings the entry point into the game at all, but being able to break that down into necessary and discretionary is helpful if you’re going to do a more flexible withdrawal strategy like I talked about.

Mindy Jensen:
So last year I did an experiment where I publicly tracked my spending over the first five months of the year. I was going to do it the whole year, and I’m like, “Wow, this takes a long time.” But it gave me a really good idea of where I was spending and I got some pushback from people. They’re like, “Oh, my goodness, you have so many categories. That’s too many categories.” And I mean, I did have a lot of categories. I separated it out from alcohol and beer at breweries and parties because I have parties in my backyard, but I did that on purpose because those are the things that I can absolutely cut out no problem whatsoever. If the market takes a huge tank and I need to pull back on my spending, great not having parties anymore, not drinking alcohol anymore, not traveling anymore.
I think it’s really important to maybe you don’t have to be quite as granular as I was, you could just have necessary spending and discretionary spending in your two buckets that you’re tracking. But I do think it’s important to track what is necessary and what is more frivolous so that when, if you do need to pull back, if you need to spend a little bit less, you can figure out how much is in there. I love your chart. I’m looking at it right now. I’m like, “Wow, if I have 70% of my expenses are discretionary, I could spend six and half percent withdrawal rate and have a 98% success rate.”

Brandon:
So Nick put that heat map together. So after you ran all the stuff, he put that heat map together, which I thought was a great way to visualize it because you can see that the 4% rule isn’t a hundred percent success rate, it’s around a 96% success rate, which again, nothing’s ever going to be a sure thing. The future’s not going to be the past and things are going to be different. So shooting for a hundred percent success rate is very, I think foolhardy just because it’s not necessary. You’re going to be flexible enough to maybe deal with those scenarios if you happen to have the worst luck that there ever was. So looking at that heat map is very eye-opening because it shows you, it’s like, okay, the 4% rule assumes 0% discretionary spending because it assumes that all of your expenses are going to be adjusted upwards for inflation every year.
And it just assumes that you need to spend the exact same amount in real terms every year for their next 40, 50 years of your early retirement. But if you’re someone like me who has over 50% of their budget is discretionary: travel, eating out, going to bars, restaurants, things like that, over 50% of our spending was discretionary. So you could have the same probability of success with 50% discretionary spending with a 5.5% withdrawal rate. So that’s a pretty major jump. So to put it into your early retirement numbers, so say your spending is 40,000 a year with a 4% rule, that means you have to wait until you have a $1 million portfolio to be able to retire early. But if you have the flexibility that I talk about in the article and you have 50% of your spending going toward discretionary expenses, you’d potentially only need to save up 727,000, which that’s like a quarter less that you would have to save in your entire career and you could retire that much earlier.
Again, it comes with caveats because there’s no free lunch, but the article itself was more just a thought exercise to get people thinking about it and not to be so freaked out about, okay, I need to save until I have a three or two and a half percent withdrawal rate, and it’s just overkill. And I think people are potentially working longer than they need to be if they in fact want to retire earlier.

Scott Trench:
Can you define fixed and discretionary expenses?

Brandon:
Yeah, so I think it’s for everyone to define for themselves. For me personally, like I mentioned in the article, some things that people would classify as discretionary are non-negotiable for me. So for instance, I want to go back to the states at least once a year to see my family and friends. And yes, that’s travel and that’s technically fun, and I could cut back on that if I needed to. It’s not like a central roof over my head or food in my stomach, but for me to have a fun and enjoyable early retirement, then I definitely need to go home to the states. So for me, that’s not discretionary, that’s essential.
But if you wanted to bare bones it and what’s essential, it’s like, all right, mortgage or rent, essential, food, grocery budget, essential and heating and utilities and all that sort of stuff. But that’s the thing with this method is that you can just define that yourself. And for me, some things like going out for dinner once a week, I think that’s going to be essential for me just… Well, not now with a 10 month old, but eventually get back to that because I do enjoy it and it just adds to a really varied and interesting life. So yeah, at the default level, essential’s the things that you have to have to live with, you can’t live without. But for this strategy, you can define that however you want.

Scott Trench:
That was one of the things that I thought was really interesting about this because my mind immediately leaped to, okay, how do you take the conclusions that you guys put together to their logical extreme and say, what does that mean? So what is discretionary? What is fixed? Well, let’s say that you’re thinking about house hacking for example, and you buy a duplex and the other side covers your mortgage. Well, now you don’t have any fixed expense for housing potentially if you’ve paid off car, you have no fixed expense for commuting, maybe just a little bit of the insurance and gasoline there. So that leaves you with, you could theoretically take this and say, wow, there’s a tremendous amount of expenses that are in fact truly discretionary here, and you can start chunking down the amount that you need to live the financially independent lifestyle pretty dramatically by following these conclusions and get up there and upwards of 50, 60, 70% discretionary spending.

Brandon:
Absolutely, and that was a side benefit of this idea and this whole strategy. I liked the idea of one, having people focus on reducing their fixed costs, and also, for someone like me who’s super naturally frugal and struggles to spend on myself, even though I know we have enough and I know that there’s lots of room in the budget to do things, fun things and buy nice things and stuff. I also liked the flip side of that where you have this discretionary budget and in years that the market’s doing well, then you have this money that you feel like, “Oh, I can spend all of that discretionary budget and I’m going to try to make the most of it.” So I liked both of those side benefits. It’s like one, it gets you to focus on your fixed costs and maybe lower those as much as you can, which is really the important thing, like the fixed cost or the main thing that will impact your spending and the success of your portfolio and things like that. But then it also lets you live a little with your discretionary budget.

Mindy Jensen:
What I like about the article is that it shows you from the opposite, you mentioned a few minutes ago, people are like, “Oh, it’s not the 4% rule. I have to knock it down to the three and a half or 3.75 or even two and a half percent rule, then I’ll be okay.” You’re like, “No, look at this, you can actually increase it depending on what your spending is.” So many people question the 4% rule, and my first thought whenever anybody questions the 4% rule is have you read the original article? The original Bengen article in the journal of, I can’t even remember what it’s called, is so interesting and so, I mean, convincing. He did so much research, he didn’t just say, “I think four percent’s going to be okay.” He did so much research and insert the past performance is not indicative of future games, but he’s so smart and this is not the what can you squeak by withdrawal rate.
This is the safe withdrawal rate. Worst case scenario, if you hit the worst case scenario ever of all time, the safe withdrawal rate is 4% and you can extrapolate it up or ramp it up in times of really great returns. So I like that this article, if somebody was questioning the 4% rule, could look at it and say, “Oh, I really could do more. I don’t have to pull back and do less,” but we’re all human and we don’t think in those terms. We think, ‘Oh, worst case scenario or I’m going to run out of money.” Are you going to run out of money in one day? Then you’re doing it wrong if… You definitely didn’t save enough, if you’re going to run out of money in one day. But Brandon, do you continue to look at the market? Do you continue to keep an eye on the market even though logically you don’t have to?

Brandon:
Oh, yeah, big time. Yeah, it’s still an interest to me. I would be better off not because what’s the fidelity study where it was like the dead people and the people that forgot they had the account were the ones that performed the best because they weren’t in there messing around with it. So yeah, I’d be better off not looking, but yeah, no, it’s still an interest to me, so I still look and I was just speaking to Nick the other day actually, and Nick was just saying how I think with a 4% rule, you’re more likely to die with four times your initial amount than you are to die with less than you started with.
So that’s how, just to reiterate what you’re saying, how people go crazy and start thinking like 2.5% rule and all of those arguments assume that this time’s different and the future’s going to be different, which it will be different, but to know that the future’s going to be different and to assume it’s going to be that much worse, I don’t buy that. If anything, I think the future’s brighter and productivity is going to increase dramatically due to automation and AI and things like that. So I’m, if anything, more optimistic to own these stocks than I am pessimistic that this time’s different and I have any idea why it’s going to be different and I know so much that it’s going to be to then say that it’s going to be 2.5 percent’s the only way to go. It doesn’t make sense to me.

Scott Trench:
Just diving down this tangent, one more step to just show how much I agree with what Brandon’s saying here. There is this study about how housing costs have skyrocketed over the last 40 years and when you normalize for inflation and then the size of new construction homes, they haven’t really increased that much. It’s just that everyone today when they’re buying a new home is typically buying a much bigger home with more bedrooms and more bathrooms than homes that were constructed 40, 50 years ago. So to that point, we have cooler stuff now you can get an iPhone, you can get a Tesla, you can travel faster and more cheaply than previously. So it is just that your money can purchase way more today, but to keep up with the Joneses will inevitably harder and harder and harder with each passing year to live the lifestyle that you’ll see folks on Instagram.
The beach isn’t getting any better. The weather in Scotland isn’t getting any better or worse. If you want to go out and enjoy the outside at a park, that time is going to be perfect now and in the future and it’s free or very low cost at that point in time. And I don’t think folks really take that through to the conclusion. If you want to maintain your lifestyle today going into the future, you’ll probably be able to do so adjusting for inflation at a relatively cheaper and cheaper rate throughout the years. But if you want to keep up with the newest technologies and live in the newest places, then that’s where the discretionary spending needs to have ample room for growth.

Brandon:
Yeah, couldn’t agree more, and not caring what the Joneses are doing is the biggest trick for pursuing financial independence or doing whatever you want with money because I feel like that was such a gift that I didn’t care that made it a lot easier and I don’t know how you do that, but it makes your whole life a lot easier not caring what the Joneses are doing because the Joneses are pretty crazy.

Scott Trench:
So you in your article took keeping up with the Joneses, I guess, was tangent to a mathematical calculation here, you said that you have withdrawal rules that you have in certain market conditions. Could you go through those how you recommend someone who’s starting perhaps at the 4% rule or something like that, or at the withdrawal rate you suggest, and then how you’d recommend they think about their spending from a discretionary standpoint?

Brandon:
Yeah, absolutely. So like I said before, there’s no free lunch. So just because you have 50% discretionary spending doesn’t mean you can just bump up from a 4% rule to a 5.5% rule without changing anything about how you spend your money. So it just doesn’t work like that sadly. So when we were going back and forth with Nick, we were trying to think of a way to incorporate discretionary spending and flexibility into a withdrawal strategy that wasn’t overly cumbersome or just really complicated. And the conclusion we came to was, “Right, okay, so let’s say that every December 31st, if you’re retired with this new method, you look at your past performance over that year, and if the market is in a correction, so if the market is 10% to 20% off its highs, then you make one change to your discretionary spending. Otherwise, if it’s 20% or more down from the market highs, then you do this other change. Otherwise, you can just take your entire discretionary budget.”
So to go back to the scenario of where your 50% of your spending is discretionary, this is how it would look. So say you spend $40,000 a year, 50% of that is discretionary. So that means your essential spending, which is $20,000, that’s going to just increase every year with inflation because we figured this is essential stuff. So it does have to keep pace with inflation. So if you’re renting, you’re going to have to keep pace with rental inflation. If you’re factoring healthcare costs into that, then you’re going to want your essentials to increase with inflation. The discretionary is not adjusted for inflation. For instance, let’s say your $20,000 of discretionary spending, if the markets are up or if they’re down less than 10%, then you take out that full $20,000 for that year.
If the market is in a correction, so 10 to 20% down, you would hit half of that. So $10,000 would be going towards discretionary spending. And if the market’s in a bear market, so 20% plus down, then you would have no discretionary budget. And this goes back to my other statement of, you define discretionary how you want it. So definitely put some essential fun in your essential bucket so that you’re not having just a completely terrible year when there’s a bear market. The good thing is it’s very rarely in a bear market and the market, like I said, is overwhelmingly up and to the right. So most years are going to be good, so you’re going to be able to get that full discretionary budget. But like I mentioned before, there’s some side benefits to this that I think are really good for early retirement, and one of those is one, it’ll allow you to annually assess what you’re spending on discretionary wise.
So it’s easy to get into a routine and just spend the same thing every year, and you may not even like it anymore. So having this at the forefront of your mind at least once a year to be like, “Actually, I don’t need that healthcare membership or health club membership or whatever, or maybe we did travel too much last year and it wasn’t that actually that enjoyable and we’ll just cut back this year.” I think that’s beneficial. Secondly, it could also fix one of the things that I was most surprised about and that was most challenging for me, and that was the fact that money no longer was a motivating factor in my life. So my entire life has been geared around money study hard in high school to get a good grades and get a good SAT score so that I could get a good college and that would lead to a good job.
Studying computer science, that was going to hopefully lead to a good salary. And my whole life, even side businesses and hobbies were geared towards like, “Oh, I can maybe make some money off of this,” to then have enough and to realize, oh, more money doesn’t matter in the same way that more tap water doesn’t matter, which was a reference that Mr. Money Mustache wrote about a decade ago. I think that when I read it, I was like, “That doesn’t make any sense.” But now when you’re in that position, it’s like, “Oh, yeah. It’s great having tap water and it’s great knowing that it’s there and you need as much as you want, you can take out and it’s great and it’s going to be good for you,” but you’re not filling up buckets of tap water to save and to have more of it, and you know what I mean? It’s not like I’m going out and scavenging for more tap water, but getting more of it doesn’t really make sense.
That was really a tough transition to make in my mind because then it was like, well, what motivates you? And not having that biggest source of motivation was very disorienting, but having this method, then, yeah, maybe you’re going to want to have a side business to account for those down years, and you don’t want that discretionary spending to drop to zero, so maybe you are going to be more inclined to pursue that side hobby that yes, there’s annoying things that you have to do upfront to get over the hurdle of then making money, but maybe that desire for money will still be there and it’ll push you through those things to do rather than just having no monetary motivations anymore, which again, it’s an interesting way to live. But yeah, I don’t know if it’s better or worse.

Scott Trench:
I think that it comes down to if you are an early retiree and you have a million dollar portfolio and you want to withdraw at the 4% rule, going back to the basics here that a lot of people are very comfortable with, right? That’s 40 grand a year and the market crashes 20% in the first year. Well, maybe either you can cut back on discretionary spending like you suggest Brandon, or you could just get a part-time job for that one year. And much more likely to your point that you referenced earlier in that Nick calculated, you’re four times more likely to end up more wealth over the end of 30 years.
So you’re much more likely to see the average 10 plus percent return of the stock market in the early years and blow way past the spending goals that the amounts of money that you wanted to set aside for spending. So if you’re willing to just run those odds and you’re like, “Oh, my downside is great, I’m going to work at Starbucks for part-time for part of this year as my worst case scenario,” that’s pretty good. And your best case scenario is you again pursue these side projects. You’re much more likely scenario is you pursue these side projects, you release an album, it goes platinum and you make millions, right? Is that what happened here?

Brandon:
No, no, it didn’t go platinum. I did get on the Billboard charts thanks to the Mad Fientist listeners, which was ridiculous. So yeah, it made it onto the Billboard charts for one week, which was still amazing, and I got the plaque, it’s in the states off to get it now, shipped over to my house now that I have a proper studio. But yeah, got the plaque with the platinum disc on it and saying where it landed on the charts and everything, which is ridiculous, but no platinum, sadly.

Scott Trench:
So that’s phenomenal, and we’re linking to that in the show notes here. So if you want to go read the article or listen to Brandon’s album, you can go check those out at the show notes here at BiggerPockets Money. But anyways, so the point is you’re much more likely to have a large surplus once you reach any of these milestones, 4, 5, 6%, whatever around financial independence and begin pursuing your own thing and living the life you want. And I think that that’s an important takeaway from all of this math. We do all this theoretical research, we do all this math to back into these numbers, and the answer is, if you’re just reasonably flexible and creative over that period of time, you’re probably going to be fine. You have a whole year every year to figure out any of those things. To Mindy’s point earlier, you’re not going to run out of money overnight if you’ve accumulated a nest egg of hundreds of thousands of millions of dollars and invest it in a 60/40 stock bond portfolio.

Brandon:
Which yeah, and that brings up two good points, which reminded me of as you were saying that. So the first is that, as you mentioned, we haven’t even touched the five portfolio due to some of the software I wrote before I even started the Mad Fientist, that’s earning money and we don’t really spend that much, so we still don’t spend that much. So that’s an important caveat because everything I wrote about is all theoretical. I’m not actually living that withdrawal rate, which again, living it is definitely different than theoretically thinking about it, but I’m not living the 4% rule either. So I talk about it in a sense of, yeah, I’m looking at this from the outside. So that’s an important caveat to make just to tell people that, because I don’t want anybody thinking, oh, this guy’s not living the walk or walking the walk.
The second thing is it reminded me of the big change that I forgot about at the beginning of the episode when you said there’s lots of things that have changed, and that is that I have started to spend more and I love it. And as somebody who’s supernaturally frugal, who is spending money means that I failed in some way and that’s like the last resort. Over the past few years, I’ve tried to get better at spending, and it has been so much fun, and we can talk about that more if you want. I knew there was one other big change that I had forgot about at the beginning, and that was it.

Mindy Jensen:
Yeah, I want to talk about that too because your latest podcast episode with Ramit inspired quite a bit in my own personal life, so thank you very much. Back to a point that I’ve been trying to make, but then we keep going off on these other tangent that I wanted to make earlier, is that you won’t run out of money overnight because you are going to continue to monitor the market even after you retire. I don’t know a single early retiree who has gotten here and then they’re like, “You know what? I am never going to pay attention to the market again. I’m totally fine. I’m just going to go off on my little 4% rule plan and never ever, ever look at anything again.”
And then wallop gets a surprise, “Oh, my goodness, the market’s down. I had no idea.” I mean, it’s not like the news doesn’t cover it in perpetuity every time there’s a blip in the market, so you will be able to course correct. And I think being aware of the fact that it’s not the 4% rule, it’s the 4.15 and it’s really the 4.8 and that’s the worst case scenario and keeping track of what’s going on in the market and oh, wow, it’s down. Maybe I’m not going to take that epic three week trip to Hawaii with my family and spend like crazy because the Mad Fientist and Ramit told me to, maybe I’m going to pull back a little bit, maybe I’ll just go to LA or I’ll go up to the mountains of Colorado.

Brandon:
Or maybe you’ll have a epic three month trip to Thailand and you’ll come back having spent less than you would’ve had gone anywhere because you’re young and you have flexibility and you are adventurous and you’re all these things that maybe a 85 year old retirees not. And that was the whole point of the article.

Mindy Jensen:
Yeah, I love it.

Scott Trench:
So we cover all this math, we cover all of these reasons why the 4% rule and these other rules of thumb make it so ultra conservative, you should really be going higher than that. Why is it that no one… I mean, I could met one person and all these years we’ve been talking about financial independence, who is actually retired on the 4% rule and not had some sort of side bet, a pension or a large cash cushion or a business or a side hustle or a book or whatever with this. What do you think it is about the amount of energy that’s been devoted to reassuring us on this number and the fact that if you talk to any early retiree, essentially none of them have actually left at the 4% rule? They all have an ace in the hole.

Mindy Jensen:
Because they’re all overachievers.

Brandon:
Yes. Yeah, big time, personality, yeah. I think if you’ve been able to do this in your 30s or 40s or 50s or whatever, then you’re an overachiever and you’re obviously very interested in things and you research them and you take them to the extremes if you think you can and you’re just wanting to do something else as well. So when you can do something else without having money being the thing that drives you, then you can make decisions that nobody else makes. And for example, with a Mad Fientist, I post maybe once every 3, 4, 5, 6 months. And that’s like every how to make money blogging tells you that’s the worst thing you can do, you have to do every week or you have to be consistent.
I say no to so many interview pitches because I’m like, “My audience won’t find this interesting.” Yes, you’re going to promote my blog and that would help grow the podcast, but I’m saying no because I’m not interested, so my audience isn’t interested. So every decision I make for Mad Fientist is with my audience in mind and money doesn’t even enter the equation. So it’s like that’s going to help my blog stand out from somebody who’s pitching everything that’s paying them or they’re plastered with ads or whatever. It’s like you get to do these things for another reason and then people notice that and then you end up making money ironically anyway because of that, because of that you’re not trying.

Scott Trench:
Yeah. So how should we think about these rules of thumb? Is this the beginning of the finish line? Is that the practical reality of these rules, like the 4% rule, in spite of the fact that they’re clearly you’re way past it financially, you’ve got all the money you need for the rest of your life as long as you’re confident in you’re spending projections?

Brandon:
I think it’s a safety blanket. So I knew I would make more money after quitting my job. I just knew it because so many of my interests, like right now after speaking to Ramit and him helping me spend more, he’s like try to think of ways you could spend more on something you love. Like, “What do you love?” I was like, “I love coffee. I love my morning coffee ritual, my pour over, my beans, grinding it, smelling it, buying different beans, all this stuff.” And he’s like, “Well, how could you spend 10 times the amount?” And it blew my mind. It made me sweaty. I had a actual physical reaction to it because I was like, “I’m already spending a lot. This is already a lot. I’m spending 10 pounds a week on fancy beans, and they shipped directly to my house, and I just bought this 300 pound grinder that’s super fancy,” and it literally made me sweat.
But since then, I’ve just kept going back to it. And now I think I’m going to buy a 3,500 pound home roaster/home roasting/commercial that does a kilogram of beans that I can roast. And even then, I think I’m going to start selling them because my neighbor sells cakes to all the hikers that go up the hill. And I’m like, “Oh, maybe I’ll just team up with her and I can sell some beans from her and that’ll help me get better at roasting because I’ll be roasting more because I won’t have to drink everything I roast.” And there it is again. It’s like there’s another way that money’s going to come in that it doesn’t have to, and it’s not going to impede on my enjoyment of the roasting hobby, but it’s just another way that it’s coming into my life that I wouldn’t have expected.
Anyway, so I knew that I was going to be making money some way because all of my hobbies have logical ways to make money, I guess. But it’s a safety blanket, like someone who’s so risk averse that they’re saving 70% of their salary. They need to know that if everything goes wrong and I’m confined to my bed and I can’t go out and make money or I can’t make money on the internet or anything, then I’m going to be okay. And that’s what I think the 4% rule was these days. And I think the people that need a 2.5% rule need a really thick safety blanket that’s just overly excessive, and they’re just going to be too sweaty under that safety blanket to kill the metaphor finally.

Scott Trench:
Well, so this is a great set and to talking about the idea of spending more and all of these concepts that I think are really hard for a lot of FI people, and I can see a lot of people who are listening who are not yet financially independent rolling their eyes at this problem. So I want to go back one second here and ask you about the arc here. You started out and you were very frugal. You saved a large portion of your income, and that’s how you built your wealth. You amassed a large number of interests in various things. You have music royalties, you’ve got the bad finances blog, you’ve now got your coffee roasting enterprise. All of these items are contributing to your wealth, and now you have this very large surplus I’d imagine that enables you to spend more and you’ve got to shake these habits that got you here to make the most use of the wealth that you’ve created here.
Do you think that’s the arc that people should set themselves up for? Or do you think that there’s… Do you think the necessity or that being so frugal and so extreme in the early days is a necessity to give you the ability to have these problems about letting go and spending more today?

Brandon:
Yeah, no, that’s a very interesting question. And I think you have to know yourself. So if you’re a naturally spendy person, then this conversation seems crazy to you. But I know for the FIRE community, and I know Mindy and her husband are right there with me when it comes to not being able to spend, even though they probably could. I know this is definitely a much more prevalent situation for FIRE people. So yeah, I think first is to know yourself and if you’re naturally spendy then don’t just let yourself go crazy, you really need to dial that in. But for someone like me who is looking back on his journey to financial independence, and now after that with the surplus, I’m lucky in the sense that there’s not a lot of regrets getting to FI.
My wife and I traveled to 50 countries. We did it cheaply and we were really good at travel hacking, and so it didn’t break the bank, but we didn’t sacrifice those experiences, which I’m really grateful for. And really the only thing I regret about my entire journey to FI was missing out on a few bachelor parties with my buddies in my 20s, because I lived in Scotland, they lived in the States. I wasn’t going to fly to the States a month before the wedding and then fly back for the wedding. I wasn’t going to fly the month before for the bachelor party. It just seemed crazy to me. But I can’t get that time back. And a book that I only recently read that I wish I had read in my 20s and 30s was Die With Zero. And that was after I published this episode with Ramit and a lot of Mad Fientist readers were like, “You need to read this book.”
And so good because it talks about how there’s a season for everything, and I’m not going to get that drunk 20 idiot time back with my friends. And I’m not in those stories where they all were 20 year old drunk idiots together, and I wouldn’t want that now in my 40s, I could have a half a beer and then I’m going to fall asleep because I got a 10 month old. So in that sense, I wish I had just relaxed a little bit, but also spending is a skill and I did not have that skill, and I’m only developing that skill over the last two or three years as I’ve actually worked on it. So I think I could have let my foot off the gas a little bit during my time to FI, and I could have exercised that spending muscle a bit to figure out, “Hey, what is worth spending on?”
And I just thought all spending was bad. Whereas now I’m like, “Wow, some of this stuff is really making my life better, some of these things that I’m buying, which I always hated things, stuff, but man, some of my stuff, it makes me so happy every day.” And then spending on experiences as well, like elevating some of those experiences has been really fun. So I think I would’ve eased off the gas a little bit, maybe taken a little bit longer to reach the FI goals and everything, but I’m thankful there’s not too many regrets.

Mindy Jensen:
Okay. You just said two things that really, really hit hard. You said, I thought spending was bad. And I hear you. I feel you. I totally identify with that, and I’m just starting to get over it. I can’t tell you how timely and helpful your episode with Ramit was and how seen I felt from that episode, thank you so much, when he told you to start spending more 10X, I’m like, I’m sweating too when you’re sweating.
You said, “But some of this stuff makes my life better.” And I have never until, what is that phrase? I was today years old, I don’t know, a month ago old when I started realizing that spending isn’t bad if you can afford it, and some of the stuff that you spend makes your life better or more enjoyable or you just like it, and it’s okay to spend money on something that you enjoy and spending is a skill, and it is hard to make that very big change. And then right after your episode came out, Pete had an article about buying a Tesla. He just spent $50,000 on a… And did you see the hate he got from that?

Brandon:
No, I didn’t.

Mindy Jensen:
People were so mean. Some people were like, “Hey, good for you.” And some people were like, “Oh, my God, I’m never reading your blog again. I can’t believe you would be like this. Why do you have to…” And by Pete, I’m sorry, I mean Mr. Money Mustache. Why do you have to be so hate filled? He clearly can afford it. He’s not simultaneously on food stamps and spending money on big fancy things that he can’t afford. He’s got lots and lots of money that he can afford to buy this car. No problem.

Brandon:
Yeah. So that makes me think of two things. First is that’s sort of why I’ve stepped back from the FIRE community over the last few years because at first, when it all started out, it just felt like all these people doing really interesting things like breaking the mold, going against common knowledge and doing them. And that was very exciting. And then it got so big 2018, 2019, and now it’s so big that there’s a group think within the FIRE community that why would Mr. Money Mustache get hate for making a choice when everyone knows he’s very good with money and he’s responsible and he’s able to do what he wants with it? And it’s getting to be like this group think, and now I’m rebelling against the FIRE community.
It’s like, when I started, I felt like I was rebelling against common financial knowledge. And now after FIRE’s taken off so much, I feel like I’m rebelling against FIRE because every individual is different and nobody should be judged for any decisions they’re making because you don’t know what goes into those decisions, and especially someone who’s as knowledgeable and intelligent as Mr. Money Mustache is, it’s like, “Why would you go against him?”
The second thing is the Tesla is always lived in my brain as something that I feel encapsulates this problem more perfectly than anything else. So I happen to know Mindy and her husband very well, and I know her husband has invested in Tesla way back in the day and probably made enough just off that one investment to buy 50 Teslas. And he’s obsessed with Tesla, he’s obsessed with EVs. He reads about them all the time, and yet he still doesn’t have a Tesla. And I think my work can’t be done on this topic of freeing people from the chains of their past frugality until Mindy and her husband get that Tesla, because I think that, yeah, just epitomizes what I’m currently now trying to fight against.

Scott Trench:
I love it, but I don’t want to lose sight of the fact that the journey to financial independence starts for most people with this pretty extreme bent on frugality. And it’s consistent across all three of us for sure. And it’s part of your identity, I think for a number of years, this is how you view yourself. You make conscious decisions about these places. You’re very conscious about where you live, what you drive, how you spend your money on food. You tightly control expenses, and that’s a necessary stepping stone, and we should encourage people to do that.
That is a step in the road to success here as the years go by, a five, seven year grind, but not so hard that you skip your buddy’s bachelor party or the wedding or the trip with your friends and family, right? I love that caveat. These are life experiences you’re never going to get back, but where you lay your head at night for five or seven years, that can make a big difference about whether you’re going to become financially independent, what kind of vehicle you drive, what you eat on a day-to-day basis, all that kind of good stuff.

Brandon:
Just to interject real quick, because I think that’s made this so fun, is that I’ve gradually added these things to my life, and it’s different. I look to some of my younger siblings, they just went from university to rate to have the fancy car and the nice place and all this stuff, and I sort of feel bad because they didn’t get to have that sort of grungy apartment life after college, and they didn’t sort of have to struggle and go to hostels and some sketchy hostels in their European backpacking trip and stuff. So I feel like adding this stuff in gradually is so much more fun because you’re getting that dopamine hit just super gradually and you can more likely afford it.
So I’m sorry to butt in there, but that was such a important point that you made, is that you definitely need to sort yourself out early, especially if frugality is not natural like it is to all three of us, but adding it gradually makes it way more fun because you just get that slight dopamine hit as you go and then you… I can’t imagine what’s going to be fun when some of these younger kids are 40. It’s like when you’re not getting wasted with your friends and stuff and traveling the world and stuff. I’m glad I had this nice house to be my 40 year old thing. Now I get to buy these cool things for my nice house. Whereas if I had had that super fancy house when I got to be 20 without house hacking or without having roommates, then what would be I get my kicks from these days in my 40s.

Scott Trench:
Yeah, I think that’s right. But one of the things I wanted to make a point was in that journey of extreme frugality, that’s your identity. That was my identity for a long period of time. Perhaps that was how you viewed yourself, Brandon, that’s perhaps how Mr. Money Mustache viewed himself. And then after a while that ceases to become important. It’s just not a relevant factor in your life to be frugal there. There’s this huge pile of surplus money. If you leave the tap on, because it’s flowing water, the metaphor we were using earlier, for an extra few minutes to fill up your water bottle with a little bit excess. That’s great. You can do that. And so that changes.
And I think that folks ingrained too much of the frugality thing is this lifetime concept in there that then they lash out in the financial independence community at the folks that are starting to spend more, which will happen inevitably. If you just spend less than you earn it and continue to invest, the pile will grow bigger and bigger and bigger after you hit the 4% rule, for example, once you get to the beginning of the end, whatever we called it with the 4% rule, the safety blanket.

Brandon:
That’s exactly right. And that’s one of the issues I see with the FIRE community because I had that struggle, just me personally without a name for it. But now there’s a name for it and now there’s a community and now there’s a Reddit subreddit that people are going to judge you for all these decisions. So it’s even worse. So for me, it’s taken a lot of years in thinking and actual dedication to try to unwind some of that natural identity association with frugality. But now it’s even harder when you’re immersed in the community that espouses it. It’s so much and yeah, that’s a shame that then people are judging people for it, which is even worse because that’s not the point. It’s not who has the most money at the end wins. That’s not the point at all.

Mindy Jensen:
Yeah, or who can spend the least amount. It’s being comfortable, it’s being flexible, it’s having enough money that now you can do whatever you want. I was having dinner last night with friends and they said, we were talking, so there was a couple, Jen and Scott, and then we met a new to the FI community, David. And he was like, “Well, I like my job.” And Scott said, “Well, you don’t have to retire. You can still work if you want to.” And I think that there’s a lot of people who are like, “Oh, well, I have to retire, or I don’t want to pursue financial independence because I don’t want to retire.”
I’m financially independent and I still work. You don’t have to quit. If you like your job, you can continue to work. You can cobble together some sort of employment situation that you enjoy most. Maybe you work five hours a week, maybe you work 20 hours a month or whatever. It’s whatever you want. It just gives you flexibility and it isn’t about how little can you spend. Although I do find enjoyment in Jacob Lund Fisker’s extreme frugality. I find it fun to voyeur through him, but I’m not going to go that route. But I also don’t think that he minds it either. I think he really enjoys that. That’s not something that he’s doing and he finds pain, but he keeps doing it anyway.

Scott Trench:
I think the lesson is go all out. Give yourself this problem in life. This is the kind of problem that you want and get to that 50, 60, 70% savings rate, but don’t get so wrapped up in that as your identity that at the end you can’t evolve to living the lifestyle that you want and make yourself happy. There’s more to life than having a large pile of money and continuing to spend, like you’re a college student at that point. But again, if you want this world of financial independence, you have to go through that phase to a certain degree. And we can’t forget that either sitting on our relative high horses here after having gone through that grind individually.

Brandon:
No, I think that’s a fantastic point, and exactly, all of life has to be an experiment because we’re so bad at knowing what makes us happy. And I definitely took it way too far in the frugality space and I definitely pushed that boundary. I tested it and realized that that was way too miserable for a long term life. And now here I am on the other side, and you’re right, the sequence does matter. Don’t test the fund spending side and see how far you can go in that without first testing the other way.
So you’re absolutely right. The sequence matters. First, tests and find your boundaries on that edge and then slowly start adding things back in that you think could benefit your life. And then get used to that spending and get used to using money for that reason. And then hopefully one day you’ll be in a situation where you’re able to then test the other boundary and yeah, it’s way more fun than I thought it would be. And it’s way more challenging than I thought it would be because I haven’t ever hit the targets that I’ve set to try to test that other boundary yet because I’m so used to being that frugal guy and old habits die hard.

Scott Trench:
I love how Ramit told you to spend 10 times the amount of money and so you bought a coffee roasting business essentially.

Brandon:
So I haven’t told him that yet.

Scott Trench:
Old habits die hard.

Brandon:
Because I haven’t bought it. But yeah, I’m definitely going to get back in touch with him because I wouldn’t have thought of that otherwise. So we’ll see how it goes.

Scott Trench:
Well, Brandon, are there any other things you want to share with us before we kind of wrap up here?

Brandon:
No, I think we covered so much of what I’ve been thinking about recently and appreciate you guys getting me on the show to talk about it because it helps with my thinking as well and my plans for going forward because like I said, it’s all an experiment. I don’t have the answers and nobody does have the answers because it’s so individual. So you have to find the answers for yourself.

Mindy Jensen:
Okay. Brandon, it’s always delightful to talk to you. Come back anytime of course, but where can people find you before you come back again?

Brandon:
Okay. So the most important thing to go to is madfientist.com/album because there you can find all the music stuff I’m doing, which is what I’m really super into after leaving my job and hopefully going to start playing some live shows. So if you can follow me on Spotify and stuff, that all helps with booking gigs. So then we can meet up in your hometown and we can talk about finance stuff over a beer, but at least then I’ll be there with the music stuff, which would be super fun. So yeah, madfientist.com/album. But you can find me anywhere that Mad Fientist exists because that’s me. It’s a made up word. So I’m Mad Fientist on Twitter and Facebook and madfientist.com and that’s everything I think. So thanks for having me again. That’s always great chatting to you guys.

Mindy Jensen:
And where can we buy the beans, the Mad Fientist coffee roastery?

Brandon:
Wow. Yeah, that’ll be very local. So it’s a very small village in Scotland you’ll have to come to. But I’ll see you at one of my shows and I’ll tell you where and I’ll maybe bring some beans with me.

Mindy Jensen:
Awesome. Okay, I’m going to hold you to that. Okay, thank you, Brandon. This was so, so, so much fun and we will talk to you soon.

Scott Trench:
Thank you so much.

Brandon:
Thanks again, guys. See you. See you. Bye.

Mindy Jensen:
All right, Scott, that was Brandon, the Mad Fientist. He’s always awesome. I’m sorry, Brandon, the Mad Fientist, Billboard chart topping musician, new dad, new homeowner, and future coffee roaster master, Brandon, the Mad Fientist.

Scott Trench:
Yeah. I love talking with Brandon every time. What a humble, happy, hardworking, brilliant person, right? I mean, every time we talk to him we learn something. He’s very thoughtful. His ego is so in check. I just enjoy talking with him every single time and love the life that he’s created for himself through humility, hard work, smarts and discipline and grind.

Mindy Jensen:
Yeah. He is such a delight and he’s so giving. He loves to take those horrible tax documents and read through them and translate them for you. He loves to take these complicated issues and think about them and look for loopholes, look for ways around them. And this most recent article about the 4% rule is just yet another example of him taking this hard and fast rule. The 4% rule that has been kind of overly simplified by a lot of people, “Oh, it’s 4%, it’s always 4%.” He’s like, “No, it doesn’t have to be 4%, it could be 5%, it could be 6%.”
I think it’s important to keep track of where your money’s going. I think it’s important to keep track of what the market is doing and if you are on the path to financial independence, if you are in a position of being financially independent, you are most likely going to be tracking your spending at least loosely. And you are going to be keeping track of the market because that’s the kind of person you are. So this is not adding anything to your plate, it’s just giving you more options. And that’s kind of what financial dependence is all about.

Scott Trench:
Yeah, I completely agree. And I also think, I just want to come back to that conversation we having earlier. I think that the three of us are going through this wonderful shift in thinking about, “Oh, what does abundance look like now that we’ve kind of crossed this hurdle of the 4% rule and are well beyond it, each of us?” That does not change the fact that the way I got here, the way Mindy, you got to your current level of wealth, the way Brandon got there was a grind of many years that was pretty intense and all out and very frugal and very dedicated for a long period of time mixed with a high income and low spending for many of those years, especially in the later stages of the journey to FI. And there’s evolution that comes after that.
I, at least want to continue to really heavily encourage that. I think it’s a healthy approach and go all out for those first couple of years and then look up after you’ve caught across that 4% rule and open up and say the rest of my life, the next five decades potentially, if you can do this in your 30s or 40s are going to be whatever I want them to be and I can go and reinvent myself five or six times. Don’t let it become your identity to the point where you carry on too cheap after the thresholds for financial independence are hit.

Mindy Jensen:
Absolutely. I really love the tap water analogy from Mr. Money Mustache. I don’t need to have Home Depot buckets full of tap water around my house. I can just go to the tap and take it out whenever I need it. I don’t need to hoard it around the house. Money’s the same way. All right, Scott, should we get out of here?

Scott Trench:
Let’s do it.

Mindy Jensen:
That wraps up this episode of the BiggerPockets Money Podcast with Billboard chart topping artist Brandon, the Mad Fientist. Get his album at madfientist.com/album. He is Scott Trench and I am Mindy Jensen saying later days, manta rays. BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kailyn Bennett, editing by Exodus Media, copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.
(singing)