19 episodes

Welcome to The Modest Millions Show. We’ll discuss personal finance strategies for average folks like you and me so we can better understand and control our own financial destinies. We’ll cover everything from how to setup (and run) a budget, which is the most critical building block of any personal finance plan, to how to figure out what your “ideal retirement” looks like, to the exploration of supplemental and/or passive income streams that can help fuel your personal finance goals. If you listen to money podcasts like The Dave Ramsey Show, Dough Roller Money Podcast, Radical Personal Finance, Afford Anything with Paula Pant, Smart Passive Income with Pat Flynn, BiggerPockets, Investing in Real Estate with Clayton Morris and Listen Money Matters, you'll definitely find value in The Modest Millions Show. Subscribe today so you don't miss an episode!

The Modest Millions Show - Personal Finance, Budgeting, Early Retirement, Financial Independence and Getting Out of Debt Tips Phil Wocken - Personal Finance, Budgeting and Early Retirement Enthusiast

    • Investing

Welcome to The Modest Millions Show. We’ll discuss personal finance strategies for average folks like you and me so we can better understand and control our own financial destinies. We’ll cover everything from how to setup (and run) a budget, which is the most critical building block of any personal finance plan, to how to figure out what your “ideal retirement” looks like, to the exploration of supplemental and/or passive income streams that can help fuel your personal finance goals. If you listen to money podcasts like The Dave Ramsey Show, Dough Roller Money Podcast, Radical Personal Finance, Afford Anything with Paula Pant, Smart Passive Income with Pat Flynn, BiggerPockets, Investing in Real Estate with Clayton Morris and Listen Money Matters, you'll definitely find value in The Modest Millions Show. Subscribe today so you don't miss an episode!

    MM019: 15 Personal Finance Resolutions for the New Year

    MM019: 15 Personal Finance Resolutions for the New Year

    We come into January energized and refreshed to conquer the world. We set ambitious resolutions so we can better ourselves and achieve our goals. And then, almost as quickly as we made the resolutions, our resolve falters and we give up on our New Year's Resolutions. But, WHY do we have a hard time sticking to our resolutions? HOW can we set ourselves up to accomplish our resolutions? And WHAT are some attainable personal finance goals that we can strive for this year? That, and more, in this episode!

    IN THIS WEEK'S EPISODE



    * The problem with most New Year's Resolutions

    * SMART goal setting

    * 15 personal finance resolutions you can hit this year



    Personal finance resolutions for the new year

    It’s the beginning of a new year, and if you’re like me, you probably set some resolutions that you’d like to accomplish this year.

    Now, we’re only a few days into the new year, so my hope is that some of your resolutions are still intact. It’s amazing how quickly our resolutions fall apart.

    But let’s unpack that. WHY do our resolutions fail? Why do we give up so quickly on our goals? After all, they were important enough for us to realize that we needed to resolve to address them, so we KNOW they’re important.



    The problem with most New Year’s Resolutions

    In preparation for this episode on personal finance resolutions, I was curious what the most popular resolutions are, and I think I found a reason why many resolutions fail.

    When surveyed, 38 percent resolved to “exercise more.” One third set out to “lose weight.” Thirty-two percent wanted to “eat healthier.” Fifteen percent aimed to “Take a more active approach to their health,” whatever that means. And 15 percent  wanted to “learn a new skill or hobby.”

    Note a pattern? How many times have you heard someone say “Gosh, this year I’m going to exercise more!” Do they stick with their resolution? Probably not. Why? It’s an empty resolution. There’s no meat in there. What I mean is that they don’t have a plan to reach their goal.

    A better version of that resolution is “I’m going to go to they gym five days a week.” Do they keep that resolution? Maybe, maybe not. See, what we don’t know is are they already going to the gym three days per week? Or are they going to the gym zero days a week and trying to radically change their habits?

    Most of us use the new year to try to conquer the world. We set our sights so high because THIS is the year that you make up for all the other years in which you failed to get to the gym. Boy, I have been there.

    The problem is, most of us aren’t wired that way. We can’t go from zero to 60 in 7 days flat. Instead, I think we could all benefit from a dose of reality to know that we’ll have much greater success setting smaller, more realistic goals.

    So, if we’ve gotten out of the habit of going to the gym, and we’re starting at square one, instead of resolving to “exercise more,” or even more specifically, “going to the gym five days per week,” why don’t we resolve to make it to the gym twice per week? Then, pair that resolution with a detailed plan for how we aim to accomplish that particular resolution, like setting out your gym clothes the night before and figuring out the specifics of how you’re going to fit the gym into your normal routine.

    Two takeaways here:





    Start small. How do you eat an elephant? One bite at a time.

    Be specific. Your New Year’s Resolutions should be treated the same as any other goals you create for work. It was back in Episode 10 that we talked about setting SMART goals, or goals that are Specific, Measurable, Attainable, Relevant and Timely.



    Resolving to improve our personal finances

    Alright, now that we’ve go the psychology out of the way,

    • 28 min
    MM018: The Importance of Reflecting at Year’s End

    MM018: The Importance of Reflecting at Year’s End

    This time of year, specifically during the week between Christmas and New Year’s, I always like to take a beat to reflect on the previous year and do some heavy planning for the upcoming year. It’s usually pretty quiet at work and at home (with the exception of school kids running around the house), but my headspace is usually pretty clear.



    So, I wanted to talk through some of my own reflections in the hope that they might inspire your self-reflections as well.





    IN THIS WEEK'S EPISODE



    * Some personal reflections on the past year

    * The importance of self-reflection

    * Goal setting for the upcoming year



    The Importance of Reflecting at Year’s End

    It’s been a busy year for us in our house.



    Earlier in the year, we started making some moves to get a better handle a handle on Roth IRAs and straighten out some of our 401(k) accounts. It also meant diving into ETFs and taking more control over our investments, which was scary, but now that the year is wrapping up, it was exciting to compare our portfolios and see that the mix of investments we picked for our IRAs beat our more rigid 401(k) plans by 3% this year.



    So that was fun.



    We also launched a couple side hustles this year, including this podcast, to help us pour energy into things that Mrs. Modest and I are passionate about. 2018 should be an even busier year on that front, which is incredibly energizing.



    Because of the our increased personal finance and entrepreneurial activity, we pulled the ripcord and finally hired a CPA to manage our tax strategy. We wave longingly goodbye to TurboTax; goodbye, dear friend.



    This year, we’ve also started looking into alternative investment strategies as a means of diversifying our portfolio. We’ve looked into buy-and-hold real estate investing as a means of building equity and generating semi-passive income. Also, with the surge in popularity in cryptocurrency, we’ve dipped our pinky toe into those waters. It was a super small amount that will definitely not make us rich, but at least we can say we’re “in crypto.”



    Let’s see, what else? Ever the random knowledge nerd, throughout the year I continued to add to the library of general, disconnected, arguably trivial knowledge that some day might serve me well in a trivia contest. I’ve found in years past that when I don’t find time for this general knowledge building that my work and entrepreneurial drive suffers a major lack of creativity. It forces my brain to make neural connections that didn’t previously exist, which I’m convinced allows me to think outside the box in other areas of life, even if the trivia is completely unrelated. Someday, ask me about how plasma lasers can vaporize trash in landfills.



    All-in-all, there is a lot to feel good about this year, especially since Mrs. Modest and I were able to do this while juggling full-time jobs and three young kids.



    But, are there things I would have done differently? Absolutely.



    For example, our budgeting still isn’t perfect. I’m still learning the best way to make sure that the savings we set aside makes it to the appropriate investment accounts and not used discretionary purchases.



    I’m also still learning how to best balance time for work, family, side hustles, podcasting, exercise, relaxation and more.



    Finally, I’m still trying to be more mindful about the task at hand at any given time and to not be distracted with the many other things competing for brainspace.

    Why you need to self-reflect

    So, how as you think about looking back at your own 2017, how have you done?



    Do you find yourself pushing yourself to ALWAYS be learning and improving?



    Do you ALWAYS give yourself the opportunity to learn something new,

    • 18 min
    MM017: How We Cut the Cord Without Losing Our Sanity

    MM017: How We Cut the Cord Without Losing Our Sanity

    Almost exactly a year ago, we cut the cord and ditched our cable. Along the way, we learned a few things that might be helpful to you as you consider cutting the cord. The fact is, nobody needs a 200-channel cable package; you're just paying for extra channels that you're never going to watch. So, why not streamline your budget and only pay for the TV that you actually watch. Come join the groundswell of cord cutters that are challenging the status quo and getting the same series, sports and movies they were used to, but for only a fraction of what they were paying to the cable company. This episode talks about how to do it.



    IN THIS WEEK'S EPISODE



    * We're back after a quick hiatus to focus on one of our side hustles!

    * The criteria we looked at when we cut the cord exactly one year ago

    * A quick review of today's cord cutting options

    * What on earth is a Roku?

    * Cutting the cord on your mobile phone plan



    How we cut the cord without losing your sanity

    For us, having a way to unwind after a long day or week of work, parenting and side hustles, we look forward to sitting down and catching the latest episodes of our favorite series, watching a movie or cheering our Minnesota sports teams.

    Many of you may be the same way.

    In fact, when it comes to our collective monthly budgets, the cable bill is probably a staple, bordering on one of those utility bills that are a necessary evil (like the gas or electric bill). The fact is, though, with the rise of streaming services, the traditional cable bill is becoming a thing of the past.



    Why we cut the cord

    Almost exactly a year ago, we cut the cord and ditched our cable. We substituted it with a streaming service that we’ll talk more about shortly. When we made the switch, we kept the high-speed internet service from our cable provider, which is around $55, but jettisoned the cable portion of our bill, which was on a promo rate for an additional $76 per month with all the equipment rental like DVR boxes and extra government telecom fees and taxes added in. When the promo rate was set to expire in a couple months, the full rate was going to be $96 for just the cable portion.

    So, for those of you keeping score, we dropped the amount we paid the cable company from $131 down to $55.

    But, that then left us without access to our favorite shows, movies and sports, so we needed to find a solution.

    We looked at several options that were on the market last year, and made our decision based on a small, but vitally important list of must-have features. I’d encourage you to complete a similar list so you can truly compare apples to apples.

    Our streaming solution needed to:





    Be month-to-month - we didn’t want to be locked into long-term contracts like the cable company required

    Provide access to live TV programming - we wanted to be able to watch a sporting event or an awards show live. With three young kids, we’re not often catching shows when they’re live, as we’re usually putting kids to bed and then working on side hustles or work, but it’s nice to have the option for Sunday afternoons.

    Have a DVR-like interface - as equally important as having access to live content, we live by the DVR, and so any solution in which we were giving up our DVR, we needed to have a suitable replacement so we could catch up on our shows at our convenience

    Deliver all (or the vast majority) of our favorite shows - I tend to watch more shows than Mrs. Modest, as she’s usually not a fan of the super complex or sci-fi series, so many of “my” shows that are on the fringier cable networks were going to be at greater risk. If I couldn’t get all of my shows because one or two networks weren’t going to be covered, we needed to figure out what sacrifices would be acceptable.

    • 35 min
    MM016: How to Find Your Side Hustle

    MM016: How to Find Your Side Hustle

    I’ve been known to have an idea or two for a side hustle. Some are ridiculous ideas. Some are impossible ideas. Some ideas are so far-fetched I don't know how in the world I came up with them. And then some ideas are solid, feasible, actionable and ambitious. These are my favorite. The fact is, when you've got a side hustle you're working on, you have more options that can help fund your future. Today's episode covers some rules to follow and a few idea starters so you know how to find your side hustle.



    IN THIS WEEK'S EPISODE



    * Keeping track of million-dollar ideas

    * The three rules of any long-lasting side hustle.

    * A quick brainstorm to think about possible side hustles



    How to Find Your Side Hustle

    I’ve been known to have an idea or two. Some are ridiculous ideas. Some are impossible ideas. Some ideas are so far-fetched I reflect on how in the world I came up with them. And then some ideas are solid, feasible, actionable and ambitious. These are my favorite. But, regardless of how hair-brained the idea is, it goes in my little orange notebook. I call this my million-dollar notebook, and I carry it with me everywhere

    I have it here in front of me. Let’s take a spin through the table of contents.

    There are categories in this book for ideas for mobile apps, web-based businesses, traditional business like a coffee shop, book ideas (I'm a sucker for sci-fi), drop-shipping eCommerce websites and more.

    What I’m talking about here in this orange notebook and what we’re talking about in today’s episode is how to find your side hustle.

    Could any of these ideas in here be the meal ticket that let’s us ride off into the sunset? Maybe. Would I like that to happen? Sure, why not? But the point of these ideas is to keep an open mind and consider the possibility that maybe one of these ideas might lead to a side hustle. I love what I do in my day job. That’s not the point of this little orange notebook. This is to think of anything that I might be able to do in addition to my day job.

    First, what is a side hustle? I consider it to be anything you do in your free time when you're not working your main hustle. Some people think that a side hustle needs to be a side business, but that doesn't always have to be the case. It could be a part-time W-2 income that you do on the nights and weekends. It doesn't need to be a separate business. We'll brainstorm a few of them shortly. Essentially, it's simply a way to categorize a source of income in addition to your main job.



    Three Rules for Finding Your Side Hustle

    There are three rules to any long-lasting side hustle:

    Rule Number 1: The most important thing to stress here is that you must have a passion for it. Otherwise, as soon as things get tough (and they will) you'll throw in the towel.

    I know, your idea is different. It's not. Trust me, I've been there. There are likely others who are doing it or have tried doing it, so you need to be passionate about it to power through the discouragement that can come from competition.

    Rule Number 2: You've got to stick with it. You'll lose so much momentum getting started with an idea, that if you keep starting new ones, it'll feel like you're always busy and making it happen, when all you're doing is burning rubber, stuck in neutral, and not making any substantial progress on your side hustle. You've got to take the long view, which means you need to do your research and some soul searching. Is this something you can commit five years to before deciding if it's time to cut bait?

    Rule Number 3: Not to be overshadowed by Rule #2, you've got to just do it. Get out there and learn by doing. You can have the best, most well-constructed business plan in the world, but that won't mean squat if you don't actually open your doors. Get out there and fail (which you will). Learn from your mistakes and improve.

    • 28 min
    MM015: How to Create a Money Binder

    MM015: How to Create a Money Binder

    If you manage your family's personal finances, what would happen if the worst happened and you were no longer "available" to manage the household finances? In our house, I manage the finances, and Mrs. Modest is perfectly okay with that. If something happened to me, I don't know if my wife would know the location of all our assets. Enter, the money binder. In today's episode we talk about the importance of a money binder and how to create one today.





    IN THIS WEEK'S EPISODE



    * The importance of a money binder

    * The key components of a money binder

    * The importance of defining your investment philosophy

    * A discussion on managing passwords



    How to Create a Money Binder

    A money binder is much more than simply a list of your bank accounts. Your money binder is a key component to your personal finance plan to ensure your loved ones are able to keep your personal finance plan in place if something unfortunate happened to you.



    Below are the key sections that should be included in your money binder. So, go out and grab yourself a three-ring binder, with a couple of section dividers and get to work on creating your money binder.

    Money Philosophy

    This should be the first page in your money binder. This is the executive summary, the single piece of paper (or two) that outlines your entire money philosophy so that your loved ones can continue where you left with your investing, saving, wealth generation. This is like your manifesto. Personal finance is just that: personal. There are number of ways to approach personal finance, and this intro document gives you a chance to chart the course for the next captain of the personal finance ship.



    You can lay things out any way you'd like. You can write it as a step-by-step document so your loved ones can follow in your DIY personal finance steps, or you can write it in a way that a professional that you trust and recommend can review your money philosophy and strategy and advise your loved ones based on that guidance.



    In addition to outlining your philosophy, use this area to give a quick State of the Budget report. Just like the President's State of the Union address, give an update on the health of your personal finances.



    As with anything over time, your money philosophy will likely change over time. And, if you're including the State of the Budget update, you'll need to update this cover sheet periodically. At least annually, but maybe semiannually or quarterly depending on your situation. When you update the document and as you insert it into the money binder, sit down with your loved ones and walk them through the details and updates. It just helps keep everyone on the same page.

    Key Contacts

    The first section of the money binder includes the contact information of the key people your loves would need to contact in the event you're no longer able to manage your family's finances. This list might include your accountant, financial advisor, life insurance agent, benefit plan administrator from work, estate/trust attorney, banks, etc.

    Include contact name, phone number, email address, mailing address, policy numbers, account numbers and any other pertinent information that they would need to verify that they can access the account.

    Net Worth Statement

    Your mileage might vary depending on the complexity of your personal finances, but here is where you can track all of your net worth and your assets. It's somewhat similar to the Key Contacts section, but here you'll want to include recent statements from your bank accounts, retirement accounts, investment accounts, business income statements, real estate, cash-value life insurance policies, loans, mortgage, etc. This is more of a high level section just to outline all of your major assets and liabilities. Don't get too in the weeds with this section.

    • 23 min
    MM014: The Simple Math of Calculating Inflation in Retirement

    MM014: The Simple Math of Calculating Inflation in Retirement

    Figuring out how to calculate how inflation affects your retirement savings is made out to be a super-complicated process, requiring advanced math skills. What's frustrating is that calculating how your retirement savings is impacted by inflation isn't all that difficult. In today's episode, we talk about the simple math of calculating inflation in retirement.





    IN THIS WEEK'S EPISODE



    * The over-complicated world of retirement calculators

    * A look at historical data to gauge rates of return and inflation

    * Introducing REAL rate of return

    * We talk about fees...again

    * How inflation works with the 4% rule



    The Simple Math of Calculating Inflation in Retirement

    Retirement calculations can be hard

    If you want to do any sort of retirement or long-term personal finance planning, you’ll inevitably find yourself at an online calculator.

    For figuring rates and assumptions, it can be easy to just go with whatever the online calculators spit out for an estimated rate of return, but without understanding the rate of return they assume, it can make a big difference.

    For example, if they assume a rate of return of 7%, does it factor in inflation, or are they adding it in later? You should understand how they're accounting for inflation in the number that they spit out. The problem is, most calculators and advice out there is unnecessarily complicated.

    Granted, I'm not a professional, and I may be giving you wrong information, so check with an expert first, but the math here is, and should be, simple.



    Using historical data to create averages

    Average rate of return from S&P 500, which is a pretty diversified collection of 500 stocks, is about 10% since its inception in the 1920s. That's pretty good since there have been some big downturns during that time. If you held only the S&P 500 in 2008, you would have lost 37% of our portfolio, but in the next two years, it returned almost 27% and just over 15%, giving it a pretty quick rebound. Now, you've got to take the long view on investment returns, especially when you're taking a more aggressive angle with an stock portfolio during your earning years.

    But, let's stick with 10% return as an average. That doesn't factor in any inflation, which you can relatively safely estimate at 3%. Then, all you've got to do is takes the difference of your investment return and your inflation rate to find your real rate of return of 7%, which is your inflation-adjusted return. Simple.



    How to use the real rate of return (RRoR)

    Now, just plug your real rate of return number (based on your expected rate of return) into your retirement calculator of choice, and make sure they're spitting out non-inflation-adjusted numbers. Then, you can more easily plan in today's numbers for what you'll need in 20-30 years.



    Watch for fees!

    Vanguard S&P 500 ETF, which matches the index, has an expense ratio of 0.04%, which is virtually nothing. Think, if you pay the average 1% management fee so you can MAYBE squeak out a little extra return, that’s like adding an extra 1% to the inflation rate. Or, conversely, it's like shaving an extra percent off your inflation rate. And it's not complicated to do. Just open up an account at vanguard.com and look for the ticker VOO. Then, just buy the number of shares your want just like you're ordering underwear and it's that easy to start investing.



    How inflation impacts the 4% Rule

    As we've discussed before, I'm a big fan in the 4% rule. It's not foolproof and it is a bit general in its advice, but it probably gets you most of the way to planning for your personal finance future. What's great, and often overlooked, is that the 4% rule already bakes in retirement by increasing the percentage each year due to cost-of-living adjustments, about 3%, I believe,

    • 19 min

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