Dollars and Hops

By Dollars and HopsBusiness Investing

Dollars and Hops episodes

July 11, 2022040 | What Is A House Hack? | Why House Hack? | Employee Work Trends, Work From Anywhere, And Be Your Own Boss
Money Hack of the Week:
Spray and forget: Do you powerwash your house or deck every year?
Spray and forget instead of power washing - save time and money
Rant - Get upside
Main Topic
What is house hacking?
House hacking is a real estate strategy that can help you live for free or close to free - dramatically decreasing your monthly expenses

Great way to start investing career - whether that be in real estate or not

Premise is simple - you buy a multi-unit property… could be a duplex or triplex (meaning 2 or 3 separate entrances to the property) - Live in 1 and rent out the other 1 or 2 units.
How to rent out the other units:
Long term tenant lease

Short term rentals - think Air BNB and VRBO
Ways to house hack:
Buy a duplex, triplex, fourplex, etc…

Buy a house with an ADU - Accessory dwelling unit
ADU is a non-attached dwelling on the same property as the primary house. Can rent it just as you would a duplex or triplex.

Rent out a single room in your existing home
House hacking as an investment strategy: Scott Trench (Set for life) and David Greene
Can house hack and buy a new house every 1-2 years

Why 1 year: Can buy a new house every single year and qualify for low down payment as it’s your primary residence, and then simply move after a year and turn all the units into rentals.

Why 2 years? You could sell the property and pay no capital gains tax on any earnings as long as you have lived in the property for 2 of the last 5 years.

This strategy will dramatically decrease the amount of time it takes to build wealth.
Why house hack?
Allows you to live for a dramatically reduced cost in most cases. Allows you to sometimes make income while someone else is paying for you to live.

Take the excess cash flow from house hacking and reinvest into other ventures such as more real estate or stocks

Fastest way to build wealth - your house is generally your largest expense and it’s not even close
Who is house hacking for?
Single people

Married couples with or without kids

Could really be anyone

People that don’t mind sharing common space in certain circumstances

People that feel like they can’t afford a monthly payment for a house even though they may qualify for a house.
Questions that need answers
-PLEASE WRITE US AT [email protected]
48 min
May 23, 2022039 | Net Worth Tracking | How To Track Your Financial Health | Cash Out Re-Fi To Invest?
Money Hack of the Week: Nest or SMART thermostat - learns your habits - saves on energy bills. Knows when you’re away, knows when you come home.
Main Topic: Tracking your financial health
What do I mean when I say financial health?
I think of financial health as a measure of how well we’re doing with our money

IT’S NOT: Our credit score, how well we pay our bills, etc…

IT IS: How much money do we have in our wallets and what type of assets do we have.

Put most simply - financial health generally equates to: how is our net worth looking and ARE we tracking our net worth?
Way back on episode #1 of the podcast - 1.5 years ago…. We did a show talking about net worth and why it’s so important. Buried in that episode, we told people they should be tracking their net worth. It’s the one truth serum there is.
Why tracking net worth is SO important:
It tracks exactly what you owe on all your debts

It shows you quickly how much equity you have in property

And IT CAN show you in real time what your investments are worth
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What Lance and I do:
We have a Google Spreadsheet - we share it
Using google sheets, you can actually track in real time the value of your investments. So we track all of the following on this spreadsheet:
Retirement accounts

Brokerage accounts

529 accounts

Our mortgages

Our home values

Checking/Savings

We add up all the assets and subtract out all of the liabilities

At the bottom of the sheet - on ANY GIVEN day, we can see exactly what our net worth is.

Record your net worth on a monthly basis.

You will be amazed at how this makes you look at money from a different perspective. It shifts your mindset.

You start seeing how things impact your net worth.
For example:
You go buy a nice car - you now get to depreciate the value of that car

You put money into investments, you will see how that money grows

Your real estate investments - you will see gains in value when your tenants are paying down the value of the house while the house appreciates in value

Going back to episode # 1
We provide a copy of the net worth spreadsheet we use. You can download it here . There are 2 tabs to the spreadsheet:
1st is to track all of your assets and liabilities

2nd is to track your net worth from month to month

If you ever wonder if you’re on the right track - this is the best way to figure it out. Start tracking net worth and you will find out if you’re going forwards or backwards.
Other things to note:
If your net worth is below 0 - don’t let that discourage you. Almost everyone starts out with a negative net worth. College is expensive, life is expensive, especially when you’re just starting out.

Don’t confuse net worth with self worth - this doesn’t define you as a person

Think of this as a tool for evaluate your financial health.
46 min
May 13, 2022038 | What Is The FIRE Movement? | Term Life vs. Whole Life Rip Off Insurance
Money Hack of the week:
Rakuten - Google chrome extension
Get cash back when you shop
If you go to a website where there is cash back, it will give you a pop-up letting you know to sign in through their link… get cash back on things you would have purchased anyway.
Main Topic
FIRE- Stands for financial independence, retire early.
The FIRE retirement movement takes direct aim at the conventional retirement age of 65 and the industry that has grown up to encourage people to plan for it.
Typically people that embrace this movement are looking to retire in their 30s and 40’s
The way people avoid the 65 y/o retirement:
Saving between 50% and 70% of their income

Finding a business they can start that’s not 100% passive, but it’s something they enjoy doing
Air BNB could be an example

Types of careers
How can anyone ever save 50% of their income or more?
Early in your career you cover your expenses, as you get raises, just act like you never did, never change your lifestyle…. Delay gratification.

Idea is to build up a massive bucket of money in investments that you can eventually draw down when you enter retirement.
Apply the 4% rule to this

So if you know you need 50,000 to live off, you can essentially take that number and multiply by 25 to get your FIRE number. 25x of 50k is 1.25M

Where do people doing the FIRE movement typically invest?
Low cost index funds / ETF’s

Real Estate

Businesses

The FIRE movement isn’t for everyone
Some people don’t mind working - they are busy bodies

Some people don’t make a large enough income to even think about doing FIRE

Some people LOVE their jobs and it’s a part of their identity

It’s OK to live a typical lifestyle and keep working. FIRE just gives you freedom
46 min
May 01, 2022037 | Kids And Money | How To Help Your Kids Learn About Money | "Should I Get A Timeshare?"
Kids And Money Episode
Headline of the week:
Food prices are on the rise, but you can still save money on groceries. Here are 5 ways how
Kids and Money
Research has shown that money saving habits and attitudes have likely been formed by the age of 7

Start with the basics:
Connection between money and work - Phase 1

Money comes from investments - Phase 2

Pre-School is around the time that children can start to grasp what money is and when it’s used

Can take children to the store - show them that you’re paying with cash/card and that you’re using your money to buy things. Even if you’re using a credit card, you can show them the receipt for the money you paid.

Teach them about savings
Most of the time they’re going to be using money to buy things, but it’s also important to instill the idea of saving for things at an early age

Get a piggy bank or a give/save/spend jar.
Savings should be short term in nature to start with so they can understand that delaying gratification can get them something they want in relatively short order. As they get older- savings can be for longer term things and you can start to introduce the idea of retirement and long term savings

Allowance VS commission

Create opportunities for kids to earn money
Consider starting a list of chores and giving allowance if they accomplish those chores.

A lot of people do the allowance in the amount of their ages (per week)

If kids ask for additional money, know that it comes with a price.

Some also consider having a list of chores that provide no allowance, and then a list of chores that come with an allowance.

Help kids learn healthy spending habits.
App called Green Light / Fam Zoo - helps kids with budgeting. Give them an allowance and make them stick with it. Allows kids and parents to do a schedule for chores and approve that chores have been complete. Comes with a debit card that money is loaded onto. Gives parents insight into their children’s spending habits in real time.

Show kids the value of giving
Help children plan out the money they have in their giving jars

What things are important to them? What organizations would they like to support and why?

Teach kids how money can grow
Set up custodial investment accounts for kids - this can start when they’re in elementary school. You can sit down with them, set up the account, and make the first investment.

Periodically check in with them and show them how their money is growing over time.

Model good financial behavior
If you want your children to have good financial habits, they need to see you making good financial habits. Tell them what you’re doing and why you’re doing it to save money. This should be a part of everyday life.
54 min
March 22, 2022036 | Social Security Deep Dive | "When Should I Take Social Security?" | "Will Social Security Run Out?" | Myths And Best Practices
Headline of the week:
Social Security cash reserves could be cut to 1.35 Trillion in 8 years

What is social security: Program signed into law by FDR back in 1935 and is a sort of social welfare program. It provides cash payments to people who are in any one of three categories:
Retired individuals and some family members

Disabled individuals and some family members

Survivors
aged widow(er)s, aged surviving divorced spouses, disabled widow(er)s, disabled surviving divorced spouses, paternal and maternal orphans, and widow(er)s caring for minor or disabled children

How is it funded? Payroll taxes fund social security. You will actually see a line item on your paycheck for social security taxes that are removed from your paycheck.
My social security website - https://www.ssa.gov/myaccount/
Excellent resource to utilize when evaluating your social security and how much you can expect to earn.

Free to set up an account

Look up your personalized statement
Will show you:
Personalized monthly retirement benefit by age of when you take social security 62-70

Medicare eligibility

Disability benefits/ Survivor benefits
Important Things to Know about Your Social Security Benefits
Social Security benefits are not intended to be your only source of retirement income. You may need other savings, investments, pensions, or retirement accounts to make sure you have enough money when you retire.

You need at least 10 years of work (40 credits) to qualify for retirement benefits. The amount of your benefit is based on your highest 35 years of earnings. If you have fewer than 35 years of earnings, years without work count as 0 and may reduce your benefit amount.

Social security uses cost of living adjustments so your benefits will keep up with inflation.

The age you claim benefits will affect the benefit amount for your surviving spouse.

If you get retirement or disability benefits, your spouse and children also may qualify for benefits.

If you are divorced and were married for 10 years, you may be able to claim benefits on your ex spouse's record. If your divorced spouse receives benefits on your record, that does not affect your or your current spouse's benefit amounts.

When you apply for either retirement or spousal benefits, you may be required to apply for both benefits
Link for the rolling 8 year s&p 500 averages
TIPS information:
Can buy TIPS from:
Treasurydirect.com - not our preferred method (harder to keep track of them)

Mutual fund - just search for TIPS mutual fund. Yield is typically paid out once annually. Also a bit more liquid in nature as they’re ETF’s/Mutual funds
Vanguard: VIPSX - .20 expense ratio

Schwab: SCHP - .05% expense ratio - favorite

Fidelity: FIPDX - .05% expense ratio - favorite
58 min
March 14, 2022035 | What's The Deal With Inflation? | How Inflation Affects Us All | How To Protect Against Inflation
Headline of the week:
Half of Americans with retirement accounts have taken an early withdrawal
What is inflation? The decline of purchasing power of a currency over time. So as an example, the way the government measures this is by effectively tracking the cost of certain common everyday items.
Currently: Inflation is at about 7% in our economy right now.
Economists claim that some of this is transitory (meaning not permanent).

They claim some of this has to do with supply chain issues which will eventually subside

Our thoughts on this: is it transitory?
Money supply and its impact on inflation
Fed “printed” money by buying government securities to the tune of trillions of dollars.

That money is in essence injected into the economy.

As more money is pumped into the system - it effectively decreases buying power
Housing shortage:
Between Oct 2020 and Oct 2021 - the average price of a house went up by 18%

This could be because we’re in a housing shortage in certain areas

According to the national association of realtors:
In New York and New Jersey - 1 new housing permit is issued for every 11 new jobs

Pittsburgh: 1 permit for every 11 jobs

Philadelphia: 1 permit for every 4 jobs

Maryland: 1 permit for every 3 jobs

Charleston SC - 1 permit for every 2 jobs

Comes back to simple supply and demand. If there isn’t enough supply for something and demand far exceeds supply, that’s going to inevitably push prices higher.

Our thoughts:
I think prices will continue higher

Between a shortage of housing and inflation - it’s bound to continue higher

What could slow the demand? Interest rates

What could actually help slow inflation up a bit:
Higher Interest Rates
Make homes more expensive via mortgage payments

Businesses don’t have the access to cheap money to invest into their business

How do we protect ourselves from inflation?
Invest
Stocks, bonds, mutual funds, ETF’s

Real estate

Businesses that produce returns at a greater rate than inflation

Stay invested - Don’t panic!
48 min
March 03, 2022034 | Winning Mindsets - Rich Dad Poor Dad | NEW Budget Hack | "Do I Need Umbrella Insurance?"
Intro: Today is a winning mindsets episode - we’re going to be discussing some of the concepts taught in a world famous book called Rich Dad Poor Dad by Robert Kiyosaki.
Book came out in 1997 - concepts are timeless 25 years later. He really forces people to think differently about money and Lance and I wanted to discuss some of the concepts taught in this book with you, our listeners today.

Book is about Robert’s 2 fathers growing up - and how they taught him to think about money.
Real (poor) dad - was a teacher

Father of his best friend (rich dad)
Lots of background to this story - but there are some key takeaways (6) from the book that we feel are super important:
The rich don’t work for money: The Poor and middle class work for money. The rich have money to work for them.
          -What is meant by this?
  Rich buy assets that generate income for them.
Assets: Stocks, Real Estate, Businesses
These assets generate money for them - sometimes actively, sometimes passively.
Rich people will dedicate their time and energy to acquiring as many assets as they can - so that their money is working for them. Eventually their money works for them, they don’t work for money.
     2. Why teach financial literacy (Cash flow of rich vs poor)
Run through cash flow of poor/middle class
Work at job - money goes towards expenses
Expenses: taxes, food, rent/mortgage, clothes, fun, transportation
Run through the cash flow of a rich person
Assets that they own generate income
Takeaway: You need to buy assets that generate income ASAP to get ahead. Those can be businesses, stocks, real estate, etc….
     3. Mind your own business
People that go to school for law become lawyers
People that go to school to study cooking become chefs
People confuse their profession with their business
Their business is not where they work, it has to do with what’s in their asset column. These are things generating income:
Businesses that don’t require my presence
Stocks

Bonds

Mutual funds/etfs

Income generating real estate

Royalties from intellectual property such as music/patents

Anything else that has value and produces income and appreciates and has a ready market.
Another interesting concept in the “mind your own business” chapter is that robert says most people should not start their own business. They should work a job and mind their business. And when they start putting money into their business - don’t take any money out… let it compound upon itself. That’s how the rich get richer.
4. The history of taxes and the power of corporations
In summary - Robert is trying to convey how important it is to understand the tax code. People that do own businesses have the ability to take advantage of writing off a lot of their everyday expenses.
Cell Phone

Internet

Car expenses / Mileage

Office supplies

Educational Courses

Professional services fees (accountant / lawyer)
When you own a corporation you earn, spend, then pay taxes
When you work for corporations - you earn, pay taxes, then spend
Big difference is that you’re paying tax on what's leftover after expenses when you’re a business.
5.
56 min
January 24, 2022033 | Bitcoin ETF | Protect Yourself From The Unexpected | Emergency Fund Guidelines | You Need An Emergency Fund!
Headline of the week:
https://www.marketwatch.com/story/should-i-buy-a-bitcoin-etf-heres-what-some-pros-say-you-should-consider-11634839325?mod=article_inline
How to protect yourself from the unexpected
The topic from this show actually came from a listener (John) who sent us over an article. Came from CNBC - Headline is just 39% of Americans could pay for a 1,000 emergency expense.
The 61% mentioned in this article that CANNOT cover a 1,000 emergency expense are using credit or a personal loan to cover unexpected expenses.
People that cannot come up with 1,000 on short notice for an unforeseen expense likely have:
More stress in their life - the stress of knowing they have nothing to fall back on

Their life needs to be perfect… can’t have anything go wrong
Some “emergency expenses”
Car repairs / new tires

Pet emergency

Major healthcare expense

Home repair

Dental expense

Unexpected travel - death in the family

Losing a cell phone

Traffic accident
***Ally Bank Buckets
Best way to protect yourself is by having an emergency fund.
Financial playbook - episode 3 and 4 - we talk about having a 3-6 month emergency fund (3-6 months of expenses)

That can sound daunting…..

Dave Ramsey says 1,000 - don’t love this
If you’re the type of person who cannot come up with 1,000 to cover an unforeseen expense, here is the number one tip on how to get started with an emergency fund:
Decrease your expenses
Find somewhere cheaper to live

Drive a different car

Decrease unnecessary spending
Automate your savings
Ever heard the saying “pay yourself first”?

What is meant by this is actually paying yourself (investing, saving, etc…) before you pay your bills.

In this case - take the money you need to save or invest - right when you get paid, and transfer it out of your bank account and into your investing account or in this case - your online savings account.
Automatic savings can truly be automatic.
Ally Savings account "buckets"

You can set up recurring transfers each week for savings accounts.

I’ve spoken about this in other podcasts, but I get pretty granular with this, I have automatic savings set up for car repairs, christmas, vacations, home repairs… you name it, I have a savings account for it!
43 min
December 16, 2021032 | Invest In Real Estate Or The Stock Market? | We're Back! | Index Investing Recap
Discussion around real estate investing versus mutual fund/index fund investing.
Recap of index fund / ETF investing:
Opening an account with Schwab/Fidleity/Vanguard

Investing in low cost ETF’s/mutual funds

Own a piece of many different companies

Completely passive - you invest and you don’t have to manage anything at all.

On average, you earn roughly 10% per year on the money.

Set it and forget it.
Let’s look at the three primary ways you can make money in real estate:
Cash Flow
When you buy an investment property - you’re likely going to put some money down to acquire it.

That money doesn’t really impact your net worth statement. You’re essentially just trading cash for equity in the property.

Assuming you take a loan, you will have a payment amount that includes the debt service (paying down the loan) + taxes

Now let’s say you buy a house, your monthly mortgage with taxes included is $1,500.

Let’s say you’re able to rent that home for $2,400 per month. Your cash flow is $900 per month. That’s income that you’re generating from the property.
Understand that there are other expenses that can occur with maintenance items, etc…. But you get the point…. You CAN generate income through cash flow by owning property.

2. Appreciation
Appreciation happens when the value of a house goes up over time. We know that on average most homes go up in value about the same amount as inflation, but in some markets and in some years the average home price can rise by much more than the rate of inflation.

It’s estimated that the value of a home went up around 15% or so in the past year.

Appreciation is obviously on the whole home amount, regardless of your loan amount or what you owe… and this can be huge.

Can’t realize all of the appreciation until you sell.
3. Equity
Over time, the renter(s) are paying down your loan. You are thus reducing the loan amount over time and increasing equity in the property.

Increases your net worth on paper, but not money in your pocket until you either refinance or sell.
Other things you must consider when buying real estate
Not a passive investment

Must maintain/update the property.

Must deal with tenant issues. Calls at night/holidays/weekends solving problems the client has.

Risk - What if you can’t get a renter, what if the estimates you prepared for STR cash flow are wrong, what if you need cash and the market is down and nobody is buying properties. Are you putting yourself in a bad position financially?
Quick example:
Let’s say you have 100k to invest.

Lance invests in an ETF all 100k. At the end of 30 years he has $1.75M assuming a 10% interest rate return over the 30 year period.

Scott buys a short term rental property for $450,000 in a vacation area. Puts 90,000 down and another 10,000 into furnishing the property.

He manages the property himself and cash flows 15,000 in profit annually from the property (very realistic). His cash flow increases by 3% annually.

At the end of 30 years:
Property is worth ~1.35M (assuming a 3.7% increase in value annually)

His mortgage is paid off

Cash Flow over 30 years is ~700k

Total earned: 2.05M (300k more than passive investing)

What did I give up in that example?? Time!

Consider Liquidity as well - Index funds are more liquid than RE
53 min
October 11, 2021 031 | Winning Mindsets - Risk Taking | Invest In Music Through NFT's? | "Should I Buy Whole Life Insurance?"
Take Risks!
Continuing on with our Winning Mindsets series. Today we’re going to be discussing risk taking as it pertains to you and your personal finance journey, your career, and even relationships.
Headline of the Week: Invest in Music- Share in the royalties - Republic
Winning Mindsets: Risk Taking
Life is short—yet many of us spend time wondering what we should do with our lives, rather than actually going out there and trying. As hockey legend Wayne Gretzky once said, “You miss 100 percent of the shots you don’t take.” It’s important to actually strike out and follow your heart—even if the odds do not seem to be in your favor. That’s the beauty of life. We never know what can happen unless we take a chance. Here are five reasons why taking risks is important and why you should do more of it!
1. Generate New Possibilities - Horizon changes by stepping out
2. You Will Always Gain - Even through failure, maybe even especially through failure, we learn more lessons perhaps than when we succeed.
3. Inaction Leads Nowhere - If you do nothing, then you can expect nothing to happen.
4. Overcome Fears - Fears of failure, what others might think, disappointment, hurt, financial loss, exposure to vulnerability or emotional stress.
5. Model a Good Example - What would you want your children or your friends or your family to think, or what kind of risks would you hope that others might take? Inspire others.

The One Thing Risk-Takers Have in Common? Confidence
Failure might turn us into better people, but that doesn’t make it any less difficult to take risks. It turns out that building confidence can help in overcoming the fear of risk-taking.

Questions that need answers
PLEASE WRITE US AT [email protected]

48 min

About Dollars and Hops

From the publisher's feed

Two best friends since the 6th grade who have grown to share a passion for craft beer and personal finance. Scott and Lance share what they have learned and what they are continuing to learn in the world of personal finance to help you optimize your financial future. From methods and philosophy on money, investing, tools used, strategies, headlines, tackling listener questions, and the craft beer Hops Showdown each episode - The Dollars and Hops Podcast keeps it educational, relevant, engaging and fun.

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Dollars and Hops

Dollars and Hops episodes

About Dollars and Hops