Ep 257 - Applying the Lesson From the 3 Acts of Your Financial Life

Hey, everybody. Flipping Danny and Ben here. We're welcome to another episode of our podcast, which is called freedom through passive income. That's right. And welcome to another episode. And this is the title of this one is applying the lessons from the three acts of your financial life.

Yeah. And this is a follow up from yesterday's. And thank you again, Ben, for being here and walking us through some of these conversations. Yesterday's episode was really great and I'm excited to hear that today's.

Well, yesterday we spoke about the three acts of your financial life. The first act is the coming of age when you're growing up and learning the skills that you're going to be using in Act 2. Act 2 is the great adult adventure, and it's the main show. Clock is ticking. Most of us watching this are in the main show right now. And then the third act is after the adventure. Well, today we're going to talk about some lessons that we can draw from this. How can having a clear perception about where we are in these three acts of life help us to be able to plan better for the next and to be able to utilize the best act that we're in or the act of life that we're in right now? So the first lesson we have is that in each phase, it can be a challenge to think about the next phase. So think about your early 20s. What were you talking about yesterday, what your life was like in the early 20s? Right.

Well, it was always, I'm doing this now, and next year I'm going to do the next thing because that's what I'm supposed to do. You know, it's like college. When you're in your college, you're doing whatever, you're doing these classes, because then the next year you're going to go into those classes and you're going to go into those classes. In fact, I got out of college and I actually started working on at Cedar Point, the amusement park, and I didn't know what to do next. So. Well, I just worked at the amusement park again the next year, and then I didn't know what I was going to do next, so I just worked at the amusement park again one more year, and I just kept doing that. And then I got led to another school. And so I went back into college because I was just. I was in a hamster wheel because I really didn't know what that next thing was, but I knew where I was. I had one, I had the next step, but I didn't have the next five or 10 steps and I didn't know where I wanted to go. And then that led to working on cruise ships, which. Well, that led me down the rabbit hole and which led to the next step, which led to, you know, so I've always. I've always went to the next step, but there was a while in my twenties where I didn't know what the next step was. So I just did the same step again.

And I think when you're in your 20s, I don't know how it was for you, but for me, I didn't know what I wanted out of life yet. You know, just gotten out of high, high school and was a musician in high school, got a full ride to a scholarship to go to college for music. And I really didn't know anything other than music. I was a little band geek, right. So I just went to school and started learning, you know, different things, not even realizing what I wanted. In my 30s, 40s, 50s, my. I don't even know that my brain.

Was ready to tackle those questions exactly. And how many. My wife and I have conversations with several people in their early 20s, and they will acknowledge, yes, savings is important. Yes, I can see at a time I don't want to pay off the house or put aside savings to live off of. But as an example, in the 20s, a car is a big thing. You know, I mean, there's so much identity tied up with the cars, cars, clothes and entertainment. Entertainment's travel, entertainment's out with your friends, etc. So that's an example of it being tough to think ahead. When you're in your 30s and 40s, you have family thing going on, you have the work thing going on. Life is very busy. It's tough to see beyond, I need to pay the bills right now. So paying the bills and keeping up with the bills is a big thing. When you're in the 50s, then you're starting to have this empty nest. You're starting to see very clearly the end of your work career. You see, okay, I've got five or ten years left. Now you start to think about the third act. So the first takeaway from life, the three acts of life is it's tough to look forward to the next act because the current act is so consuming.

Yes.

And enjoying it. And to a large degree, that should be. Well, that takes the second lesson, which is a little bit of preparation. Now, wherever you are in life can make a big difference later. So with certain investments, and here's the great news, with certain events, investments, you can do a Little bit of work now and time will work for you.

Yes.

And so much of real estate is about that.

Yes.

Now with the stock market, it's interesting again, you know, two of the major investment vehicles are the stock market and real estate. With the stock market, it generally goes up over time, just as real estate does. But there's a bit of variability with the stock market where it can go years at a time, even decades at a time, where it really doesn't move up after World War II, from 45 to 65, it really didn't move up that much during that time period. There's a lot of movement in between the last decade of the 2000s, 2010s pretty much stayed within that range the whole time. So with real estate, in particularly some of the funds that we offer right now, there's a level of predictability where you can say, okay, I know two years from now I'm going to be here. I know five years and 10 years I'm going to be from here. So a little bit of prep now, this, this idea of, especially for those of you that are in your 30s and 40s, you can do a bit of set and forget where you can put money into the investment. You know, it's real estate backed, it'll continue to perform in a very predictable level. And that brings a lot of assurance, I think, to people, rather than just this general idea of, yes, eventually it might get me this average of 10% return for that third lesson is that this allows you to be able to, by doing the set and forget, you can save a little bit now, put time into motion for you, and then go ahead and use the rest of your money to live in the active life that you're in now. So in other words, we're not asking you to give up all the pleasures of Act 2 living so that you can have Act 3 a good lifestyle now. But instead we're saying just a little bit now in an investment that will be able to perform for you in a predictable manner can make a big difference later. Yes, that's about that.

Yeah, 100%. I think that when I was younger, it's funny, you talked about yesterday on cruise ships, how we were reading books and studying and things like that. That was me. I was studying to figure out, what am I next? Because I was still in that musician lifestyle, just trying to figure life out and I was learning about all the financial vehicles and trying to decide, okay, so how much of my money am I going to put into this and what is it going to mean to me later. And as a young person, you think that, oh, I don't need to start right now. I've got all the time in the world. And that was my thought process. I got fully and totally educated in it. I invested a little bit, but I didn't stay consistent enough to see. I would love to now do a kind of a study of if I would have just stayed consistent, what would have that, you know, grown into?

You might not want to look at that.

Yeah, but it's something that now, you know, where we are in life, you really kind of look back and go, I was on the right path. I just, my youth overcame my brain.

Would you say that some of it, some of it is not being able to see clearly the end result. Like, for instance, when I was in my, you know, late 20s, my brother comes to me and says, listen, you need to open up an IRA account. So I started putting in $2,000 a year. My business was going well and so, but I didn't see what it would mean for me all the way down the line. It's just like, I'm going to put this in this fund and it's just going to grow, quote, grow. Well, that doesn't draw, at least for me, that doesn't draw me nearly as much as if I put this $2,000 in. I can see that 20 years from now it's going to grow to $30,000 or $10,000 or whatever, whatever the number is. So that I think that specificness of it can, the predictability of it really adds the incentive where you can say, hey, I know if I put in money now, this is what it's going to mean later. And that takes us to the next lesson, which is there's still time. No matter what active life you're in, there's still time. Now, this goes back to podcast number 213, in which we talked about how you can take a lazy hundred thousand dollars that's not earning very much money and you can still use this to create $135,000 income. So if you haven't heard podcast 213, we recommend you go back to that. But here's what it means for you. If you're in your 30s and 40s right now, basically, if you put $100,000 into one of our funds over the next 20 years, that one time $100,000 investment plus your annual IRA contributions will lead to, over the next 20 years, $135,000 year of annual income. So for people in their 30s and 40s that one time investment means you can retire early if you're 50 years or older. One of the important things about this lesson is time still can work for you. You can still have a good result, a happy financial ending if you put in. So if you're 50 years old and let's say you just have $100,000, which happens a lot for 50 year olds that have raised children, they've paid a lot of bills, a lot of college education, and they suddenly they're 50, they see the end of the line. They're like, oh my gosh, we only have, you know, between us, our IRA accounts, our savings accounts, we only have $100,000. What can that do for us? We're already 50. Maybe the window of savings has passed us by and it hasn't at 50 years old. And we can, you know, the numbers are very clear. If you have a 10% return, this is the power of 10%. 20 years from now, when you turn 70, that one time $100,000 investment plus your IRA contributions will create $135,000 of additional income for you beyond what your Social Security income will be on that. If you're 60 years old, you're like, wow, I'm really, you know, I want to finish by 70. And time's close. If you, if you're 60 years old again, that 100,000, plus your IRA contributions when you're 70 years old, that's going to create an extra $45,000 of income. So let's say that a person's Social Security income at 70 is going to be $3,000 a month. That's $36,000. At 60, you can start today, this month, start your savings with a debt fund or one of our other funds. Ten years from now, when you turn 70, you're going to create an extra $45,000 a year of income. So $36,000, 3,000amonth for Social Security plus 45,000 from your income is going to create an $80,000 total income for you. That's a lot different than $36,000. Yes.

That's so powerful. I'm so glad that you do the math for people because that's, I think what, where the missing piece is is understanding the end game, right? And seeing it come to fruition, because that changes the game and it helps.

People to take action when they go, hey, wait a minute, I've got only $100,000 in the bank. And let me do this Last one here, 65, you have $100,000. You want to retire in five years completely. Again, the same example, $3,000 a month Social Security or $36,000 a year. That's your starting point to figure out what passive income is. If you go ahead for just five years, $100,000, one time investment, add your IRA contributions for the next five years, that's going to create an extra $24,000 a year of income. Your 36,000 from Social Security plus 24,000, that's going to take you to $60,000. And what I'm saying is this, that two or three and one of the themes here is an extra two or $3,000 a month that can make kind of a anxiety type filled and create a lot of extra abundance and extra cushion when you go there. So the key takeaways here for this is this for these two episodes that we've had, number one is that passive income is a final goal for everybody.

Yes.

Yeah.

Yes. Freedom through passive income is the words that we use for this podcast on purpose.

And when you're in your earning years, 30s, 40s and 50s, you've been focused appropriately on income producing, producing income production. But in the end, when you get to the third act, it's all about your passive income. And so the passive income is going to be the major difference when you retire. Whenever that is, whenever you reach the point where you're no longer interested in working or you're no longer able to work, the amount of passive income that you have is going to directly determine the lifestyle that you enjoy.

That's right. Yep, I agree.

Well, we hope that you enjoyed this episode.

I did.

Make sure you head on over to our website freedomcapitalinvestments.com to join the investor club and make sure you're checking us out on all the social media channels as well. But we hope you like this episode and we end all our episodes with.

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