Episode 291- Spend Your Way To Wealth & Freedom w/ Sam Dogen

Sam Dogen 0:02

It might sound cliche, but it is more than half the battle. Believe that you deserve to be rich believe that you belong. Don't let the media tell you that you don't deserve it. There's trillions of dollars in the world for the taking. There are creators out there making millions, they might not be as smart as you are as hard as working as you. But they took that leap of faith to take that risk. Take those risks.

Intro 0:23

T-Minus 10 seconds. Welcome to the journey to launch podcast with your host jameelah. So frogs as a money expert who rocks her. She's got some brave juniors like you get out of debt, save, invest and build real Whoa. Join her on the journey to launch to financial freedom in 5, 4, 3,2, 1.

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Intro 2:13

If you want the episode show notes for this episode, go to journey to launch.com. Or click the description of wherever you're listening to this episode. In the show notes, you'll get the transcribed version of the conversation, the links that we mentioned and so much more. Also, whether you are in OG journey or are brand new to the podcast, I've created a free jumpstart guide to help you on your financial freedom journey. It includes the top episodes, so listen to stages to go through to reach financial freedom, resources and so much more. You can go to journey to launch that comm slash jumpstart to get your guide right now. Okay, let's hop into the episode.

Jamila Souffrant 2:56

Hey, journeyers Welcome to another What I hope to be enlightening conversation. I think it will be I think I think it will be just for the fact that we have on someone who is pretty I think popular. Like if you know his blog and you know him, then you know, his work is pretty legit. It's I mean, I've known of you Sam for a bit I haven't like personally met you yet. But I know that people who follow your work, really find your work useful. And so on the podcast today, journeyers we have on Sam Dogan, who is the creator behind the financial Samurai, very popular blog, and now the author of a new book called by this not that and how to spend your way to wealth and freedom. So welcome to the podcast, Sam.

Sam Dogen 3:40

Thanks for having me. Jamila.

Jamila Souffrant 3:42

All right. So Sam, I was reading through your book, your new book. And you know, I gotta say like, it's actually one of the few finance books that I find that like had a new spin on things like, since we're both in the personal finance space, and we talk about financial freedom and independence. Sometimes things can get pretty redundant, especially if you read a lot of books about the same topic. And sometimes I actually avoid trying to read the books because I'm in the process of writing my own book. So I don't want to kind of cloud, my process and all that. But what I really did like about your book was like how you framed the reason for writing it and the frameworks that you have within it. So I can't wait to dive in and talk about the concept between buy this not that and this term of spending your way to wealth and freedom. So can you talk a little bit about that.

Sam Dogen 4:28

The idea behind the book is to build wealth by going on the offensive, not on the defensive, defensive is saving and budgeting which is super important. But I think that is something that should be a default mechanism where you've got it down pat you know where your money is going, you know what your saving rate is. Once you get that down pat and in the background, you can focus on the offensive way of building more wealth, which is getting a raise at your day job getting promoted jumping firms, building your side hustles building your entrepreneurial business and so forth, because the offensive way to build wealth is unlimited. The wealthiest people in the world are entrepreneurs, or they've climbed up that corporate ladder so high that it's just, you know, the cost savings and budgeting is actually completely irrelevant because of how much wealth they've built. So it's going on offensive, and it's all about opportunity cost.

Jamila Souffrant 5:22

I love that. Because what I find is that a lot of it, we are coming from the defensive side of things, or people aren't understanding why it's so important because of maybe an error that's occurred or they are on the brink of something. Maybe they are in financial dire straits. So they are looking now to help like, I need to understand my finances, versus to get ahead of it right playing offense. And to get past like the baseline level that you talk about, like the saving and budgeting, there's another level, which provides more opportunity and more wealth. So in the book, you talk about framing decisions based on a 7030 philosophy. So I'd love for you to explain what that means.

Sam Dogen 6:03

You know, one of the things that I don't like is to look back on my decisions with regret. I want to encourage people with by this not that to think in probabilities, not absolutes. And the way to think in probabilities, and not absolutes is to utilize what I call my 7030 decision making framework. And that says, If you believe there's a 70% chance you're making the right decision, you know, based on your research and your analysis, then go for it with 100% conviction, 100% conviction, while also having the humility and understanding knowing that maybe around 30% of the time, hopefully less, you're gonna get it wrong. But you're gonna learn from your mistakes and make better decisions going forward.

Jamila Souffrant 6:48

And we should probably take a little step back, because I know there are some journalists who don't know who you are. So I'd like to talk a little bit about your journey, your personal journey, so to give context to the advice that you give, because you are financially independent, but you also have a thriving business that where you earn money. So I'd love for you to talk about like, how you've gotten to this point, and your financial independence journey.

Sam Dogen 7:12

Sure. Well, my parents worked in the US Foreign Service. I was born in the Manila, Philippines when they were stationed abroad. So I lived in Malaysia, Philippines, Zambia, Taiwan, Japan, and I came to the US for high school in college. In 1999, I joined Goldman Sachs, which is an investment bank, in New York City and everywhere. And I thought it was my dream job. I was like, Wow, I can't believe I got a job at Goldman Sachs, going to a public university, the College of William and Mary, how did I land this job after 55 interviews, six rounds, it was ridiculous over seven months. So I thought I won the lottery. And the reality is any job you land is like winning the lottery, because other people are vying for that same job. But I quickly learned in the first week that oh, my gosh, getting in at 5:30am having to stay past 7pm to connect with my colleagues in Asia was not sustainable. I was stressed I gain weight is just a terrible experience in the first month. So the irony of having a really difficult and brutal job with brutal hours is that it forces you to think about your future, it forces you to save and invest wisely. So that one day you can accumulate enough money, so you can get the hell out and do what you want. And so originally, I thought I was going to last hopefully until the age of 40. So 18 years after college, just grind, grind, grind, save, invest, having a passive income and SEO later. But in actuality, I left at 34, because I was able to negotiate a severance that paid for about five to six years of living expenses. So the severance bought me time in 2012, after I worked in finance for 13 years, to get the hell out. And before that, I had started financial samurai in July 2009, during close to the bottom of the global financial crisis, because I thought, My gosh, I'd spent 10 years saving and investing, you know, maybe 50% of my income every year, and then I lost 35 to 40% of my net worth in six months. So financial samurai was born out of a crisis. It was born out of fear and the desire to understand what the hell's going on, so I could get through the process. So two and a half years later, I left in 2012. And I decided, you know, I'm gonna retire for like a year and travel, spend time with my wife more play tennis. And then I got bored. And so I mentally unretired and I said, You know what, I'm a writer, and I'm going to work on building financial samurai.

Jamila Souffrant 9:45

And you've been poured into the blog.

Sam Dogen 9:48

Yeah, in 2009. When I started, I said, I'm going to publish three times a week for 10 years and see where that will take me. Surely something good could have

Been after 10 years, right? And so after two and a half years, you know, there was some momentum with financial Samurai, I really enjoyed building community, learning from other people from all around the world around the country. And it was just so fun, I would wake up in the morning, it felt like Christmas, where I was like, Okay, you want to open your presence. I was like, Okay, who commented and was just so fun. But I thought this is something I'd love to do after working in traditional finance. And so that's what I've been doing ever since.

Jamila Souffrant 10:28

Now, you said you were working at Goldman, but you knew pretty quickly, it seems that you did not want that to be your lifestyle. And if you could think back to maybe some of your colleagues, because what I found also working in corporate America is that unless everyone was also undercover fire enthusiast, financial independence, retire early enthusiast, none of my co workers, it seemed we're into saving and investing, they seem to be into just living their lives like being on that treadmill. And I don't know if it's just because they just didn't know that there was another way out, even if they were unhappy. Like, I'd see people working they, you know, they'd be I think in their 50s and even 60s, and they just looked unhappy, and they were literally just there because they wanted to get to their retirement date. And, you know, I said to myself, I didn't want that to be me. So how did you know early on that that was a pathway for you, and that you didn't fall into kind of maybe what other people were thinking or doing?

Sam Dogen 11:21

I think there are two reasons. One, so when I was interviewing at Goldman in 1998, the firm was private. And in 1999, the firm went public, so all the partners made Mega Millions, right, the VPS made Mega Millions to, and I saw them pretty soon after they got all that money. And I was like, they don't see much happier than the average person. And I didn't know if I wanted that lifestyle, because to the forecast your future is to forecast your misery. And I looked at them 10 years what I want to be them 1020 years. Yeah, it'd be nice to have their money. But I didn't know if I wanted to grind 60 hours a week, 70 hours traveling, not seeing family, the senior partner in the international equities department just went through a divorce. And I was like, that seems like a big trade off. So I thought, okay, I can cut it out for 18 years, till age 40. But that didn't happen. And then, you know, try to have a second life. Second Life, maybe being an entrepreneur or just chilling out in Hawaii, where my parents are from. And the other thing that really changed me was when I was 13, I went on summer vacation. And I came back and I call my friend Mark. This is in Kuala Lumpur, Malaysia, and his mother picked up and I said is mark there. And she said, No, Mark passed away in a car accident. And that was a huge, huge shock for me, at 13 years old, that my 15 year old friend, good friend, passed away and disappeared. And he was someone that I was just going to go skateboarding with, I thought the very next day and hang out. And so from a very early age, I realized that life is ephemeral. It's precious, it goes quickly. And you don't want to waste it. So I figured if I could save and invest as much as possible at an early age, try my hardest to get the best job possible. I could get out sooner. And in case I didn't last until 80 years old, the median life expectancy, I would at least have a hedge where I would retire early and live the life that I wanted. And so I wouldn't look back with regret.

Jamila Souffrant 13:26

And you talked about the severance that helped almost fill this gap of what five years you said of expenses?

Sam Dogen 13:31

Yeah, five, six years of living expenses.

Jamila Souffrant 13:33

Now, what were the conditions for you to be able to negotiate that severance? And what can people do if they're listening? And like, well, maybe I can and want to do the same?

Yeah. So I think a baby panda dies in the woods, every time someone quits their job. Instead of quitting your job, try to negotiate a severance, quitting your job is actually the more selfish way to go. You give your colleagues and your boss Two Weeks Notice See you later, two weeks notice that's not enough time to find your replacement and to train your replacement, especially in a strong labor market. So the idea of negotiating a severance is to try to negotiate your exit as you try to negotiate your entrance into the job. And the way to do that is to have a open conversation about what you're feeling, what you want to do after and how you can help the firm transition out transition yourself out and find your replacement so that there is no drop off in productivity. So when I negotiated a severance, I said, Look, folks, I've been here for 11 years. This was at Credit Suisse. 11 years loyal soldier. I hired my replacement a couple of years ago. I would my heart's not not into this anymore. And I don't plan to go to a competitor which is a key point.

Sam Dogen 14:51

I would love to get a severance which would include a severance check and all my deferred cash and stock compensation and in do that I will train my subordinate, my junior, introduce them to all my clients do everything for the next two or three months, so I can get that severance. And they thought about it for a couple of weeks, three weeks, four weeks. And then they said, actually, that sounds good, because at the end of the day, your employer wants someone who wants to be there, who's enthusiastic, who wants to add value, right. And so if your heart's not in it, it's hard to keep them it, you know, that person who was not in it, it could their attitude could spread like a cancer towards their colleagues and everything. And so I stuck around for two months trained introduced my subordinate to all my clients. And I left. And it was a wonderful time, it was a fearful time. But it was the right decision for everybody involved.

Jamila Souffrant 15:48

We haven't said it yet. But it's pretty obvious that income plays the most important role in being able to do some of this, especially like your, the higher the income, and like the career that you choose. And you do talk about that in book which I want to get into. But I think it's just to be able to be in that position already meant that you were probably a very an excellent worker, right. And so I find that when we have the conversation about financial independence, and being able to live the life you want on your terms, that it does take work. And I'm not saying you can't be average. But what I'm finding is most people who are able to do it earlier in life and earn high salaries, they are they're excellent at something, maybe not everything. But they have people skills, they're able to move up the ladder quickly or change jobs, like you said, every two to five years. And they're able to negotiate their salary. So I want to also give some tips for people who are in their career now who wants to set themselves up to be in a position to go to their boss and say, Hey, this is what I want to do like in say that scripts, you just said, what what should they be doing now?

Sam Dogen 16:53

Well, so one of the biggest pushback I get regarding negotiating a severance is the employee will say, Well, why would they ever give me a severance, I'm such a good employee or a valued employee. So the first thing to realize is that the employer only employs somebody if they provide more value than the cost. Otherwise, you wouldn't have that job for a long period of time. So just know that if you're a good employee, you actually have a higher chance of gaining a severance, because you've provided value. And it's a interpersonal people skills, ability to negotiate. Right, you have to see the other side of the story. What is your boss want? What are your colleagues want, you know, what we found during the pandemic, and with this quitting movement is that a lot of people who get left behind are just left with more work to do by the person who quit. And they're not going to get paid commensurately. So that that stinks, right. So to position yourself for severance, I think minimum, you should work three years. Because it you give three years of your life that shows somewhat loyalty in this modern day and age, when people are job hopping around, the longer you're at your firm, the greater your chance of getting a severance, because they appreciate your loyalty. And they want to take care of their people. And they don't want their ex employees to start bad mouthing them on social media or writing op eds in the New York Times, or whatever wood that I've seen before. reputation is everything. So the longer you can work, the better your reputation, the greater your chance of negotiating severance, and go to your calendar, and circle, a date a year and a specific date on when you think you can no longer take it and when you want to leave. Because that's what I did. Ah, 40,000 That 2017 is I can't do that anymore that I'm out of here. But lo and behold, I was able to figure out in 2012

Jamila Souffrant 18:46

Isn't that a bit magical? I know there's a lot of math in it that way that happens because I also set a date for myself that at 40, I'd be able to quit my job. And it happened earlier for me. I did you know sacrifice some guaranteed income to be able to do that, but gain so much freedom. And I find that setting that date is very powerful. Because even if you know you do the math, you calculate backwards, okay, if I want to hit this date, I want to be able to quit my job, I need this much money. And so you kind of kind of work the numbers to see how much you need to save invest to kind of have in your fund. But it's surprising to me how much I've done that you've done it and it happens earlier. Like that's why the path like when you start this path and you start to educate yourself and you immerse yourself in this world, that things can happen differently. So maybe not the same way you intended them to or and faster by just starting.

Sam Dogen 19:34

Yes. I mean, you will surprise yourself. That's the beauty of I think human nature, we tend to figure it out. If we really want something we kind of figure it out. We talk to people who've done it before to learn from the experiences we read to understand from other people's experiences. We take steps and then we often push ourselves the more we want something the more we'll try to figure it out. I do believe in the long term everything is pretty rational. You know, for example,

Like, if I really wanted six pack abs, I would stop eating ice cream and cake. And I started working out. But you know what, I don't really want that much. So I can't really complain. So it's okay, you know, good enough, you know? So it's thinking long term rational.

Jamila Souffrant 20:16

Yeah. And going to this idea of negotiating a severance or negotiate anytime that you're going to leave your job, like you had said, you get it's you have better leverage when you're saying you're not going to a competitor. So I think this strategy is good for this idea of financial freedom, which I want to talk about what that means the way you say it, right? Like, what is the ultimate goal, and I know that it's gonna be different for everyone. But for, you know, some people when they think about financial independence and freedom, it's never having to work again, because they're living off of their investments. They're literally not working. And I talk about it in a way in stages. And I think that most people can get to a level in which they can choose what they want to do. So it's not that they never have to work for income, but they, they can choose what they do. They can take breaks, and they're living off of their portfolio or some passive income. Can you talk about it and how you frame it and the ultimate goal that people should be going for?

Sam Dogen 21:06

Yeah. So in 2009, I felt like I helped kickstart the modern day fire movement. And my definition of financial independence is simply if you have enough passive investment income to cover your basic living expenses, basic food, clothing, shelter, education for your family, children. And over that time, it's evolved all these definitions of fire to help fit someone's progress on their way to financial independence. And I think that's really creative. And actually, you know, sometimes it's kind of silly sounding. But I think it's really helpful to help keep people motivated, because it's really hard to build enough wealth to generate enough passive income. So my definition is to have enough passive income to do whatever you want. But I think what you'll find once you are free to do whatever you want is that there might be this kind of letdown, especially since you've been saving and investing and sacrifice for years and years, or maybe decades. And then you finally get there. There's no party at the end of the rainbow, there's actually a letdown where you're like, Oh, is that it? There's kind of like this emptiness inside. So it's really important to figure out what you want to do, hopefully, before you say goodbye to your day job before you negotiate a severance. Luckily, for me, I was able to start financial samurai two and a half years before I left, and it was just so fun for me, you know, I wanted to travel but after seeing, you know, like the fifth Gothic church in Europe, they all started looking the same. I grew up in Southeast Asia. So I knew what it was like. And so, you know, right now, I know what I want to do financial independence, to me means spending more time with my children, until they no longer want to spend time with me, which I estimate will be at the ages of 12 and 13.

Jamila Souffrant 22:50

Wow, okay, that's just me sad. Kids that wanted to spend time with you. Yeah. And I think too, it's one of those things where people who have not reached a certain level of having enough can look at it and say, Yeah, whatever, when I get there, then I'll tell you how it is like they don't believe maybe that that is going to be the case. But we can all account or say there have been experiences where we wanted something, we worked for something really hard or hat that thing and then it's exciting at first, and then it's like, Okay, now what,

Sam Dogen 23:22

what's next? What's next. So it's, I call it the the trough of sorrow. So you just grind so hard, the more heart you put into something, the more effort, the greater he set yourself up for that sorrow, that letdown feeling. And it's so amazing, because that's what I felt after I wrote by this not that, you know, I spent two years writing it. And it was out in the world, like, Oh, this is amazing. Of course, you feel insecure, because people will be like, Wow, that, you know, that book sucks, or something, you know, you'll be like, Oh, the negative feedback. But then you'll have the positive feedback. And then when it made the Wall Street Journal bestseller list, I was like, Oh, that's amazing. You know, it's like impossible to get there. I'm like, the only guy with black hair to get on the list. I was like, sweet. And then about a week later, I was like, Oh, is that it? What's next? And so I understand why actually, rationally, people won't try to grind so long or put everything in, they'll try to go with the medium. Because they don't want to feel that that sorrow, that pain, that sadness, that inevitably comes off and after some good success, you know, life is so dynamic. And that's what I want to encourage all my readers and listeners to think about and not just expect some fixed result whatever you imagine in your head, after achieving financial independence will probably be different from reality. And also, if you're still on your path, enjoy the path because the path is really the fun part. The good and the bad. It's really fun. Getting to it's just kind of like anticipating your vacation to the Maldives or something. You know, you save you look forward to it, you put it in calendar, you talk to your friends, you look at the book works, read watch TV, whatever. And that's the fun part. And once you get there, you're like, Oh, this is pretty nice. And then you start counting down the days where that vacation will finally end, and you gotta go back to reality. So just the secret is really to enjoy, to getting there and there. And then once you're out of there,

Jamila Souffrant 25:18

right, and ultimately, it's doing work or finding work that you enjoy doing, and where the money may not matter as much, because you have enough savings invested from other passive income sources, to be able to supplement your expenses or what you need to pay. But I feel like, really, it's the idea of figuring out what it is that you want to do. So one of the things I like that you do in this book is you kind of just give another way to think about what your financial independence number should be meaning how much you should have saved to consider yourself or to support yourself, once you're financially independent. And typically, we hear about it in this space as 25 times. So take 25 times your annual expenses. And you know, it's just a common rule, people use the back of the hand envelope calculation to figure out how much you would need in your portfolio in your investments to help give you money to help pay for your expenses on an annual basis without running out. Now, you say you should actually do a multiple of your income versus your expenses. And I love why you mentioned that. And I want you to kind of explain what that means and what it is,

Sam Dogen 26:24

right. So let's go it's back to my thought process of going on the offensive to build wealth. So when you have a target based on a multiple of expenses, you can cheat your way to financial independence, you can suddenly slash all your expenses, just drink water and eat salary. And you know, you've got a $10,000 annual expense. And then suddenly, you're like, Oh, I'm financially independent with you under $50,000, based on the 25x rule. And that's what expenses, right, but if you shoot for a target based off your income, and hopefully all of our incomes will grow over time, you can't cheat your way to financial independence. As your income grows, you're forced to continuously focus on saving and investing wisely. So you can build that net worth over time. And I think it's a much smarter way. And it's a much more apples to apples way. And it's a much more honest way to go. Because our journeys are going to be long or short. But the idea is, the more you can base your goals off your income, the more honest you will be. And then once you get there, you know, try to get to at least 10 times your average gross annual income, or your highest gross income figure, whatever it is. But once you get to about 10 times, you're gonna start feeling great. And it just changes the way your mindset and the way you do things by focusing on a multiple income,

Jamila Souffrant 27:42

right? Because you said focusing on or looking at it from the expense side kind of encourages scarcity. And I agree with that. I remember when I first found out about the financial independence movement, and it was all about Alright, how little can you spend? So then I would like look forward about okay, we can cut this out, okay, if we can we only spend 40,000 a year, then we can do this, we'd be fine. And then when I'm living my life in the real world, there's like no, that for my taste and having a partner and kids like that's not going to work. That's not realistic. So I definitely agree. It's a more honest approach to things.

Sam Dogen 28:17

Yeah. And I do wonder whether it'll be widely adopted and take off or not. I think logically, it makes a lot of sense as our careers progress, as our income grows as our tastes change, as our expenses go up, right with inflation at 40 year highs, just focusing on the top line, which is the income is a logical way. But I don't know if it's going to be widely accepted because it's harder to do. And when things are harder to do, things tend to be ignored.

Jamila Souffrant 28:45

We are talking about a lot of money here, depending on what your goals are. So there's different types of financial independence buckets that you can like fall into. There's like lean fire. So this is widely talked about on the blogs and on other podcasts, but it's lean fire where you're not spending that much very frugal. So you don't need that much to have accumulated. There's fat fire where it is more what some would say looks luxurious lifestyle and again, it's all relative, and also this term called barista fire, which I'll let you explain that Sam,

Sam Dogen 29:19

I do like barista fire. Because I do think especially if you have a partner, a wife or a husband, that is one person gets out the door first retires early or becomes entrepreneur takes more risk does what he or she wants to do. And the other one has a steady day job I think that's the best combination but barista fires essentially you have enough where you know you're generating some good investment passive income but you some supplement that income with a generally you know a barista. It's like a low paying job, but you might be minimum wage, which is pretty good nowadays, like 15 $20 An hour and it might supplement your health care insurance, right Starbucks is famous for providing health care insurance to its baristas and healthcare insurance is pretty expensive. For example, my family, we spend 2300 a month in premiums for a gold plan. It's not even a platinum plan, the platinum plan would cost 2600 a month. And so that is actually one of the biggest worries that people have about retiring early, how are they going to cover their health care costs. And if you just look at it as an expense, that's how you're going to cover you're gonna have to figure out how to accumulate enough money to cover that expense. Or as some people do, they, they earn less than 400% of the Federal Poverty Level limit per household size, to get subsidized health care, or they could start a business, which would make their health care expense, a business expense.

Jamila Souffrant 30:42

Right. But it's also just important to know like these terms and different ways people think about it, because I do find that if you do have a partner like so in my case, right, it was a little bit easier for me to exit the work field and career, like my career because my husband was still working. So we didn't have to really worry as much about, you know, at least we had some steady income and didn't cover everything, but it covered something. And we had health insurance, right with small kids. So I just find that understanding that there are different ways to think about this. It's it's not all or nothing, right is important to thinking about what it may look like for you. Yeah, there's many ways to do it.

Sam Dogen 31:19

Technically, I did the barista fire route, I guess it was, yeah, because I left first, my wife is three years younger than me. So I left that 34. And I told her, you know, she was 31. At the time, if things work out after three years, you too can leave your day job at 34. And I'll help you negotiate a severance as well. And three years later, things worked out the bull market resumed in 2012, financial samurai grew and I helped her negotiate a severance. So there's definitely many ways to do it. I think though, one foot out the door and having a partner one foot in the door has is a good hedge. But people can do whatever they want. That's the beauty of it. And so I hope people are more accepting and open of the different varieties there are,

Jamila Souffrant 32:03

right now, when it comes to the income side of things. I feel like there is like a dance between like the income and your expenses. So you say that, in order to understand like how much you would need, if you're going to use the multiples like that, I believe and you correct me if I'm wrong, the income multiple is that first figure out like the desired lifestyle you want to have. So can you talk about that, and the expenses like this kind of what it looks like a dream budget, like how you really want to live?

Sam Dogen 32:27

Well, I think we'll figure out really quickly how we want to live, maybe after three years of working, you know, we're not that volatile, suddenly, we're not like, oh, we want to pop champagne off a yacht in the south of France.

Jamila Souffrant 32:40

Speak for yourself, Sam.

Sam Dogen 32:45

But I like to keep things simple. You know, there's basically some target network figures by age that I go through, like I said, once you get to about 10x, you're gonna start feeling financially independent. And then once you get to 20x, your average gross income, you're free to do whatever you want, but have these frameworks these multiples by age, for example, 3x, your gross annual income by age 30. And then 5x, five, you know, and then so forth. So in the book by this not that I have frameworks by age, because time is is set, right? You can't buy more time. So I have these networth goals. And I have these asset allocation goals by age, age 2325 3035. So look at by this not that as like a coach, you might not get there, but at least you'll have this guide so that you'll get farther than if you're just winging it.

Jamila Souffrant 33:34

Yeah, I gotta say, though, Sam, when I was looking at that, I was like, I know so many people who because the Amen, you know, if I kind of myself in here, like started later than they would have liked, someone may be listening to this. And they're in their 40s. And they have nothing invested in save. So they can look at that chart, which says, I don't know what their multiples should be. And they're just like, All right, so I guess there's no hope for me, which I don't want people to feel. I don't want you to feel that ways. I'm sure Sam doesn't want you to feel that way. But I do think it's a reality check. I think it's a reality check that I think people tend to want to avoid, like, you know, you want to live this lifestyle, and you want freedom. I think we all deserve to have options in our life and to be in secure safe environments. But I also think there's some that would be realistic. And so I just know that some people will not have the multiples that you talk about, because they came to this later. So let's talk about if that is the case. What can they start doing to catch up?

Sam Dogen 34:28

Right? So first of all, it's a guide. It's kind of like an ideal guide. So just like I would ideally like to have six pack abs when I see some dude in the magazine or rocking out on Instagram, whatever. It's not going to happen, because I'm not doing but it can spur me to change my habits to eat better, exercise more and so forth. The first step is to understand what it is that you want and what it is that you are miserable about and what it is that you are doing right now that has gotten to where you are. If you are saying okay, look This person at 40 years old has nothing, well, then we have to go through the root of the problem and figure out what it is why you have nothing, is it because your saving rate is 0%? Is it because you're spending more than you earn every single month? Is it because you're not spending enough time reading books, watching video about other people who are really focused on their personal finances, I think one of the first steps is to really get into the community, whether it's this podcast, or reading a book, or reading financial Samurai, not everything will be relevant to you. But just the discussion and the writing and the conversations about saving, investing, retirement planning, estate planning, family planning, all these important things, they will rub off on you and will force you to look at what it is that you are doing that got you there. And you've got to change those things to get to where you want to go. And so nothing really good, comes to easy, you know, unless you're just born with everything, but even if you're born with everything, I would just kind of pity that person because they don't know what it is like to struggle. So you really have to figure out what the root causes for why you are the way you are, you know, there's some basic things that I like to tell my readers, one is that the amount of money you're saving each month doesn't hurt. You're not saving enough. So if you've ever had braces, you know, the reason why it's painful in your jaw and your gums and your teeth is because they're moving your teeth, right? If they move in your teeth, nothing's happening, you're gonna have the same money, then your your teeth look amazing. Did you get braces when you're young?

Jamila Souffrant 36:35

No, I haven't.

Sam Dogen 36:36

Really,

Jamila Souffrant 36:37

I never had a cavity either.

Sam Dogen 36:39

Really, oh, you're genetically blessed. So save until it hurts each month, otherwise, you're not saving enough maxed out your tax advantaged accounts. Think about other ways in which you can make income, think about what you are doing to provide value. So you can climb up that corporate ladder curve to make more money and get promoted. There's an endless way of making money. Don't just think about a fixed way. Think about that growth mindset.

Jamila Souffrant 37:06

Again, it starts to with the mindset pieces first believing if you believe you can't, and you can't, like if it's like a non starter. Like it's like, and I don't think if you're listening to this, or you're at all, you don't have to be immersed yet just yet. But I think anyone who's gotten to this part of the interview, there's something there that they're like, Okay, you know, this is something I do believe is possible. And that they can do.

Sam Dogen 37:26

Yeah, I mean, belief, it might sound cliche, but it is more than half the battle, believe that you deserve to be rich, believe that you belong. Don't let the media tell you that you don't deserve it. There's trillions of dollars in the world for the taking. There are creators out there making millions, they might not be as smart as you or as hard as working as you. But they took that leap of faith to take that risk. Take those risks, I think, you know, I'm 45. Now I look back in my 20s and 30s. And I think I wish I had taken more risks, pushed myself more, and then maybe things would have been a little bit better. But think that okay, I'm just saying the fear in your head is often way worse than reality, take more risks and believe that you belong.

Jamila Souffrant 38:07

Yeah. Why I think this book is really great is that it's not just math and numbers and formulas. It's also about like real life, while we're in the real world making these decisions between private school or not, or taking that big vacation, or budget travel. So talk about like, just the dilemmas people face and how it's just that one sided, how we can think about it in a better way, or just a different way.

Sam Dogen 38:32

What we should all go through is a regret minimization framework. And this is what Jeff Bezos talked about over a decade ago. And that is pretend you're 70 years old, look back on your life. And identify what are those things that you would regret and figure out how to not have those regrets because I truly believe feeling regret is one of those things that oh, just really kind of eats you up inside. Now good thing about mistakes, some of the mistakes is that you can make up for them, right. So if you decided you decided to work longer hours instead of take that trip with your friends, when you're 28 you can make up for that. But there are some things that you can't make up for. And it might eat up a lot inside. So with by this not that, you know, I talk about how to build more wealth and a risk appropriate manner to help you build more wealth so you can do more of what you want. What's most interesting to me is tackling life's biggest dilemmas. Right now I'm 45. I have a five and a half year old kid, two and a half year old daughter, and I have all these hopes and dreams for them. And I know the difficulties that I went through, and I'm trying to help people never say this again. If I knew then what I know now things would have been better, right? So the key to extinguishing that phrase out of your head is to read and learn from someone who's been there before, where you're going to go and learn about the pros and cons of every single event. So right out in the thick of parenthood, I'm thinking to myself, hmm, private school or public school? Wow, this is a lot of money to go to private school, but will they be happier? Will they be less bullied? Will they have a better education? These are all the dilemmas that I think a lot of us will eventually face.

Jamila Souffrant 40:18

So then how do we make that choice, then it's like, do we invest that money, or spend it in that way, or invest it in this other way, if you look at as an investment,

Sam Dogen 40:25

right, so then I basically wrap up all these dilemmas using my 7030 decision making framework, I argue one point. And then at the point that we'll get to a 70%, convincing rate probability that that's the right choice. And then it's up to the reader to decide, okay, that makes sense. But and I don't agree with it, or whatever. So the idea is to basically like a book club, where you discuss and debate your point of view, after you read my point of view, and based on the research, and so forth, to make the ultimate choice. Now, specifically for private and public school, I've come up with a multiple of tuition per child. So I say, our children are the most valuable things that we have in our lives, we want the best for them. And education is one as one of the greatest gifts we can give our children. So but the problem with that is some people, they just spend everything they have, and then they end up with not enough money for their own retirement, right. So they kind of screw themselves. And then if they go to a school, that's private school and they don't get a job, then the kids are probably going to be really burdened with student loan debt, and so forth. So, for example, I say, feel free to send your child to a private school, if that's the school that you believe is best for your child, if you earn at least seven times the net annual tuition of that school. So if it costs 20,000, gross, but you got a $10,000 scholarship, that's 10,000 times seven, if you make $70,000 per child, okay, you can send them to private school for 10,000 a year, and be flexible. But I do believe the ideal is if you can find that ultimate public school with supportive parents that have safe environment that's free, go that route, because I just I don't think the math pans out for those who are making less than seven times the annual tuition.

Jamila Souffrant 42:19

Yeah, it speaks to that. It's not just about you know, spending on anything, no matter what the the marketing is for the hat thing, and whether it's for your children, and or for a home, like, it's really important to do your due diligence, and both ways. So I like that, like become someone arguing at first for both sides. And then like you said, like, take one side, do the math, see how it works, and not overextend yourself in anything, I think any expense shouldn't be overextension. And shouldn't stretch you to the point where, you know, you have your banking on the return so much that if it doesn't happen, you're going to be ruined.

Sam Dogen 42:56

So if any marketer is doing his or her job correctly, anything, their marketing will sound like the best thing ever, because they tug at your emotions, they make you imagine a better future. And so as a result, the more emotional you get, the more you're willing to spend beyond what is appropriate. So that's why education, you know, everything can be learned for free right now online. But yet, why is private school costing $57,000 a year in tuition? Why is the tuition going up faster than the rate of inflation? I mean, that's crazy, especially when everything is free, right. And especially when you look at the 1020 year difference between income and net worth of private and public school graduates, it's not that much different. And the reason why people spend so much is because of that emotional tug that marking, and it's the same thing with cars, you know, I have a 1/10 rule for car buying, which states don't spend more than 10% of your average household income on a car. So if you make $80,000, try to limit it to $8,000. If you want that $50,000 car, well, heck, you're going to try to have to make $500,000. And a lot of people get pissed off by that. But I'm like, actually don't get pissed off getting motivated. If that's what you really want. You might make that one day, and you might realize, you know what, I don't really need that $50,000 car, but cars if you think about the Superbowl ads, it's very emotional, right? So that's how people get in trouble. And then they regret it later on. And so that's one of the things that's one of the main things I want to help prevent people from feelings that regret of spending too much and buy this not that.

Jamila Souffrant 44:31

Yeah, and giving the multiples are really helpful, just you know, almost doing like a check a gut check on this. And I think it's also fighting back on this, you know, desert like, I deserve factor, like, ultimately, it's like, you actually say in the book, like, I think you said if you can't afford it, if like you've never used debt to buy it, then technically you don't deserve it, but it's not a value of your worth that you're not deserving of it. You can't talk about that.

Sam Dogen 44:58

You know, it might be hard love. But I say like if you're a C student, do you really deserve an a lifestyle? No, I don't think so. And I think that's the problem. Because the average is a C, right? If you look at the bell curve, but then everybody wants to have the best. And that's in congruent with your effort. And the result, the reward, so the idea is to be congruent with your effort, and what you expect what the reward is, if you want more, you got to put in more of the work, no rational person will argue against that. But I think some people will feel offended by that. But this is the hard truth that I think if we become congruent with our thoughts and actions, better things will happen going forward.

Jamila Souffrant 45:42

Yeah, I think I think that is a touchy subject. Because, you know, this, like, we are still taking that analogy, like the example of like a C student, we can talk about reasons why the student is a C student like, and I know, again, it's gonna probably get to, it could get too deep for this conversation. But there may be reasons why there are a C that are outside of their control. But there are some, you know, I still believe in self responsibility. But I also believe that there are things that do happen, that you do have to overcome that maybe other people don't, right,

Sam Dogen 46:12

let's actually talk about a specific example. So let's say you grew up in a single family household, let's say your mother's working all day, you have inability to get after school tutoring. And you can't afford those crazy LSAT preps for $2,500. Like, I couldn't afford that. So you just go to Barnes and Nobles, and you just flipped through the book, or you go to the library, where you will probably have a more difficult time than the kid who has a two family household who has all the money to give you all the prep in the world. And that's not fair.

But let's stay consistent, you might get that C grade, which actually could be an eighth grade, if you had more help, but you know that at the same time, it's okay to be that C student under those circumstances, because you did the best that you could, right. So what I want to encourage people to do is say, look, never fail due to a lack of effort. Because effort requires no skill, you know, people can be better than you because they had their richer, two parent household, they're lucky or they have connections. But if you fail, because you just didn't try your best in the circumstance that you were given, then that is a shame. And so let's say let's continue with that analogy. And that the kid who struggled see student, but that's okay, I don't want that C student to start saying I deserve that BMW for $60,000. You know, I don't think we should say, he should think or she should think I deserve the best. No, they're going to work towards getting better. And once they get to that better stage to that with a level of effort, or a level of wealth, or whatever it is, then they can be more congruent in their spending. That's all.

Jamila Souffrant 47:51

And I think it's important to know that what we are defining as a lifestyle, a plus lifestyle, like the way we're speaking right now is about like material things. So marketing has also led us to believe that the BMW and the expensive car and the bigger house isn't a plus lifestyle, where that's not necessary. That's not the case for if you're looking at it in a holistic way. Like that's not necessarily what that really means. Like you can still be in a Honda and in, you know, a smaller home and be living in a plus lifestyle. So I want that to be clear to that it's easy to get caught up in the money and like the value of things. And just because it has a higher valued means is perceived as better, when that's not necessarily the case.

Sam Dogen 48:33

Yeah, so I'll give an example. So when I left in 2012 13 years in finance, I lost 100% of my active income 100% six figure income. Did I feel sad? I was like, yeah, it's kind of sucks. No more paycheck, right? It was kind of weird after 13 years of getting a paycheck. But I felt happier because I had more freedom. And instead of material things, I mean, I was never really that into material things. But I was able to have the freedom to go to the park, to sit on a bench to read a book to listen to the birds to go to free music concerts to go to the free museum weeks on a Tuesday when everybody's working right. That to me it was the a plus lifestyle, to not have like a micromanager telling me what to do from New York and Hong Kong to not have to check my email or Blackberry or iPhone at 9pm That was the a plus lifestyle to me. So define what your A plus lifestyle to you is, and don't let anybody tell you otherwise.

Jamila Souffrant 49:33

And then also just to wrap this up to its be congruent, like your your effort, and what you want out of life. Like make sure that's congruent, like don't say that you want whatever your A plus lifestyle means without doing some sort of work, whether that means you're reading or you're setting aside some time to look at your money and to dedicate to that or you're negotiating your salary becoming better at your job so that you can set yourself up to one day leave like I think These are all the effort part that you should be looking into.

Sam Dogen 50:05

Yeah, be congruent with what you want and the actions you take.

All right, Sam, this was a great conversation. I hope that others feel the same. I want you to let everyone know where they can find out more about you your blog, and then your book.

Yeah, if you want to pick up a copy of by this, not that how to spend your way to wealth and freedom. You can go to financial samurai comm forward slash b, T and T. And that stands for by this not that. And if you want to check out my free weekly newsletter I've been writing for over 10 years, I basically highlight the most important things that happen throughout the week. And then I give you my candid opinion, it's not offensive, it's analytical, and it should help you. It's at financial samurai comm forward slash news and E W S. Alright,

Jamila Souffrant 50:50

Thanks, Sam.

Sam Dogen 50:51

Thanks so much Jamila.

Jamila Souffrant 50:55

Oh, don't forget we are giving away a copy of this week's guest book. So if you want your chance to win, go to journey to launch.com/win for more details, and make sure you're following me at journey to launch on Instagram, Twitter, and Facebook.

Outro 51:12

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