Psy Ko joins Andrew Brill to share how he transformed his life from $110K in debt to financial freedom through the FIRE Movement. Now a finance coach and expert at @FIREPsyChat , Psy emphasizes the importance of taking responsibility for your financial future, building financial literacy, and making intentional changes to spending and saving habits. Discover practical strategies on budgeting, boosting your savings rate, and using the right financial tools to achieve FIRE (Financial Independence, Retire Early) — no matter where you’re starting from!
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Johann “Psy” Ko 0:00
Started this with a lot of debt. I had a not just an aha moment, but it was one of those I’ve had it moment, and that’s when I just started saying, I need to do better. Nobody else is going to bail you out. Nobody will ever care about your finances more than you. It’s never too late. It doesn’t matter what age you are, it’s never too late to start.
Andrew Brill 0:29
Welcome to wealthion. I’m your host. Andrew brill, many of us look at financial independence and simply think it’s not attainable. Well, we’re here to explain how, and we’ll do that right now,
Andrew Brill 0:45
I’d like to welcome back sai from fireside chat to talk to us more in depth about the fire movement and how to achieve financial independence. Sai, welcome back. Glad to have you.
Johann “Psy” Ko 0:56
Thank you. Thank you again for having me. I appreciate
Andrew Brill 0:59
it absolutely so, you know, I know it starts with financial independence, and we’re going to dig a little bit more into that and and we’ll get into the retire early, but before we start, explain to us again how you got into this and where you were in life and how this made such An impact on you. Yeah. So
Johann “Psy” Ko 1:20
I started this with a lot of debt. I had a not just an aha moment, but it was one of those I’ve had it moment, and that’s when I just started saying, I need to do better. And my daughter was one, not even one at the time, and I accumulated over $110,000 in debt from the last conversation that we had and how I got on a plan to really pay it down as quickly as I could, because I was reading all kinds of all kinds of books about how to invest, how to save money. But when I looked at my net worth statement, it was negative 60,000 and I had over $110,000 in debt. I’m like, There’s no way I could do this. So the more books I read, more videos I read, I watched, and that’s when I realized I need to get out of debt first. And that was, you know, a few years after the global recession, so unemployment rate was still high. I was on active duty in the Air Force. I didn’t tell my superiors about my debt problem, and I was just kind of like, Alright, I need to figure this out on my own, because I’ve had it, and I needed to have a I never budgeted before that, and I went through a divorce, you know, with everything just coming just crashing down on me, that’s when I realized, all right, I need to do something about it. And then after I paid off my debt, I still didn’t tell anybody about it, because I was still somewhat ashamed for what I went through. And then I started saving money. I started to read more books about some of the investment vehicles, the characteristics that come with them. That’s when I realized, wow, financial independence movement is a real thing, and I didn’t do anything for like, two years during my Debt Free Journey. And that’s all I did, was reading, staying home, not going out. When I paid off my debt, I was ready to go. I was ready to start saving money. And while I was still living frugally, and when I started saving more money, I started to realize, alright, I need to enjoy my life a little bit. And I took my daughter on a cruise, pay with cash, not taking out debt for it. And that was probably one of the best moments I had. And when people started asking me how I did it, you know, how are you able to go on a cruise like that? That’s when I realized, wow, you know, there’s a lot of misery misinformation out there. There’s a lot of financial education that we don’t necessarily have or was available at the time. Social media is definitely thriving now, and you can, you know, have access to a lot of information. So I created this channel and the financial coaching, financial consultation, to just kind of get people in the right direction so that they can also get out of debt and start saving for their financial independence. How
Andrew Brill 4:14
did you get into counseling others? It seems like you work really hard to get out of debt and start saving. But how did you get into counseling others?
Johann “Psy” Ko 4:26
Yeah, so it was more like, well, you know, it was during covid In 2020, I was just sitting at home, working from home, and I’m like, wow, there’s a lot of opportunity out there that where I can maybe start a business, because I was already saving, saving money. I was doing my nine to five job, and I wanted to do more. So I had to take a moment to kind of realize, well, what’s my passion? Right? So my passion was in finance, even though my degree was on something else, aerospace, aerospace, international relations and all that, completely unrelated, but Finance. Was just my passion, and I wanted to do something with finances. So when I started doing some research on, like, just starting with Google search on how to get out of debt, there were a lot of search results, but I wanted to get in touch with people. Just kind of talk to people. It was kind of weird not talking to people, but talking in front of camera. Start publishing YouTube videos on how to just answering specific questions. And as time went by, people started to reach out to me and say, Hey, can I get some counseling session with you? Can? How do I get out of this debt? How do I budget this better? And that’s when I started thinking, wow, this could be this could go somewhere. And I’ve been helping people ever since.
Andrew Brill 5:42
So where does someone start? You obviously recognize that there was a we No one gets better unless they recognize they have a problem. But where do you start? Obviously, there’s a stigma, there’s an embarrassment. You didn’t want to tell your friends, your superiors, your family, and once you get over that, where do you start?
Johann “Psy” Ko 5:59
Yeah, so it’s really you have to start with financial literacy. A lot of people just assume that 401, K is just a scam because you heard it from someone, or you think that budgeting is just a waste of time and inflation is causing all the problems, because that’s all you read on the news. All you watch on the news is inflation. Is inflation that? But when you look at your own budget, that’s where you have to start, is look within yourself. So what are you truly spending on, right? So when I talk to my clients and and my clients show me their their budgeting, the first thing I ask them is, what do you think you are with your finances right now? They’re like, well, it’s not so great, and I could probably do better. And then when I look at their finances and they say, Well, did you know that you were spending like 1500 bucks a month on entertainment, restaurants, liquor, all that stuff, and they’re like, Well, we have no idea. Okay, so this is where you need to start tracking what you’re truly spending on, because you’re trying to figure out how much you want to save and invest. But when you’re spending this much money on discretionary items, and then you have no room to save and no room to pay down your student loan debt or anything else. That’s where the problem really is. But the other root cause, I think the root cause is a real issue, is your behavior. So when it comes to behavior spending, it does take a while for you to adjust to it. I didn’t go from, you know, one day to the next and say, All right, I’m gonna stop spending all my money, right? So it took me a while to get used to that, not just being frugal, but being intent, like just intentional spending. What am I spending this money for? I’m intentionally spending this money for longevity budgeting.
Andrew Brill 7:37
And I did watch your, your first video on your your YouTube channel is actually all about budgets and how you sit down every year and put together a budget. And people like you said, people don’t realize what they spend money on until they really sit down and say, okay, you know what? Whoa, I went out to dinner eight times this month. I spent, you know, $150 each time. I can do that only four times and save a bunch of money, right? It’s, it’s, it’s, it’s discipline. And when you sit down with people, is that one of the first things you talk to them about? Yeah,
Johann “Psy” Ko 8:11
definitely. It’s all about behavior spending at the beginning, because they want to figure out which, you know, am I doing this right with the investment return? What if I get 7% but I look at your budget, and I’m like, well, you’re you’re spending a lot of money on this. This is why you’re not increasing your savings rate. So when it comes to financial independence, it’s not about what investment product. I mean, that’s a part of it too. Like which investment product will give you maybe the best return, to steady return, but your savings rate always trumps your investment return. And what you know how to get to the high savings rate will need to start with budgeting. And budgeting is difficult. It’s not a easy thing to do, and I, over the years, I have been trying to perfect this budgeting product, and it’s a it’s really a simple spreadsheet and just kind of keeping track of your expenses, and it even tracks all the inflation increases year over year. And you know, I’m not going to say that everything is on behavioral spending. I mean, inflation has been a problem for a while, since 2020 and I know the Fed even says that, hey, inflation has been easing. But when you look at some of the research, you know, so like, what was it? A lot of the staple items, the essential items, have gone up a lot, so it has been a problem for the last four years. So when people say, Well, I can’t really afford this anymore, that’s it’s a true story. And I think, you know, this is just my personal opinion, but you know what Wall Street is? You know, they’re doing investments, but they, they haven’t really, I think they met. What’s going on with Main Street is, what I’m saying is, you know, that’s what’s really going on with the people who are trying to survive and people who are trying to do things right, but their income is just not, not. Where they should be, and then the inflation keeps going up. CPI says 3% but if you look at some of the items they they have been like 40% over the last four years, like frozen juices, 49.7% and that’s a 12% annual increase. You know, if you look at it, and the motor vehicle was like 47% over the last four years, and that was that’s like 12% annually. And vehicle insurance is also up. That’s over 40 it’s like 47% over the last four years. My car insurance premium went up by 26% in just one year. And that’s something that that I do talk to my clients, and I do address in my videos on my channel, is that inflation is a real thing. I mean this. This has been a difficult time, but you have to learn to adjust based on what you currently have, because what comes down to it, it is a mat, a math problem. It’s, you know, if you say, Well, I don’t want to give up something, well, you’re, you’re going to go into deficit, right? So that’s, that’s really the big, big thing is,
Andrew Brill 10:58
I, is it ever too late, and I’ll explain. We got a we got a message from a viewer who said that, you know, she left the working world when she had kids, and was out of the working world for a while, and she ended up going through a divorce. She used some of her retirement savings to purchase a car, but she’s so far behind the eight ball, and now she’s, you know, in her 40s, and trying to start over. Is it ever too late, or is it possible for people to climb out no matter what the situation is,
Johann “Psy” Ko 11:31
it’s never too late. It doesn’t matter what age you are. It’s never too late to start. And that’s the first step. Is to recognize. You have to recognize what is going on with your financial situation. And for the she took out some retirement money to purchase a vehicle to try to get started with her investment journey or retirement journey, whatever her financial goals are. Now is the time to kind of look at, look at everything that you have and just say, alright, this is not working, so I need to find a new plan that’s really the biggest thing is, a lot of people just want to keep doing their own things, and things are not working out. They need to move away from it. And then talk to somebody, or talk to, you know, talk to a peer, talk to your family, your coworkers, and just say, hey, what do you think it is? What have you been doing, you know, just strike up that conversation to say, What have you been doing that’s been, you know, that’s been working out for you. So if that current plan of yours is not working for you, then you need to start something else. Now, when I say take control of your finances, and I mean that, take control of your finances, every dollar needs to be tracked, going out, coming in. If you think that you’re not making enough money, you need to look at your career. If you’re overspending your discretionary spending, that’s that’s where you need to look at too. And if you look at your essential expenses, non discretionary items, and you, you can, you’re, you’re doing all you can with all the inflation that’s going up, eggs and car insurance premiums and all that, then you need to start exploring, what else can you do to cut your expenses? But you can only cut your expenses so much, so at that point, that’s where you need to go. And look at your income and say, What can I do to increase my income? So when I was still active duty in the Air Force, I took a bunch of professional certificate courses, and I worked on my schooling and so that I could get higher in the private sector. And I did that to increase my income. I remember my income in on active duty, it was like less than $50,000 less than 60,000 and when I got out, my income increased. But before getting out or before moving on to something else in any time of your life journey, you need to invest in yourself 100% and then you need to be undeniable when it comes to hiring. And that is a just remember that be undeniable. Why should that person hire you? And looking at your resume, this person is undeniable. I need to hire her, and she’s going to start climbing, climbing up the ladder, or whatever it might be. So that will be a good starting point. Now,
Andrew Brill 14:12
when we first spoke, you took a pretty drastic approach. You kind of fell off the map with your friends. You never went out. You worked a few different jobs. Does it have to be that drastic for everybody? No,
Johann “Psy” Ko 14:26
it just really depends on what’s going on with your financial situation. So my debt situation was It was bad. It was beyond bad to the point where it was twice my income at the time. So my income at the time was about 58,000 and my debt was 110,000 so I had to take some drastic approach to say, I don’t need this anymore. I’m gonna sell it. I sold both vehicles and I saw some excuse me. I had to sell several items in my house, the furniture I didn’t need any. More, and I sold those, and I to kind of get started, but if you’re like, say the only debt you have is a student loan, right? And we’ll just call it $50,000 then have a good plan to pay it down within the next two years, three years, as quickly as you can. Then you don’t need to take drastic approach, but you need to have intentional spending, intense like you need to have a good plan to pay that down as soon as you can, not five years. 10 years, you need to pay that off within the next two to three years. Otherwise you’re not going to have enough time to invest. Your savings rate will need to go up the later you start investing. And
Andrew Brill 15:39
but that takes discipline, like you said, and budgeting and making sure that you spend the money in the right place. Does your budget calculator build in an escalator for inflation for look, prices go up no matter what we want to do. Prices go up every single year. Is that built in or it is?
Johann “Psy” Ko 15:58
Yes, yeah, it is built in. So what’s awesome about that is when it tracks your expenses. So my expenses, I’m thinking about, like turning into an app one day, but what I spend this year with, let’s say, utilities, electricity, and then I can look back from the previous year and say, Wow, that’s increased by 2% year over year. For utilities. It’s not usually month over month because of seasonal changes, but when it comes to like, let’s say, the cell phone plan, you know, did that go up? And it’ll tell you it went up by 10 bucks, or it went up by 4% year over year. And I have some items on the expenses that’ll show you what’s deflating, right? So some of the deflationary indication too. So like electronics have been, have been going through deflation. So if you need to purchase a cell phone, it’s been like down 10% from the year prior. So it does, I’m still working on it. I’m still trying to perfect it every day. And just to help people realize, well, you know, when it comes to retirement planning, I need to account for this much inflation, but it’s not always 2% every year. It could be 1% next year. It could be, you know, hopefully not 8% in one year, maybe 40 years from now. So those are the things that you have to account for, and my budgeting tracker can help people do that. So
Andrew Brill 17:19
it’s the fire movement financial independence and retire early if you want to do that, but it’s really save for retirement. Does? Are they mutually exclusive? Or can you try to achieve financial independence while also saving for retirement?
Johann “Psy” Ko 17:38
Yeah. So what I focus on all every single time is I talk about fire, but what you should really focus on is the five portion of the fire, so financial independence portion of it, so that you have the possibility to retire early. And some people don’t want to retire early. I don’t want to retire early right now because I’m enjoying my business. I’m enjoying this, you know, this conversation. I’m enjoying talking to people and helping people get out of debt. And you may have the same goal too. You may be someone who wants to, you know, keep working as a maybe up on a part time job as a barista, because you want to stay active. Some people want, you know, like when I’m in my 60s, 70s, later on, you know, I want to hold a stop sign for the kids on the, you know, on the road, and make sure that they don’t get hit by the bus or something like that. That’s those are the things that that I do tell people like, alright, five and read, people do focus more when they’re in their late 40s and 50s on the retire early portion. Is it a possibility? Because retire early, that is a, almost a subjective term. But you know when, when it comes to retirement planning, people say, well, 62 would be a good age to start planning, because that’s when you get your social security at the earliest, at the earliest, right now and But what people don’t realize is that the 401 K has a rule of 55 where you can start taking money out of 401 k at The age of 55 so that’s another rule that people don’t realize that that exists. But if you quit at 54 then you lose that rule of 55 you can get fired, you can get laid off, and you still take that money out of the 401, k, if you’re a police officer, a firefighter, doing something like in the public safety field, you can, you know, you’re probably have some something called 450 7b plan, and there’s no age limit on when you can take that money out of it. And if you retire at 50 you can start taking money out of the 457 those kind of things. So I guess my goal is, when I talk about financial independence, I talk about the retirement planning because so that when people understand the rules and say rules, regulations and tax free, tax deferred after tax and all that. When they understand what those do, then they have a better understanding of how to plan for it. Is it right to do traditional 41k as opposed to Roth 401, K, you know, I’m not going to say Yes, Andrew, you should. You all. Roth, you know, it wouldn’t be fair for me to say that, because I don’t know anything about your financial situation. So it really depends on where you are and what your goals are and what you’re trying to achieve out of it. Other
Andrew Brill 20:11
than the budget calculator, are there? There are other tools that you use to help people get to where they need
Johann “Psy” Ko 20:17
Yeah, yeah, yeah. So I have a free I have, like, a bunch of free calculators on my website. You can go to Fireside chat.com/resources and we have, like, the financial independence calculator, the fire calculator, that helps you calculate based on how many, how much you have currently. And then it does. I have my spreadsheet algorithm that calculates how much you need to invest every month if you choose to retire before the age of 55 or if you retire between the ages of 55 and 59 and a half. And there’s another math that runs if you retire after the age of 60. So you know when it comes to fire or fire calculator, when, when they run the calculator, they need to have a good understanding of how that calculation takes place. So fire number is calculated with, you know, it’s 25 times your annual expenses to become financially independent using the 4% withdrawal rate. So for example, assuming that you’re not going to have any debt, and let’s say the total annual expenses will be $50,000 a year. And if you multiply that by 25 that’s $1.25 million and does that mean you can retire early? Not necessarily, right? So if you have, like, say, 1.2 5 million in your 401, K, you can’t really start collecting that until you’re 55 years old. And I’m sure some people would say, well, 1.2 5 million is not going to be enough with inflation. So does that mean you’re not going to invest at all? No, right. So when it comes to like retirement calculations, you do need to take taxes and inflation into consideration, and that calculator has inflation into consideration, but not taxes, because everyone’s tax situation is different. Now the other part of the calculator is it shows a taxable brokerage account too. So if you retire, if you want to retire at the age of 50, it shows like the after tax calculation based on whatever age that you want to retire at. So if you retire early, let’s say at the same number with the 1.2 5 million in a taxable brokerage account, using a 4% withdrawal rate, and assuming that you’ve held your investments for at least a year, your long term capital gains tax rate could be at 0% with $50,000 annual withdrawal and that’s also assuming that you have no other income. So a lot of people forget that the long term capital gains tax rate could be at 0% if the only source of your income is from your taxable brokerage account, up to 61 it was like 61,600 and that’s including the standard deduction for a single individual, and if you’re married. And on the calculator, it even shows you that if you’re married in filing your taxes jointly, that 0% capital gains tax rate is up to $94,050 I have to memorize because I’m married. And if you add this standard deduction of 29,200 let’s say for 2024 you could retire early, tax free up to $123,250 and that’s completely tax free because of the long term capital gains tax rate, assuming that you file, file your taxes jointly. Okay, so I know that was a lot of information, but that’s a those are all the factors going into the calculation. You touched
Andrew Brill 23:35
on the rule of 25 which is the, you know, that’s one of the fire movements, things where you have 25 times your annual expenses as a retirement nest egg. Is that realistic? Or do people you find that people look you know what expenses are, one thing, but what if I want to travel a little bit, or what if I want to do some things I’m not doing now? Is that rule of 25 realistic? It
Johann “Psy” Ko 24:03
is well, so the you have to take a lot of things into account. So when people retire early, they usually have, let’s say, one investment account that they want to live on. They might have a real estate income that they want to live on, right? So they have 10 units that that’s going to replace the nine to five job, and they retire early, and they look at their calculations on the monthly income then, and let’s use that $50,000 as the same example. $50,000 replaces your current $50,000 job that you are financially independent, technically, right? So, like, if you’re just living on your investments, you’re technically financially independent, because you have that money working for you. So when you calculate the fire number, so if Andrew wants to, if you want to retire with some travel funds, set aside, that’s where budgeting comes in. So when you budget, let’s say 50,000 is not going to be enough. That’s only going to pay for my housing expenses, utilities, transportation, groceries and all that cool. How much do you want to spend on travel every year? Well, I want to spend 15,000 every year. Put that into the fire number. And what if I want to get another property in a different state, put that into the fire number. So there are different stages. And some people can retire on lean and that will be lean fire, and they could retire realistically with less than $750,000 in in their investment portfolio. Some people do the traditional fire up to 2.5 million, and that’s all always going to increase based on inflation. And some people want to retire on fat fire, and they need to have, like, about 5 million in their investment portfolio, and that’s going to generate about, we’ll say, $200,000 a year. $200,000 a year could probably give you the better opportunity to travel and maybe live in a different state or live in different country, if you want to. So yeah, and the 4% rule, and if I can just explain, are you okay? One time? Is that okay? Okay, okay. So the 4% rule, and it came from a study a long time ago, from a 1998 paper at Trinity University in Texas, and they did a study on safe withdrawal rates from retirement portfolios that contain stocks and bonds, right? So it was called a choosing a withdrawal rate that is sustainable. But we all just call it the Trinity study. So they did a study the with several different portfolios, 100% stocks, 75% stocks and 25% bonds, 5050, 2575 and 100% bonds. I’m not going to read the entire study throughout our during our conversation, but I’m sure people can relate to this a lot, because if they’re actively investing in their retirement, they may have 100% stocks. They may have 7525 so that paper shows that they tested out the 4% withdrawal rate based on the stock allocations, and the success rate was much higher if you have more stocks and bonds. But they really go into the details, like how much small cap stocks are in the mix, or the success rate, if you had 100% stocks for 30 years with a 3% withdrawal rate instead of 4% what if you go to 5% 7% 8% so I really encourage everyone watching this to just take a look at that document. It’s free. On the website, you can go to Fireside chat.com/resources and you can download it for free. But just keep in mind that the paper was written by based on the past historic, historical returns from it’s like from 1926 to 1995 so the 4% withdrawal rule is a rule of thumb for the safe withdrawal rate every year, and adjust for inflation every year for, say, 30 years, right? So it’s 4% always right, not necessarily. Maybe you need to go 3% if the market is down. Maybe you need you can go 5% 6% if the market does it really well, and say it’s done a 30% return in one year, that sort of thing. So
Andrew Brill 28:08
is there, are there accounts that you recommend people open, or is it by circumstance? Do you look at each, each individual separately, say, Well, this would be the best vehicle for you, and there’s a different vehicle for you, sure?
Johann “Psy” Ko 28:24
Yeah. So it depends on the each individual, like some people can be, most Americans are employed by somebody w2, employees. And if you’re a self employed individual, there are many tools for that too. But you know, in most case scenario, you have your 401 k, the first thing I would look at is, if your 401 K comes with a match, don’t leave free money on the table. The only exception is if you can’t feed yourself, and if you have a hard time budgeting, and if you’re in a deficit with your budget, then stop the 41k matching until you can figure out what’s going on with your own budget. Now after that, then I would always recommend opening up a Roth IRA, because Roth IRA is going to be your tax free distribution. So your tax free income going into your retirement Roth IRA can reduce your tax liability. So if you you know, let’s say you have a million dollars in your 41k you have a million in your Roth IRA, and maybe you don’t want to withdraw too much out of your 401 K so that you can use some of the money from from your Roth IRA to reduce your tax liability. So that’s really, really important to have that Roth 401 K and IRA to completely separate investment accounts. And that’s probably one of the most common misconception is that 401 k and the IRA are the same things when they’re not and then when you’re done with all of those, then you can move on to opening up a taxable brokerage account that is going to be in after tax contribution. So that’s something that I would definitely look into. And the other investment vehicle that a lot of fire people love. Is the HSA, or it’s a health savings account, and what people you can contribute in pre tax dollars. And it can reduce your federal income tax, state income tax, except for California and New Jersey, and you can contribute before Medicare and Social Security tax too. So that’s it. Can reduce your pre tax. It grows tax free, and then when you’re 65 you can actually take that money out and use it for anything. The only tax you’ll owe is your federal and state income taxes and but if you use it before 65 for any non qualified medical expenses, then you will owe a 20% penalty. So keep that in mind. And the last trick that you’ll have with the HSA is that you could save your receipts. So if I spent 200 bucks today on my contact lenses that was supposed to come out of my HSA, and I use my cash instead. I save my receipt for it, and in five years down the road, and I want to reimburse myself that 200 bucks that I already spent on, I can just go to HSA and get that 200 bucks back and just spend it on something else. So that’s another trick that a lot of people don’t know. So so
Andrew Brill 31:07
the retire early part is somebody say someone wants to retire in their 40s or 50s, but some of these vehicles, you have to wait until you’re 55 or 59 and a half to actually get money out without a big tax penalty. So how does that work?
Johann “Psy” Ko 31:22
Yeah, so it will be the taxable brokerage account is where you need to probably focus on. But I don’t encourage people to just skip out on the 41k or Roth IRA just because of that. If you’re looking to retire in your 40s, your savings rate needs to be really high. So if you’re just saving 25% of your income, you’re not going to be able to retire by the 40 if your income is less than, let’s say, 200 $300,000 a year. But if your income is outrageously high, which is very it’s not as common, then sure 25% could work. But realistically speaking, you will have to save and invest probably above 50% of your income to get to that. So I always encourage people at least get that employee match, because that’s free money from 401 K and get the Roth IRA, because that is going to be the tax free growth going into your 60s and 70s. And I treat that as kind of a an insurance plan going into my 60s and 70s, because if I fail to retire early in my 40s. I still didn’t miss out on my contributions, on my 401 K and Roth IRA that grows tax deferred or tax free. So I would still focus on those as a long term plan. But in the short term, let’s say you want to retire within the next 10 years in your 40s, then you can say, I’m going to put more into my taxable brokerage account, and I have my calculator on my website, and say, This is how much money you need to save each month and every year, assuming that your rate of return is seven or 8% then you’re going to get this fire number and retire, potentially retire early, and then you do the inflation adjustment too, so it’s doable, but I still don’t encourage you to miss out on the retirement contributions.
Andrew Brill 33:10
Ever recommend alternative investments, real estate, stuff like that?
Johann “Psy” Ko 33:15
I don’t talk about like cryptocurrencies or anything like that. On my channel, I do talk about real estate every once in a while, but not real estate heavy. Most people ask questions about primary home and instead of a real estate investments, I do. I don’t have anything against it. I just don’t. I choose not to do it because I but I do say that it is not a passive income. When it comes to real estate, you do have to do a lot of work. I would very much prefer to do stock market investing as opposed to real estate, because it, you know, it’s I gotta deal with the tenants, and I gotta deal with all the fixer uppers and all that stuff. I’m like, that’s not necessarily for me, but in the future down the road, if I want to diversify a little bit, I could. But, you know, it’s not something that I that I’m investing in. You know, so to speak.
Andrew Brill 34:15
Can you explain good debt versus bad debt? Cuz I’m sure you’ve experienced the bad versus the good. I got a mortgage, is that good? I’ve look i I’ve spoken to people that never have a mortgage, but is is mortgage good debt? And I know the credit cards is really bad debt.
Johann “Psy” Ko 34:34
Yeah, yeah. So I guess in a simple term, you can call this good and that bad, but when I look at debt, I need to see if this is going to benefit my financial planning. This is debt going to help me invest more and increase my net worth. So when it comes to mortgage debt, yeah, I believe it is good debt, as long as I have a timeline on one. And I want to pay it off by so if I have a 30 year fixed mortgage, I want to just keep paying down the minimum, and I don’t put anything extra towards it when I’m in my 20s, 30s or 40s, because I want to invest that extra that I would put towards my mortgage into my investments, because that’s going to grow a lot more now if I’m in my 50s, and I look at my mortgage set and I say, Well, I got 15 years left, and I’m going to be 65 by the time I retire. Say, I want to retire at 57 instead of 65 then I’m going to have a plan to pay it down by 57 because when I truly retire, no longer doing any of this, having a conversation with Andrew you, then I want to be completely debt free because that then I don’t want to have any risks in my my overall net worth. I don’t want to have any line items on my liabilities. That’s just me, because I am. That’s how I look at when it comes to debt. Debt is a tool that can build. So if you start a business and you need to take out a business loan, say, $20,000 to get you started on to have a business because you have a great idea your revenue is going to go up, and you’re going to hire some people to help you. Then that could be a good debt, but it can become a bad debt, as if you bid more than you can chew. So if you took out a $50,000 business loan and your business just goes bankrupt. It didn’t take you anywhere. Then it becomes a bad debt, then you’re gonna have to pay back. And when it comes to credit card spending, we have a lot of credit credit card spending issue right now, and I was just actually reading the news before we got on the call. I think it was like, we just reached a $1.14 trillion in credit card debt. And it’s just, it’s the one of the fastest pace ever. And a lot of people would say, well, it’s inflation. Take a look at your spending. Is it really inflation, or is it because you’re spending on something that you don’t need? And those are the things. And I was reading that, you know, I think it was like, Gen X has the highest average credit card balance, with $9,300 right now. So bad debt is something that you just don’t get anything out of. When you argue and say that you have a credit card reward program for 3% cash back, but you’re carrying it, carrying a balance every month that charges you 25% that’s you’re not doing anything in that personal loan. What did you use it for? Did you use it to grow something. If not, that’s a bad debt, car loan, I would say it’s probably the second worst type of loan out there is a car loan, because it’s a you take out a loan at, let’s say, 8% interest rate, and that’s depreciating in value by 15% annually, depending on the type of car you buy. So that’s something that I’m like, Man, that is, I would never take out a car loan ever again. So So
Andrew Brill 37:44
here’s a situation. Here, you take your daughter to the park. You’re sitting on a park bench eating a sandwich, and you hear some people that are obviously in distress because of the debt. They’re in the they don’t think they’ll ever be able to afford anything. They don’t think they’ll be able to get out of it. What’s your elevator pitch to them say, no, no, hold on a second. What are you saying to them? To say, no, no, we you can get on the right path.
Johann “Psy” Ko 38:10
Yeah. So well, I know this is a hypothetical, but I wouldn’t talk to people and just say, Oh, you can do this. You know, strangers, but I would say, you know, Hey, there, I think there’s a way to get out of that situation. So if a, you know, more realistic scenario, let’s say you sit down with me and say, hey, you know, I don’t think I can afford this. And, you know, what do you think of this economy? And it’s just, situation is so bad, I think we’re in a recession, you know? And then I would say, Well, you know nobody, you have to realize that nobody’s going to help you. The government’s not going to help you. Nobody else is going to bail you out. Nobody will ever care about your finances more than you. So that’s what I would say. And say, you have to take care of your own. You have to take care of your family. So do you think the government’s going to bail out all the student loans? Maybe. But are they going to get you out of poverty? Probably not. So are you? You know, we still have homeless issues, right? And for so many years, you have to take control of what you got, take a look at what you have, what you’re spending, become the CEO of your household when it comes to finances, and surround yourself with people, good people who can help you, a COO, a VP, who can help make sure that your house is running. You have a roof over your head. You got utilities running your house, and you have food on the plate. Those are the things that you the basic things that you need to look at and say, Alright, can I do this? What am I doing wrong? This is not working. I need to find a new plan. That’s when you should reach out to a professional and say, What do I do here? And that’s when people reach. To me and say, I am stuck. I don’t know what to do with with this car loan, I don’t know what to do with this credit card. I don’t know where to start. And that’s when I say, you Well, hold on, let’s start here. Let’s look at what’s going on with your income. Let’s look at what’s going on with your expenses. Then let’s look at your debt, because the first thing I want to make sure is that you got food on the plate. The second thing I want to make sure, well that’s probably the third thing. First thing I want to make sure is that you have a roof over your head. Do you have things running your house? Do you have transportation to get from point A to point B? And do you have food on the plate? Do you have insurance that you’re paying every month? And that’s the other thing is that I was reading that about the one in five people between the ages of 18 and 35 are no longer insured. They have no car insurance anymore because they can’t afford it. So those are the things that I would say. Let’s go over those and figure out what’s going on. What is the root cause? What are the contributing factors to where you are right now?
Andrew Brill 40:57
Do you see more and more people with the economy obviously slowing down. Do you see more and more people coming to you or hear about people that are having money issues?
Johann “Psy” Ko 41:07
Yeah, absolutely, and that’s actually an unfortunate thing. And you know, obviously I’m here to help, but I am actually seeing many more clients who recently lost their jobs, and they’re having a hard time finding a new one. So I had a someone working in the sector and got let go and trying to apply to as many jobs as possible, and just couldn’t get a reply. So instead of going through the finances, we actually sat down and went through the resume of his and just some of the interview tricks that he can go through. And I still don’t know what’s going on with that, but then I’m seeing, I’m definitely seeing a lot more job losses, just based on who I have seen. Now, I haven’t seen like every single American, but the labor market has been slowing down, as we saw with the unemployment situation, that triggered a som rule two weeks ago, right? And panic in the Wall Street, but that, I think that’s when the Wall Street realized that the the main street is struggling, and that’s kind of a wake up call to the people and say, Whoa. You know, the labor market is not what it used to be. You can’t just quit your job and find another job the next day, and now it’s a lot more tight. Companies are laying people off because interest rates are still high, because it is much more expensive to borrow money. So those are the things that I do. Talk to my current clients, my long term clients, and say, Just be ready for maybe a a little toughness going forward with the labor market. So that’s something that you want to watch out for. So I thanks
Andrew Brill 42:44
so much for joining me. And you know, I really appreciate it. Where can people find you if they need help?
Johann “Psy” Ko 42:51
Yeah, they can go to fireside chat, com, my website, and they can get the free resources, all the calculators that we met that I mentioned, they can schedule a session with me and go to Fireside Chat com slash consultation, or they can join my private community, if they want to, and just get connected with other like minded individuals. And that’s something that I’ve been working on, is a lot of people just kind of hold their information to themselves because they feel ashamed, or, you know, they don’t want to talk about their finances. And I, I’m starting to create this community where people can come together and say, Whoa, this is what’s going on. This is what I’ve been wrong doing wrong. What can I do? And it’s not just me talking to them, but other people who can come together and say, Hey, I’ve done it before. This is what I did, and it worked for me. And that’s very, very valuable when it comes to just having that fire community. So you can join my community by going to fire such a.com/community too. Thanks so much. Go to my YouTube channel. You can do that too,
Andrew Brill 43:49
and which I do, I do check out your YouTube channel so I appreciate it. Sai. Thanks so much for joining me, and we will see you again soon. Had to wrap on another discussion here on wealthy. And thank you for joining us. If you need help being financially resilient, please head over to wealthion.com and sign up for a free, no obligation portfolio review with one of our registered investment advisors, and remember to follow us on social media for the latest news and information to help you invest wisely. If you could like and subscribe to the channel, we greatly appreciate it. Don’t forget to hit the notification bell so you can find out when we post new videos to the channel. Thanks again for watching and until next time, stay informed. Be empowered, and may your investments flourish. And if you like this content, please watch this video next you
