Set for Life: Dominate Life, Money, and the American Dream.

266 Pages·2017·3.02 MB·English

by  Scott Trench

SET FOR LIFE

Dominate Life, Money and the American Dream

By Scott Trench

This publication is protected under the U.S. Copyright Act of 1976 and all other
applicable international, federal, state, and local laws, and all rights are reserved,
including resale rights: you are not allowed to reproduce, transmit, or sell this
book in part or in full without the written permission of the publisher.

Limit of Liability: Please note that much of this publication is based on

personal experience and anecdotal evidence. Although the author and publisher
have made every reasonable attempt to achieve complete accuracy of the content
in this book, they make no representations or warranties with respect to the
accuracy or completeness of the contents of this book and specifically disclaim
any implied warranties of merchantability or fitness for a particular purpose.
Your particular circumstances may not be suited to the examples illustrated in
this book; in fact, they likely will not be. You should use the information in this
book at your own risk. Nothing in this book is intended to replace common sense
or legal, accounting, or professional advice and is meant only to inform.

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Set For Life: Dominate Life, Money and the American Dream Scott Trench
Published by BiggerPockets Publishing LLC, Denver, CO
Copyright © 2017 by Scott Trench All Rights Reserved.

Publisher’s Cataloging-in-Publication (Provided by Quality Books, Inc.) Trench,
Scott, author.
Set for life : dominate life, money and the American dream / by Scott Trench. —
First edition.

pages cm
ISBN 978-0- 9975847-1- 4
ISBN 978-0- 9975847-2- 1
1. Young adults— Finance, Personal. 2. Investments.
3. Wealth. I. Title.
HG179.T74 2017 332.024'010842
QBI17-348

First Edition
Printed in the United State of America 10 9 8 7 6 5 4 3 2 1

Contents

Introduction

Three Stages of Wealth Creation

Part I: The First $25,000 Is the Hardest

Chapter 1: Building The First $25,000 through Frugality

Why Wealth Creation Begins with Frugality

The Psychology of Frugality

Conclusion

Chapter 2: How to Live an Efficient Lifestyle

An Overview of the Average American’s Spending Habits

Tackling Major Life Expenditures in Order of Significance

Conclusion

Chapter 3: What to Do with Money as You Save It

“Bad” Debt vs. “Good” Debt

Credit

The First Three Milestones in the Journey to Financial Freedom

Conclusion

Part II: From $25,000 to $100,000 through Housing and Income
Generation

Chapter 4: Turning Your Largest Expense into an Income Producing Asset

Average Joe’s Housing Dilemma

Conclusion

Chapter 5: The Financial Impact of Housing Decisions

Five Ways to Buy a First Property and Their Financial Consequences

Questions to Ask Before Buying a House Hack

Conclusion

Chapter 6: How to Make More Money

What Is the Point of Earning More Money?

Changes Necessary to Increase One’s Income

Conclusion

Chapter 7: Scaling a Scalable Career

Five Tactics To Help You Earn More Money

Conclusion

Part III: Moving from $100,000 to Financial Freedom

Chapter 8: An Exploration of Financial Freedom

Who Are the Financially Free?

The Four Levels of Finance

How to Go About Pursuing Financial Freedom

The Components to the Financial Independence Equation

Conclusion

Chapter 9: An Introduction to Investing for Early Financial Freedom

The Seven Core Tenets of Investing

Five Concepts for the Savvy Investor

Conclusion

Chapter 10: Investing in the Stock Market

Do Not Attempt to Pick Individual Stocks

Conclusion

Chapter 11: Real Estate Investing

Five Reasons to Invest in Real Estate

How to Invest in Real Estate

Conclusion

Chapter 12: Tracking Your Progress

Tracking Your Money

The First Financial Metric: Net Worth

The Second Financial Metric: Spending

The Third Financial Metric: Income

The Fourth Financial Metric: Time

How to Track Your Time

Conclusion

Chapter 13: Habits and Their Impact on Financial Freedom

Cut These Ten Habits Out of Your Life

Conclusion

Chapter 14: Conclusion

Appendix: Retirement Accounts

Several Reasonable Approaches to Retirement Accounts for the Aspiring
Early Retiree

Conclusion

Acknowledgments

More From Biggerpockets

Introduction

Let’s talk about the American Dream. Traditionally, for the majority of us—at
least for those of us in the middle class—it means consistency. It means buying a
nice home, in a nice neighborhood, and having a nice life. It means that after a
thirty or forty-year career, we plan to retire using a formula that historically
hinges on having saved 10 to 15 percent of our income and having invested in a
401(k) or other retirement vehicle.

The problem with this formula is that the working person following it will be

forced to work for wage income for the better part of his day, during the best
part of his week, throughout the best years of his life. At best, he will retire with
a modest amount of wealth, late in life, and be forced to hope it’s enough to last.

How about a different formula for the American Dream? How about

something capable of producing a retirement level of wealth in less than ten
years? How about less than five? How about retiring in your twenties from
wage-paying work?

Those who accomplish this financial result can laugh off would-be

employers who ask them to be at work before 9:00 a.m. She can spend a sunny
summer Tuesday at the park instead of crunching spreadsheets in a dusty
cubicle. He can stay up until 3:00 a.m. binge-watching Game of Thrones on
Sunday night, and head to the gym at noon on Monday. She can rent out her
house and travel the world, living like a local. He can start a business funded
with passive income, volunteer in his community, or focus on raising his small
children. She can serve others without the red tape and bureaucracy of corporate
involvement or the interference of a boss with objectives different from hers.

Early financial freedom enables this. Those who achieve early financial

freedom build wealth and acquire assets such that they produce passive income
in excess of what they need to live. And they expect to continue to generate that
level of income for the duration of their lives. Regardless of whether you
currently enjoy your work or not, early financial freedom is a worthwhile goal.
Industries change, companies change, and coworkers change. Even if you love
your job, wouldn’t it be great to have the option to leave wage-paying work?
Wouldn’t it be great to know that you show up because you love to be there, and
not because you have to be there?

This book will teach you how to make wage income irrelevant to your

financial picture in just a few years. In this book, you will learn how to redesign
your lifestyle, restart your career, and rebuild your financial position. In this
book, you will save your money, earn more money, and use the cash you
accumulate to purchase freedom and the ability to design your day-to-day life

without the need for wage-paying work. This book is designed for someone with
a specific set of circumstances. It is designed for the full-time median (around
$50,000 per year) wage earner who has little to no initial savings but wants early
financial freedom.

Three Stages of Wealth Creation
This book offers a simple, three-step approach to gaining early financial
freedom. It is written with a specific audience in mind: the full-time wage earner
starting with little to no wealth but aspiring to early financial freedom. Each step
in the journey increases one’s flexibility and exposes the individual to more and
more opportunities. Each step increases one’s financial runway—the number of
years that one can maintain their lifestyle without the need for wage-paying
work. Many Americans can’t survive for more than a few months without
earning a paycheck. Readers of this book will rapidly develop a financial
position capable of sustaining their lives for a year without work. Then they’ll
extend their financial runway to five years. Then forever.

Part I of this book will take Average Joe from $0 to $25,000 in personal

wealth. You have to start somewhere, and the median wage earner with little to
no accessible wealth will begin their journey by focusing on lifestyle design.
Part I teaches readers how to make the necessary changes to go from little to no
savings to preserving over 50 percent of one’s middle class income. It teaches
readers how to live well on less than $2000 per month and how to use the
savings to pay down debt and extend their financial runway to a year or more.
Executing this leaves the reader in a position to have a full year of expenses in
after-tax wealth, ready to be deployed in pursuit of early financial freedom.

Part II of this book takes readers from $25,000 to $100,000 in personal

wealth. It takes readers from one year of financial runway to a position in which
they could survive for three to five years or more without earning a paycheck.
While continuing to live efficient lifestyles, readers will further reduce their
living expenses by purchasing a primary residence that allows them to live for
free. They will also learn how to earn significantly more income by changing
careers and how to develop habits tied to success. Opportunities to earn more
income often develop out of careers in sales or technology, or are the result of
joining a small company or freelancing. The financial runway developed in Part
I will be critical to ensuring that readers can pursue these opportunities with little
risk.

Part III of this book takes readers from $100,000 to early financial freedom.

It takes them from several years of financial runway to a lifetime of permanent
financial abundance. Readers will continue to scale their income and live
efficiently, but our focus shifts to the purchase and creation of income-producing
assets. Readers are exposed to an advanced discussion on the concept of
financial freedom and taught investment philosophy. They learn what types of

wealth count toward financial freedom, and what types don’t. This background
will enable readers to intelligently exploit the investment and income
opportunities multiplying before them as their financial position improves and
their financial runway lengthens. Readers also learn how to track their progress
efficiently.

This book layers philosophy alongside practical knowledge. Wealth creation

is not a rigid formula or step-by-step process. Don’t ignore income opportunities
while you focus on building your first $25,000. Don’t ignore investment
opportunities while accumulating the first $100,000. You need to earn more,
spend less, and invest the difference aggressively throughout your journey, as
they apply to the specifics of your situation.

Understand that accumulating a lifetime of wealth in a short period of time

involves making personal decisions in major areas of your life that are different
from the norm. It involves working harder and smarter than the average
employee, and it involves making different career decisions than the Average
Joe. Achieving early financial freedom involves managing wealth in a totally
different way. In short, it involves a change of perspective that may be sharply at
odds from that of your family, friends, and colleagues.

Examples of the perspective you’re about to discover include:

You should start by saving the next $1000, not earning the next $1000.
A new car is totally unnecessary.
You should spend more, not less, on entertainment and fun.
Student loan debt is rarely worth it.
Buying a home (or worse, a condo) in the best part of town will slow
you down on your path to early financial freedom.
Stocks are less risky than bonds.
You need to spend less money to earn more money.
Developing a specialty is far more risky than being a jack-of-all-trades.
A few good options are better than too many options.
Contribute less, not more, to your retirement accounts—and be ready
to withdraw from them early.

If you want a different financial result, you need a different plan. This book

offers that plan. Work hard. Spend as little as possible. Invest the difference
intelligently. Set yourself up for life, as early as you possibly can. No, it’s not
easy. It will be up to you to decide if it’s worth it.

Part I

The First $25,000 Is the Hardest

This section shows you how to put yourself in a position where you have over a
year of financial runway. It teaches you how to accumulate your first meaningful
amount of capital. You will do this by focusing heavily on the preservation of
your median income, and by cutting out spending where it will make the most
impact. To achieve the goal of this section, you need to accumulate at least one
year of spending in readily accessible cash or cash equivalents.

Why should you do this? Because this runway buys you flexibility, freedom,

and the ability to make your first big investment. This kind of wealth-building
makes the next stage of wealth creation easy and automatic—and it will force
you to think about building readily accessible wealth, not just maxing out a
401(k) or making a mortgage payment. You may not be able to retire forever on
one year of savings, but you can certainly introduce yourself to a wealth of
choice—the ability to take advantage of opportunities unavailable to those with
weaker financial positions.

Remember, the goal is to build out a yearlong financial runway. Retirement

savings, home equity, cars, and other false assets aren’t useful to the individual
who wishes to work toward early financial freedom. The fellow with $20,000 in
retirement savings and $40,000 in home equity, but who spends $3000 per
month and has just $7000 in the bank, has no financial runway. If he leaves his
job, he runs out of cash in three months. Compare this to the guy with $25,000 in
cold hard cash and a $2000 per month lifestyle. He can leave his job for a year or
longer and be just fine. He can take advantage of opportunities unavailable to the
first fellow. Why? Because the $25,000 is real. It is after-tax, and in the bank,
and the guy who accumulated it is ready and willing to spend it to advance his
position.

Be the guy with $25,000 in the bank and real options. Don’t be the guy with

just the mortgage and the 401(k) and no after-tax accessible wealth to show for
it. The former can pursue his dreams and land on his feet if something goes
wrong. The latter has no real wealth that he can deploy in the short term and is
locked into working his current job or one very much like it to cover the
mortgage.

For some folks, a year’s worth of expenses will be $50,000 or more. That

will change. After reading this section, you will know exactly what you need to
do to put yourself in a position where your annual spending is well under
$25,000 per year. You’ll learn how to do this by cutting back on some big,

unnecessary expenses in your budget that will free up both time and money.

This part of the book will guide you from zero and negative net worth to a

position in which you live a low-cost lifestyle, save thousands of dollars per
month and have accumulated your first $25,000 in cash or equivalents. It will
also teach you how to live a happy, healthy, and fulfilling life on $2000 per
month or less.

Chapter 1

Building The First $25,000 through Frugality

How does a full-time employee go from a standing start with few assets to five
figures in wealth? By saving their pennies. They must start designing a long-
term lifestyle that costs as little as practical, given their priorities. For most folks
with nine-to-five jobs that pay median wages, the pursuit of early financial
freedom depends on the ability to preserve earned income. The hard truth is that
the first step in the process to escape the rat race is (and always has been) to
begin preserving capital. Frugality. Savings. Penny pinching. Living on less.

Obviously, it’s inefficient to exclusively save one’s way to hundreds of

thousands of dollars in net worth and true financial freedom. That can take
decades, if not a lifetime to accomplish, and it isn’t what’s suggested here.
Clearly, the individual seeking early financial freedom must do three things to
achieve their goal:

They must accumulate real assets that produce income and increase in
value.
They must constantly seek to invest their capital efficiently.
They must design a lifestyle that costs as little as practical, such that
passively generated income can pay for it.

Almost anyone thinking about building wealth understands these three basic

premises. But, while many people are excited about making more money and
learning to invest, few are willing to make the changes necessary to begin saving
significantly more by cutting back on their current lifestyles. They focus instead
on attempting to invest paltry sums or build assets in the little free time they
have. This is a mistake, because the wealth-building process begins with
accumulation of capital for the full-time employee. Let’s explore why you must
begin this journey with frugality.

Why Wealth Creation Begins with Frugality

Reason #1: Frugality Enables You to Seek Opportunity
Many finance experts and motivational speakers say things like, “Don’t limit
yourself to a scarcity mindset,” and “Don’t sacrifice! Build your income!” They
tell their audience things like “Expand your mind—money is unlimited.”
They’ve, in effect, convinced their followers that they need to focus on income,