|Complete Book Title||Set For Life: Dominate Life, Money, and the American Dream|
|My Rating||4 out of 5 stars|
|Must Read||Yes (especially if you are in your early 20s)|
“Don’t be one of the millions of smart, talented people who are too lazy, afraid, or financially incapable of challenging the status quo to pursue their dreams.”Set For Life, Scott Trench, page 125
The author, Scott Trench, is a Real Estate Investor and the CEO of BiggerPockets. Per the BiggerPockets website, they “are a community of like-minded individuals, here to motivate and help you move toward financial success—whether that means landing your first investment property, expanding your current portfolio, networking with fellow investors and vendors, or simply bettering your financial situation.” They also have a highly successful 5 star Podcast (with 13K Ratings) boasting 1.3 million members at the time of this post.
In the introduction, the author shares his thoughts on three stages of wealth creation which includes:
- How to take the Average Joe from $0 to $25,000 in personal wealth
- How to go from $25,000 to $100,000 in personal wealth
- How to go from $100,000 to early financial freedom
Throughout the journey and the three stages, the author shares that there is a fundamental philosophy that goes alongside the knowledge we will gain by reading this book
“You need to earn more, spend less, and invest the difference aggressively throughout your journey, as they apply to the specifics of your situation.”Set For Life, Scott Trench, page 9
The author has an aggressive approach and specifically says “if you want a different financial result, you need a different plan” (page 11). He admits that the path won’t be easy and that it will be up to you to decide if it’s worth it. Some of his more radical ideas include:
- 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
- Developing a specialty is far more risky than being a jack-of-all-trades
- Contribute less, not more, to your retirement accounts – and be ready to withdraw from them early
Frugality is your first step in your journey
In Part 1 of the book, covering chapters 1 to 3, the author makes us question a few things we have probably held dear all of our lives. As an example, the author says “be the guy with $25,000 in the bank and real options. Don’t be the guy with just a mortgage and a 401(K) and no after-tax accessible wealth to show for it” (page 12).
Wait… what? Did the author imply that all of the work that you and I have been doing over the last 10 to 20 years paying down our mortgage and saving in our 401(K) might actually be a bad thing? I would suggest that is exactly what he is saying and is making no apologies about it. It’s almost like a punch in the gut. At the age of 45, I think he might actually be right. My 401(K) is a source of pride as I have been faithful over 25+ years of investing. It is my treasure chest. It is the reason and primary showcase to convince everyone to start saving for their retirement as early as possible so you can take advantage of pre-tax benefits and the wonder of compounding of interest. But, it is my treasure chest with a timed lock on it as I cannot unlock it until age 59.5 (I’m not going to get into Roth Conversion Ladder in this writing). Since I was eighteen, 59.5 years old has always been my target date for retirement. As of this writing, I have 14.25 years to go. Could there have been a different way or a different strategy? One where we can still invest in our 401(K), but also put a plan together that might actually accelerate our wealth building and help us retire at an earlier age… maybe 55 or 50 or 40. There just might be and that is what the author is putting forth in his book.
The author details three things that we should do if we are seeking early financial freedom (pages 12-13)
- You must accumulate real assets that produce income and increase in value
- You must constantly seek to invest your capital efficiently
- You must design a lifestyle that costs as little as practical, such that passively generated income can pay for it
During this section of the book, the author shares that wealth creation begins with frugality because frugality enables us to seek opportunities and it opens us up to opportunities that may have always been out of reach. If all of our money is being spent or locked up, we cannot take advantage of the opportunities that come before us that could help us accelerate our path to financial freedom through income generating opportunities. The author also suggests that we should seek areas to make extra cash outside of our normal work income. For this stage we should try to save $25,000 of cash or a years worth of living expenses.
“Early financial freedom should be a powerful motivator. The result of attaining financial freedom is a life lived on your terms. A life of impact. A life of growth. That motivation should be the driving force behind many of the most important financial decisions you make.”Set for Life, Scott Trench, page 19
You can review my expanded list of income generating ideas at my Side Hustles, Gig Work, and Extra Income post.
Spending habits and savings rate
The author then takes us on a journey of the major spending habits based on national average which includes 33% towards housing, 17% towards transportation, 13% towards food and then the many other items. There are great examples that demonstrate the impact these expenses have on our life and the challenge we will have if we don’t get into the frugal mindset and get control of these expenses. It’s also the beginning to understand that maybe a house with a mortgage may not be our best friend which is completely against everything we’ve been told… you know, the whole American Dream thing is to own your home. As the chapter continues, the goal is to challenge some of our preconceived notions and to get us to begin getting into a savers mindset so we can start our path to financial freedom.
“Saving 15 percent of your income will not make you rich. It will not produce a life changing financial result in less than a few years. You will still spend the best years of your life working in similar fashion to your current profession at that rate. You need to save 50 percent of your income. Or more. You need to cut out anything that does not bring you happiness from your spending – including much of what middle class America purchases. You need to take pride in living frugally, in handling your own problems, and in making choices that save you tens of thousands of dollars each year and result in a healthier, happier, wealthier, and more exciting life.”Set For Life, Scott Trency, page 47
That is ridiculous! Save fifty percent of our income? Is that gross or net? Come on Scott, you can’t be serious. But think about this. Really think about this. Depending on your age when you read this post or the book, think of your twenty year old self. As your income increases, generally your spending increases. How about if we embrace the frugal lifestyle and as our income increases, we don’t increase our spending but we increase our savings. We are currently accustomed to living at a certain lifestyle. Most likely we are near broke because we are just starting out. Are we able to maintain that lifestyle as our income increases? Maybe we start with a 10 or 15 percent savings rate. Then, we stretch it to 20… then, 25… then 30 and so on. It all comes down to our mindset and the lifestyle we want to try and live — hopefully a frugal lifestyle. The author begins to share a plan to put this into motion in part two.
House hacking and income generation
Now that we have saved some cash by embracing the frugal lifestyle, our options begin to open up and we start to see opportunities to now accelerate wealth accumulation. During this section we get introduced to house hacking. Maybe we have been a renter in an apartment or still living at home with our parents. Recently we decided to move on and decided to either rent or purchase a duplex that has just come on the market. The author walks us through three case studies in our decision making – we rent half the duplex, we purchase the duplex and turn it into a single family home, or we purchase the duplex and live on one side while we rent the other. This is where we start to see the power of passive income and having others partially or fully pay the mortgage payment. Now, we have our first investment property.
In chapter 5, we go through the financial impact of housing decisions and walk through a number of scenarios including:
- Buying a luxury home
- Buying a reasonable home
- Buying a home the smart way
- Buying a live-in flop
- Buying a house hack
In chapter 6, the author focuses on How to Make More Money. For many, this is really where the excuses begin as we all seem overly busy — too busy. But, are we really too busy to try and change our future? In the chapter there is a pie chart included that breaks down the “time use on an average work day for employed persons ages 25 to 54 with children” (page 102). I enjoyed this chapter as it helps us to begin thinking about our skills, our specialties, our passions, and our expertise and to try to put them to work outside of our normal work day. Is it possible that we could squeeze an hour or two a week towards a side hustle that could generate some extra cash for us?
Today, there is a continued debate in the value of a college education; especially if you are spending $100,000 learning a skill that isn’t relevant. The author shares that if you are going for a degree, make it one that you can take advantage of in the marketplace.
“Don’t go through a four-year degree and spend tens of thousands of dollars to educate yourself on a subject with little commercial value. Why bother going to collage at all when you can learn for fun and for free on your own time? Instead, pursue a degree that places you at some advantage in the marketplace.”Set For Life, Scott Trench, page 117
Rounding out the book in part three, the focus is that we are now accumulating assets that “generate returns in excess of the spending needed to fund our lifestyle;” therefore we are now exceeding “the financial freedom equation” (page 148). The author spends time walking through perceived assets and detailing which assets are really false assets and points us to true assets. Chapter 9 provides an introduction to investing for early financial freedom and details his seven core tenants of investing (page 173)
- Never spend the principal
- Reinvest most investment returns
- To invest, one must have capital
- Effort correlates with return only if you are in control of the investment
- Investment returns are impacted by knowledge
- Do not confuse volatility with risk
- The best investments are specific to the investor’s personal situation
Stock market and real estate investing
Chapter 10 covers investing in the stock market and does a good job providing many of the basics. Chapter 11 covers real estate investing. Chapter 12 is about tracking our progress. In this chapter it discusses various applications and websites as well as our net worth. I appreciate his view on net worth and separating real net worth vs false net worth. As an example, your home with a mortgage (even with equity) is a false net worth because it isn’t a usable asset for building wealth. Yes, you can use your equity in your home to possibly make a purchase in a usable asset; however, just know that also makes an adjustment to your overall real net worth.
In chapter 13, the author reviews the 10 habits and their impact on our financial freedom. Such habits include TV/Netflix, Eating Out, and Social Media to name a few. This is an opportunity for each of us to take an inventory to see if we are using our time to make a positive impact towards our financial independence and freedom.
I’m giving this book a rating of 4 out of 5 stars and am putting this on my must read list; especially if you are in your twenties. Even if you disagree with the authors thoughts on some of his thinking regarding the opportunity to max your 401(K), purchasing a home, etc., I value this different way of thinking. Life, as well as your personal financial journey, isn’t a one size fits all. I highly recommend anyone and everyone to broaden their thinking. Knowledge is power. This is one of the books I am making my twenty-two year old son to read. He is currently in a plumber’s apprenticeship program, making great money, currently living at home, and has a steady relationship that may lead to marriage in the next one to two years. We have always discussed trying to get to a 25%+ savings rate and I want him to expand his thinking on the limitless possibilities that are made available to him. With an ever expanding knowledge base, he should be able to put him and his family in a position to be financially free and not be one of the millions of people without a retirement plan.
[Note – I’m making her read it to. I’m making them both read a four book set before they get my marital support. I’m kidding… no I’m not]
Hopefully you enjoyed the high-level review.