Deacon Hayes is the Founder of WellKeptWallet.com and the author of You Can Retire Early: Everything You Need to Achieve Financial Independence When You Want It.
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3 Value Bombs
1) Early retirement is not just for a few, it’s for those who plan and execute.
2) Describe what financial independence is for you, and start your plan with that.
3) Put everything on paper and track your cash flow.
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(click the time stamp to jump directly to that point in the episode.)
[00:52] – When Deacon and his wife got married, they were $52,000 in debt
[01:01] – Deacon was selling wood flooring that time, getting commission-only sales, but they were able to pay the loan in 18 months
[01:39] – For Deacon and his wife, financial independence was not early retirement, rather having enough resources to do what they want, when they want
[03:53] – There are 3 different ways to achieve financial independence:
- Real estate investing
- Investing in the stock market
- Creating a business
[05:02] – To Deacon, financial independence is having the financial resources to do whatever you want, whenever you want
[06:20] – The amount of money you need in order to achieve financial independence depends on the path you want to take
[06:25] – “It’s less about stacking up a certain net worth, and it’s more about a monthly cash flow”
[07:10] – The Safe Withdrawal Rate is 4%
[08:10] – There are different extremes in the rates
[09:28] – It’s easy to get multiple streams of income nowadays, BUT you have to perfect and maintain them
[10:23] – Make your money work for you, not against you
- [10:37] – Put money into income producing assets
[11:50] – Make short term sacrifices for the long term
[16:01] – The start of a financial strategy: put everything on paper
- How much money do you have left, or how much are you negative?
- Get into the positive as much as possible
- Have a starter emergency fund
- Figure out where your cash flow goes
[18:10] – Find out what’s the best avenue where you can use your gifts and talents to achieve financial independence
[19:36] – Early retirement is for those who plan and execute
[20:13] – Track on a daily basis
Deacon Hayes: You know I am, John!
John Lee Dumas: Deacon is a founder of WellKeptWallet.com and the author of You Can Retire Early!: Everything You Need to Achieve Financial Independence When You Want It. I want it now, Deacon, so take a minute, and fill in some gaps from that intro, and give us just a little glimpse of your personal life.
Deacon Hayes: So, when my wife and I first got married, we had 52 grand in debt, and for us, that was a lot of debt, and so we realized we needed to develop a plan to pay that off fast. And so, at the time, I was selling wood flooring, and it was commission-only sales, and so I was doing everything I could to make sure that we paid off our debt in 18 months, and we did it. We crushed it and had the blessing of sharing that on your show a long time ago. I think you said 1,600 episodes ago.
John Lee Dumas: Episode 310, but who’s counting?
Deacon Hayes: I know who’s counting. But since then, a lot has happened, so I’ve really stepped up my entrepreneur game, created this plan for financial independence, and so now, it’s shifted from, “Okay, we paid off the debt. We put ourselves in a good financial position. Now, how can we retire early?” and for us, it’s not really about early retirement so much as being financially independent, having enough resources to do what we want when we want.
And so, we have been on that journey for probably about seven years now and are kinda towards the tail end of that journey, so we’re almost financially independent and since have written a book called You Can Retire Early! to kind of encourage other people to do the same. And I’ve calculated that I’ve put in over 10,000 hours of either research, just blogging, whatever, but be around personal finance, so maybe according to Malcolm Gladwell I’ve hit that expert mark.
John Lee Dumas: So, Fire Nation, as we briefly talked about, Deacon was on the show before, 1,614 episodes ago. He was Episode 310, so if you want to hear the full story of Deacon’s worst moment, his aha moment, all the awesomeness – and by the way, it’s a great story – definitely go check it out. EOFire.com, just search for “Deacon” in that search bar.
Today, we’re talking about something different. When I bring guests back on for a second, sometimes even third, very occasionally a fourth time, we talk about a different topic. We don’t go through the EOFire flow. So, today, we’re gonna be talking a lot about financial independence because it’s so important, Fire Nation.
As Deacon and I were actually chatting in the pre-interview chat before we pressed the Record button, because I’ve been able to achieve a high level of financial independence myself, when Hurricane Maria absolutely devastated the island and really, really destroyed a good portion of my house, I was able to immediately start the rebuilding process, not have to wait the months and months and months for insurance checks and this and that, and I was able to get on with life and do the things I had to do to protect myself and my family and Kate and whatever that meant at that period in time because of that financial independence.
But people who are living paycheck to paycheck, and they’re all around me here in Puerto Rico, as they are all around the world, it’s a different scenario when that happens because, all of a sudden, that paycheck’s not coming in, and then terror sets in, and that’s the last thing that you want and need in a situation like that.
So, this is a super important conversation. Deacon, let’s start off with you breaking down how the average person can achieve financial independence.
Deacon Hayes: There are three different ways that people can go about it, traditionally speaking, so either through real estate investing, through investing in the stock market, or creating a business. And so, it’s really kind of figuring out what’s your personality type, like what are you willing to do.
Do you like risk, and are you willing to put in the hours that it takes? Well, maybe being an entrepreneur is for you. Are you less risk-averse and you’re like, “Hey, I want kind of a proven model. I want to set it and forget it”? Well, then, index investing in the stock market’s probably for you. And then, if you’re like a do-it-yourselfer, like you like to fix stuff, you like to work with your hands, then real estate investing might be the path for you.
And so, each one of those paths has its own pros and cons and personality types, and so people have to decide which one is the one that they want to go down.
John Lee Dumas: One thing that I actually was a little surprised about is – I think you said this; I don’t want to put words in your mouth – that you are getting close to achieving financial independence but you haven’t yet. Is that what you said?
Deacon Hayes: Correct.
John Lee Dumas: So, then, what does that mean to you then? I’m kind of curious, since you are this financial guy who’s put in over 10,000 hours. What is your personal definition of what financial independence means to you, and how will you know when you’ve achieved it?
Deacon Hayes: So, financial independence, to me, is having the financial resources to do whatever you want whenever you want, so basically being able to say, “Okay, I can work or not work.” For me, I’m a productive person. I know you are too, John. So, the idea is I don’t think I’ll ever retire. I’m not gonna go sip lattes on a beach, or Mai Tais or whatever, and just chill or play golf. I want to do stuff productive. I want to add value. And so, I’ll always do that, but I also want to spend time with my family. I also like to travel.
So, it’s like I don’t want to grind out these 40-, 50-, 80-hour weeks doing stuff that I don’t enjoy. I really want to design a lifestyle that allows me to do the things that I want to do in life: help other people, help entrepreneurs succeed, help people with their finances, those kind of things. So, really, the financial independence is the piece that allows me to do that and, like you said, you to do what you’re doing.
And so, really, we could be technically financially independent. The problem is we have wants above what resources we have right now. We’d like to have a cabin that we could go to in the summer because, in Arizona, it is hot. It’s like 120 degrees. But we don’t have that right now, so we’ve kind of pushed our financial independence date a little bit further so that we can have these other things and enjoy those things.
John Lee Dumas: So, is there a number that you have in mind?
Deacon Hayes: So, here’s the interesting thing. So, depending on the path – my path is entrepreneurship – it’s less about stacking up a certain net worth. It’s more about a monthly cash flow. So, for us, we’re already in the high five figures per month cash flow, like net, so it’s less about stacking up a nest egg, like it would be if you were investing in the stock market, and it’s making sure that that cash flow is consistent. So, I’d like to be at the six-figure mark per month to be comfortable saying, “Okay, all of the things that I need to do are in place.”
John Lee Dumas: Is there a system that anybody can use to maybe figure out what their number is, whether it be that monthly net income or that overall nest egg? Is there something that you followed, or is there something that you’ve created?
Deacon Hayes: Yeah, there’s definitely what they call the safe withdrawal rate. So, let’s just say if someone had $1 million in assets invested, and they wanted to use a 4 percent, which is the safe withdrawal rate, that would give them $40,000.00 a year. So, they can basically say, “Well, then, if I had $2 million, that’d be $80,000.00 a year.”
John Lee Dumas: Let me break in here for a second because I gotta be honest, Deacon, and maybe we can go back and forth on this a little bit because you might have a different opinion, but in a lot of ways, I think that’s BS because, to me, somebody that’s saved $1 million or somebody that’s saved $2 million – that means they saved $2 million – they don’t have a lifestyle that they’re gonna be able to live on at $80,000.00 a year. That just doesn’t really exist. There might be a percentage of two-millionaire, two million-dollar-aires, whatever you call them, multimillionaires that can live on $80,000.00 a year, but let’s be honest.
I came down to Puerto Rico. I bought a beautiful home on the Caribbean. I have more than $2 million in the bank. I can’t live on $80,000.00 a year. So, let’s talk about this.
Deacon Hayes: Yeah, that’s a really good point. So, there are different extremes. So, you could look at Pete, Mr. Money Mustache, and here’s a guy that lives on 25 grand a year, and he makes $400,000.00 a year. So, there are people that have the resources and they choose to live a simpler lifestyle, but to your point, that’s probably not the average person. If they had those kind of resources, they wanna do more. They wanna enjoy life more.
And so, that’s why I like the cash flow side of things, and so figuring out how to have different streams of income so that you could have the level of lifestyle that you want.
John Lee Dumas: That’s actually a good way to put it. I want to break in here because that, to me, makes a lot more sense than spending all of your life trying to build up this nest egg, than being like, “Okay, now I can take 4 percent of that nest egg a year so that I hopefully don’t run out before I die,” opposed to creating a business, Fire Nation, where now Deacon knows he’s got high five figures coming in a month, that I know that I have six figures coming in every single month. That is what kind of excites me about entrepreneurship and business, and probably, Fire Nation, it excites you too.
Now, before we move on to the next thing, Deacon, could you wrap up what you were talking about with the average person achieving financial independence?
Deacon Hayes: What I think in this 21st century with technology and entrepreneurship is just exploding, so you can easily have multiple streams of income coming in each month, whether it’s from a course you created, or a service you’re providing, or whatever it is. So, really, just perfecting those different streams of income and making sure that they maintain, and then you can be assured that, over the next 5, 10, 15, 20 years, that that income’s gonna be there to provide for your lifestyle.
John Lee Dumas: Let’s talk about the dangers of debt. One of the best gifts my parents ever gave me was fear of debt, and so that’s why I went to college on an Army scholarship. I graduated no college debt. And of course, I did have to go to war, so if I had been killed in action, that would have made that not such a good plan, but you get the idea, Fire Nation. Debt is not a good thing. So, Deacon, break it down for us. What are the dangers of debt, and what do we do?
Deacon Hayes: The reality is is when you owe somebody else money, you have to do whatever you can to pay it back, and you’re paying interest. I would rather my money be working for me not against me, and that’s what debt does. It works against you. And so, the idea is trying to figure out a way to minimize the amount of debt that you have as quickly as possible so that you can start putting that money into income-producing assets or into entrepreneurship ideas that are gonna provide different streams of income. So, it’s taking your money from working against you to working for you.
John Lee Dumas: So, give maybe one example of somebody that you’ve seen, or maybe even yourself, specifically in these 10,000 hours that you’ve put in who’s been able to successfully pay off their debt fast. What have they done? What was the tactic that you were like, “Ooh, that’s really cool”? And we’ll keep this one short, Deacon, but just like a really cool, quick story.
Deacon Hayes: So, I would say really just putting everything down on paper, and the one thing that I think is helpful is keeping it simple. We don’t have a lot of time, and so literally saying income, expenses, assets, and debts, all on one piece of paper. That’s what we did, and one of the cool things that I did that was helpful for us was selling my brand-new car which was upside down. So, basically, because I did that, I was able to free up an extra $400.00 to throw towards our debt even faster.
John Lee Dumas: Per month.
Deacon Hayes: Per month, yeah. Plus, I got rid of $18,000.00 worth of debt, so that really snowballed things to say, “Okay, now we have this extra cash flow. We don’t have this debt. Let’s keep going.” And I’ve seen other people do that too, to where they say, “Okay, I don’t need this brand-new car. I can use a used car for a period of time to be able to get to where I need to be,” so short-term sacrifices for that long-term gain.
John Lee Dumas: Now, there are a couple things out there. There’s Mint, which I actually don’t like because it has a bunch of ads and it’s all ad-crappy and stuff, but then there is something else, this [inaudible] [00:11:30] called Personal Capital, which I use, and I’m on that site every single day because it’s linked to all of my accounts. So, I can go to one place, and I can see everything from my assets to my liabilities to how my investments are doing. Even the value of my home is linked to Zillow. So, it’s a really good snapshot, and you can even dive deeper into that. Is that something that you use? Do you use something like that, Deacon, or you’re just a pen and paper kind of guy?
Deacon Hayes: It’s funny. That’s actually the tool that I use too, Personal Capital. I started out with Mint, and then I gravitated towards Personal Capital because it had more of the investing side, so you could see your holdings, your returns, all that stuff. So, I’m on the same page with you there.
John Lee Dumas: And not all the ads. So, by the way, Personal Capital, if you’re listening, don’t go the same route Mint did. Don’t go for the quick buck to just scare us all away. Speaking of which, Deacon, I think this is a perfect time for me to cut to sponsors who bring this show to you, Fire Nation, free and have been doing so for free for 1,924 episodes. So, stick around because after this, we will be right back, and Deacon will be dropping value bombs.
So, Deacon, we are back, and there’s a couple things I want to kinda rip through right now because there’s a lot left I want to talk about with finance because it’s just so important, and you’re one of the guys for this. So, let’s talk about a strategy that actually works and how to actually stick to a strategy.
Deacon Hayes: So, the first step is gonna be, like we said, putting it all on paper. Once you’ve got that, you say, “Check.” The next step is gonna be what is your surplus or deficit from that. So, how much money do you have left over, or how much are you negative? And then, the idea is, obviously, you want to get into the positive as fast as possible, which means that you’re gonna have to either get extra income – pick up an extra income stream, driving for Uber, doing whatever you gotta do in your business to excel – or slashing expenses, certain things like cable. Gosh, we haven’t had cable for years. We use Netflix, and so instead of paying 100 bucks, we pay 10 bucks a month. So, figuring out what those components are.
John Lee Dumas: Although Netflix just bumped it up to 14 bucks a month, those sneaky little buggers.
Deacon Hayes: Unbelievable, I know. But yeah, figuring out what those components look like. The next thing is gonna be having a starter emergency fund, so at least 1,000 bucks in the bank to be a buffer between you and debt. Then, after that’s done, paying off any debt. So, we had that 52 grand. We knocked that out as fast as possible. Once that’s done, having three-to-six months’ emergency fund. And now, you’re kind of in that sweet spot of no debt, you’ve got a decent emergency fund, you’ve got everything on paper, you’re tracking, you’re doing everything you can to increase your cash flow every month, and so now, you’ve gotta say, “Okay, where’s that cash flow gotta go?”
It’s really gonna go to the places that are gonna provide the best ROI. So, for us, it’s gonna be investing for our future. It’s gonna be paying down our mortgage faster. It’s gonna be putting money in our kids’ college. And then, it’s gonna be growing the business. So, those are the areas where we’re taking that excess capital and we’re putting it to work for us instead of against us.
John Lee Dumas: This is Entrepreneurs on Fire, Deacon, and this is your second time on here, and again, Fire Nation, go back and listen to Episode 310 where Deacon tells his stories. It’s very inspiring. But this is a show about entrepreneurs, and, Fire Nation, the people that are listening right now, they are entrepreneurs, solopreneurs, wantrepreneurs, so let’s bring this home strong right now. Let’s take this home with you sharing how entrepreneurship can be a vehicle to retire early if you want.
Deacon Hayes: So, I think the thing is we’re all wired with certain gifts, talents, and abilities, and so figuring out what’s the best avenue to use those gifts, talents, and abilities where people will actually pay us. And so, that’s that sweet spot of, “Hey, I’m passionate about something, I have a genuine interest in something, and I’m really good at it. Oh, and people are willing to pay me really well for that,” whether it’s a product, service, or whatever. So, really, just focusing in on that.
And so, I really encourage people to take a strengths-finder test or a Myers-Briggs test, and figure out how are they wired, and then work in that wheelhouse. And so, for me, it’s really about I love to help transform lives by helping people save money, make money, and pay off debt. And so, now, I create courses, I create relationships with affiliates, I create ways to bring in traffic, so that I can amplify that mission. So, really, saying what’s your mission, what are you good at, and what are people willing to pay you for, and kind of mashing that all together, and then perfecting those income streams.
John Lee Dumas: Fire Nation, you need to sit down. You need to create a plan. You have to know what you want, and then create a plan on how to get there, and then execute.
Now, Deacon, as always, I want to end on fire, so give us just a parting piece of guidance, something that might be interesting, maybe just a quick rundown about actually how to map out a plan to get there, and then break down the best ways that we as Fire Nation can connect with you, and then we’ll say goodbye.
Deacon Hayes: Absolutely. So, I just want people to know that this is definitely realistic for the average person. I think a lot of people think, “Oh, early retirement is only for a few,” and I think it really is. It’s for those that plan it can be achieved. And so, it really is sitting down with your spouse or with someone that you – whether it’s a good friend or whatever – to help you say, “Okay, this is where I want to be, and these are the things I’m gonna do to get there.”
So, let’s just say that you wanted to have, just for numbers’ sake, $4,000.00 a month in passive income, and if you were to say, “Well, then this stream needs to be producing $1,000.00, this stream 1,000, 1,000, 1,000 consistently over time,” and then fine-tuning with tracking – I track on a daily basis. That’s one thing that’s really helped exponentially grow my business is tracking in Google Sheets everything that I do from a revenue standpoint, and you’ll be amazed at how the revenue grows. And so, really, not just wishing but making a plan of action to get there.
John Lee Dumas: And what’s the best way we can connect with you?
Deacon Hayes: Best way is at WellKeptWallet.com.
John Lee Dumas: Fire Nation, you, yes, you are the average of the five people that you spend the most time with. You’ve been hanging out with DH and JLD today, so keep up the heat, and of course, head over to EOFire.com. Just type “Deacon” in the search bar, and his Show Notes page is gonna pop up with everything that we’ve been talking about today. These are the best show notes in the biz – timestamps, links galore.
And just head directly over to WellKeptWallet.com. It’s a great site, so many resources. And of course, his book You Can Retire Early! – because, Fire Nation, you can retire early – Everything You Need to Achieve Financial Independence When You Want It. Check that out where all books are sold, at least definitely on Amazon.
So, Deacon, thank you for sharing your journey with Fire Nation today. For that, brother, we salute you, and we’ll –
Deacon Hayes: Oh, John, before we go away, I’ve got a giveaway for your audience that I think will blow their minds. So, our course, Debt Free in 18 Months, it’s a $97.00 course. I’m giving it away for free to anyone who buys my book. So, basically, if they go to WellKeptWallet.com/Retire, just give us a screenshot of the purchase, and we’ll give them access to the course because the idea is that I want to help people get debt-free and achieve financial independence.
John Lee Dumas: Fire Nation, that is something you have to take advantage of. $97.00 value, all you need to do is buy a book you should be buying anyways, which is You Can Retire Early!. So, head over to WellKeptWallet.com/Retire and ignite!
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