The idea of saving a large nest egg for retirement is psychologically ineffective and outdated. Instead, you should be thinking about cash flow. What is your "Freedom Day?" It's the day you wake up and can go to work, but don't have to. The author of Freedom Day, Jeff Kikel, joins Paula and Jon today.
Jeff's background is as a traditional financial planner, and he experimented with the "Freedom Day" concept himself before employing it for others. The first step is figuring out your "MRI"- Minimum Required Income. Once you can make 125% of that number from various revenue streams, work becomes optional. For example, if you need $3,000 per month, and you're up to $3,750, you're "free."
This income can come from a combination of investment returns and withdrawals, rental income, side hustles, creating an online course, or even social security if you're old enough
As you work toward your Freedom Day, Jeff works with you on a bucket list. Figure out what's on your bucket list, and realistically, what each item is going to cost.
Not everyone can change their retirement mindset to one of Freedom Day. And Jeff does work with traditional retirement planning as well. But for those who can embrace this concept, it can be life-changing.
Find Jeff online:
YouTube: https://www.youtube.com/c/JeffKikel
Website: https://www.freedomdaywealth.com/
LinkedIn: https://www.linkedin.com/in/jeffkikel/
Email Paula Christine at Paula@PaulaChristine.com. You can also learn more online at www.PaulaChristine.com.
Paula Christine: Hi, and welcome to Beyond The Paycheck. I'm Paula Christine. Today I welcome Jeff Kikel, author of Freedom Day. Jeff works with individuals and business owners to help them find their Freedom Day, which is the first day that they wake up and don't have to go to work. I too would like to have my Freedom Day, so I'm excited to learn more. Welcome, Jeff.
Jeff Kikel: Hey, Paula.
Paula: What is Freedom Day?
Jeff: I've been in the financial business for almost 30 years doing financial planning, retirement planning, and what I noticed about, call it 2014/2015, is I was starting to see a disconnect in my clients. The younger clients had been through that post-2008 four-hour workweek world. That's what they grew up in and they're looking at retirement different from my generation and generations before me. They were looking at, "Hey, I want to have fun now. I want to enjoy life. I want to live now. I don't want to wait 40 years and then have to sell my house, downsize it, have one car, wear black socks with sandals, and take one cruise per year. I want to do things now."
Paula: I can handle the black socks with the sandals, but I can't handle the white socks with the sandals.
Jeff: [laughs]
Paula: Just got to put that out there.
Jeff: The one cruise per year just didn't work for me either. I looked at it from that point that, okay, my younger ones were there, but my older clients, let's say 50s and beyond, were starting to look at things and go, "Oh, crap. I didn't really do a very good job of saving. I've been through a couple downturns in the market. I don't have enough. I'm not going to make it." I started to realize, one, that the retirement system was broken, and two, that we had to figure out something that worked for both sets of clients. It just so happened I was sitting down with somebody one day, and I basically can look at somebody's numbers, and without running it through software, I can basically tell you it's going to work or it isn't. I just happened to say, "Well, hey, you're at your Freedom Day." He looked at me kind of funny and said, "What do you mean by Freedom Day?" I said, "Well, you got up and went to work today and you didn't have to. You have a work-optional lifestyle." I saw this big smile come on his face. I started using that term over and over and over again and stopped using the term retirement, because retirement sounds like something that I have no control over and it's some time-based thing. I'm retired at 66, some arbitrary number that the government picked for retirement. I started looking at Freedom Day as you have control over this. You don't have to worry about the governmental programs. You're focused on your lifestyle and your work-optional lifestyle which you can control if you do some things. That really became Freedom Day. Then I started to develop-- I was basically the guinea pig for all of this in my own life. I started trying different things, developing different sources of income, coming up and realizing that the reason the retirement system was broken is because we in the retirement business focused on these massive sums of money and we didn't focus on cash flow. If you focus on cash flow, you can get to your Freedom Day much faster because you can develop different sources of income and not worry about amassing millions of dollars.
Paula: If I understand the philosophy correctly, your Freedom Day is the day that you have enough money, doesn't matter your age, that you have enough money where if you didn't have to go to work the next day, you would be okay.
Jeff: Absolutely. You have enough cash flow.
Paula: Okay, cash flow.
Jeff: You have enough cash flow to cover 125% of what I call your minimum required income.
Paula: Explain that.
Jeff: You do a budget. There's some fluff in everybody's budget, but there is a base level of income that I need to make to be able to live my life. Once you have 125% of that number, which I call minimum required income, you are free. You're free that day. Now, it doesn't mean you're a millionaire, it doesn't mean you can do nothing for the rest of your life, but you've reached a point where you have enough passive income that if you chose not to get up and go to work that day, you don't have to.
Paula: Let's say that my expense need is $3,000 a month. 125% of that is rounded up as $3,800 a month.
Jeff: Absolutely.
Paula: If I have assets, reoccurring revenue, those things that can give me that $3,800 a month, then I'm free.
Jeff: You're free. As long as it's not active things that you have to do, you are free at that point. What we try and do is, first off, we try and get people to retrain their brain a little bit. If you've been in a paycheck mindset your entire life, it's, okay, I get up, I give my job 40 or 50 hours of my time every week and I get a paycheck. Well, that's not going to work going into later in life, especially once you reach retirement. You're not really thinking from a paycheck perspective.
Paula: Well, you don't get a paycheck, really.
Jeff: You don't get a paycheck anymore so you've got to have something that's going to do this. If you're going to rely on the way that the retirement industry has been, you've got to have $2.5 million to be able to cover your expenses. For most people, that's not a reality, but for most people that want to, they could go out and say, "Hey, I want to do a little side hustle. I want to do something that generates some extra income." Or maybe instead of just pouring money into my 401(k), I might take some of that money and get into real estate, or start a little side business, or something along those lines that provides recurring revenue, provides passive income. Eventually you're going to get to the point where you transition to the point where one day you woke up and you got enough to come in to cover 125% of your MRI, and boom, you didn't have to go to work that day.
Paula: What's MRI again?
Jeff: Minimum required income.
Speaker: By the way, Paula, you could have 125% of your MRI as that. You could not have 125% of what an MRI costs as a medical procedure these days.
[laughter]
That's a lot harder.
Jeff: It's a little bit more difficult.
Paula: Okay, smart arse. Let me think this through. Let's just make easy numbers for me. I need $3,000 a month for my minimum retirement income, my MRI.
Jeff: Required income. Yes.
Paula: Minimum required income.
Speaker: Let's get the acronym right before we get into the numbers.
Paula: Thanks.
Jeff: Come on now.
Paula: He's feisty today. I need $3,000, and that can come from investment returns or withdrawals from my investments. It could come from potentially social security, if we're talking about retirement.
Jeff: If you did it later in life, yes.
Paula: It could come from rental income, a side--
Jeff: Could come from creating a course and selling it, or the combination thereof. I encourage people to have multiple streams of income.
Paula: I get that as I'm younger, but when I'm 75, do I still want all of that? You know what I mean? Do I still want to be doing a side hustle? I wish I'd done rental income, bought rental property when I was younger. I think that's a great income source, especially for retirement.
Jeff: That can start at any time.
Paula: True.
Jeff: As long as it's passive income. The problem is people have this belief that, if you're going to get into real estate, I'm going to have to be cleaning toilets and all that. Well, no, don't. That's active income, that's not passive income. There are multitudes of ways to invest in real estate where you're not cleaning toilets, and you shouldn't do that. You shouldn't manage your own properties. I own about 25 different properties in four different states and most of those I've never stepped foot in. I've never even seen them besides on a camera.
Speaker: Jeff, you're talking about something that Paula and I have talked about in many previous episodes, which is just diversifying your income, having many different streams of income. Paula, we've talked about many of these types of income in previous episodes. It's a matter of adding that up to get to that magic 125% number.
Jeff: Absolutely.
Paula: My brain is going like, "How can I do this? How can I do this?" I'm trying to talk to you at the same time, but my brain's going, "I want to do that. I want to do that."
Jeff: How do you do it? One step at a time. How do you eat an elephant? One bite at a time. Find one, one that interests you. Typically what I teach people to do is, if they're coming out of that paycheck mindset, one of the key components of the Freedom Day method, which there's eight steps in the Freedom Day method, step two, after we've built a budget and figured out our MRI is we build a bucket list of things that we can reward ourselves with or things that we've wanted to do before we die. The first step in this process to get people going is to choose out of that bucket list and we do a hundred. We do 10 things in 10 categories, and then we choose three to four that we can do in the next six months. We sit down and say, "What training do I need to have to do this? What equipment do I have to do this?" One of my bucket list items was I wanted to be able to play my favorite song on a guitar. I had to sit down and think about, "I need to figure out how to play the song. I need a guitar, and then I need to practice over time." Only one of those things really did I need because I didn't really need to take lessons. I just needed to watch YouTube stuff and learned how to play this one song. It was my only goal, was to play this one song.
Paula: What's the song?
Jeff: The song is Ventura Highway by America.
Paula: Okay. Know that song.
Jeff: One of my absolute coolest favorite song, and it's a really not difficult piece, but it's difficult enough for one person because it was meant for two guitars. One person playing it's like you need four arms to do it. I looked at that and I said, "Okay, well I need a guitar. I can buy an inexpensive one for 120 bucks or so on Amazon. Boom, done. All right, great. Now I just have to practice." I knew my budget was $125.
Another thing on my list, I realized that I'm a freak about planes, trains, and automobiles. I realized there were 10 items on my list that were everything from, I wanted to drive a Lamborghini at the F1 track here in Austin. I wanted to fly on a World War II bomber. I wanted to be on this train that's really incredible old train. There's only one of them in existence in the world. All of those things cost between $4 and $600. I realized there's 12 of them, so if I just did one of those a month for the next year, all I really needed to do was create an income source that was $500 a month. I quickly realized I could do that very simply in real estate. There's some techniques that I use in real estate that really don't require a whole lot of money down. We work with a very specific clientele and I was able to, within about two weeks, get a piece of property under my control, turned around, rented it out for a little extra $500 a month. Then I started this year doing my planes, trains, and automobiles every month.
Paula: That's great. I love that. My brain is going crazy. I'm like, "I can't wait to sit down and figure out how I'm going to do that."
Jeff: At the end of the year, when I'm done with my 12 things, I still have the $500 income coming in per month. I could use it for other bucket list items. If I had debt, I could pay down the debt. There's a bazillion things I could do, but it's changing people's mindset. The problem is people are like, "I can't do this. I can't afford this. I'll put it on credit because I want it today."
No. I want you to stop, retrain your brain and say, "How can I pay for this? What can I do to pay for this?" It was very simple for me. Instantly, I went, "I could create a course." Maybe I could create one that's going to be $500 a month, but I can't be sure of that. I've had some that have taken off and done well, and I've had some that are just a complete turd and they haven't gone anywhere. I wanted something that I could predict, and it was really easy to go, "If I go out, do a master lease of a property, work with a local real estate person who doesn't want to manage their property anymore, come in, master lease it, turn around, lease it out to traveling nurses," which is what we do mostly, and that netted me an extra $500 a month. Done. I don't have to think about it again.
Paula: I have a little sticky that sits by my computer and it says, "What can I do today to make money?" It's the same philosophy.
Jeff: I love it, and that's what you have to do. That's it. Once you have that mindset, then you start to look at that and it's like your $3,800 or $3,000, that's not so hard.
Paula: No, it's not.
Jeff: I could just rinse and repeat the same scenario and say, "For the next seven to 10 months, I'm just going to focus my effort on finding the right property, securing that property, not necessarily having to buy it, but securing my control over that property. Then use a strategy that I know works, which will generate enough Delta above what I'm paying for that property, and boom, I'm done."
I don't even have to own anything at that point. I don't need any credit, I don't need to own anything. I can control property very much the way I invest in the stock market. I typically don't just buy individual securities. I'll typically use options where I can control a larger amount of securities with a smaller amount of money and use leverage.
Paula: You're very interesting. There's so many takeaways for me just personally.
Jeff: It just takes sitting down and saying, "I'm going to focus on one or two things." One, I want to reward myself for being successful. You pick something you're going to reward yourself, something on your bucket list, and then once that's done, once your brain starts to get retrained, you start going, "Wow. You know what? If I followed what Jeff said and I learned about master leases and I learned about working with traveling nurses, okay, boom." Let's say I make $200 or $500 Delta per month above. It's not going to take too many of those. Six to seven of those are going to get me to my $3,000 a month and I'm free. Then I can just keep doing the same thing over and over again. I've got some friends that are up in Colorado that do this with short-term rentals and they manage like 250 properties.
Paula: It's a little bit more than $3,000 or $500 a month, that's for sure.
Jeff: They wake up every morning knowing that, "This month, we're going to bring in $25,000." The winter season, when people are up there skiing, they know they're going to make $25,000, $30,000 a month without blinking an eye. Even if they have a slow month or a slow period of time, they've made so much that year they don't worry about their minimum required income.
Paula: What do you do with clients who can't get out of that paycheck mindset?
Jeff: You've got to want it. That's one of the challenges that I find with clients. This was a bit of a challenge, coming from the traditional wealth management world, which I could do it the easy way and just everybody comes in to me, "Hey, let me put together a financial plan for you, and let me invest your money for you. Okay, great. We'll get 8% to 10% per year and we'll get you to that point by age 66." I still have people that come to me that way, and we can't get them out of that paycheck mindset. I work with them like I would traditionally, but there is a small subset of people, I'd say 20% of the people I interact with, that this resonates with. They're just people that are like, "What I've been sold down the road was I have to do this for 40 years, I have to save 10% or 15% of my income, and I'll get there. Well, I don't want that. I want something different." The Freedom Day message resonates with that client who's a little bit different, who's willing to look outside the box or knows that there's something better for them out there. Otherwise, I work with people still. Whatever I can do, I do encourage them to do some other things like, "Let's take part of your money and let's look at some of these alternative assets and alternative ways to generate cash flow." One thing I do is I do focus on cash flow now and not on just let's save up $2 million. We're going to focus on cash flow. We're going to look at things that can generate a higher level of cash flow than the 4% that the mutual fund or brokerage industry will tell you you can take out.
Paula: I love that. Focus on cash flow instead. I think the younger generation today, they're much more open to--
Jeff: They're getting it. I think, one, there's a ton of people like me that are out there talking about this on YouTube. I've got a YouTube channel. I throw up a video and I get 3,000 people. If I put something about real estate, I'll get 3,000 to 4,000 or 5,000 people watching a video because I think there is that demand. I want something different and I get this whole thing about creating different income sources and multiple income streams. They just get it. Now they all think that they're going to become a bazillionaire and drive a Lamborghini in a year and a half, which I hate to tell them, I look at myself and I'm a 10-year overnight success with this.
Paula: Jeff, we've only talked about two of the eight steps that you talk about in Freedom Day. How can someone get ahold of your book?
Jeff: We've got the Freedom Day book that's coming out on Amazon early August. If somebody wants just an overview of the process or what I call the Freedom Day method, if you go to www.freedomdaymethod.com, you can actually download what I would call the Cliff Notes version of the big book that walks you through the eight steps of the Freedom Day process and gives you some other resources. The podcast that I do, the YouTube channel, and everything else. You can get more tools to play with.
Paula: I love that. Thank you. What is the name of your podcast?
Jeff: Freedom Nation Podcast, and it's just freedomnationpodcast.com.
Paula: Perfect. Thanks so much, Jeff. I know we're having you back next week to talk about how to create a side business a little bit more than about the rental, so I look forward to talking to you next week.
Jeff: Brilliant.
Paula: If anybody wants to get ahold of me, they can reach out to me at paula@paulachristine.com, or you could check out my website at paulachristine.com. Thanks.