Commercial Real Estate Podcast

JF2928: Starting Over and Losing Everything — How to Move Forward | Passive Investor Tips ft. Travis Watts

Written by Joe Fairless | Sep 10, 2022 2:19:00 PM

Passive Investor Tips is a weekly series hosted by full-time passive investor and Best Ever Show host, Travis Watts. In each bite-sized episode, Travis breaks down passive investor topics, simplifying the philosophy and mindset while providing tactical, valuable information on how to be a passive investor.

 

In this episode, Travis explores a hypothetical situation many investors have thought about: What if you lost everything and had to start over again? This is a typical, fear-based thought many investors experience in the early stages. Travis shares why he knows he’ll be okay regardless of what the future holds for him, how avoiding the “success cycle” is crucial, and the two things you should always keep in mind as a passive investor.

 

1. Remember the Challenges You’ve Already Overcome

When Travis was 20 years old, he made $20K per year working 40-hour weeks at his first professional job. Due to his “hardcore frugality,” Travis was not only able to support himself on that income, but he made it through the first year without debt. He was also able to purchase a house and contribute to his IRA. Looking back on that time in his life, Travis is confident that even if he loses everything and has to start over, he has what it takes to make it. 

 

2. Avoid the Success Cycle

The success cycle is the need many people have to constantly increase their income and net worth as they continually adapt their lifestyle to meet their means. If someone makes $100K, for instance, they might create a new goal to make $1M. After reaching $1M, they shoot for $2M. For many people, this cycle never ends. 

 

3. Two Passive Investing Tips

  • Diversify. Travis has multiple income streams built out that produce passive income. He invests in different sectors of the economy. “Every deal has risk,” he says, “so you want to spread out your risk throughout your portfolio.” 
  • Stick to the fundamentals. It’s important to keep in mind that there are fundamentals when it comes to investing, which he covers in detail in episode #JF2921: The Secret to Investing Is Simple, But Not Easy.

 

 

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TRANSCRIPT

Travis Watts: Welcome back, Best Ever listeners. I'm your host, Travis Watts. This is another exciting episode of Passive Investor Tips, tools, tricks, tips, formulas, psychology of being a passive investor, whether you're an active investor now looking to become passive, you're a hybrid between the two, or you're like me, you're a full-time passive real estate investor.

I want to talk about something really important in this episode, and it's this concept or this idea of what if you lost everything? What if you had to start over again? It's a very fear-based thought, but it does come up from time to time. In fact, I want to share with you, I'll start with a quick story. True story. I was just on the phone with an investor. This was two days ago. And he is battling his own psychology right now, because he's leaving the corporate world. He's worked there for 40 years, in a very stable, consistent career. He's looking at retiring to become a full-time passive cash flow investor, and he battles the same fear and uncertainty and unknown that we all do. If you've ever been laid off, if you've ever quit a job and in the process of finding another, whether you're retired or looking to retire soon, there's a lot of fear and uncertainty and decisions like this.

So you might feel overwhelmed, you might second-guess your decision, but the reality is that a lot of people have fear in general over investing, especially in the early stages. And this topic today is something I actually think about a lot. As Charlie Munger says, he is a hopeful pessimist. I'm kind of the same. I'm always looking at the downside, and what's the risk, and what if everything went wrong, but also very hopeful that that doesn't happen, and that keeps me moving forward with my investing.

And I'll share with you this story of my own life. I remember being 20 years old, I did two years of college, I decided that wasn't for me, so I quit... And I was 100% on my own. I was working a 40-hour work week at my very first professional job, if you can call it that... And my gross income was $20,000 USD; that was all my income. This was before real estate, before passive income. That's how much I made. Obviously, not an ideal place to be financially speaking. And I didn't have many luxuries. I wasn't taking extravagant vacations, I didn't have fancy clothes; I had to budget like a madman, in fact. But the funny thing is that I made it. I made it through; and not only did I make it, I made it through without going into debt, not $1 of retail or credit card debt. Thankfully, I didn't have student loans either. And in that same year of making $20,000 per year, I actually purchased a house and contributed to my IRA. And that seems really crazy looking back and thinking about it. I was a lot more hardcore than on frugality than I am today. But it's possible. And it was at this time in my life that I learned a really critical lesson of what we're talking about today, and it's that it's going to be okay. If I lose everything, if I have to restart from that point moving forward, I know I can always just get a different job, hopefully a higher-paying job... But if I had to come back, I would be coming from a position of strength; I would have more knowledge, I would have a better resume, I would have more connections, and I wouldn't be so naive. So if anything, it might be a blessing in disguise.

So in America, it's easy to get caught up in the marketing, in the publicity, the movies, the luxuries... What I like to call the success cycle. And what that means is, once you make, let's say, $100,000, or you have that in savings or investments, now, you're probably going to push your goal up and say "I want a million dollars." Once you get a million dollars, then it's "Well, I want $2 million." And once you get two, then it becomes four. And see, what most people do is what I call lifestyle creep. So they're constantly, as they get more net worth and more income, they're pushing their lifestyle up to their means. So the question becomes, "Where does this end?" And the sad truth of it is that for most people, it never ends. There's always going to be somebody above you, somebody doing better... And it makes it really easy to try to keep up with the Joneses.

Break: [00:05:49.15] to [00:07:35.04]

Travis Watts: Something that's shifted my perspective on this was a book I read years ago called The Top Five Regrets of the Dying. It was written by a nurse, I believe she lived in Australia and she went around, very personable human being, and she worked in a terminally ill patient care unit, so people living out their final days in life... And they would share their top regrets with Bronnie, for whatever reason; I guess that's just kind of the nature of that environment. And the top two were "I never pursued my dreams and aspirations." That was the number one regret. And "I never spent enough time with friends and family." That was number two. And that, my friends, was a complete pivot and mind shift in my life. I remember thinking after I read that years ago, "I don't want that to be my story."

So the journey to financial independence, if you dig deep enough, is really not about money at all. It's about people, it's about experiences, it's about creating a lifestyle that best suits you... It's a pursuit to happiness, if you will.

On a related note, I was also listening to a recent interview with actor Johnny Depp; he was talking about how he first got his start in Hollywood as an actor, and how he entered that space without having any fear. Whereas, as you can imagine, most people, that's their life ambition, they're just trying to make it; they're working super-hard at it. He really didn't have to do that, because he was just after a little bit of side income. Quite frankly, he just wanted to continue being a freelance musician. And the reason he had no fear is because of his mindset and perspective. He said he reflected back on all the different jobs he had done to that point; he had worked manual labor, he had worked in retail shops, as I mentioned, he was a freelance musician, he thought, "Hey, if this acting thing doesn't work out, I can just always go back to getting some other kind of job." And that's the right mindset and psychology to have. That, quite frankly, is what allowed Johnny Depp to pursue roles that he was truly interested in and passionate about, so that he didn't have to sell out and work in roles that he really didn't resonate with. He was able to live his life on his terms even before he really made it as a big Hollywood actor, as we know him today.

So when you look beyond the money, and you're looking more at dreams and aspirations, as Bronnie Ware would phrase it, there's a lot more to the bigger picture of what we discuss here on the show. You can create something much more meaningful and impactful.

So one of the takeaways here is just simply to enjoy your life. I love the quote by the Roman emperor Marcus Aurelius almost 2000 years ago. He says, "Look, you could leave life right now. So let that determine what you do, say and think." I don't believe that you or I will have long-term regrets by simply pursuing what we love and what we enjoy. In fact, the quote that I've come up with for myself is that passive income allows you to do more of the things that you love and enjoy, and less of the things that you don't.

So bringing this back to investing, speaking to you guys as a passive investor, back to our core topic, "What if I had to start over? What if I lost everything?" A couple things to keep in mind. One, I'm a huge advocate for diversification. So I have multiple income streams built out that all produce cash flow, aka passive income. I don't invest in just one sector of the economy. Every deal has risk, every sector has risk, so you want to spread out your risk throughout your portfolio. And I certainly don't depend on just one income stream. To me, that's the riskiest thing you can do. Unfortunately, it's how most people live their financial lives, and have that structure. And I find a lot of peace of mind in knowing that there's a formula to follow; that there's simply fundamentals to investing, as we spoke about in episode number seven, I believe it was, of Passive Investor Tips. So it's really that simple when you realize that you can build a life on your terms.

So with all of that in mind, to your success. Thank you guys for tuning in to another episode of Passive Investor Tips. I'm Travis Watts. If we haven't connected, I'd love to, on social media. LinkedIn, Bigger Pockets, Facebook, Instagram... Happy to be a resource for you or anyone you think could find value in these episodes. Have a best ever week, and we'll see you in the next episode.

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