Scott and Virginia Trench: Goals, Spending, and Family Finances

The Trench Household's Financial Framework [0:00]

• Scott and Virginia Trench discuss their approach to goals, spending, and investing.
• Scott acknowledges his privileged position from early involvement with BiggerPockets and his CEO tenure.
• They aim to share their financial plan and how they play the hand they've been dealt, acknowledging both wins and mistakes.

  "I'm by no means saying that this is a realistic or attainable or repeatable path."

Goal Setting as a Foundation [1:08]

• Their financial planning starts with a clear, concise, present-tense description of their desired future state, called a "vision."
• This vision document, posted on biggerpocketsmoney.com, includes details about their home life, daily routines, and family.
• A dedicated paragraph outlines their financial situation within this single-page vision.

  "So this in practice is like a one-page vision, right?"

Weekly Money Dates & Household Equity [2:25]

• A set weekly time, typically over breakfast without their young children, is dedicated to checking in on immediate financial priorities.
• The meeting includes discussing wins, gratitudes, rosebud thorns (something great, something to look forward to), and reviewing personal goals (red, yellow, green status).
• A "household equity check" is incorporated to address division of responsibilities and potential resentments.

  "So we go out to breakfast and we sit down once a week for about an hour to go through this in a more day to day."

Stop, Start, Continue Feedback System [5:00]

• This feedback system is used weekly to improve their partnership and household operations.
• "Continue" involves appreciating something a partner does (e.g., bringing coffee).
• "Stop" addresses behaviors one partner dislikes (e.g., "dish adjacency"), and "Start" suggests replacements.

  "A continue would be something you appreciate your partner doing."

Kid Sync & Financial Check-in [7:01]

• After personal and household checks, they have a "kid sync" to discuss their children's activities, like signing up for sports.
• The finance check-in involves reviewing the big picture and transactions from their Monarch account over the past week.
• This process has led to a significant reduction in household spending over the last six months to a year.

  "And then finally, from there we get to the finance check-in where what I like to do is go over the big picture."

Reducing Household Spending [8:57]

• They reduced household spending by a couple thousand dollars per month by identifying accumulated small expenses.
• This included addressing a "Costco slush fund" and catching unused subscriptions.
• Consolidating entertainment subscriptions and cutting back on Amazon spending were also key.

  "A couple thousand a month, I'd say, you know, but it was, it's just like, oh, you know, these things all added up here."

Utilizing Monarch for Financial Tracking [11:40]

• Monarch is used to track their financial situation, providing a holistic snapshot and a recurring merchants tab to find unused subscriptions.
• The tool simplifies accessing all financial accounts in one place, avoiding the hassle of multiple logins.
• Consolidating accounts and having everything in one place has been a significant improvement.

  "Monarch has definitely changed my understanding of my holistic financial picture because everything's right there."

Portfolio Overview: Chubby to Fat Fire [13:39]

• Their net worth is in the "chubby fire to fat fire" range, with a paid-off house and a financial portfolio.
• The portfolio is allocated approximately 45% to real estate, 45% to liquid/stock investments, 5% to cash, and 5% to "side bets."
• This excludes assets like published books, private company ownership, cars, donor-advised funds, and 529 plans.

  "But you can kind of break this out as there's a paid off house and then a chubby to fat fire financial portfolio."

"Side Bets" and Future Aspirations [15:45]

• "Side bets" include positions in debt funds, a commercial office building, and various syndications.
• Scott hopes to advise companies using his CEO and operator skills, potentially taking board seats.
• This could involve consulting gigs or advisory roles in future ventures.

  "We have positions in debt funds. We have positions in a commercial office building that I recently placed."

Real Estate Status and Holdings [16:54]

• They are currently status quo on rental real estate after purchasing a quadplex and a duplex last year.
• The duplex is undergoing rehabilitation after a tenant moved out.
• They own 19 rental units, with 13 in a partnership and two completely paid off.

  "So last year we made a big purchase that we talked about with the quadplex that we purchased."

Shifting Away from Mega-Cap Tech [18:36]

• Scott expresses distrust in mega-cap tech valuations, having previously invested heavily in the S&P 500.
• He has begun reallocating his stock portfolio away from this concentration.
• Denver real estate has remained stable or slightly decreased, while rents have been less impacted.

  "I'm actually kind of actively betting against you, Mindy, with the way that we have our portfolio set up because I do not trust the mega cap tech valuations."

Equity Portfolio Reallocation [20:13]

• Scott has shifted public equity positions into factor tilts like small-cap value and international small-cap value.
• The equity portfolio is now largely in an equal-cap index fund (RSP), with a portion in VTI and the rest in factor tilts.
• He prefers this diversification over a heavy concentration in mega-cap tech companies comprising 40% of the S&P 500.

  "And my feeling is I do not want to have 40% of my wealth in this mega cap complex of, you know, nine major technology companies."

Individual Stock Holdings & Philosophy [22:30]

• Scott holds a small sleeve of individual stocks from his "stock picking days," including Crocs, Franklin Covey, and Red Robin.
• These positions are very small and have not been actively managed for years.
• His primary thesis is avoiding concentration in mega-cap tech, opting instead to diversify across the equity market.

  "My largest individual stock holding is Crocs, actually."

Mega Cap Tech Valuation Debate [24:10]

• Scott wrote an article and created a calculator on BiggerPockets Money about the risks of mega-cap tech concentration.
• He argues that the valuations require "preposterous assumptions" for all these companies to win simultaneously.
• He acknowledges that others have differing opinions and that his husband, Carl, has a different perspective.

  "It's just, I believe that they're valued at a level that requires fairly preposterous assumptions as a group."

Portfolio Controls and Spending Band [27:47]

• Their spending has been about 3.25% to 3.5% of their financial portfolio value, a level Scott finds comfortable.
• He becomes uncomfortable if this number exceeds 4%, emphasizing the need to stay within financial independence bounds.
• This disciplined approach avoids deprivation while eliminating waste and allowing lifestyle growth if the portfolio increases.

  "Our spending has been about three and a quarter to 3.5% of the financial value of that portfolio."

Real Estate Concentration and Options [31:00]

• Scott acknowledges the risk of real estate concentration in Denver but likes the area long-term.
• He believes owning real estate locally allows for greater involvement and management.
• The paid-off rentals offer options, such as refinancing, and generate cash flow, which he considers an underrated aspect.

  "But it is a real risk that makes it harder to model the portfolio because of the geographic concentration."

Tax Strategy: Aggressive Basis Reset [34:05]

• They have very little wealth in pre-tax buckets, favoring Roth positions and aggressively resetting cost basis.
• This strategy aims to harvest gains in the 15% capital gains bracket, anticipating higher future tax rates.
• Scott believes this approach will generate more post-tax net worth compared to deferring taxes.

  "We have gone the complete opposite route. We have very little wealth in the pre-tax bucket, much larger Roth position here."

Estate Planning and Future Considerations [37:07]

• Their estate plans, including revocable trusts, are up-to-date.
• They are monitoring potential changes in inheritance tax laws.
• The possibility of using structures like South Dakota legacy trusts is being considered for future generations.

  "I was worried in preparing for this episode that we were way behind on not updating that, but we had a great setup for that."

Insurance Strategy: High Deductibles [39:20]

• They carry a small insurance policy to cover debt on the leveraged portfolio, but not life insurance on Virginia.
• For rental properties, they opt for the highest possible deductibles to significantly lower premiums.
• This strategy prioritizes protection against catastrophe while self-insuring for larger, but less frequent, claims.

  "So all of the premiums in our portfolio are at the highest possible deductible, like literally 20, 25, 30 grand."

The Feeling of Financial Independence [41:54]

• Despite being ambitious, they focus on enjoying the flexibility and freedom that financial independence provides.
• This includes spontaneous activities like walks during the day and scheduled "date" activities.
• Gratitude for small things, like their youngest daughter's pronunciation of "shoes," is a key part of their weekly check-ins.

  "So it's just a matter of being intentional with enjoying the freedom, the financial freedom that we have and being grateful for what we can do and the flexibility that we have."

A Day in the Life: Scheduled Spontaneity [43:40]

• Their days involve dropping kids at daycare, "money dates" over breakfast, and activities like paddleboarding.
• They record podcasts, have meetings, and incorporate workouts into their routines.
• "Nights off" are scheduled, allowing one parent to have a break from parenting duties while the other pursues personal interests.

  "Then we're going to do a quick daycare. We like to do our dates if we can during that period because we're already paying for daycare."

Virginia Trench's Books [46:45]

• Virginia Trench writes psychological thrillers, with her new book "Mr. Disappear" coming out in November.
• The book is about a con man and women who seek to take him down, featuring a financial scammer.
• Her previous book is titled "Our Secrets Were Safe."

  "So I write psychological thrillers and you can learn more at virginiatrench.com."

Resources and Final Thoughts [47:30]

• The episode concludes by directing listeners to biggerpocketsmoney.com for financial information, a blog, newsletter, and free resources.
• Scott Trench and Virginia Trench are identified, with Mindy Jensen as the host.

  "So hop on over to biggerpocketsmoney.com and check us out."