Backstop Financial

Personal Finance Blog

Former D1 Catcher turned Certified Financial Planner – Blending finance and psychology

recent posts

  • How to Think About Debt (And When to get Out of it)

    -By Anonymous for Now – Certified Financial Planner – Backstop Financial

    From time to time, clients I meet with often have questions about debt management and how to properly adjust their risk levels over time. Roughly 80% of American households have debt so this is obviously a topic that many Americans face around the U.S. Granted, a lot of this debt comes in the form of a mortgage (Which you will absolutely want to stick around for at the end), however the average American still has over $20k in non mortgage debt as well. Today what I will discuss is how you should view debt and a unique framework that I believe will change how you view debt forever and hopefully sparks change in your behavior surrounding it moving forward.

    Take a look at this graph below:

    These ups and downs are the obstacles that life can throw at you (Pandemics, Wars, disability, Divorce, gambling addiction, a delinquent child, death of your spouse, natural disasters, terrorist attacks, bad political descisions, job loss, etc.)… What I can unfortunately say without a shadow of a doubt is that you will absolutely face one of these at some point in your life – Hopefully not all of them! There is no way around this. And when it happens, it almost 100% guarantees that some level of financial burden will find its way in front of you. What debt does is decrease our tolerance to these events and puts us in a position to make desperate decisions such as having to sell real estate, stocks, take out a personal loan or something else that we would rather avoid if we had the option to do.

    Now lets look at this same graph below and use the assumption that this is an individual who has very limited debt or no debt. Maybe they paid their house off, eliminated all consumer debts, and have a nice nest egg in retirement as well as an emergency fund. Their graph may look something like this:

    The events are the same but their tolerance and ability to withstand these events, represented by the red lines, is very wide. In other words, outside of a few severe events, they are able to remain invested in the stock market, use cash to fund unpleasant surprises, and never experience an event that breaks them to the point where they begin to rapidly decrease wealth which can mean working for an additional decade or having to decrease your lifestyle…

    Let’s compare this to the average U.S. household who still has auto loans, student loans, credit card debts, a mortgage they are already struggling to afford, etc. What does this do to their tolerance of life’s curveballs?

    It drastically shrinks their margin for error and peace of mind. Now when a pipe bursts and they have to pay out of pocket, they are already stretched so thin with other debt payments and no access to cash that they have to go further into debt which as you can guess, shrinks their ability to withstand future emergencies even further.

    Now, how do we view this? What should our plan be for paying debt off and which debts should we feel comfortable hanging on to potentially? Should we go full Dave Ramsey and completely eradicate debt immediately? MAYBE – As a CFP I understand that paying off a 3% mortgage when you can make 8-12% in the stock market over time makes zero sense financially BUT it can make a massive difference PSYCHOLOGICALLY. If owning your house and having 12 months of cash reserves allows you to remain invested in the stock market when a crash happens because you have peace of mind to not panic sell, then you should absolutely do it. The psychological benefit at that point is exponentially larger than the 5-8% arbitrage we could earn annually for the time being. I work with clients who tell me that paying off their house in their 50s instead of waiting until their mortgage ran out at 60 is the greatest financial decision they have ever made and I can 100% understand why. I am in the process myself of paying down a 30yr mortgage and often dream of the day I own it outright (except for those pesky property taxes) /:

    So what are some rules of thumbs? How should I view various debts? I’ll start with an easy one and go from there.

    Credit Card Debts – Get rid of these before doing any other investing outside of your 401k Match. Why get your match first? It is likely a GUARANTEED 100% or 50% return on your money. You cant get that kind of return anywhere in the market place. Take the free money and then go knock out the credit card debt that is hanging out around 20%… If you can only earn 10-12% in the markets, having 20% interest build against you will be the death of you over time. KNOCK IT OUT NOW!

    Auto Loans – In my firm we use a framework so you don’t get killed with interest – 25/3/10 – Put 25% down on the vehicle, finance for no more than 3 years, and the payments can be no more than 10% of your gross monthly income. Yes I prefer cash but also understand you need reliable transportation to your J.O.B. This rule keeps interest from accruing too quickly and leaves margin for you to invest, pay off credit card debt, and build cash if needed.

    Student loans – We break these down by age as the older you get the less your expected rates of return can be in the market. If you are in your 20s and have student loan interest over 6%, pay off the debt first… For the 30s, if you are over 5%, pay off the debt first… And if you are in your 40s with student loan debt, pay it off no matter what. It has been hanging around your neck long enough. You are at the age where you want to begin to simplify your life and have less payments not more.

    MORTGAGE – This is the one I have to arm wrestle clients on from time to time. Everyone wants to own their property and if they don’t they have just accepted they will never own it and decide to have a mortgage forever (No, we can do better than this). It is very unlikely if you are reading this and are a homeowner you have a mortgage over 8%. If you do, I believe that you should be paying off the mortgage as the premium investing in the markets adjusted with inflation simply isn’t worth it. Most of you probably find yourself in a range of 2% – 6% with either a 15yr or 30yr loan… Earlier I mentioned clients of ours view it as their best decision when paying off their mortgage earlier. They only get the green light to do this if the following are true: 3-6 month emergency fund, no other consumer debt, maxing out all tax advantaged retirement accounts, and their portfolio has grown to a size that if they stopped contributing they could still live the lifestyle they want to live and retire at the age they desire. The reason behind the last one is because we don’t want you having a paid off house and zero dollars working for you. The older you get, the less your dollars can work for you (see my previous blog post) which is why we cant support clients knocking out a mortgage without assets working behind the scenes. Once those rules are met, then and only then, do our clients get a green light to start pouring into the house at which point we support them 100%.

    To conclude this, I would state the following. Stop viewing debt as a bridge that can get you to the things you desire with small payments. Instead, begin to view it as a dangerous tool that can narrow the amount of life’s obstacles you can comfortably withstand. Keep your margin of error as wide as you can and use debt only when you believe it to be absolutely necessary. Build cash for emergencies and buy as many assets as you can as fast as you can and reduce those liabilities.

    Best of luck!

    P.S. A few readers have asked for where they can review their own financial situation with myself. If you would like feel free to use this link –> One Page Financial Plan

    -Anonymous for Now

    Backstop Financial

  • The #1 Factor that Limits Wealth Building?

    The #1 Factor Limiting Wealth (And It’s Not What You Think)
    By Anonymous for Now — Backstop Financial

    After working with hundreds of clients—wealthy, struggling, and everyone in between—I’ve noticed one trend that consistently separates those who achieve financial independence from those who don’t.

    It’s not income.
    It’s not budgeting.
    It’s not the hand your parents dealt you in the genetic lottery.

    Yes, all of these play a role. But the single biggest differentiator between people who build wealth and those who never do is belief.

    Wealth Begins in the Mind

    We are all products of our environment just as much as we are products of our genetics. Before we’re even conscious, we’re shaped by unique circumstances, messages, and experiences—often wildly different even among siblings.

    Maybe you grew up in a home where the focus was simply getting food on the table.
    Maybe you grew up with parents who taught you to save or tithe every week.
    Maybe your parents placed you for adoption because they couldn’t afford to raise you.
    Or perhaps you turned 18 and learned there’s a trust paying you $500,000 a year for life.

    There is no one-size-fits-all financial plan that works for both the family counting dollars before payday and the family investing five figures a month. Unfortunately, much of the financial industry caters to the latter because that’s where the profits are. But real financial progress requires meeting people where they are mentally—not where a spreadsheet says they “should” be.

    And for the family barely surviving, no change will happen until they believe change is possible.

    That is always where the journey starts.

    The Inherited Mindset

    When I work with clients who have never built wealth—and often never desired to—there’s almost always a pattern. Generations before them lived the exact same way.

    Maybe they relied entirely on Social Security.
    Maybe the family never left their hometown, sometimes never left the town limits.
    Maybe they repeated phrases like, “investing is gambling.”

    If investing is gambling, then the cash in the bank—backed by the same investments—is no good either. And hiding cash under a mattress isn’t safe as we will discover because inflation eats away at it.

    So if their current worldview doesn’t offer any hope… what can?

    What can help someone believe that a different financial future exists?

    For many people, it starts with simple math—math that feels almost unbelievable the first time they see it.

    (Not financial advice, just an illustration.)

    The Millionaire Math Nobody Expects

    How much do you think someone needs to invest each year to reach $1 million by age 67?

    Assume they start with $0.
    Assume we reach them at different ages.
    Assume a long-term, historically reasonable ~10% annual average return.

    Here are the numbers:

    • Start at 27: $2,280 per year
    • Start at 37: $6,120 per year
    • Start at 47: $17,520 per year

    And again… this assumes starting at zero.

    Two massive takeaways:

    1. Start early.
      Waiting just 10 years nearly triples the amount needed.
    2. Even for someone living paycheck to paycheck, these numbers are reachable.
      A small side hustle—one Uber Eats shift a week, one Saturday job, one small income stream—can completely change a family tree.

    Inside a ROTH IRA, all of this can grow tax-free. Meaning you won’t owe taxes in retirement. For someone who has spent their whole life paying Uncle Sam, this is life-changing.

    For those already out of consumer debt, a typical path looks like:
    • Build a 3–6 month emergency fund
    • Max your 401(k) match
    • Start funding your Roth IRA

    Don’t know what those mean? A quick YouTube search will get you 90% of the way.

    Belief Comes Before Strategy

    This is where belief begins—not with huge salaries, complicated investment strategies, or flawless budgeting.

    Belief begins when someone realizes:
    “I can be a tax-free millionaire if I commit to one extra night of work per week.”
    “My kids can start life already on third base.”
    “I can grow my income. I can manage my expenses. I can widen the gap.”
    “I can be the one who changes everything for the generations after me.”

    When these beliefs stay buried—when someone never sees what’s possible—that is where regret and failure live.

    But when belief surfaces, everything else follows.

  • Welcome Post + A Few Thoughts On Money

    I couldn’t think of a better way to begin my writing than by discussing my general thoughts on money and how it interacts into all of our lives. This is the first blog of Backstop Financial and one that has taken me too long to begin. Often, I find myself overthinking with no outlet besides my wife (she is tired of it), and I believe that getting these thoughts out of my head and onto paper (screen?) will not only help myself but hopefully a few people who come into contact with them who may want to take control of their financial life. I am a Certified Financial Planner based out of Tampa, FL who has a career in helping individuals become work optional. My goals for this blog are to become a place where you can find financial advice that not only help you monetarily but also psychologically. Morgan Housel has played a massive part in sparking this journey for me, as I occasionally find myself in conflict with what I want psychologically (peace, freedom, autonomy) and what I want monetarily (8 figure net worth, Hustle, Luxury) . This post will be one of the few where I focus on my background and myself at this level. Moving forward, posts will be centered around how you can change your financial life, build a better mental relationship with wealth along the way, and some overall life considerations as well.

    At this moment I find myself working in a job that I tolerate. Not love, not hate, but tolerate. Perhaps you find yourself here as well. Early on in my professional life, the biggest challenge I face is I’m still in the first stages of my career, have climbed the ladder of corporate America, and making just enough money to be fearful of starting something new that I know I would be more passionate about (this blog post is a good step), however not enough to be considered “rich”. Granted, if I did this for another 10 years and continued to save and invest 20+% of my income, there’s no doubt I would be, but 10 years is a long time to simply “tolerate” anything in life, in my opinion. We all deserve to be passionate about what we do but even I will admit sometimes sacrifice, especially in your 20s and 30s, is necessary a lot of the time while building skills. What I really want for my future self is to own my time. For most people, this comes at age 65+ after working for 40 years, at which point they “retire” and begin to do the things they are passionate about and have waited for. For whatever reason, one that I believe may be due to an entrepreneurial spirit, is simply not an option for me. Let me make it very clear – there is nothing wrong with working for 40 years. Plenty of people do this and live an abundant life. My hope is to show people there may be other options than what you may have come to accept due to your own personal experiences. Money does not and will not ever correlate directly to increased levels of happiness with the exception of meeting your basic necessities (more to come on this topic in future posts). However, what it can be is a tool that allows you to live the life you want to live and also be “the great enhancer.” Enjoy, listening to music with your friends? Money allows you to go to a concert with them of your favorite artists. Enjoy Saturdays with friends binging college football? Money is the tool that lets you pick your favorite game each week to travel to for the weekend. Enjoy cookouts with your friends and family? Money is the enhancer that allows you to do it in a beautiful home and a patio of your dreams. This is how I view money. A tool – an experience creator. If you ask for more from it, I assure you it will not. One of the greatest privileges for a young person is to be rich enough to buy whatever they want so they can realize money won’t buy fulfillment, so they can spend the rest of their life chasing what actually makes them happy: family, time with friends, experiences, deep relationships, meaningful work. There is no doubt that this view of mine has been formulated by decades of watching my parents, friends, colleagues, teammates in college, and even random strangers interact with money. Someone who was born into extreme wealth may view money in a completely different way just as someone born into poverty may also have a different relationship with money. It is one of the reasons I am always quick to say that there is no one “right” way to view money. We are all products of our environment, where and who we were born into, the people we spend our time with, etc. Many financial experts, advisors, and even individuals believe they have “their way” and will not change even in the face of data or rationale that they could be wrong. A question I have begun to ask that Morgan Housel first introduced me to is “What have you changed your mind on in the last decade?” A decade is used because it forces you to think bigger. One example that comes to mind is politics (uh-oh). I would argue that if there is not at least one stance that you have changed your mind on within your political party over the last 10 years, then are you really thinking independently? Or are you simply following a party that you affiliate with? Should we not evaluate every political issue regardless of what side our party is on? I am going to stop here before I get cancelled, but hopefully this forces you to think deeper. I challenge you to find something big in your life (not who is better between MJ and LeBron – Hint: it’s LeBron) and look at it from another perspective and just evaluate, yes just evaluate, others’ opinions and where they are coming from. This may be a hot take, but if we used that lens more often in life, I believe we could begin to solve more of our world’s problems. Even if your mind doesn’t change (we are all entitled to our opinions), at least we can move closer to understanding our opposition.

    If you are reading this, there is a good chance you are finding this after months or even years of blog posts. Hopefully this is the worst my writing ever is and I continue to improve in that department. Future blog posts will be much more centered around financial considerations in your life as well as how to interact with money from a psychological view point. Thank you for stopping by and happy reading!

    – Anonymous for Now

    Backstop Financial