EP 613 – Achieving Your Aggressive Retirement Goals Early Via Passive Income With Rachel Richards

NCS 613 | Retirement Goals

NCS 613 | Retirement Goals

 

If there is one common thing that brings almost all of us in the world stress, it would be money. Especially as adults, managing and even thinking about money can be a headache. How much more if we’re trying to achieve some financial goals that lead to retirement? This episode’s guest tells you that it doesn’t have to be hard. Scott Carson talks with author, realtor, and investor Rachel Richards about some of the best ways to build passive income to hit your aggressive retirement goals. She talks about her books, Passive Income, Aggressive Retirement and Money Honey, where she lets us in on the models that helped her retire early and live life on her terms. Join Scott and Rachel in this conversation as they tap into rental homes, being mindful of your expenses, savings, and more.

Listen to the podcast here:

Achieving Your Aggressive Retirement Goals Early Via Passive Income With Rachel Richards

I’m jacked up for our special guest. You’re going to get a lot of great nuggets that you can apply to your life and your business. You are going to walk away feeling excited after this episode. Our guest is a former financial advisor, who made a name for herself in the personal finance realm. In 2019, she quit her job and retired with over $10,000 per month in passive income. She’s the bestselling author of Money Honey and Passive Income, Aggressive Retirement. She’s been featured on The Penny Hoarder and the New York Times and has been contacted to speak at colleges all across the country.

As you know, we like to have real estate investors on this show. She’s also a very active real estate investor with over 35 rental units. Her valuable money lessons have helped thousands of Millennials and other people work their way out of financial despair. She has success that no one has done before. She made the topic of money management fun, entertaining and simple. We are honored to have the author of Money Honey, Rachel Richards, joining us on the show. How’s it going, Rachel?

I’m good. How are you?

I’m doing wonderful. I’m glad to have you here. We were talking beforehand how you moved to Colorado Springs. Where was home before Colorado Springs, Rachel?

We were in Louisville, Kentucky. That’s where all of our rental properties are.

You’ve done a great job in sharing resources and sound counsel. You’ve helped a lot of people up there. What would you say if you look back now and see what’s going on in the crazy world, your experience and had a crystal ball going forward, what are a couple of things that you would give to our audience? Things that they can put in place or try to put in place in this crazy time right now, as far as helping them with their finances or looking towards retirement?

In any recession type environment, cash is always king. People ask me, “Should I be saving up more money? Should I be paying off debt?” A lot of the times, I’ll say, “Have a little emergency savings account, but make sure you’re aggressively paying off that high interest debt.” Coming into this Coronavirus and this potential recession, maybe we need to switch our thinking on that. Maybe it’s better to have more in savings and wait now to pay off the debt aggressively. That’s what I’m telling people, “Cash is king.” If you have a little bit of extra money right now, I would personally rather put it in my savings account just in case. Safe is better than sorry.

Something we can ask ourselves is, “Was I happy with the amount of money I had coming into this crisis?” There’s some statistic out there that more than 50% of Americans had less than $500 set aside for emergencies. That’s not where you want to be coming into something like this. It’s a great opportunity to ask ourselves, “Did I like the way I was coming into this crisis financially? What can I do to prepare the next time better?” It’s not a matter of if. It’s a matter of when.

We went through this several years ago in 2008 with the Great Recession. This is going to end up dwarfing it based on some of the other things that we looked at. Back then, it was the real estate that dropped dramatically and a lot of layoffs in banking. This time around, the real estate cliff hasn’t hit yet. I was like, “It’s coming.”

It’s very weird. In the last recession, I was young. I was in high school. I saw it firsthand in terms of I saw what happened to my parents and other people in my life. I wasn’t personally affected the way other people were. This is the first time I’m like, “This is crazy.” It seems like things could get worse, but I don’t have a crystal ball. I don’t know what’s going to come.

When you look at the number of unemployment, 40 million people have filed for unemployment, 25 million, 30 million Americans are already in the forbearance agreement or something like that. Fifty percent of small businesses expect not to come back from everything. There’s a lot of distress stuff out there. The mortgage company is doing a forbearance. With our portfolio, it’s one of the things we offered to borrowers. It was like, “If you need to wait 60 days or 90 days, we’ll tack it at the end of the month,” which is great. If people aren’t going back to work or those jobs aren’t there, they’ve got to get creative. I was talking with some people here in Austin and they’ve made their money with Airbnb and Uber. Those things aren’t working too well for them, Rachel.

No one’s traveling right now. Who could have foreseen that? That’s a great point to why it’s so important to diversify. Don’t have all short-term rentals. Don’t have all long-term rentals. The more variety you can have in your real estate portfolio, the better off you are.

With your portfolio of rentals, what’s the makeup of them? Are they all like 3s, 2s or duplexes, triplexes or is it long-term or short-term? What’s the makeup of your portfolio, Rachel?

There’s a mix. I have two single-family, a duplex and then three buildings that have 10, 11, 12 units each that are bigger. Most of them are one-year leases. The bigger buildings, we allow a three-month lease at a minimum. It’s somewhere between short and long-term. It gives people a little bit more flexibility. People like traveling. Nurses and doctors, we get those a lot. They’re on those twelve-week assignments. They can’t sign up for a year-long term. That’s been interesting to do.

With the shorter-term lease, it’s like executive leasing a little bit there, the 90-day aspect of things. You get a higher clientele than somebody who’s a normal renter for a year. Would you agree to that or does it vary?

It varies. It depends on where you are in town too. We are in the business area. It’s close to the hospital. We do get a lot of the people in the medical or people that are needing to work downtown and maybe don’t have access to private transportation. They need to be within walking distance of things.

NCS 613 | Retirement Goals

Money Honey: A Simple 7-Step Guide for Getting Your Financial $hit Together

Those small apartments, ten units, how do you find those? Were those buying retail? Do you have a broker? What led to you taking those down?

I’ve been lucky. I found all of our deals on the MLS, which I know is crazy to hear from a real estate investor. There are some reasons I’ve been fortunate the way I am. Part of it is I have my real estate license. I got it early on because I wanted to have that time advantage. I don’t think you can reasonably compete on the MLS if you are reliant on another realtor. You have to wait until they’re free to show you the property whereas I have my license. The second a property came up and I saw that it had potential, I would get my butt down there. There were times that I would be down at a property 30 or 60 minutes after it was listed. I was almost always the first one. That gave me a little bit of a competitive edge because the MLS is very saturated.

I agree that if you’re waiting for a realtor to send you a weekly report or once a month, you’re going to be weeks behind the competition. Somebody who’s hungry are looking at it. That’s the beauty in some markets. There are a lot of opportunities for that. Here in Austin, it’s way overpriced for the most part. Louisville is probably a much more affordable market compared to other parts of the country.

It’s affordable. Anywhere in the Midwest in my opinion is a great place to invest. I tell people the first duplex I bought it was on the MLS, but it was an expired listing. I called the listing agent and pestered her for several months. I was like, “Once this goes back online, let me know.” She did. She called me first before she even listed it. I was able to put in an offer before anyone else saw it. That was one of the best deals that I ever did. I tell people it’s funny because that duplex was $100,000. Even in Louisville, Kentucky, that’s a cheap price. I can hear my Bay Area people scoffing at me because that’s not realistic in some cities. I always encourage people to consider long distance landlording. It can be done. I’m doing it now. I’m managing our properties from far away. It’s going fine. I know it can be scary. If you are in one of those high cost of living areas, maybe that’s the only way that you could get invested.

Most of the country is a two-hour plane ride from probably about 75% of the United States. If you’ve got to jump on Southwest, you’d want to get away for a weekend to go out and take a look at a property or to put your team in place. We all can’t do it ourselves. Although most real estate investors are egomaniacs when it comes to things, it’s best to delegate and you end up sleeping a whole lot better versus running around and trying to unclog a toilet, replace light fixtures and rank the property all by yourself. If you’ve got a team and professional that you trust, you’d be a realtor. You’ve got access to a lot of people there locally to being remote now to make things happen.

That’s given me a big advantage. You bring up a great point. I always talk about rental income being passive. It’s hands off, mailbox money, whatever you want to call it, but there’s a caveat. If you want it to be passive, you have to build in the expense of having a property manager, a cleaning person, maintenance person. You can’t be doing it all yourself. I always tell people, “Set it up the right way from the get-go. When you’re analyzing the numbers, make sure you’re building in the expense of a property manager. Even if you don’t hire someone right away.” At least the last thing I wanted to do was quit my job to become a full-time landlord.

Nobody wants to do that. That’s replacing one job with another job. Let’s talk a little about Passive Income, Aggressive Retirement, your book. It’s a great book. What was probably the biggest surprise that you’ve gotten from writing that one, and maybe even Money Honey? What’s the biggest thing that shocked you after you wrote it?

For Passive Income, Aggressive Retirement, I was shocked by how many different types of passive income there are. The way I defined passive income is money that is earned with little to no ongoing effort. It’s no get-rich quick scheme. It does take time or money to create. I look at it in two stages. Stage one, you’re investing the time. You’re investing the money. You’re getting into place. For rental properties, you’re searching, closing, inspecting the house, and getting tenants into place.

In stage two, once you’ve launched it and have it going, that’s when it becomes passive and a lot more hands off. You have to make sure and be aware that there is this upfront investment that you are going to have to do to put that passive income into place. The epiphany I had a few years ago was, “Once your passive income exceeds your living expenses, you’re retired. You’re financially independent.” That’s what I started going for. In my opinion, this whole nest egg theory of trying to save up a ton of money by age 65 to retire. I wasn’t interested in that because I want to have fun now. Maybe that’s a little entitled of me.

It’s unrealistic and difficult to do. There are studies that show that Millennials will need to accumulate at least $2 million by age 65 in order to retire. I don’t know about you, but I don’t know that many multimillionaires. To think of becoming a multimillionaire, it seems overwhelming. This whole idea of generating passive income of $5,000, $8,000, $10,000 a month. To me, that seems a lot more attainable. My whole journey started out with real estate investing. At first, that was the only type of passive income I was aware of. To me, it’s one of the best tools for building long-term wealth. Once I started writing this book and becoming the student of passive income, researching and talking to people, I realized there are many ways. In my book, I outlined 28 different passive income models. Trust me when I say that there is something out there for everybody.

It’s a great read. I love how you break down each of those 28 different models and taking the time. You’re learning it as you’re going through. You’ve done a lot of it. There’s no excuse for anybody out there not to find something that could be passive.

People ask me a lot, “Where do I start? How do I get started making passive income?” I tell people, “The first question to ask yourself is, ‘Do you have more time or do you have more money?’” If you’re anything like I was a few years ago, I would have said, “I have neither.” The second question to ask is, “Which one can you create more of? Is it going to be easier for you to free up more time or easier for you to create more money?” Based on your answer to that, you can narrow down which type of passive income makes the most sense for you to pursue.

Did you get to start with some goals in mind too?

Yeah. I always say you have to have a solid understanding of your expenses. How much are you spending each month? What are you spending on necessary expenses versus expenses where you maybe have a little bit more flexibility? If my living expenses are $5,000 a month, I didn’t want to make $5,000 a month in passive income because that leaves me zero wiggle room in case something unexpected happens. That’s why I aimed for $10,000. My husband and I are closer to $15,000 a month now, but even at $10,000, we were more than covering our expenses. We have such a big buffer that we’re still saving several thousand dollars a month.

That’s a very valuable point to bring it up. We always talk about, “What do you need to have coming in to be able to walk out of your job if you wanted to? What do you need to have coming in to cover your expenses comfortably not barely getting by and living on ramen noodles every night and walking for entertainment versus sitting down and watching a movie?” You’ve got to be able to live life, not just get by. There’s no fun in every cent you’re putting away. You’re not able to have any type of enjoyment. Do you agree with that, Rachel?

I’m so glad you said that. There’s a piece of advice that I feel like entrepreneurs or business owners are given when they’re starting out. A lot of people will say, “Take a leap of faith and the net will appear.” I’m like, “No, don’t do that.” Make sure you’re making a solid enough income to walk away from your job comfortably. The last thing you want to be doing in your business or as a real estate investor or whatever you’re doing is you don’t want to be operating out of a place of panic and out of a place of desperation. That’s not going to be good for your business or for your mental health.

NCS 613 | Retirement Goals

Retirement Goals: In any recession type environment, cash is always king.

 

Make sure that you get to a point. I started off my businesses on the side. I started investing in real estate on the side. I started writing my books while my husband and I were both employed full-time. It wasn’t until I was making $10,000 a month from my side hustle that I quit my job. I’m so happy I waited to do that because I’m very comfortable now. I’m at peace. I’m not trying to figure out, “How am I going to make my bills this month?”

As a financial advisor and a real estate investor, what’s one of the other side hustles that you were doing that maybe most people don’t know about?

I have four sources of passive income now. I have my rental income and the royalty income from my books. I have a print on demand business. That’s where you can take advantage of platforms online that have things like mugs, tote bags and t-shirts. You make designs to go on those things. When they sell, you’re paid a royalty. It’s cool because there’s no inventory risk. There’s no financial risk. You’re only paid when something sells. I launched my first online course. That’s my fourth source of income. To give you an idea, I’ve always been very transparent on the income stuff. In a normal month, the rental income makes anywhere from $7,000 to $12,000 a month. I mean profit by that, book royalties. In February, I had my first $7,000 a month in book profit. The print on demand, it’s a few hundred bucks a month, but it’s super passive. The course, I’m expecting to make $1,000 or $2,000 a month. Things have been pretty solid except for the rental income. Do you want me to talk about rental income and Coronavirus?

Let’s go down there. You’re all excited by it. We’ll come back to couple of other things. Let’s talk about that.

In a normal month, anywhere from $7,000 to $12,000 a month in profit from the rentals. In April, our rental profit was $1,000. There are many people that are worse off than me. There are many landlords that are doing a lot better than us. The way I see it though is if my worst-case scenario is that I breakeven for a few months, I’m totally happy. Nothing’s coming out of pocket and nothing’s costing me. That’s totally fine. There are several reasons for that. Some of our tenants haven’t been able to pay rent. Some of our tenants have moved out because they knew they couldn’t pay rent. The third thing is I haven’t been filling the vacancies because I haven’t wanted to put anyone at risk yet.

We’re slowly starting to do virtual appointments and virtual showings. I think we’ll be back on track by August. Things are already picking up, but that’s part of the reason it’s been so low. I would say to any real estate investor out there, when you’re looking at buying a property, make sure that you have the ability to pay the mortgage for several months if you had to. You don’t want to be housebroken as a real estate investor. You want to be able to cover all of your expenses for at least several months because these things happen on a cyclical basis. It’s not a matter of if. It’s a matter of when.

Do you have students as your tenants as well too with the universities and stuff like that being ghost town these days?

We’ve had a couple of students in the past but for the most part, we haven’t had many students apply. We’re not that close to college campuses.

That will be an opportunity for a lot of people and also negativity. There are a lot of towns out there that are based on the colleges and universities. There are a lot of the landlords and rental properties. Now they are tumbled. There may not be quite tumble leads flowing through the cities, but there are a lot of vacancies. A lot of people are having to get creative on what they’re doing. Especially when you look at the short-term rentals, people are running houses for weekends if we don’t have a college football season or other things happening, or even professional sports taking place. There’s a big impact to the bottom line for a lot of investors out there.

Think about college dorms, they’re empty. For the colleges that aren’t going back in person this semester, I would be figuring out a way to do Airbnb with those dorms or short-term rentals or something. That’s scary too. That’s probably a big source of revenue.

Let’s talk about your class. You got your first class you’re launching. Let’s talk a little bit about that. Your goals and ambitions for that and break it down a little bit for our audience out there.

I was so excited. I wanted to launch a course for so long. The thing about most topics is that it’s one thing to have the knowledge. It’s another thing to implement it. That’s where we all struggle. We all know we should be eating healthy, exercising and saving our money instead of spending it on stuff we don’t need. Why don’t we do it? It’s because of instant gratification. It’s because we’re not thinking about the future and it’s because self-discipline is one of the hardest things. I eat chocolate every single day even though I’m trying not to. I struggle with it too. Anyone can read the book, Money Honey, but people struggle to implement some things maybe sometimes. I was like, “What if I can create this environment, create some accountability, be more hands-on and help my readers in a more hands-on way.” That’s why I wanted to create the course.

I ended up doing it in the middle of Coronavirus. At first, I had this moral dilemma, “Is it okay to be charging for this? Is it okay to have this product right now?” I didn’t want to rub people the wrong way. I went to my platform and I asked people, “Do you guys want me to do this? What do you think? Is this a bad idea?” They were like, “Please make this course. This would be so helpful right now.” I was like, “Okay.” I did it at a very reasonable price. I got a great response. I’m finishing up the beta round, where I had people tested out for a much lower price. They absolutely loved it. I’m so excited. I’m going to launch my final version of the course.

What’s it called?

My first book is called Money Honey: A Simple 7-Step Guide for Getting Your Financial Shit Together. The course is called Get Your Financial Shit Together. It goes along with the book. It’s a lot of fun.

This can be online like a virtual summit or videos. How are you going to deliver it?

NCS 613 | Retirement Goals

Passive Income, Aggressive Retirement: The Secret to Freedom, Flexibility, and Financial Independence (& how to get started!)

It’s all online. It’s all prerecorded videos. There are homework assignments, all these Excel templates downloads, bonus content and lots of different things.

What’s the price point for our readers out there who are salivating reading this?

I haven’t nailed it down 100%, but I’m pretty sure it’ll be like $247 or $297.

That’s a great price point. Your time and knowledge are valuable. That’s one of the things I always tell entrepreneurs. We’ve been teaching online workshops for years and charging. When people have an investment, they show up. They take a lot more ownership into what they’re learning versus if it’s free or very cheap, they don’t take as much serious because the investment’s not there.

You have to have some skin in the game to take it seriously. If I was offering this course for free, people wouldn’t take it seriously. You have to have some type of investment or commitment.

That’s on everything. You got to invest in yourself. You dropped a little bit of money in the stock market as well too to buy some stuff. You’ve dropped $10,000 a month of passive income for you into the stock market. Do you want to dive into that and share a little insight on what you’re doing there?

I did it right in March 2020. I was lucky on the timing. I saw that it was down far. I was like, “I got to get in.” I wish I had invested more. I put $10,000. I put it all in VTI. I’m a big believer in index funds, ETFs and passive investing. There’s been a lot of research that showed that passive investors perform as well as active investors. If that’s the case, then why are you paying a 1% or 2% fee to a mutual fund manager? I always tell people, “Do index funds, ETFs. Aim for an expense ratio that’s 0.2% or lower. By doing that, you’re going to get a 1% higher return because you’re not throwing your money away.” That’s the way I invest. Invest for the long-term, buy low, sell high. Don’t try to time the market, all those golden rules.

You put money where your mouth is. Here are the things to do it. Are you planning on getting your license there in Colorado and looking at a property there in Colorado Springs?

Not immediately. The last time we acquired property was in 2018. We were still working full time when we got to this point where we did not have the capacity to acquire any more rentals. We took our foot off the brakes. We haven’t needed to. For real estate investing for us, it’s more of a means to an end. We got to this point financially where it’s making enough to more than cover our expenses. We don’t exactly have the drive to keep building this massive empire. We have thought about selling some of our properties in Kentucky and then maybe doing the 1031 exchange and buying a massive complex out here. For some reason, maybe you can speak to this, it’d be easier to have one big property. Things would be more streamlined rather than having all these different random things in Kentucky. I don’t know. We’ll see.

It all depends on the deal. It depends on your time and energy. If you’ve got one property, great. If it’s 30 doors versus 30 properties, it’s a little bit different aspect of things. It all depends on the price, your comfort level and how much time you have to go into moving the other properties and then finding the other properties. Multifamily is one of the most overpriced assets right now in the market. I also think there’s going to be a lot of opportunity here as the market starts to come down. You had a lot of people buying multifamilies that’s way overpriced. They are counting on appreciation and the fact that they go and regentrify and get refinanced out in three years. By looking back at what happened several years ago, when the market dropped and the value dropped, the banks had capital calls. All of these investors are bringing 20%, 25% cash to refinance out. Most people didn’t have that. We saw a wave of specifically 100 or 200 or minus units hitting the market in default. You’ve got some opportunity if you wait around for 6 or 12 months here.

Maybe I’ll wait and take my time. I’m in no rush.

That’s the beauty of it. That is a very smart thing. Especially telling investors don’t get OTSC, “Oh, That’s So Cute, I got to have that house right now.” Be smart. Work on the numbers and get in the habit of saying no to skinny deals and going to next. When you rush in, you make a lot of mistakes versus being patient and smart.

I always tell people the best advice I can give to new real estate investors is to be patient, do not settle. We looked for that first duplex for nine months. That was after making offers, having accepted contracts that fell through, having to back out from inspections. Let me tell you all of those previous properties we made offers on, they weren’t nearly as good as the one that went through that duplex. Be patient, the right deal will come up. Scott, you made another important point too, which is that you can never count on appreciation.

The way I see rental properties is that there are three benefits. I’ve referred to this as the Holy Grail rental properties. You get the passive cashflow, that’s number one. Number two is you get the equity buildup because your tenants are paying your mortgage. Number three, you get tax benefits. A lot of people would say appreciation should also be in there, but I always view it as a bonus. It’s like, “If I get appreciation, great, but I’m not going to count on it to make the numbers work.” I’m only going to view that as an extra, as a bonus.

That’s the cherry on top of the sundae. A lot of times when you look at different markets, appreciation doesn’t kick in. If you look at the West Coast predominantly, they’ve counted on appreciation. I know people that would slice their grandmother’s throat for a four cap. That doesn’t make sense if you’re thinking about what you’re investing in. You will also look at the value. I can buy one property out in California. I could buy a block in Columbus, Ohio or something like that.

I’m not super familiar with California, but after moving to Colorado, everyone here is like, “Everyone from California is moving to Colorado right now.” I’m wondering if it’s become so oversaturated, overprice in California, maybe that bubble is popping a little bit now.

NCS 613 | Retirement Goals

Retirement Goals: Once your passive income exceeds your living expenses, you’re retired and financially independent.

 

If we listen closely, we can hear the air escaping from that balloon there. It’s Colorado or Texas where they’re moving to. We get many people here that are doubling down. They sell their house, two-bedroom, two-bath and buy a four-bedroom, four-bath for a third of the value. They put $500,000 in the bank to do some stuff with it. Let’s take it back a little bit though. With you working with people, and being a financial advisor, what’s the 1 or 2 things that drives you apeshit? You’re pet peeves when you’re talking with people. For me, it’s if you give them good counsel and they go the opposite direction. What’s a couple of things that drives you bonkers when you work with people?

That’s such a funny question. I don’t think I’ve ever been asked that, but one thing comes to mind is I get a lot of questions about, should I do a balance transfer on my credit card? I have mixed feelings about this because on one hand, transferring tens of thousands of dollars into a no interest, no balance transfer fee credit card, that can save you a lot of money in interest. At the same time, I hesitate to tell people to do that because I’m like, “Are we fixing the problem or the symptom?” The only way to get out of credit card debt or any debt is to pay it off. Moving it from one type of debt to another type of debt account, that’s not going to do anything.

Maybe it can make it easier, but I always tell people, unless you’re ready to pay off that debt aggressively and you have a plan to pay it off completely within that introductory period, don’t do it because you’re going to end up hurting yourself more in the long run. You’re going to give yourself a sense of relief and a sense of feeling like, “I can take my foot off the gas pedal now because I moved it to this account. It’s 0%.” You feel like you’re buying more time. That’s not what’s happening. I always tell people that.

Another thing that comes to mind is with student loan debt. A lot of people say, “Should I be consolidating this? What’s the best way to go about this?” Student loan consolidation can be a great thing, especially if you’re getting lower interest rates. A lot of people will look at consolidating their debt. They’ll see, “This bank is offering me a lower monthly payment. This is great.” They don’t look at the interest rate. What’s happening is the term length of the loan is increasing. It’s going to take you a lot longer to pay it off. That’s what’s making those monthly payments go down. People think, “I’m saving money.” In reality, that’s going to cost you a lot more in the long run. I always say, “If you’re going to consolidate your student loans, stick to the original term length of the loan and get a lower interest rate.” That way you’re helping yourself out.

Throwing that one extra monthly payment in there to reduce a lot of extra interest over time, reducing that and speeding up the payoff of that aspect is also probably something you’re a big advocate of too.

Be as aggressive as possible. Dave Ramsey talks about the debt snowball method. In Money Honey, I talk about the avalanche method, which is where you pay the highest interest rate first. That’s going to save you the most money over the long run. The secret that I tell people is it doesn’t matter which method you use. Use the one that’s going to motivate you more. Use the one that’s going to help you pay off your debt the quickest, and either one is going to work.

You and your husband are very goal-oriented. You put plans in place. What’s your ultimate goal? What’s your 5 or 10-year goal that you are working towards? You guys have probably had those conversations. What’s the end game for you, Rachel? What’s that honeypot of gold that you’re wanting to get to?

The end goal for so long was to get to this $10,000 a month mark and to be completely financially independent. We are totally financially independent. We could become more financially independent, continue to grow our income, make more money and save more. That’s fine, but we feel like we have this sense of we hit our goal and we’re going to relax a little bit and enjoy life. It becomes a lot more now about, “What brings us fulfillment? What can we do for fun? What do we love to do?” We love to travel. We’re not doing that right now. We’re hiking. We’re enjoying our time together. We sacrifice 2 or 3 solid years where we were working 80 hours a week and not spending enough time with one another. Now it’s been refreshing to get that quality of time back, relax a little bit and reset. In terms of one of the more fun goals that I have, I’ve always wanted to write a fiction book and become a fiction novelist. I’m going to start dabbling in that for fun. Most of the things now that are goals are for fun goals, which is cool.

If you’re going to work so hard, you’ve got to play hard. One of the biggest thing entrepreneurs struggle with is that we’re so driven to get things done. We don’t enjoy the victories along the way. We don’t celebrate the little wins. We get so burnout burning the candle at both ends that we’re not stopping to smell the roses, not stopping to take the time and say, “$10,000 is my goal. I got to $2,500. Let’s celebrate us being a quarter of the way there,” or we shoot these big goals. At the end of the year, we don’t hit them, but we’ve still exceeded anything we ever done. It’s good that you’re enjoying yourself. It’s good that you’re having fun. It’s good that you’re smelling the roses and what you’ve worked so hard to get to. That’s a very valuable thing.

I appreciate that. I’m glad you said that because having that burnout, that’s been my biggest struggle in the past few years of my life. It’s something everybody struggles with, but it got to a dark place for me personally. I was overcome with anxiety. I remember even when I quit my job, I had anxiety. I thought, “I’m not going to have this accountability anymore. What if I become this lazy person, sleep all day and I don’t do anything?” I didn’t know myself very well because the opposite of that happened. I went from working 40 hours full-time to working 80 hours as an entrepreneur. It’s a lot harder now because there’s no clear start and stop to my day. I’m not going into an office and leaving an office to come home. Plus, I’m doing things that I truly love. I teach young people financial literacy and that’s so much fun. It doesn’t even feel like a job anymore. I can make it hard to protect my time and make sure that I’m relaxing. It’s something I still struggle with. I’m glad you bring that up because a lot of people can relate and it’s easier said than done is what I’ll say.

You have to block that time out. You’ve got to set those, “I’m going to go do this for myself.” Sometimes we feel guilty about taking that me-time because we get so used to that grind. I don’t know of a successful entrepreneur that puts in 40 hours a week for the most part. You’ve got tools of Titans over your shoulder there from Tim Ferriss who preaches the four-hour workweek. That’s great in theory, but we all know that’s in theory in a lot of cases if you’re not at where you want to be right now.

I always have this innate drive to keep growing and keep impacting. I didn’t become financially independent to sit on the beach or to golf. A lot of people do that and that’s great. I get bored easily. That’s me personally. I was like, “I’m going to keep working on this book business because this is what I love to do.” There are a few things that I feel like I’ve done in the past year that have helped me to protect my time better. One of those is that I only do calls or appointments or meetings three days of the week. The other two days I block off either. I can do the work that I want to do or have those days off completely.

The other thing I’ve had to be more comfortable with understanding that my to-do list is never going to be done. There was a time when we were in high school or college where we had a manageable to-do list and a lot of us could feel like we’re on top of things or ahead of things. As you become an adult or an entrepreneur, that’s not true anymore. If you’re always struggling to try to finish your to-do list, that’s a lot of what’s going to create that anxiety and burnout. I’ve had to be okay with realizing not everything’s going to get done. It’s okay. I will get to it eventually.

That’s the big thing. As we get older, we get big rocks as a list versus to-do lists. We’ve got the bigger things that we’ve got to get done. The little small things will fit into the cracks of the week or the day to get things done. You mentioned something that you’re working with the youth on financial literacy. Talk a little bit about that. What are you doing with that? There are a lot of readers that we’ve got here on Note Nation that have kids at home. They had been at home with them for 60 days, no visual or online learning. They want to try to keep their kids entertained and keep that mind working versus sitting in front of Netflix or Amazon for twelve hours a day. Tell us about what you’re doing with the kids?

When I say young people, I mean students, not like children or anything. My first book, Money Honey was geared towards female Millennials. As that came out and that had a lot of success, I started getting solicited by different college campuses. One thing I did a little bit in the past few months is I’ve spoken on different college campuses. The speaking thing is winding down a little bit right now because people aren’t doing those types of events. I’ve been doing a lot of virtual workshops. I would say overall, my target audience is high school students, college students, female Millennials, young people that are starting out in life and don’t know how to manage their money.

The thing is we are in a financial education crisis. At no point in our lives are we taught how to manage our money. We’re left as young adults to try to figure out all on our own, which is a little bit unfortunate. A lot of us feel these feelings of guilt, shame and embarrassment that we don’t know what we’re doing with our money. That’s why I’m passionate about it. That’s why I’ve made it my goal to teach those younger generations about financial literacy.

NCS 613 | Retirement Goals

Retirement Goals: The last thing you want to be doing in your business or as a real estate investor is you operating from a place of panic and desperation.

 

I’m getting chills here because I’m screaming the same thing that while we are the best country out there, we are such financially illiterate for such a mass majority of the United States. It’s such a bad thing. They don’t even teach you how to balance a checkbook in high school anymore. They don’t talk about trading. It’s all about barely passing a test to get buying it passed on. You may not be making a lot of mistakes. I remember being in college. I graduated in 2001 from college. I’m a little bit older than you, but it used to be a big thing of, “Get the college t-shirts. We’ll give you $1 to fill out the credit card application for Discover,” or something like that. The beautiful thing is they outlawed that on campuses, but there are so many traps that we make student loans, not paying bills on time as college kids, because we don’t have the education. It’s not passed down a lot of times from families or our parents are not there. They’re not able to help out because they’re financially illiterate as well.

The problem is that not teaching this publicly reinforces systemic poverty. Kids that are growing from poverty, they’re not learning from their parents. That reinforces that cycle. It’s sad. It’s an enormous problem. There are many memes about them, but one of the ones I referenced early on in my book is that you’ve probably seen this meme, but it’s like, “I’m so glad I learned about parallelograms. That’s come in handy this parallelogram season.” It’s like, “Yeah, what the heck?”

When you were starting off, where did you get your education from before you got it? I know you were a financial advisor, but before that, what helps you build that foundation and what helps you gauge such an interest in personal finance?

One of my earliest memories of learning about money was in sixth grade. I was at this water summer camp or whatever. All my friends were going on the waterslides playing. I was sitting by the pool reading this book I had found, Motley Fool’s Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of. I was totally nerding out. I’ve been a nerd my whole life. I was like, “This is so cool. I’m going to be able to know this stuff at a young age.” I understood the advantage of time even at a young age. I was like, “I’m going to get far ahead.” The other thing too that motivated me is I grew up in this wealthy white county, surrounded by uber rich people. My family was always on a budget. We weren’t going out on these luxurious vacations. We didn’t go out to eat at restaurants.

I went to high school where when people turned sixteen, they were getting brand new BMWs. At that age, I remember feeling like I didn’t fit in. That’s the last thing you want to feel in middle school and high school. I remember thinking, “I don’t want to end up like everyone else who’s struggling with money. I don’t want to have to operate on a strict budget for the rest of my life. I don’t want to have to borrow money from family and friends to make it to my next paycheck. I wanted to be different.” I realized then that what I did then was either going to set me up for wealth or for poverty. I had these motivations, this feeling of wanting to stick in, wanting to become financially independent at a young age. Those you call them fears is what has driven me to become what I have become.

Fear is a huge motivating factor that we want to overcome things. I feel that same way too. I saw my parents struggle when I was young and I did not want to end up back in that situation. Fear has driven me to keep going. Even though I look at my parents as heroes because they were my motivation and where my work ethic is from, but I agree to that. You look back and realize, you don’t want to be in that same situation when you’re older and you want more for your kids or your family as you grow older. Where is your favorite place to travel to? I had asked this question because Steph and I love traveling as well. If you could go anywhere right now, they opened up the borders anywhere in the world or on the United States. What are the top 2, 3 places that you would go to right now if you had the opportunity?

My husband’s family is from Italy. I’ve always been obsessed with Italy. I’ve always wanted to become fluent in Italian. We go there once every 2 or 3 years. It feels like my second home. If I ever had to pick, I would keep going back to Italy.

What part of Italy?

His family is from Chieti, but I’ve been to lots of different places. We did Northern Italy. We were in Venice and Lake Como. It’s beautiful. There’s so much to see there. I’ve been in Santorini, Greece. It’s the most picturesque place I’ve ever been in my life. That’s another good one.

Italy is one of our favorites too that we’ve been to a couple of times in the last couple of years. We’re taking a couple of cruises, hitting 5 or 6 spots. We’ve talked about going back and spending more time, especially wine, the country, the food, the people, the bread, the cheese, the pizza. The artwork and the architecture are beautiful. As with any good architecture or any type of building, it wasn’t built overnight. With retirement and savings, it’s not built overnight. You got to build it one brick at a time, one deposit at a time. We talk about the budget aspect of starting to put away money towards saving. How important do you want to scream at people to start putting something away? We talked about this at the beginning, 85% of Americans were one missed paycheck away from being in default. Before all this happened, 10% of Americans are already 30 days behind in their mortgage. It’s important to be putting something aside and doing it on a regular basis. It’s $1 or $100 a month.

It’s hard. There are people who are scraping by. Systemic poverty is real. It’s hard to get out of that cycle because some people are already doing everything, they possibly can to make more money. When you’re thinking about saving money, it boils down to this, in workshops and when I’m teaching people, I’ll ask people, “If you’re trying to save money quickly, what kinds of things do you do?” A lot of people will say, “I’ll eat out less. I won’t shop as much. I’m going to make my coffee at home,” stuff like that. That’s all great. There’s a common theme there. Most people are focused on decreasing their expenses, which again is great. You have to get your spending in line and make sure that you’re not living above your means.

It’s important, but there is only so much you can do to decrease your expenses. In normal times, you can’t negotiate your rent or your mortgage payment. You can’t stop paying car insurance. You can’t stop buying food. There’s a little bit of a limit. I always tell people the bottom line when it comes to saving more money is doing one of two things. Either decreasing your expenses or increasing your income. For whatever reason, a lot of us, we don’t automatically go to that, increasing your income. The great thing about that is that there’s no cap on how much money you can make in a year. There’s nothing stopping you from going out and making more money. I always tell people, if you’re looking to save more or make an impact with your budget, don’t do one or the other, focus on both, decreasing your expenses and increasing your income.

This has been so much fun, Rachel. What is the best way for people to connect with you or do you have a way for people to sign up for your course that you were talking about earlier? What’s the best way for people to reach out and connect with you?

All the information can be found on MoneyHoneyRachel.com. Both of my books, Money Honey and Passive Income, Aggressive Retirement are in e-Book, paperback and Audible. You can find them on Amazon. I will give readers my free passive income bonus gift. This gives you some resources, deadly mistakes to avoid, free resources and tools if you want to start building passive income. You can go to MoneyHoneyRachel.com/bonus to download that.

Thank you so much. I guarantee you’ll be seeing some downloads from our reader database because they are action takers. Rachel, this has been awesome. We got to have you back on at a later episode.

Thanks, Scott. You’re great. This has been a lot of fun.

There are many great nuggets of advice and counsel from Rachel. Do something powerful, do something for your future self. If you want to accomplish big things, start now. As Rachel said, “A little bit here, a little bit there,” not just on cutting debt, but going forward, making more money. There are many different ways. You have to look at what’s going on right now as a way to pivot to capitalize on the different opportunities available out there for you, so that you can bring in multiple streams of passive income to help you with your goals a lot faster. Go out, take some action, and we’ll see you all at the top.

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About Rachel Richards

NCS 613 | Retirement GoalsOnly 27 years old, former financial advisor Rachel Richards has made a name for herself in the personal finance realm. In 2019, Rachel quit her job and retired, with over $10,000 per month in passive income! She is the bestselling author of “Money Honey” and “Passive Income, Aggressive Retirement.” She has been featured on the Penny Hoarder and the New York Times and has been contracted to speak at colleges. Rachel is also a real estate investor with 35 rental units. Her valuable money lessons have helped thousands of millennials work their way out of financial despair. She has successfully done what no one has done before: made the topic of money management fun, entertaining, and simple!


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