BiggerPockets Money Podcast - 178: Finance Friday: From $33k in Debt to $100k+ in Net Worth Through House Hacking & Smart Saving with Budget Girl

Episode Date: March 12, 2021

Last time we talked to Sarah, AKA Budget Girl, she was on Episode 6 of the Money Show. If you haven’t listened to that episode, here’s a quick recap. Sarah was $33,000 in debt from student loans, but she was able to pay it off while making less than $30,000 year! For most people, this would have taken decades to pay off, but Sarah was able to crush her debt in only a few years! Now it’s time to check in on Sarah, and see what she’s been doing since clearing herself from debt. Currently, Sarah has a net worth of over $100,000, she took some advice from the BiggerPockets community and bought a duplex to house hack! She purchased the duplex within the “path of progress” around Texas A&M University. She’s seen some solid appreciation over the past 10 months and cash flows a small amount off the property. She’s not only living for free, she’s getting paid to live in her own property! Sarah has also hoarded a serious sum of cash and investments sitting on the side. She has retirement accounts, brokerage accounts, and a large surplus of cash that is slowly building so she can buy her next property. Sarah is able to do this by keeping her expenses very low, while making money from her full-time job and her side hustle as Budget Girl. She proved that even with a low income, you can get out of debt and hit financial milestones! In This Episode We Cover Getting out of debt fast, even with low income Creating multiple streams of income so you can save and invest heavily Buying properties within the “path of progress” House hacking to live for free (or getting paid to live) TSPs, Roth IRAs, and other retirement accounts Keeping your spending conservative so you can go all in on investments And So Much More! Check the full show notes here: https://www.biggerpockets.com/moneyshow178 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 178 Finance Friday edition, where we check in with Sarah Wilson, the budget girl, and talk finances and real estate investments. My basic plan above that was to save for the next property because I would like to keep buying myself more sources of income. That's really fun. Didn't know about that when I started all this, you know, trying to pay off debt a few years ago. I really enjoy it. Hello, hello, hello. My name is Mindy Jensen. And with me as always is my calculator-loving co-host, Scott Charles. French. That about sums it up, Mindy. Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story because we truly believe that financial freedom is attainable for everyone no matter when or where you're starting, and today's episode proves

us right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business, or get out of the conservative mindset and start playing to win. We'll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams. Scott, today we welcome back, Sarah Wilson, the budget girl, and we talked to her and catch up with what she's been doing and look at what she's doing with her finances. Remember when we had her back on episode six, she had just paid off $33,000 in student loan debt while making $30,000 a year. And that scarcity mindset has really affected her opinion of money, not opinion, her relationship with money, which I find very fascinating.

And now she finds herself in an enviable position, but she didn't realize it, I think, until she spoke with us. Yeah, this was a great episode. And, you know, I just can't wait to get to it because she is just so impressive. I said it, you know, she started off in a really tough spot, $30,000 in debt, $30,000 in income, paid it off, got to zero a few years ago when we last talked to her. And now she's built a significant net worth is house hacking. And I believe that she is very high probability going to become very wealthy very quickly in the next couple of years. And we had a fun discussion about how to maybe accelerate that today. I agree with you.

She is very impressive and she is on her way to generating massive wealth. Before we bring in Sarah, let's talk about what my attorney makes me say. My attorney says the contents of this podcast, her informational in nature and are not legal or tax advice. And neither Scott nor I nor Bigger Pockets is engaged in the provision of, legal tax or any other advice. You should seek your own advice from professional advisors, including lawyers and accountants regarding the legal, tax, and financial implications of any financial decision you contemplate. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings,

investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving,

not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. so every decision actually moves in Edle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at monarch.com code pockets. I love Matt, said no one ever. Nobody starts a business thinking,

you know what would make this more fun? Calculating quarterly estimated taxes? But somehow every small business owner ends up doing it. Your dreams of creating, selling, and growing, get replaced by late nights chasing receipts, juggling invoices, That counts as a write-off. Change all that with Found.

Found is a business banking platform built to take the pain out of managing money. It automatically tracks expenses, organizes invoices, and even preps you for tax season without you doing the heavy lifting. You can set aside money for business goals, control spending with virtual cards, and find tax write-offs you didn't even know existed. It saves time, money, and probably a few years of life expectancy. Sound has over 30,000 five-star reviews from owners who say, Sound makes everything easier, expenses, income, profits, taxes, invoices even.

So reclaim your time and your sanity. Open a found account for free at found.com. That's fowundd.com. Found is a financial technology company, not a bank. Banking services are provided by lead bank, member FDIC. Don't put this one off. Join thousands of small business owners who have streamlined their finances with found. Audible has been a core part of my routine for more than a decade.

I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leen or Stronger for Fitness, the Anxious Generation for Parenting Perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals,

podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP money. Today we sit down with Sarah Wilson, budget girl, to review her finances. We first spoke with Sarah all the way back on episode six,

and she shared her story of paying off $30,000 in student loan debts in three years while making $30,000 a year. Today we're going to look at her overall financial picture and specifically at her recent rental property purchase. We'll review her numbers in the Bigger Pockets rental property calculator. And for those of you listening when this episode airs, this weekend, March 12 through the 14th, 2021, is all you can analyze weekend on the rental property calculator on biggerpockets.com. This weekend only, March 12 through 14, get unlimited access to our rental property calculator and property insights. No limits, no credit cards, no commitment. Plus, share your analysis in the forums for a chance to win a one-on-one mentorship with our Rookie podcast co-host, Ashley Care and Tony Robinson.

And if you share your analysis in the forums, you will get feedback from other community members on your analysis to tell you if you're crazy or not, which I think is very powerful. Ooh, that is fantastic. I forgot about that part. Thanks, Scott. So, Sarah, welcome back to this show. I'm so excited to see you again. Thank you so much. I'm so thrilled to be here. tell us what you've been up to the last three years. I can't believe there's been three years since I last spoke with you. Like online, I've spoken to you offline. Yeah. So last time I was on the show, I had just paid off $33,000 worth of student loan debt on an average $30,000 income.

I started at 26. And since then, I have saved a bunch of money. I now have an over $100,000 net worth. And I am the owner of a duplex. Very freshly 100,000 air over here. I love it. Congratulations. That's awesome. Thank you. And if you haven't, and Mindy mentioned this earlier, but if you haven't already, go back and listen to episode six because it's just incredible. I mean, it's not the most debt we've heard paid off in the show, but it's the most debt we've paid off,

had seen paid off at the shortest amount of time relative to the income level that you had. It's a truly remarkable and impressive feat and no surprises that you're becoming wealthy a few years later after achieving that. Thank you. It is a, it's a lot more fun. to build up the wealth than to pay off the debt. I'll tell you that. And a lot faster, too. That's really fun. Yeah. Wow. How much and that just grow. Compound interest is working for you rather than against you with that. So can you tell us a little bit about just to catch up on the money story before we get into that review. Could you give us a little bit of a catch up on the duplex potentially or any other highlights of the journey of the last three years? Yes. So the duplex

purchase I actually have only had for 10 months. So I bought it right when the pandemic started. I was renting and I was saving up for a property because I knew I wanted to do multifamily and I found the perfect place after shopping for a year right as the world went to hell. So it came at a very good time because my rental apartment was actually going to increase $300 a month. And so I started really seriously thinking like if I find the deal where the numbers work, let's go ahead and do this. So it was a $230,000 property. in College Station, Texas, and it has three beds, two baths on each side, little backyard, little three parking spots for each unit. Very cute little thing in a little subdivision

near the campus, Texas A&M University campus, in the direction that the campus is growing. So I very much anticipate that that will increase in value. And it already has. It's actually already worth $2.50 after 10 months because I just refied. All right. I want to point out that somebody else on this call also purchased in the path of progress. And that would be Scott, not me, because we have different investment styles. But that is a really great thing that I think some people don't realize or take into account. If the path of progress is going north, you need to be looking north because those are where the properties are going to appreciate at a faster rate than the potential path of progress than outside the potential path of progress.

And nothing's guaranteed, but Scott had a really great way to choose his property, too. And it was smack in the path of progress. Yeah, parallel. Also, my property was with $240,000. So a very similar type of deal for us. And even our cabinets are the same. I saw on Instagram. Yeah, the same exact cabinets that by my property had. But let me ask you this, is your property located when you say the path of progress,

in the best area you could be living in right now if you were to purchase anywhere in a 30-mile radius? No, not even close. But it's also not in the worst. It's in kind of a medium area. There's some older homes nearby, and there's also a, they just built like a Walmart and a shopping center there.

But more importantly, Texas A&M owns so much of the surrounding area, and they keep building in that direction. And, I mean, the university plans are on the website for free. You can go look at them. that like they're planning on growing in that direction. So I could be just like a spit from one of their like giant new enormous buildings in a couple of years. Awesome. And my understanding is your house hacking this. Is that right? Yes. So I am renting outside A. I actually, originally I inherited a HUD tenant who was paying 10.50 a month. Her lease ended at the end of

February. I am doing some fix-ups on the project this month in March. And I have a new tenant moving in in April at 1250 a month. Awesome. And I understand that you're crowdsourcing feedback on your remodel on Instagram. So you can follow her at Go Budget Girl. And she really wants more opinions on what color she should paint the kitchen cabinets in the second unit. Is that right? Oh, definitely.

Yeah. And the other parts of the house hacking, of course, is I actually, so I have renters on A, I live in B, but my boyfriend also lives with me and I charge him $500. a month in rent because I'm nobody's sugar mama. All right. I was going to say, how did that conversation go? That's still a good deal for him, right? That's less than the other half the other side.

So, like, it's a three-bedroom unit. So we both have an office and we share a bedroom. He has a lease that I wrote for him and we both signed with, you know, contingencies for things that might happen. He didn't have a deposit. He doesn't have pet rent. And he essentially gets way more space than he would, anywhere else in town for that price. And due to that, he's helping me with the A unit right now.

He was mopping yesterday while I was at work. All right. Perfect. It works out. But I'm glad that there's that conversation. And what's your mortgage payment on this? It was originally just under $1,700 a month. So I was paying $150 a month out of pocket. But I just refied. And I was able to go down almost a whole point. So my new mortgage is going to be $1,500. So just under 1600. So I'm going to be making $100 a month. That's fantastic. And so why did you refy generally? Was it because of the interest mostly? Or was there like PMI that you're able to shed? Or what were some of the things around that? Unfortunately, I wasn't able to shed PMI quite yet. But I saw that interest rates were dropping. I was pleased with my rate. I got a 3.65 right around

the time that everything was going down and then it bumped up a little bit. And I did an FHA low. so I only put 3.5% down. Even though the property had appraised for 10 grand more than I paid, and even though it's now worth 10 grand more than that, I'm still not quite to the level where I can shave off the PMI, but that's $150 a month. And I find that to be worth it. Are you still with a conventional loan? No, I'm an FHA loan. And I was able to do an FHA streamline refi, which I just found by kind of looking into any refinance options. It cost me $0 to refinance, and it shaved $150 off of my interest payment.

$50 of what used to be my interest payment is now going to the principal, and my escrow and taxes and PMI all stayed the same. But overall, my loan went down $100, and $50 more is going to principal each month because I refied. I went from 3.65 to 2.75. Awesome. And so just a slight tangent here. We had a guest on recently who talked about some of the drawbacks of FHA being the appraisers can be real sticklers, which can make some sellers not want to sell to you if you have an FHA loan. We talked about how the FHA loan comes with that PMI, how you have to refinance out of it. This is an interesting tidbit that actually makes the FHA loan look a bit more favorable than I had thought coming into this call. I did not know this before that. But it looks like there are some really cool options to continuously refi- the FHA loan of interest rates drop that you were able to take advantage of with very low cost. That's fantastic. Did not know that. Yeah, the FHA streamlined program essentially took some of the costs of it. I didn't have to do an appraisal or pay for that. And then the lender costs were pretty much absorbed into that as well. So it was really great. It would have been stupid not to do it.

Yeah, that is a, I haven't had an FHA loan for a few houses, but that is a really, interesting program. People ask, is the FHA streamline refinance worth it? While it may sound too good to be true, the FHA streamline is a perfectly legit refinance program backed by the FHA. Can offer a simplified low-doc application process and below market rates, but you have to be a qualified homeowner or the current FHA loan to use this program. That could be the difference between getting a conventional or an FHA. Very interesting. And I bet you one additional trade-off with this is that you're probably committing for at least another year to living in the property, I imagine, with it. Actually, there were no qualifiers for that. I kept asking lenders. There was no original

qualifier for the first FHA loan, and there's no for the refi either. So I checked and double checked because a year from now I might be in a different property potentially. That's a powerful tool then that I think opens FHA back to folks listening as a potential consideration for your first or second house hack with this. That's awesome. That's very interesting. Thank you for sharing that. I'm learning a lot here with this. Okay, so we've got a good house hack underway. Let's get into the finance review with this kind of stuff. Since we've already got the duplex, which looks like it has, you know, how much equity do we have in that duplex? Maybe we could start with that. You know, I'd have that number if you didn't tell me. Current loan amounts, 221, and it's worth 250, though I'd have to get like an official appraisal to double check that. But that is what the internal systems that the new mortgage lender appraised it at. Okay, great. So we've got about 30K there. Where else do you, are you building both right now?

So I have a teacher's retirement savings account or retirement system. I work at Texas A&M. I'm not a teacher, but because I work here, I get to use that. And that has about 15K in it. They have a really wonderful match program for my day job. So I put in 7.7% and they match it to 7.5. And I have a Roth IRA with about 13 grand in it and an old IRA for about 10 grand, and then I have about 3 grand in a just regular brokerage account. I am working on increasing investing right now, but I wanted to save for the house and then have kind of stock up some savings as well, just in case first. Don't make apologies. You are doing fabulously. Don't make apologies. Sorry, did I miss one part of that? Do you have cash savings right now, or is that really your $3,000 in the after-tax account? I have $44,000 in cash. Oh. Well, that is a great position. So you have a lot of options with that, with that. Yeah, we'll talk about that. When you say cash, does that mean sitting in a bank account earning 0.01% interest?

Cash or? I mean, it's in high yield. 0.8%. Yeah. Point two. Okay. Okay. Well, that's still good. It's easily liquidatable, but not currently invested. So if you're going to be using that soon, you don't want it to be currently invested at anything that could be rather volatile. How does it feel to have more liquid cash than you had debt a few years ago?

It feels really wonderful. I consider it my little goblin hoard and I just like to go look at it sometimes because coming from the place where I was where I started on my journey, unemployed in 33K worth of debt, not knowing how I was going to pay my rent or feed myself. That feels like a security blanket, and it feels like a box of options in case anything bad happens. That's fantastic. Yeah, I can't argue with that at all. And that's a solid emergency reserve. Is that going to be like a year or two of expenses? Or what does that equate to you?

The breakdown is $10,000 in a personal emergency fund, $10,000 in an emergency fund just for the duplex, about $9K in sinking funds, which I am starting to think maybe that. that money might be better invested. And I keep about five grand in my personal checking account and in my property checking account where rent comes in and out and for regular expenses. I think that's really smart. I like that a lot. We'll revisit that, I'm sure, in a little bit. But I think that's actually there's a lot of, I think that's really good. That's incredible. And that's just the testament to another several years of great hustle and discipline. I'm sure is what has contributed to that.

Okay. Let's talk income. I make $50,000 a year now at Texas A&M. I've been blessed to get several raises since I've been here. And I make about $3 to $5,000 a month off of my budget girl business. So that's YouTube, AdSense, website ads, sponsorships, affiliates, et cetera. Last year, I made $35,000 of a budget girl, which was my best year yet. And I grossed about $25. This year, I have plans to make at least $15,000.

$50,000 with it. So you could be living off of your budget girl salary and investing in saving your day job salary, right? I've been kind of doing the opposite for the past several years. I've been living off of my day job salary. And, well, I was saving and investing 40% of that. But now the mortgage is in there. But I also make money off of the mortgage now.

So it gets a little muddied. but I've been living off my day job income and then since budget girls a little bit more flex, I save from that towards whatever my next money goal is. Okay. Well, this is awesome. So we're looking at about 75K in net income per year right now, and that's expanding rapidly, maybe increased this year, and no cost of housing. Right.

And that's not including, you know, the rental income, which, yes, for the most part, is just going to the mortgage. But I made $18,480 off of that in 2020. And anticipated income for this year will be 22, just under 23. That's phenomenal. So for our purposes today, I think it would be good to just think of that as a wash, where your housing is effectively zero, and that you've got 75K in income disposable,

but no housing expense. So that should go really, really far, which is really exciting on that. So what about the expense side? So my expenses are about $5,000 a month, including the mortgage. So about $3,000 a month realistically. And 15% of that five goes to investings and 20 goes to savings. You're sending $750 a month to your investments.

And you're sending $1,000 a month to your savings account, your various savings account, and you're considering that spending. Yes. I love that you consider that spending. That's how my budget breaks down. I actually show my budget every single month on YouTube, so it might be easier to, like, see it in practice. It might be a little funky.

No one ever taught me how to do this. I just kind of figured out what worked for me in my brain. I was just going to say, does it work for you? Yeah. Yeah. And then any extra I make on top of that, I'm able to sort out. So any business income I make each month,

I do the income expenses for the, that, save a portion for taxes, and then maybe save a little bit for future expenses, and then apply the rest of that to whatever I want and subtract any additional housing expenses for the property. So I heard $3,200 a month in spending after the mortgage payment. Yes. And $750 plus $1,750 of that $3,200 is going to investing or saving. So you're effectively living off of $1,250? Is that correct? outside of the housing payment? I just brought my budget up.

So before savings and investing, total expenses, including the $1,700 mortgage, are $33.47. So 70% of my 5K take home. 930 goes to savings each month. About 550 goes to investments.

The rest is electricity, groceries, some personal spending, clothing, Kindle Unlimited is important. So you live off of 1,600 a month at this point. That's how I would, I'm reading it. Is that math right? I don't like, maybe I should do crunch these numbers more often. I just convinced my, yeah, that's $1,600. That's a realistic number with no housing expense, right?

That probably feels pretty good. It feels like you have a plenty on the zero housing expense. Oh, yeah. That's living large for me. When I started this journey, I was making $1,600 a month, and, you know, 500 plus of that was going to debt. So that's awesome. Wow. That's a great quote. I had to do the math. Now you're spending 100% of your income from seven years ago.

So you're really spending too much. We're going to have to spend the rest of the call there. Attacking that, I think, is going to be the advice. I mean, honestly, like, I just went over to my budget. And I'm like, I mean, I've got $300 a month for personal spending, $150 a month. for restaurant, 300 for grocery, 60 bucks for clothing. Like, that is more than I need. And I don't normally spend all that each month. And that's out of that 1600. So I'm living large. What do you do with the extras? That goes, everything rolls down to what's left over. So

anything that I don't spend in my budget combines with any additional income that I got that I didn't have the expense for. And that goes to my big honk and money goal. What is your big honk and money goal? Right now it's the next property. Okay. So sometimes it's, you know, $1,000 to $5,000 in a month that I'll be able to throw at that. So, yeah, let's talk about that then. I think you have a phenomenal cash accumulation rate relative to your situation. It's fantastic.

I think best we might have heard ever on the show with this. And then I think that you've got a very good, I think you have a really good match. It sounds like you're taking all of that and maximizing that. I'd be interested to hear if Mindy has some thoughts on the retirement accounts piece, specifically. I think that there's some optimization with you being a teacher that we could play with. And then I think the rest of the media discussion after that will be on the next investment piece and put yourself in position for that. I think you're very close. You're capitalizing very intelligently for what I can see so far. Yeah, the first thing that I thought of when I saw your numbers, and I do get these numbers in advance.

I don't just get these numbers right here and, you know, try and figure this all out. I get them in advance. And I said, oh, TRS is teacher's retirement system. That's great. I didn't realize you were a teacher. Do you have a 457 plan? And your response was, I don't know, let me go look into it. You looked into it.

And not only do you have the TRS, which I am assuming is the same contribution limits as a 401K or a 403B, the 19,500 every year? I think so. I'm not sure. I just put in the max that they allow me to and then get to get that match. Okay. Oh, they only allow you to put in 7.9 or whatever your number was. I can't swear to that, but they make you put in 7.7 to get the match. So that's what I did.

Okay, okay. So the 403B and the 457 plan, do you have to take the TRS or the 403B or can you do both? I checked it. I can do it in addition to up to 19,500. up to 195 across both like a total of 195 across both no I think it was an addition to I looked at

you mentioned it earlier and I looked it up I was like I've literally never heard of the 457 before or so I had to look up do I have this and I got to the benefits book and there were two optional plans that I could put an additional 195 into okay the TRS

you are maxing out great. She's not maxing it out. She's taking the maximum match, right? Taking the maximum match. Oh, that's an important consideration. We have a high-level strategy issue here because she's taken the match, but she's also house hacking with a phenomenal ROI, which I think we have to discuss.

And that the next investment repeating that might have a tremendously higher ROI than the pre-tax savings that she would get from maxing out. one of these other options. And so that's going to be an interesting strategic discussion because she's got good income and good savings, but she can't max out both of those accounts and buy more property at the same time in the short run, right? So that's going to be fun. I don't know what the right answer is there. I don't know what the right answer is either, and we are not giving advice. We are making suggestions for Sarah to look into. This is for entertainment purposes only. However, our friend, the millionaire educator, wrote a fantastic article.

on the 457 plan. It's called Seven Reasons to Love Your 457. And I will include a link to that in the show notes. It's also in the show notes for the Millionaire Educator episode, but I can't remember what that is off the top of my head. I'm failing in my old age. The 457 plan basically is the same as the 401K 403B, where you've got the 19,500 contribution limits.

But when you separate from service, you can take all of that money out of the 450s, plan penalty-free, not tax-free, but penalty-free. So you can pay no taxes now, kick that down the road until you want it out. But that's a great way to save and invest as well. It's like an additional option. So if you've just got $1,000 to $5,000 a month sitting around looking for a home, that could be a good idea. Do you have plans to separate from service or do you enjoy your job? I really like my job. And they treat me really well. well here. Much better than journalism. Okay, so maybe separation of service isn't something that you

want to consider, although I like the 457 plan more than the 403B. The 403B and the 401K are kind of the same, but different, but the same. But the 457, should you decide down the road that this is not the place that you love, you know, you can get that money penalty-free. Whereas with the 403B, I'm almost positive you would have to pay a penalty to. remove that money. Does the 403B come with the match and the 457 not come with the match? I wouldn't get a match for either of those. That's just an additional option for me not to pay taxes on that money. So you're getting a match in a third thing called the TRS. Is that right? Yeah, the TRS is where I get my match. And that's the preferred savings plan that has my retirement

benefits in it. My 457 is an option for me to put X amount of dollars in pre-tack. and for it to grow from that, but I had never really thought of it because I didn't know about it. I figured I would maybe dunk more money into just regular index fund investing at some point. Because you can get that out. I'm trying to figure out if that would just, if that would be better than the tax thing or what? I do think it's important to have both pre-tax and post-tax investments. As you start getting into a new tax bracket,

it could make sense to contribute to the 457 just to bump you back down to the previous tax bracket. It's a lot of things to consider. And you don't know about the 457 plan until somebody tells you about it. And you're like, wow, that's amazing. Jamila Sufret told us. And I was like, holy cow, I can't believe that exists. I want to go work in public service. Not really. I am maxing out my Roth. Yes, I love that. Would it be better, do you think, to put that money in the 457 or the Roth? No, the Roth. Yeah. So this would be above that.

Yeah, I think these other options now that I'm, here's what I see when I'm taking a look in digesting your position. I'm seeing someone who is highly disciplined, has complete control of spending, is expanding income steadily and rapidly now in a geometric fashion, and your monthly saving average is continually increasing. And I see intent to invest in ridiculously high ROI house hack real estate on the horizon. And you just can't do that in the retirement accounts, the 457s and those types of things. And so I think the Roth is great and the employer match is great in the TRS. And that's it. That's all I did in similar circumstances. And I think, yeah, you can lose if you do it that way. But the odds on that are just so much

higher in building wealth if you kind of stay focused on the real estate path. I think in this particular case in the short run. In two years, what's going to happen is you're going to be so rich and have so much income coming in because you're continuing to expand that and cash flow, that you're going to be able to do more of the above. And that's when the retirement account contributions and the 457 contributions and those types of things can probably continue to scale up. But I like the what you're doing right now. And I don't know if I would be putting way more in the retirement accounts. I think it's a sound strategy. And again, you're taking leverage and taking risk, but I think it's the right bet, even if it does, depending, even though who knows what the market

will do over the next couple of years. So one thing you said, Scott, was rapidly accelerating income. I believe that the single taxpayer income limit is $135,000 to still be able to contribute to the Roth. I love the Roth at your age. You're very young. You have all this time to grow tax-free wealth. So I would continue to max out the Roth. Of course, get the free money with the match and then max out the Roth. And then as you hit up on this, oh, I can't contribute to the Roth anymore. Throw as much money as you need to in the 457 plan so you can continue to contribute to the Roth as long as that's an option.

And again, just a suggestion. But now that you know about the 457 plan and the 403B plan, you can go and do research and make sure that all of the stuff that I'm guessing at is actually true. I think it's pretty close to true. And if you need the money and they're off, you just take it back out. Right? So that's not the issue if you need it for real estate purposes. I did do the math.

And currently including the match, which vests after a year, so I pretty much have it. A year? Yeah. I was all up in my benefit system this morning when you sent me that email. I didn't realize that. I figured it was three years, and I've been here three years. So I'm currently including their match, investing $13,600. $136.68 a year between TRS and my Roth, which seems like a decent amount to me for hopefully

longer term wealth building. The return on the TRS stuff is going to be like the 10% market average or whatever your assumption there is plus 100% with the match on that, you know, as long as you stay there and invests into it. The return on the Roth is going to be way lower than that. It's going to be whatever the average long-term return is going to be on the index stuff. but it's growing tax-free. So it's fantastic with that.

I want to talk about your ROI on the duplex as well, because that'll be a fun one. Yeah. Once I move out of there and rent both sides, I should be making $700-8-a-month off the unit above all expenses. So that'll be fun. And finding a duplex that you can live in for free and make $100 a month, plus your $700 or $800 on the other side,

that's Here's what's going on in that duplex Is previously how much were you paying in rent? $6.65 a month. So I had a pretty good deal. Now you're paying zero effectively, right? Or maybe $100 a month. You could say you're paying $100 a month if you covered utilities and maintenance and all that kind of stuff.

I don't know. Making that up, right? So you're saving $6 to $7 grand a year. And how much did you put down? $8,500. All right, you put down $8,500. Let's say you're making $7,000 a year in rent. rent savings that you wouldn't be having. That is absolutely ROI attributable to your duplex.

You're paying down, you're amortizing that loan, probably like three grand a year. Is that probably in the ballpark? Yeah, because it's very early in the loan, too, so interest is kind of high. Yeah, so great. So now we're at 10 grand in ROI. Your property has appreciated by, what, 10 grand? It was a price at 240 when I bought it, and I bought it for 230, and now it's worth 250, so 20, actually. Great. So you've made 20 grand in appreciation. So that's a $30,000 gain effectively in the first 10 months, it sounds like. I'm rounding on a couple of these on an 8,500. That's a that's a 340% ROI, right? And so that is, and that's not outrageous, right? I mean, maybe not everyone can buy a property that's for 10,000 less than it appraises for. So someone had some real guts

to buy this property and follow through during the COVID whole deal. And so. I was really scared. Yeah. So, you know, you deserve every bit of that, right? Thank you. Given the terror that you must have gone through and making, betting the farm on this property at that moment in time, right?

And so congratulations. That's why I did the FHA instead of a conventional. I had almost pretty much enough save to do a conventional, but I was, I wanted to hold back some money in case the world burned. Yeah, makes perfect sense. So that's 340% ROI on this property. And you're not getting that in your other, and I think on average, you could expect, hey, that property wouldn't have gone from 230 to 250 in one year, but maybe it goes from 230 to 28 in a year, right? That would be a more average and reasonable assumption. So in that case, it would have been 8 grand plus 10 grand, which would have been a 200-ish percent return. So regardless of whether you're taking the great return of the market that we got last year, or an average situation, that's just so much better than the alternatives that it's not even close, right? And what do you guys think? Am I, you know, there's closing costs so we can factor those

in and talk through it. But what do you think I am generally with this analysis? So just one fun fact that I found out after I bought the place, because it's, there's like an area of all identical duplexes. I made friends with the lady across the way. She told me how much her parents paid for that unit 10 years ago. And they just sold it again. and I did the math. So actually the houses in that area appreciate nine grand a year. Nine grand a year. Nice.

And that's probably like 4% a year, four and a half, something like that. Yeah. So that's fantastic with that. And it sounds like you have done, you didn't just buy willy-nilly in the area you found, you feel comfortable with the area and know where the path of progress is and where you think odds are the appreciation is going to flow in the next couple of years. Is that right? Yeah.

I shopped for a year. I saw maybe 13 or 14 multifamily properties, and I know the area really well. So I definitely did my research and drove a real estate agent nearly crazy. Now, let me throw one additional thing into the mix here. You also have a business that you're running, and you said you bring in 33 or 30, how much did you bring in from the business gross? Last year, 35. This year I'll probably make 50. And you said your net was 22?

They were about 10K in expenses, so 25. Yeah, so you're investing 10K in the business. You're probably going to think of that because it's probably all COGS, you know, cost of goods sold or cost of revenue, perhaps. But you're investing 10K in that business and generating a 300% return on that as well. So you have some phenomenal investment approaches here going on across your portfolio. I'm having fun with this. This is great compliment to you. Yeah, let's do it.

And I discount the office space on my taxes, of course, in my home for home office. There you go. Absolutely. So you have two phenomenal investments here that are just way, way, way better than your index funds or retirement accounts. And I want to point this out because there's probably other people in your shoes who are also intelligent, driven, charismatic, capable people who are in this expansionary phase in their career. And I believe aggressively, arrogantly for myself, that it's far better to bet on myself and keep that cash available the way that you're doing than it would be to stick it in a long-term average investment profile in this situation. What's your reaction to that? I like that I can keep my cash hoard. I'm just kidding. I mean, that's kind of what I'm thinking, especially when I was thinking about retirement. I didn't max out my Roth last year. I was, I just wanted to put more towards the house and everything like that. And this year, I decided to max that out. And then my basic plan above that was to save for the next property because I, I would like to keep buying myself more sources of income. That's really fun. Didn't know about that when I

started all this, you know, trying to pay off debt a few years ago. I really enjoy it. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward. It's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments,

net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focus on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at monarch.com code pockets.

You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed's sponsor jobs helps you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works.

Sponsored jobs on Indeed get 45% more applications than non-sponsored posts. The best part? No monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through Indeed worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed.

And listeners of this show will get a $75 sponsored job credit to get your jobs more visibility at Indeed, dot com slash bigger pockets. Just go to indeed.com slash bigger pockets right now and support our show by saying you heard about indeed on this podcast. Indeed.com slash bigger pockets. Terms and conditions apply. Hiring, Indeed is all you need. When you want more, start your business with Northwest registered agent and get access to thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place. Build your complete business identity with Northwest today. Northwest Registered agent has been helping small business owners and entrepreneurs launch and grow

businesses for nearly 30 years. They're the largest registered agent and LLC service in the U.S. with over 1,500 corporate guides who are real people who know your local laws and can help you and your business every step of the way. Northwest makes life easy for business owners. They don't just help you form your business. They give you the free tools you need after you form it, like operating agreements, meeting minutes, and thousands of how-to guides that explain the complicated ins and outs of running a business. And with Northwest, privacy is automatic. They never sell your data and all services are handled in-house because privacy by default is their pledge to all customers. Visit northwest registered agent.com slash money-free and start building something amazing.

Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money-free. At Desjardin, our business is helping yours. We are here to support your business through every stage of growth, from your first pitch to your first acquisition. Whether it's improving cash flow, or exploring investment banking solutions. With Desjardin business, it's all under one roof. So join the more than 400,000 Canadian entrepreneurs who already count on us. And contact Desjardin today. We'd love to talk.

Business. Great. So I guess what's your next plans? What are you intended to do? You're probably not intending to sit on your cash hoard indefinitely. Like what are the, what's the strategy right now? Well, right now I have about three grand save for the next property. So I'm working from there and I'll save up for the next one.

I know I can't get another FHA while I have one. So I'll have to save up a little bit more for the next place. I've also considered getting a little bit of land in the area and plopping like some little tiny houses for Airbnb's on it. I'm very interested in that avenue right next to a college. You can easily book out stuff for all the game day weekends. I think that could be an even higher ROI than long-term rentals. I'd love to get in the short-term rental market, but I'm trying to do it smart and slow. Let me ask you this.

You have $44 in cash, but you only have $3,000 saved up in the rental property. Let's go through those again, because I believe you have an overwhelmingly conservative position, and I'd love to know how you're thinking. I think your $10K for the property reserve is fantastic. That's a fantastic minimum. Maybe even beef that up a little bit. I think your personal expense reserve is maybe good as well, but I'm interested in the other kind of half of that,

an extra 25 grand that's sitting there, and what the thought behind that is? Okay, so I started doing some sinking funds when I was getting out of debt for obvious reasons. It really helped to break down annual or semi-annual expenses into smaller portions than I paid off those each month. And I just kind of kept Adam after. So I have about 1,500 in a travel fund,

$600 in a car insurance that's billed annually. So that's just me saving money by paying every six months. $779 in a car repair or replace fund in case anything happens to the car. $273 in a pet fund, $800 in a Christmas fund, $400 bucks in a medical fund, and about $3,000 in a YouTube tax savings fund. So that comes out to $11,000 in sinking fund savings that I'm just kind of. of sitting on. Some of those funds I wouldn't touch. The car insurance, the YouTube tax, I didn't get a chance to start typing them all down as you were reading them off. But the one for travel, are you going

anywhere in the foreseeable future? I mean, we're in the middle of COVID. Do you have like a big trip that you're saving for? You know, oh, in 2022, I'm going to go to Australia or something. Or is that just a place that you put money? It's $100 a month that has grown a lot because I haven't traveled in so long. So that's why that's so high. Usually I use that for, you know, maybe I'll go visit a friend once a year or Finkan expenses kind of thing. Though I guess I could take that out of my YouTube earnings. I would definitely. That's a business expense. So what about what kind of car do you have? You have almost $1,000 in car repairs. And yes, car repairs are expensive, but What kind of car do you have?

I drive a 2016 Nissan versus a note that is a salvage vehicle that I bought for $5,000 cash. Ah, okay. And it's an excellent condition. Drives like new. You are a legend. It has a backup camera. Oh, thank you. It has a backup camera and like clicky locks and my, I can play music on my phone

through the car, which is the, it's like I have a limo or like a private plane. Like I, when I was paying off debt, I drove a nine. 97 tracker without air conditioning in Louisiana. I had a no air conditioning card too. That's where the true sacrifice comes. I've never had that. I've been, I'm spoiled. Snob.

That's okay. My carola has great air conditioning. So what I'm trying to get at is I see a lot of money that you may be, I don't want to say could borrow from, But you could borrow from it if the right property popped up on the market and you wanted to hop on it. And I'm wondering if you're continuing to watch the market because you want to buy another property, you could, it's been 10 months since you originally bought. And I'm really surprised that your documents don't say you have to live in it for a year. I would definitely encourage you to go back and read that one more time.

But if it says it doesn't say it, it doesn't say it. But for the purposes of the advice that we're giving in general, most mortgages will say you have to live in it for a year if you say you're going to be an owner occupant. So let's say in two months you're available to go and buy a new property. If you are finding something now, you could just write the deal to close in 60 days. Are you keeping track of it? And if not, why not? I'm sorry, not keeping track, watching the marketing and looking at properties. Yes, constantly.

It's my favorite hobby. In fact, I went toward a $60,000 A-frame from the 1930s the other week. But, oh, it needed a lot of work. But, oh, I love an A-frame. Yeah, that's a $50,000 roof job. The roof is fine. But there were other things. There were other things that probably cost that much.

I just want to chime in here with a couple of things about the cash position in general, right? So I think you need to reframe how you think about your cash, be my advice for you. And there's two options, I think. And here's how I think of, here's my personal life. I need a certain amount of cash. You've proven that you're extraordinarily disciplined with your budget and you're spending with this. So you are in good shape for that. And I'd consider potentially pulling that and saying, okay, all these different accounts, what's just one number that I'm comfortable with? Is it 15 grand? Is it 20 grand? Is it 25? You know, and once I pass that number, how much do I need for my personal life? Second, how much do I need for my rental property

business of one, perhaps more to come soon? How much do I need right now and how much do I need after the next acquisition? Do I need to bump that up from 10 to 20 or whatever it is to feel good about that? And third, you have a business, a real business with Budget Girl and that's producing income. And that also needs cash to be capitalized. And so you have two options, I think, at the highest level that would potentially simplify your cash position and allow you some more flexibility to harness more of that right now. One, and you don't have to take any of this advice, your approach is working really well, and it'll just be a few more months before you have the cash built up for the next property if you don't, if you don't do that. But there's nothing,

this is a directional thing. But one option is to fund each of those things separately. And the second is to say, you know what, I'm just going to aggregate one giant pool of capital and use that to deep reserve for all three of those funds. And everything above that I can then spend on the next investment or whatever it is. But I think if you could simplify that, you might be able to free up 10, 15 grand right now if you zero-based and said, here's what I need for personal, here's no need for this, here's our need for that. Do I want to have those each living within those entities or separate accounts?

I want a giant pool of capital. And then, great, all the proceeds now that come from those different sources go straight into the next rental pool after my investment, after all the good habits you got right now with the Roth and the other investments. Any reaction to that? What's your thoughts on that? I've been thinking about it for a little bit. To be honest, I mean, I started these sinking funds when I couldn't cash flow expenses like these in a month. Realistically, I could cash flow any of these expenses in a month now. So it would make sense for me to maybe cut down some of those. I'll keep saving for taxes.

I'll keep saving for, you know, annual car insurance. But realistically, it might make more sense to pull on those. And I have thought about what Mindy said, you know, if the perfect deal came up, would I rob those funds? Absolutely. But, yeah, I might be thinking with kind of a scarcity mindset on those where I have this much is in a pocket, especially for this when that fund comes up when in reality I could I could just pay for it out of that month if I needed to. So I could probably take at least five grand out of that and be fine. I don't know if I'd want to just have like an emergency fund that I tapped anytime I needed. Maybe that's a mental break, but maybe an emergency fund and then like a little operating or something.

Or maybe not. I don't know. You've got a ridiculously conservative position, which is great because you've got like 15, 16 months of cash on hand. Right. And that's inclusive of your mortgage payment. That assumes no offsets to that comes in. If you don't include your mortgage and all that kind of stuff, you've got, what, like, three years, close to three years of cash on hand.

And compounding that extraordinary conservative cash position, you also have a ridiculously high savings rate. Again, if we net out the housing and all that kind of stuff, you're bringing in 75 a year, and you're only spending 20, right? Now there's taxes, so we'll bump it down a little bit, but you're bringing in, you're probably saving at like 60% of your income, your net income, again, zeroing out that. So because of your incredible conservatism on those fronts, you can ironically afford to be more aggressive on the investing front to a certain degree, which I think is a fun position to be in. The way I manage my cash, or, you know, I had a similar situation arise for me a couple years ago. And the way I kind of manage it is like, okay, I'm just going to have a pool of capital for the rental property. a pool account for my personal account. And whenever the account, and that number is suitably high,

so you have 10 grand for personal. Let's say you bump it up to 15. Well, whenever it gets below 15, you just let your next income stream dump into it and you're still way above your 10K mark. So your 4,300 in surplus instead of 5,000 in surplus over it. And then now you feel good. You can sweep every dollar above that into the next investment fund. That's kind of how I front it. So just, I don't think you can go wrong. These are just tips on ways potentially to harm. harness more of your cash sooner with that. That's all. So should I invest that money or should I save it for the next property? I would consider your Dex down payment fund investing. You're not earning a return in the immediate future, but you're now capitalized immediately to buy that next property.

That's your investment, right? And you're just getting a zero percent return in the first three months of the business hold process because it's in cash, and then you begin generating the higher return when you begin, when you make the investment. Yeah, I want to clarify what Scott is saying, just because he's using the word investment, what he's saying is hoard that cash for your down payment, not putting it into an investment, put it into a high yield savings account and earn that 0.02% interest.

But if you're going to use that in the next two to, what is it, two to three years, Scott? If you're going to use it in the next two to three years, you need to have it in a liquid account, not invested in the stock market. Because look at last March. You put all of your money in the stock market and then March 13th happens

and it is now worth 60% less or whatever the drop was. That's really scary. And yes, it popped back up. It popped back up so fast. But that's not how markets usually recover from a crash. So that was like a blip. That wasn't really a crash. But yeah, I just wanted to clarify that because Scott uses all these words.

I just know how he thinks. Yeah. This is not the time to like overextend and take a crazy risk or whatever. But like you're clearly close to or currently in position to buy another rental property. responsibly based on everything I can tell from this situation. And it just depends on how ready and willing you are. Do you want to wait another few months and continue to bulk that up or you want to go down? You could go now. I mean, we rarely talk to people who are in better position to buy their next property than you right now. That's so funny because in my head, I'm like, I only have

three grand for the next property. It's going to take me a while. You only have three grand in that bucket, but you have a lot of other buckets that could be poured into that, and then just replenished. I mean, like Scott said, you have a great savings rate. He didn't use the word great. I'll use the word great. Because Scott said ridiculous and that's wrong. It is a great savings rate. He is right. You are very conservative. Ridiculously great. You are very conservative in your projections, but that also comes from the fact that you were in massive debt in relationship to your income and in relationship to your income potential in that field, you were in massive debt. And you paid that off. That's an awesome story. But I bet you were sitting there six years ago like, oh my goodness,

how am I ever going to climb out of this mountain of debt? You're an overnight success in six short years. Yeah. Exactly. But that affects you. So I totally understand where you're coming from. but what sort of financial position could you be in with another similar duplex? Pretty good one. Pretty good one. So I'm wondering if you could start reaching out to all the duplex owners. You said you live in a place that is just a bunch of duplicate duplex owners or duplicate duplexes. Reach out to the owners.

Get a list of all the people who own but don't live there and send them a note. Hey, I'd like to buy your duplex. If you're ever interested, sell it to me. Absolutely. I always kind of, I mean, I like the property I'm in. I think it's great. But I figured I would get the next one somewhere else, just in case. Do you believe in the area?

Yes, a ton. But I guess I'm thinking, like, well, if something happens to the area that's negative, that's, you know, all of my investments down the suffering instead of like, I mean, I'm in Texas. We've had a lot of disasters lately. Sarah, do you believe that your business is likely to continue growing? I promise I'll tie this together in a second here. But do you believe it's likely to continue growing over the next couple of years? Hopefully, yeah, I do. I believe in it. Okay. So if you weren't a part of that business, would it stop generating revenue? Like, if you stopped doing stuff? Yes.

Okay. So what you have here is a business that is worth a lot of money, but only to you, right? Like, someone else couldn't buy the business and continue to sustain the revenue, right? But you've got an asset here, right, that's generating 25 grand and is highly, highly likely to generate more and more revenue each passing year in addition to your full-time job with that. And so I think you inherently have diversification that you may not be thinking about in terms of your income stream that make your income very, very stable relative to the vast majority of your peers and the vast majority of maybe a lot of people out there. That was intentional. Yeah, a $25,000 income stream like that, you know, people would pay a million dollars for that if they could feel like it's stable.

Now, you obviously have to work at it, so it's not really worth a million dollars. Like, you don't have a million dollar asset right now, and you can sell it for that. But I think it gives you optionality in being very conservative or being a little bit more aggressive with those types of things. And I think you're understating the risks of investing out of state in areas you're not as familiar with, unless you have an area in mind, like we're used to live in. I meant like another subdivision in the College Station-Bryan area. Oh, okay. I also know about it.

Not on the same block. Yeah, just not like right next to each other. So if like a tree falls down, it hits both. Fair. Okay. I see you're saying. I would, right now from my seat, I'd love to have a property that was right next to the other one. That would allow me to check out both every time.

And those advantages are really nice. That said, I guess a tree or a tornado could wipe out. both in one stroke. But I think that's a fairly remote risk. That's why you have insurance. Yeah, you're at the same market risk if you're just down, if you're just a few blocks away or a few miles away anyways, I think. Dang, the one across the street just sold for 230. I probably should have snapped it up. You should have snapped it up. I think that would be, I don't know specifically, but that would be like, my instinct would be to favor that over the other stuff, not knowing anywhere and near the amount that you know about your local area and your block and those types of things.

Yeah, I do like the idea of reaching out to all of these same duplexes and letting them know, hey, I just bought one for 2.30. I'd like to buy another one. If you're interested in selling, let's talk. And if it's going to cost you 2.30 with or without an agent, it's better to them to have the age, no agent representing and then they get all 230 instead of 230 minus agent commissions. So something to think about. And it only cost you a few stamps. Send a letter to everybody. Hey, I want to buy your place. I mean, I have the people's phone numbers. I did my due diligence before I bought the place. Y'all are on another level. I need to get up there. I need to get past my own personal,

I'm broke barriers and like, go ahead and bash it up there. anymore. You're about to become real rich real quick with this. If you just do nothing and don't invest anything, you're going to get rich at a rate of like $2,000 a month, which is $25,000 annually in cash, not to mention all of the investments that you're applying with it. So this is fun. Another thing to think about like for your situation, if you really are this interested in getting aggressive about this stuff with the real estate side of things and considering the creative avenues is maybe you should consider getting your license on the side here and investing in that. That's not always the right move. But if you think you're really going to be buying another one, hey, that's three grand,

four grand in the next year right there. And while you're doing that, that gives you an excuse to pad your cash position even more and feel better about that while you're getting a license. So that can be a potential avenue for you to explore as well. There's also the whole literally anything I do, I can film it and make money off a bit on YouTube. Well, you should because look at what you just did. You've really built an impressive position. And like, you absolutely should because you're helping lots of people. How many people can come on here? Like, nobody, I have never talked to somebody on the money show that has gone through what you went through to get out of debt. It's just, it's not the same in a lot of these scenarios. It's all different, but yours, I think, of all the

positions to start from, yours would be the one that I think is least enviable, frankly. I think, like, with the income you had and the debt you had, I think you had the hardest, I think you were dealt the worst hand, and you start out with the worst set of cards of anybody we talked to on this show. I don't know, Mindy, what do you think? You're killing her. I don't know that I would have phrased it like that. I think so. I think it sucked.

It had to suck, right? Like, we talked about it. Yeah. Yeah. No, I completely agree. And we have talked to a lot of people who have paid off more debt. But their story isn't as impressive. And I say that I don't try to be mean, but you had $30,000 in debt and we're making $30,000 a year.

It's hard to live on much less than $30,000 a year. You cut it in thirds, or you cut it by a third, and you paid a third of your income to debt and lived on two thirds of your income. That's huge. That's what I mean by that, yeah. Yeah, when you've paid off $100,000 in student loan debt in two years by making $100,000, that's a very different scenario. It's real easy to live off of $50,000. I mean, it is for me. I mean, that's my day job income now.

And every single month, I'm like, well, what should I do with this? I should probably save it because I have, I'm so lucky that I have so much more than I need to live on now. I remember making $1,600 a month and having like $100 to spread across groceries for the month and living in a very bad part of town. I'm going too far with that. I'm sure there are folks that have similar situations and had, you know, a child to look after or other types of things. So that is probably, I'm probably going too far with that. But you had a very tough situation that you've overcome.

And yeah, absolutely. Like the lessons learned. Like, it's just inspiring seeing what you've done right now and all that kind of stuff. And I think you're ready for like the mindset pivot of like, okay, now I own assets and businesses. And I'm going to scale them and look about them in terms of ROI and capitalization and those types of things and how do I reduce costs and maximize income. I love the creative thinking around the mobile homes, the small homes on the land. That's a great concept. Yeah, I would not capitalize

that the same way you capitalize a duplex. I'd put a lot more equity into that and use a lot less leverage because it's such a higher risk, less tested, time-tested thing than like a duplex. But that would be awesome. I think if your instinct tells you something there, that'd be to look at and you're in position to attack it, I think. So this is fun. I'm having fun. Thank you. Yeah. I'm reading all the books and everything. I've read you guys's books and all and I'm trying to get into that mindset, but a huge part of me is still very much that girl in the $400 a month apartment with a buttload of debt who's like, what if something happens? I need money. I'm trying. Yeah. So again, I think it comes back to what is the amount that you need to

feel comfortable. And that amount can be more. You might just say, you know what, it's 50 grand. And then I'm going to feel comfortable. But peg it there and then start playing to win what the rest of your accumulation would be my advice. Because I think you can in your position. You've got, there's very few that you're in the best position I can think of to start doing that at this point. Unless mid, do you think differently? No, I love the position that you're in now. And I can completely relate to the money scarcity from before. position and ultimately you have to do what makes you comfortable. It doesn't do you any good to take our advice and go buy another property and maybe deplete some of these funds and then be up at

night because you're worried that something's going to happen. That is, I mean, you can call Scott and ask him for some money then, but, because he gave you these ideas. But, you know, it doesn't, for the advice that we're giving for the options that we're suggesting, I really do think that you should continue to look for the next property. And even if you only have $3,000, you know, pull from some of these other funds to make it when you find the amazing property. I wouldn't pull from any funds for a mediocre property. But what if the one across the street lists for $2.10? and it's in great shape, and they didn't overspray the cabinets,

and the tile doesn't make you want to vomit. If it comes on the market for 210, you want to be able to jump on that. You clearly saw the value in a 230. 210's just going to be even better. So you want to be cognizant of the market. You want to be able to pounce when you can. And I think you can pounce now, because your savings rate is so high, because you live on so much less than you make,

you should be able to pull the trigger very quickly if something pops up. So I would continue to hoard the cash, continue to, you know, and even really all of your, all of your little buckets seem pretty full right now. So unless they're all about to get emptied, I would throw all the extra cash after the TRS and Roth savings. I would throw all the extra cash into your home down payment fund and see. what happens in the next couple of months. I mean, the market is pretty hot, hot, hot right now.

So I don't know that you're going to get one for 210 without a bidding war. It's a little high right now. I'm hoping things will lower soon. I'll admit, that's why I've been thinking about this, because 44K in cash seems kind of stupid if I'm thinking real hard about it. Once I break it down, I'm like, that seems reasonable, like how much is in each bucket. But it seems like I'm probably wasting slash losing money. Yeah.

Eyeball in it, I'd say like, if you said, I have 30k in cash, 15 for the rental reserve and 15 for my personal reserve. I wouldn't be able to argue with that. That says, okay, that's how much I would capitalize a duplex of that size for, because that will go a long way toward replacing that roof if you have that at one moment or the HVAC, you can write a check on that. And then the personal side of things, that is 10 months of expenses, which is a big reserve, but not unreasonable, you know, with that. And then I, like, that would be a potential number that would, you know, optically seem in the ballpark of it.

But again, if you want more, you want more, just peg it as what's enough. And then from there, you can begin applying all the surplus to the next thing. So there's no wrong answer, but I just, I'd encourage you to start, I think you're in position to play to win. I'm looking. I have a lot of book properties bookmarked on Zillow. All right.

I think this has been really fun. Do we want to recap, Mindy? Yeah, you're killing it. Good job. That's the recap. You've got a great salary that you can live off of, more than live off of. You've got a side hustle that you can live off of with great potential. You are cash flowing your rental. And I say that because the numbers aren't fabulous. But the numbers are really awesome because your living expenses are zero. Your living expenses are zero. Your living expenses are negative 100. So when you look at this duplex and you run the numbers as $1,700 in rent, it barely cash flow. In fact, I think it negative cash flows. But $1,700 is also with you having a place to live.

I want to completely disagree here, Mindy, respectfully. This is a huge winner. If she was renting it out at market rent, she'd be bringing in $2,400 on a $1,500 note. Right? So even with conservative $500, $500, maintenance, all that, kind of stuff. She's bringing in 400-month-in cash flow on a $10,000 down payment. That's a 40% cash on cash with that, right? So this is a real winner of a property with that. It's just what your house hack can get it. Your cash flow is in the form of not paying rent, I think. So I think

that's how you underwrite it with your deal there. That's, no, I'm glad you disagreed with me, because I ran the numbers with what she gave me, the $1,700. I didn't run the numbers as what they could be. And what is one side, 1250? The other side's 1250. That's a way better. 1250 and 1250 is 2,500. That's a lot better than 1,700. That's a killer deal. So, yeah, this is a great property. So you're killing it on the income. You're killing it on the side hustle. You're killing it on the rental property. You're killing it on the investments. I would like you to look into the 457. So when you do start crushing it on the side hustle income, you can knock down your day job income so that you can still contribute to the Roth.

Because of your age, I love to see you max out the Roth from now until you can no longer max it out. And start looking for that next property because it's going to take a couple of months to find and then you'll just jump on it and be there. But I think sending letters to all the people who have owned the property that are in your area for more than three years, I would send them all a letter. hey, I would like to buy your property. If you're ever thinking of selling, here's how you can get in touch with me. Phone number, address, email address, like all the ways to get in touch with you

and let them choose the one that makes them the most comfortable. So a quick question. Because I already have an FHA loan, I can't do another one. I assumed I'd have to do a conventional at like 20% down, which is 50 grand. No?

Talk to your lender. You can get a much lower down payment. Conventional goes down to three percent. I'm assuming you have excellent credit. Over 800. Ooh, la la. Yeah. So you can have a conventional loan for as low as 3% down.

I've seen a lot of 5%. If you are living in the property, it is, you don't have to put down 20% or 25%. Oh, I'm thinking of investment properties, aren't I? But obviously, I'd move out of the one I'm in now. And I've actually tried to run the numbers to see if it would be more responsible to like either rent or just buy another place to. so I could get the full rental income out of, but that doesn't quite work. That's right. Yeah. If you were to put down 40 grand or 20% on one of these rental properties, you would, I think, inappropriately weak at mild as sunlight is right of my eyes for those watching on YouTube.

This, if you were to put down 40 grand, a 20% on the rental property, you would then be over leveraged, and that would be a really stressful situation with that. But you could put down 3% responsibly on the next duplex and move out, and you'd have a very good shot of cash flowing with a good reserve. and you'd still be able to pack on a nice reserve with that. I think that's only probably a few months away for you from being able to do that pretty easily. I don't know why I was only thinking. I was thinking for the next loan, I'd have to do like an investment. I guess back when I was looking at it, it was like I was thinking I had to do 20%.

Maybe that was for like a quad or a triplex or something. I don't know. No, no. If you move in, you can probably put down that very low down payment with a conventional loan, most likely. Talk to a couple lenders to verify that. But I'll be surprised if you can't put down three to half or five percent on a an owner-occupied property with a conventional loan in your area. There might be something that you don't know that's impacting your area, but that would be my

belief. That makes my options a lot sooner. Yeah. I was really thinking I needed 20% for the next one. Yeah. My skepticism is around whether your FHA financing will really let you move out a year after moving into the property, less than a year. You seem confident in that, but that's unusual in my experience here in that.

I'll check the paperwork again, but I asked that question so many times. And they were like, no, you're good. You're not the only person I've heard say that. But, yeah, I tend to have the same experience Scott has. And yeah, all of my advice about getting into another property was based on you house hacking it and getting a three or five percent down loan. It was not based on the 20 percent. 20 percent down, you don't have enough money for. You would deplete your entire emergency fund and that would give you the hebie-jeebis.

So, no hemy-jeebis here. So yeah, that I I love your position and I want to talk to you again after you buy this house. I get to come on again. Yeah, we'll have you back every three years. Standing appointment.

There we go. That'll be awesome. Sarah, this was fantastic. I really enjoyed talking to you. I love where you have come. If you are listening to this episode and you did not listen to her original episode number six,

it's a great episode. She shares her story. There's some tough decision. had to make. I remember you had a baked potato party. And hey, with your friends, I'll bring a baked potatoes and you bring the butter and you bring the bacon and you bring the cheese. And I had baked potato parties after that because of your episode because that's a really inexpensive way to feed a bunch of people. So fun. And heck, if you're really feeling bushy, make it like a taco potato party. All right. So bring the meat. The richie. That's a good meal. We'll have Scott bring

that. That is going to be what we'll share on Instagram. That would be the clip right there. No, thank you guys so much for looking at this. I'm kind of the first person in my family to do anything like this. I lost my parents a while back. So I don't really have, I haven't really had the person who's been able to kind of pave the way or show me the path. So I've had to learn everything through YouTube and through like the bigger pockets forums and through, you know, podcasts and stuff like that. So I do tend to be very conservative just because I'm afraid that I'm like unaware of something that's going to ruin me. But I appreciate the, you know, I appreciate the, you know, advice and the encouragement and that you guys believe in me and I really appreciate it. Oh, how could you not believe in you? I'm just so grateful you came on the show twice now. And again, I think your story is just so phenomenal. I can't wait to watch the next couple of years. This is just going to be, you're giving us a gift of really good content with this and we appreciate it and you're helping lots of folks in the process. So thank you. Okay, Scott, what did you think of Sarah? I had fun, if you couldn't tell. This is a fun situation

because she's got all the options in the world because of the discipline and ridiculous, strong fundamentals that she's put in place and sustained now for six years in a row with her spending, continuing to increase her income, which is now beginning to rapidly accelerate. And this is the story. Like if any story is repeatable, it's going to be hers to a large extent. The discipline she put in may not be sustainable, but if she can do it, anybody can do it, is what I'm trying to say, or most people can do it with this. I had so much fun. I am so impressed. I think she's so wonderful. She is. She's absolutely wonderful. And her story is absolutely repeatable. You can hear in her voice that she still carries some of that financial insecurity. And I think it's going to take her a really long time to be able to put that aside. I don't want to say get over it. I think she should always remember that there was a point in time that she wasn't able to afford most anything.

she wasn't able to cash flow an unexpected expense. But I'm super excited for her future and I think it's huge. Yeah, I had a ton of fun there. Again, if you're interested, go follow her on Instagram at GoBudget Girl. And she is really looking for advice on how to paint her kitchen cabinets. So that's her favorite thing. We're saying that facetiously because she got like 150 opinions of that and I think it's funny. So go give her another opinion on that and give her a follow.

And yeah, that's the big ask for a question. today. Should we get out of here, Scott? Let's do it. From episode 178 of the Bigger Pockets Money podcast, he is Scott Trench. You can find him on Instagram at Scott underscore Trench. I am Mindy Jensen. You can find me on Twitter at Mindy at BP. And we're saying, got a swish jellyfish.