BiggerPockets Money Podcast - 37: Paying Off Student Loan Debt with a Median Income and Two Kids in Northern California with Kyle Renke

Episode Date: September 10, 2018

Kyle Renke graduated from college and hopped right on the American dream bandwagon. He started off with a starter house, added a couple of kids and moved onto a bigger, better house—one that he could barely afford. He then went back to grad school, tacking on another $40k in student loans. Kyle and his wife spent money left and right, never seeming to be able to get ahead. Finally, he got sick and tired of being sick and tired. Kyle read books and connected with friends in a better financial position. He sold the big house, threw everything at the student loans, and rented a smaller, MUCH less expensive place. Kyle’s story shows that you CAN make big financial mistakes, change your course, and work toward financial freedom—even with children. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast show number 37 where we interview Kyle Ranky. So there were a few things that kind of pushed us over the edge to make it change. The first being that we were just, as Dave Ramsey says, sick and tired of being sick and tired. We were just pushing ourselves emotionally, obviously financially, even spiritually, just we were drained. And we were kind of redlining it the whole time. And we just didn't have the margin or the reserve to really kind of focus on what we wanted. to do. It's time for a new American dream, one that doesn't involve working in a cubicle for 40 years, barely scraping by. Whether you're looking to get your financial house in order, invest the money

you already have, or discover new paths for wealth creation, you're in the right place. This show is for anyone who has money or wants more. This is the Bigger Pockets Money Podcast. How's going, everybody? I'm Scott Trench. I'm here with my co-host, Miss Minnie Jensen. How you doing today, Mindy? Scott, I am having an awesome day. It's beautiful outside. It's about 85 degrees and just feels awesome. Yeah, I'm very excited to interview Kyle. I mean, what a fantastic episode we have coming up today. I love his story. We got connected with Kyle through David Green, who is the new co-host of the Bigger Pockets Real Estate podcast. And David said, you know, this guy has a really great story. I talked to him. Like, this guy has a really great story. I want to get him on the show. We have been going back and forth, and I'm so excited that today we finally connected and had an opportunity to have him on the show. I just, I love what he talks about.

The focus of his show is it doesn't matter what you've done in the past. You can still turn your finances around and move towards financial independence. He's 34 years old, so he's not a spring chicken like you. But he's also not super old like me. But he had made some choices that weren't the best financially. He accumulated some student loan debt, some credit card debt, and decided one day, you know what, this isn't what I want to do anymore. Yep.

I mean, this episode is applicable to you if you consider yourself a middle class American person, right? I mean, he earned a middle class, maybe slightly upper middle class income in California, his family for a couple of years, had a very low savings rate as a result of a large number of liabilities. You know, rich dad talks about rich dad poor dad, the book, which has been referenced a ton of times. and we assume that you listeners have read. If not, you should probably go read that. But we talk about accumulating liabilities.

That's what he did. He accumulated a lot of liabilities in the form of student loan debt, house payment, car payment, all this kind of stuff. And then he one by one knocked these out and began saving on the path to financial independence and is chugging along. I mean, it's just a great story that's applicable to everybody. That's a middle class American with a family.

Yeah. You were saying, oh, this is applicable to you if you're, and I'm like, American. America is a culture of debt. You got to have the latest thing. You need to buy, buy, buy, buy, buy. So this is a really great show for just about anybody. And something else you just said really inspired me.

You said, oh, if you haven't read Rich Dead, Poor Dad, you should. You know, we have these famous four questions. And the first one is, what is your favorite finance book? So I'm going to ask the readers. Or I'm sorry, I'm going to ask the listeners. What is your favorite finance book? Send me an email. money at biggerpockets.com and just tell me what your favorite finance book is.

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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. Kyle Renke, welcome to the Bigger Pockets Money Podcast. How's it going today? It's going great. Thanks for having me, guys. Awesome. Thank you for being here.

Let's start from beginning. Can you walk us through kind of where your journey with money begins? Sure. So I'm going to run it back about a decade here because I want to give you a little bit of context. But I graduated in 2006 with my bachelor's degree in English. I was newly married. And my wife and I moved down to Southern California to pursue my dream of becoming a college basketball coach. We had empty pockets, no money in our savings, no assets, and about $15,000 in student loans. My wife enrolled in nursing school at that time at the same university that I was working at. And I also started pursuing a master's degree. So we took out about another $25,000 in student loans at that time.

Well, within about a year of being at that coaching job, my boss, the head coach, ended up getting fired, which meant that as a result, because I'm the assistant coach, I got fired as well. So kind of at that point, I made an internal decision with myself to really sort of, start pursuing safety and security in terms of my career choice instead of pursuing kind of my passions and my dreams, which can obviously be a more unpredictable course. So at that point, my wife and I, we moved back up to Northern California. I found an entry-level tech job to put her through nursing school. And during this time, things were tight. We were living paycheck to paycheck, never really gave much thought to saving or investing. The focus was just to get my wife through

nursing school. Our student loans, they were either alternating between being in deferment or paying the minimums. But I still kind of had that entrepreneurial burn, the kind of the drive to want to do something different than just kind of sitting in a cubicle all day. So during that time, I actually taught myself to write code and developed a software business where it actually, we secured contracts with different athletic programs throughout the U.S., including Stanford, University of Florida. And it was right at about that time where it could have gone. well, but this time around I was more afraid of failure because of the consequences of the last time I took a risk. So I was less inclined to step out and do something challenging this time around.

So instead, I hedged my bets and I did what I thought was smart and I went and pursued another graduate degree, this time taking out about $42,000. And I ended up getting a degree in speech language path, which is what I do today, because that's much more predictable career path. and straightforward in terms of the income that you make. Eventually, my wife finished her degree in nursing. We purchased a home. I graduated with my degree in speech pathology, and at last we felt like we could have that stability and security that we were looking for.

So a couple of years later, our son was born, and like most other people, our H, we decided for our growing family. We need to buy a bigger house. So we upgraded our house, and we basically doubled the size of our square footage, which pretty much doubled the size of our mortgage as well. And then we also needed, because it was a new construction home, we felt like we needed a nice big backyard with a really nice fire pit and all the amenities.

And so we took out about a $12,000 line of credit to build that backyard. So we were both working full time living in this nice new house. We were probably spending about $2,800 a month on our mortgage, $1,200 in student loans, just paying the minimums, $1,500 in debt. daycare. And we were just so busy and so exhausted, both working full time. We didn't even have time to cook. So we were probably spending $1,000 a month eating out. And we did this for about 18 months with our son at home. And we just found ourselves stressed, exhausted, deeply in debt, very little margin at the end of each month. And we just didn't have any extra time or energy to pursue what we

were passionate about. So it was at that point that we knew we needed to make a change. So what we did was we sold our house. We downsized to a smaller rental, started budgeting. My wife actually dropped her hours at work to spend more time at home, and we made large payments towards our student loans with some of the equity that we had and started focusing on long-term goals instead of kind of short-term goals of just making it month-a-month. So right now, we're in a smaller home, but we are in a position where we're able to save and invest much more each month with my wife working two to three days a week instead of full time. And we now have much more flexibility and freedom currently to help us pursue our long-term goals. So we did this, made this change about

three years ago. And the last three years have been a huge difference for us. Okay. So that, there was a lot there. And we're going to have to dive into this chunk by chunk to go through kind of of each kind of major piece here. So many themes. So it's pretty clear from the first part of it where you're in school, you graduate from that first job. And you're starting to put your wife through. nursing school. Let's fast forward perhaps to right around when you bought that first house are about to have a child. Yep. So what was your position like then? How much total debt do you have and how much total income is coming in? And what is your kind of mindset at that point in time? So at about that time, we had about 50,000 in student loans, but I also, during that time,

took out an additional 42,000. So we were right at our max of about 90,000 in. And, you in student loans. And our income was my wife had just started nursing school and she was making about 72,000 a year. And I was at about 20,000 a year. I was still actually working part time at the university where I got my graduate degree. Okay. You mentioned that you had a software company, or you worked at a software company. Did you own the company? You had talked about entrepreneurial. Yep, I created it. So I literally taught myself to code. I have no computer science background, but I saw a need for something within the sports realm and created a software program that actually allows coaches to communicate with their teams. And this was back in 2005, 2006, when, you know,

mass text messaging wasn't really a big thing back then. And so it was a platform in the cloud where coaches could communicate with their team. So I had no idea what I was doing in terms of building this thing. I partnered with a former Major League Baseball player, Division I, or baseball coach, and he was able to help kind of you put his name on the product and market this thing. But I had no idea what I was doing in terms of building a business, marketing, selling, that kind of thing. So what I want to ask is, why was your mindset at this point in time that, you know,

this is a risk. It's a risk to go to start this business on the side, you know, while you're making $20,000 a year? Why were you able to take that risk at that point in time? Mentally, you think. Yeah. So at that point in time, it didn't feel like a risk. as I was building it because I had nothing to lose with the exception of time, just putting my time

into this thing. It felt like a risk when it started to grow and it started to be something that could potentially do well. And it was at that point that I was afraid to actually take that risk and jump into that more of a full-time position rather than just kind of letting it sit and be small like it was. Okay, so I'm sorry, I'm confused here. Were you working on this full-time or did you work on this full time? I worked it on it on the side. Oh, I see. Okay. Yeah. So it wasn't really a risk. It was a kind of a side project more of it. Yep, totally. Side project for sure. Okay. So it sounds like what I'm trying to get at is during this period of time, you're making these decisions, you're accumulating debt. You're basically buying yourself into large expenses. You know, rich dad would say you're accumulating

liabilities like the middle class, right? And your tolerance for risk is dropping. You're not pursuing your dreams as a result you're hedging your bets in this period of time is that a fair kind of statement or assessment of that very fair and that's a result of the decisions that you're making one by one across this period of maybe five seven 10 years is that accurate exactly i was about seven year run where um i was truly afraid to take risk i was pursuing more of stability security and perfection to be honest i was afraid to fail i was afraid that if i failed it would define kind of me for the rest of my life and that I would kind of be stuck in that perpetual state forever. Yeah, awesome. So the reason I want to get up that is because there's a shift coming

in your story, it sounds like, later on. So let's fast forward now to the point where you have your peak spending, right? And I was writing down the numbers as fast as I could as you were saying them just there. But you had $2,800 on mortgage, $1,200 on student loans, $1,500 on daycare, and $1,000 a month or more in food. So just between those four, categories. Was that four? Yeah, it was four categories. You're talking about $6,500 per month in expenses. What was your income like at that point for your household? So we were netting about $9,200 a month, and we were spending about $8,900 a month. Oh, so you're saving $300 a month. Good job. Thank you. Yeah. At least we weren't in the negative. Well, and that's a really good, that's a really

good point. You know, there are people who make, what did you say, $9,600, $9,200 a month, and they're spending $9,500 a month. I mean, there's, you know, this is better than some. And so I'm assuming that our chunk of that rest of that money that it's not being accounted for here is in transportation and fun and all that kind of stuff. Is that right? Exactly. That's right. Okay. So, yeah, what were you doing with that $300 per month? Was that going into savings? Does that go down to pay down the debt? Or, you know, I think it was just sitting there and not really doing it. We were just happy to have like a little bit of a buffer so we didn't overdrawn on our account. Gotcha. Okay. And so,

so this is the point I think that is really relevant to a lot of people. I think there's a lot of people out there who are in this position or similar one right now. And I don't think yours is, I don't think this is extreme at all. This is what a lot of people would say, this is a normal way to approach your life and accumulate assets. But you're completely stuck. You can't go anywhere, right? You're saving less than, you know, 3% of your take home pay. And so, in there. And so you're not even close. There's no possible way of accelerating toward financial freedom from this point for as a lot of people's thought processes. What happened? What was the mindset shift that came in to trigger you deciding, hey, this is not the right way to go about it.

I'm going to make some drastic changes here. So there were a few things that kind of pushed us over the edge to make it change. The first being that we were just, as Dave Ramsey says, sick and tired of being sick and tired. We were just pushing ourselves emotionally, obviously, financially, even spiritually. Just we were drained and we were kind of redlining it the whole time and we just didn't have the margin or the reserve to really kind of focus on what we wanted to do. So that was one of the big game changers. Another one is a really good friend of mine, David Green, who was on Bigger Pockets Money episode 12. He's been a big influence. He's, him and I grew up playing basketball together, and he kind of planted a seed in me,

not necessarily him just telling me what to do, but just me as his friend watching the kind of the seeds that he planted along the way, starting small, and really seeing the potential of starting small and working towards something big and making a huge change, and that it is possible, and that you don't necessarily have to work a thousand hours a week to do it. And so him and I had many discussions where he basically kind of mentored me in a sense and coached me in moving in the right direction. Awesome. So it was between kind of these, did you hear about Dave Ramsey in addition to this?

Or was this mostly David Green and then maybe a couple of other sources corroborating that? Yeah, it was a little bit of everything. It was just kind of different people in our life. So David was one of them. And he had heard of Dave Ramsey. And so he kind of turned me on to that. And so I definitely listened to Dave Ramsey a lot. lot and then just picking up different financial books at that point, wanting to learn and kind of

feeling like it was something that I could actually do because that was my fear is that this isn't just like every other fear that I had that I would fail. This was an area where I thought I could potentially fail too. And so I was afraid to actually make a change at first too. And what year was this? What year did you kind of decide to do this? And then let's walk through the changes one by one that you made to reduce those expenses. So we made this change. at the end of 2015, beginning of 2016. Okay, awesome. And so what does that look like?

What's the timeline of the reduction expenses here and the downsizing of your house? So we were in that house for about a year and a half. It was a new construction home. The best kind of decision we made was, let's get rid of this house. It had a huge mortgage. We looked at our expenses, and that was actually the first, kind of the biggest thing for us, was downsizing this house, getting rid of that $2,800 a month. We asked ourselves, what if we could cut this in half, look at the extra money we would have each

month to be able to kind of move forward. So that's the first thing we did was we sought out a real estate agent, figured out we could sell the house. And we did have some equity in the house. So we knew that we could use that equity to pay off a big chunk of our debt as well, particularly the consumer debt. That's the stuff we wanted to get rid of first because of the high interest rates. What year did you purchase the house?

And then what years do you sell the house? Good question. So we purchased our first house in 2012, and we had some equity in that and rolled that over into our second house. That's the big one. And we sold that one in 2015. Oh, I'm sorry. And we actually bought that the first house in 2010. My son was born in 2012.

Okay, awesome. So you bought the house in 2015. You sold it 18 months later in 2016. Correct. Okay. Okay. And then you use the equity there to pay off your student loan debt or a big portion thereof? Yeah, and we had about $60,000 in equity, so we couldn't quite pay it all off, but we took a big portion of, I don't think we used all the equity, but we took most of it and threw it at a big chunk of our student loans.

Okay. What did you do to live? Did you go? You went back to renting or did you buy another place? We actually chose to rent. And the reason we chose to rent is for us, it made more financial sense to kind of take that step backwards as opposed to getting into a slightly higher mortgage. the prices have been rising in California for home. So we're actually taking advantage of kind of the higher wages in California,

but we're also staying at a smaller rent. I wouldn't say that's a step backwards. I'd say it's a side step so that you can get the rest of your portfolio in order, the rest of your finances in order so that you can continue to move forward. Like you said, so until somebody finally phrased the question in such a way that really made me think, should I rent or should I buy? Oh, you should always buy. No, you shouldn't always buy. Buying in the Bay Area, buying in New York City, buying in these super expensive areas may not be the best choice for you. Yes, you're missing out on the appreciation. You can't guarantee there's

going to be appreciation. And you're trading this, you know, potential for appreciation for possibly a lower rent price. In my local area, I can't buy a house for a mortgage that is going to be more than I can rent the house out or there's going to be less than I can rent the house out for. It's usually about what I can rent. Okay, this is getting confusing. I'm sorry. I think like the point you're making, though, is that just renting a place can be more efficient than buying a place. So, or than paying down a mortgage. What was your mortgage at this home was $2,800 per month? What was the rent you paid when you moved? 1280. 1280. So now, you know, you're like, you're saving $1,500, $1,500 a month in cash.

outflows. Yes, some of that was going to mortgage and loan amortization under your home. And yes, you had the possibility of benefiting from appreciation. But are you benefiting $1,500 a month on average in that appreciation when you could be investing that difference in the stock market or in real estate? I don't know. I think there's a strong case to be made when the numbers are that skewed that you made the correct decision and one that's going to accelerate you toward financial freedom much faster by downsizing and renting. Right. And I think it's hard to make that argument on the other side. Oh, you should have kept your house. No, you're saving this money and you're paying off your debt immediately. At some point, you're going to have to pay off your debt. The longer you have it, the more it's going to cost you. Right. And I would also add, too, that what it did for us was it allowed my wife to cut down her hours and half. And now she's able to stay at home more. And it actually gave us more kind of reserve and energy ourselves, so we're not both burning out. And how much money did you save on child care? cost when your wife is staying home half the time. You were paying, what was it, $1,500 a month in

childcare? Yeah. Now you're paying, what, 700? Yeah, about, it comes out to about 800, 880. Yeah. Okay. Still another significant chunk of change that is not going out of your pockets, that can still come out of your pockets and go towards paying down other debt. So you just created $2,200 a month in additional savings, or at least lower, lower expenses with this move. Absolutely. Yep. And how much of the salary when your wife cut her hours and half, how much less money was she bringing in then? Was she bringing in half as much? So at her high, yeah, so at her highest, she was making about $108,000 a year. And then she dropped down to about $72,000 the next year.

And then in 2016, when we had our second child, she dropped down to about $20,000 because she stayed home with our daughter for a good six months. And that's another thing that it gave us was it gave us freedom for her to stay home. And we didn't have to take out any money from credit cards. just to survive for her to stay home. So it gave us that flexibility on that side as well. Yeah. And there's a big offset there against the child care expenses as well, right, which is coming into play. Yep, absolutely. And they're pretty high here in California. Yeah. So what was your income during this time? What were you doing for a job? You had mentioned

working for your software company and you had mentioned working for your old college. Correct. So what I was making early on when I was putting my wife through nursing school, I was making at tops about $27,000 to $30,000 a year. I wasn't taking any salary from the software business that I started. It was all just kind of blood, sweat, and tears and time that was put into that thing. We did keep a lot of the money in the bank, and then when we eventually closed down the company, I took a portion of that. I think it ended up being about $10,000 or $12,000, and this was probably two years ago that

we took that money and just threw that towards loans. But at the top, I've been ranging about 100,000 a year. Okay. And what do you do for work right now? And that's working as a speech language pathologist right now. I work in a medical setting, yeah. Okay. Okay.

So that, and when did you get your degree in speech path? So I got my degree in 2012. 2012. Okay. And you're a full-time speech pathologist. So I do that full-time. And actually, I recently dropped down from working. five days a week to four days a week, 32 hours a week, again, because it gives me more freedom

and flexibility now to kind of focus on kind of my entrepreneurial pursuits. So now I'm actually working a few days a week with David Green as a real estate agent. Awesome. Ah, real estate agent comes into play. A real estate comes in. Going back just a step. So we talked about the child care and housing expense. Were there any other changes that you noticed as well, did your food budget drop during this period or anything else going on that allowed you to spend less as a family? That's a great question, Scott. So I would say one of the biggest things that we did, and you hear this a lot, is we actually started doing a budget. Believe it or not, it actually works. And we did the Dave Ramsey, or, you know, I don't think Dave Ramsey came up with it. I think it was some

grandmother that came up with it. But we came up with, we did the envelopes. And for us, we didn't do envelopes for every single line item in our budget, but we did do envelopes specifically. for the areas where we kind of have the high expenses, where we tend to spend more, which for us is groceries, any kind of dining out or weekend trip, weekend getaway. And so using the envelope system has also been a great thing to kind of keep us on track. And the envelope system for those who aren't aware is basically you just write down on an envelope what your budget is for groceries for the month and you put in cash into this envelope, right? Or you literally write down the amount of money you're going to put in to those categories

in these envelopes, that way you can kind of control your spending a little better. Is that right? That's exactly right. And I will add one other thing that we did do was we were paying about 120 a month for our satellite TV, and we actually decided to cut that out completely. And now do everything, we've cut the cord, as they say, and now we do everything just kind of, we don't even do Netflix because we don't want to pay the money for it. We just either watch what's kind of what's free and what you can kind of stream for free online, and that's been a big thing as well. Awesome. So what did you, when you did the envelope system, what would you say kind of your,

what do you estimate kind of your net spending outside, you know, in the categories that you're walking, using the envelopes for dropped to? Or what was the total savings that you kind of got from that system? So just by actually budgeting and opening and taking a look at it and sticking to it, obviously it fluctuates every month, I reckon that we probably saved an extra six or $700 a month just from that. Awesome. So we're talking about almost $3,000 a month in aftertax cash flow generation that you, that you produce, maybe a year or a half long period as you kind of discover FI and begin making these decisions to move yourself intentionally towards it.

Big decisions, life-changing decisions, where you live, right, like what you're kind of doing with your lifestyle, you know, how you're managing child care. These are things that a lot of people that are in the position you were in a few years ago, consider fixed expenses that they can't change and that you did it. And it's, you know, I guess the question was, are you happier or were you happier in light of making these decisions? How did that affect what your friends say, your family? So it's crazy. So we got a little bit of a mix, right? I maybe had some coworkers that thought we were crazy, that we were leaving our big, beautiful house and moving into, so we moved just so you can kind of get an illustration of what we did. We moved from about a 2,500

square foot house to a small two-bed, two-bath, half-plex, under a thousand square feet. I think it's 920 square feet. And there's four of us living in here now. And we love it. We're close. We're closer now as a result. I think my wife wants to get out of here eventually, right? We're growing and the kids are getting bigger and we need a little bit more space eventually. But we are much more happier here than we were when we lived in our big, comfy house. and it's given us more freedom and the ability to do things. And we've also had friends that, you know, patted us on the back and said, that's a great, you guys made a great decision.

So we've got a little bit of mix, too, in terms of what people think and how they perceive us. And my wife was just talking to me about this morning. She said, you know, she kind of had to eat humble pie. It was kind of embarrassing that we moved into this new construction home. And a year and a half later, we're packing up and leaving. So it was definitely a humbling experience for us as well. I think it's a tremendous amount of courage and intelligence and boldness to go through that process. I mean, that house is what's eating most of middle class America alive right now.

Most of the people in this country are stuck because of that house and the expenses that come with it. All of your effort as a family went to, financially, went to working these jobs at the highest possible salaries that you could possibly earn, a total optimization on the salaried front for both you and your work. wife, and you had no other choice but to continue doing that until you made that big decision in conjunction with the other ones. And now the savings are accelerating. So what's your position, I guess, what's your position look like now as a result of these changes and what's going on your life today? So our position has changed. I wrote the numbers down here. Net worth in 2015, I think we were at negative $15,000.

And today it's, as of, I think, a couple days ago, it's 139 in the positive. And that has set us up to move in a direction that we never honestly thought was possible when we were living at our big house. And so for us moving forward, we kind of have a couple goals. The first goal is we obviously want to stay for a down payment to get into a house where we can live in as a family. but we're also saving and working hard towards a first down payment on a property as well. A lot of the money that we do have, the assets are in index funds, but we've kind of slowed that down, and I've more focused on accumulating cash for down payment on the real estate side thing. Obviously, as you know, Bigger Pockets is something that I definitely follow, and it really has

changed my perspective on real estate investing. I'll just give you a little example. when David first got into real estate investing, I thought he was crazy. He had his first, I think it was a second house that he bought. And he would occasionally, this was when he was still managing his properties, he would occasionally ask me to come help him do some kind of side project in the backyard to make, fix it up, make it nice. And there was this bush that we could not get out. And we were out there for eight hours in a hundred degree weather, trying to pull this dang bush out. We hooked up his dad's truck to a big old chain and tried to pull it out. We didn't.

never got that thing out. So finally, David's like, that's it. I'm hiring a professional. So I really wasn't turned on to real estate investing. I thought, he's crazy. He's wasting his time. But now kind of seeing the firsthand experience watching David and the growth he's made. And then obviously being part of the bigger pockets community, seeing the growth that other people are making really has inspired both me and my wife to kind of head down that path. Awesome. Just to kind of piggyback on that story about getting a bushout, I had the same problem at my house, the duplex where I live, I spent an afternoon trying to remove a stump that was right next to the house just with an axe going after it, get sore, sweaty, and I'm

working without a shirt on. And I guess my pants were hanging down a little low. So I got this incredible sunburn that was all along my back and like halfway through my butt. So anyways, that was a nice picture. Everyone now has that image in their heads. You're welcome. Let's move of talking about finance and real estate. I'll remember that. I have a story really quick. I took out two bushes and like four trees in my house and I did it with a chainsaw and you get the stump as low as you can go.

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Get more with Northwest Registered Agent at Northwest Registered Agent at Northwest Registered agent.com slash money free. So I want to go back to your wife who had to eat humble pie and move out of this brand new build. No, anybody who cares is not a true friend. And it doesn't matter what they think about you. You have to do what's best for your own personal self, your family, your finances and your situation. And one of my favorite quotes is from Coco Chanel.

She was so sassy. She's a fashion designer for those of you who don't know who. Coco Chanel is, Scott. And she said, I don't care what you think about me. I don't think about you at all. I love that quote. I tell my daughter that all the time who's going through middle school and all of the pain that goes through that. I hear Coco Chanel's products are very five-friendly. Yeah, yeah. Every financial independence person that I know is totally wearing Coco Chanel. She's quite pricey. Anyway, so that long segue or that long rant off onto the wrong road. You know, time and again, we hear from our guests that real estate has either contributed to or even been the impetus behind their financial independence.

So you talked about you are starting to work with David Green and getting your real estate license. You're saving up for your down payment on what kind of property. Is it going to be an investment property? Is it going to be a property for you to live in? And then where are you putting that cash while you're saving it? So most of our cash right now is just going into a savings account. And what we're focusing on is we kind of have two paths where we're headed. We're definitely focused on a down payment for a house that we can live in because my wife just, she won't be able to stay here forever. And so that's a big thing for us. And then we also have another kind of bucket that we're also putting money into. And that's going to be for our first investment property. And where that's going to be for our first investment property. And where that's, that's going to be. I'm not sure yet. Probably out of state because I know the out of state expert. And the biggest thing for me really is how much I'm going to learn between the time that it takes

me to start saving now versus when I actually make that purchase decision, which is why I've gotten into real estate, which is why I got my license, which is why I'm really trying to come at this with a learner's heart and a learner's brain in a sense and just absorb as much as I can before it comes time to pull the trigger. Yeah, I love it. That initial period of saving for that first significant investment, which it sounds like your process right now is how do I accumulate cash to make my first significant investment or set of investments in your next home purchase and then your first real estate process. That's a, that's a grind. It's like a year. Yes. Maybe two. Maybe longer depending on what your savings rate is and how big of that you want that investment to

be. The obvious thing to do in that time period is to continue saving, continue earning and learn and self-educate as much as you possibly can to give yourself the highest possible odds of success, which I don't know, I just love that mindset going into that grinding process. Yeah, totally. And that's the thing. And so for us in terms of saving, our saving kind of fluctuates every month because my wife, I call her the X factor because my, I have, I work at kind of a set salary right now. And so she kind of can, she can up or down her hours depending on what's going on with our family. And so she really is our X factor in terms of whatever extra income we get is from her working extra shifts. And so she's really been fired up about this the last six or

seven months. So she's been picking up a ton of extra shifts. And so all that extra money that we accumulate, we just throw into the savings account. Yeah. And getting your spouse on board is one of the best ways to reach financial independence. Because when your spouse is fighting you or when your spouse is not cooperative, you're going to have a way worse time. And money is the number one thing that spouses fight about. So having them on board. And, you know, how did you get your wife on board? Is this a conversation that you had? Did you show her one thing? Was she already on board? Was she more savey, more spendy? She got me on board, to be honest. Yeah. So she... Why are we talking to you? Let's talk to her. Yeah, she's the expert. No, you know, honestly, it was us both

sitting down and talking about what our goals were individually, but also what our goals were going to be as a couple, as a married couple, and as a family, and sitting down and talking about our core values and where we want to be in five years, where we want to be in 10 years, where we want to be in 20 years, and then aligning those values with each other to determine, okay, how are we going to get there? That's the biggest thing. If you and your spouse can necessarily be focused on the bottom line, but what the goal is or what it is that you guys have as your core values, that is what, to me, what drives productivity and what drives and increases that savings rate. So the more we talk about what we actually care about and where we want to be, that's to kind of

keep pushing forward and doing the best for our family. Awesome. So, Kyle, do you and your wife track your spending? Do you use your budget instead of actually writing it down? Or this is the number one thing that we hear from people over and over again is you have to track your spending. Did you start tracking your spending? Totally. Just go to the budget. Okay, let's look at how that, how that worked for you guys. So what worked for us was we definitely watched our budget. So we use mint mostly to track our spending. And what Katie and I have is we have

a monthly kind of financial meeting that we have. And she's not always, she's not the spreadsheet geek like I am. So she doesn't like to sit down necessarily talk about it. But she's actually gotten a lot better at it. And so what we'll do is we'll actually sit down and we will discuss how we did that month. How was our performance? What percentage were we over or under in a certain area and what we can do better the next month to kind of improve that budget area? Again, the areas where we tend to have the most trouble, which is why we do the envelope system is kind of eating out or kind of entertainment, grocery shopping, that kind of thing. But what we'll also do is we'll kind of, we have a monthly balance sheet where we look at our assets and our liabilities and what direction

those are headed at as well, kind of review that. So we look at kind of our short-term goals, how we're doing on that. And then we also look at kind of the big picture item as well. How are we doing overall as a budget? And that's where we can kind of have that open communication and talk about any issues that might be coming up. Okay. So what I hear from you and what I hear over and over again from almost every guest

we talk to is couples who are on the same page are constantly talking about money. And constantly is not the right word. Continually talking about money. You have monthly money dates. You have monthly balance sheet meetings. Hiding your head, hiding your finances, like doing the ostrich thing, that's not going to get you down the path to financial independence. Does everybody want to talk about $90,000 in student loan debt?

No. But not talking about it doesn't make it go away. Paying it down makes it go away. Talking about it keeps it in your head. You're like, okay, now I've really got to get this out of here. I have to pay this down. I can't stand having this debt anymore. When you think about it more, I think it really makes you more apt to pay it off. Absolutely. And that's what we did for that six or seven year span was I literally did hide my head. No, I didn't literally do it, but I hid my head

in the sand. And it was to the point where if I looked at my monthly bank statement, it caused a lot of anxiety for me to even look. So I wouldn't look because emotionally, I was not ready to have that relationship with money to kind of have the hard look. Now it's something that we do, no matter how hard it might feel. For example, we know, we still have times now where, man, we just didn't, we didn't make as much progress this month as we wanted to. And it's easy to kind of start ignoring it and then kind of let it be something where you don't track the spending anymore. So it really comes down to that, that daily, weekly, monthly discipline that you can have despite what you might even be feeling emotionally at that time. Yeah, I like that comment. I wasn't emotionally

ready to have this relationship. And now you are. So, and look, once you start paying attention to it, you actually get a paid off. Yep. Absolutely. How important was self-education in this process for you, kind of both in the expense cutting? And what are you doing now to prepare for those real estate investments? So I'm doing a lot of things. So self-education was, was and is very important. Again, really having the bigger pockets community is a great thing, listening to various podcasts, reading books, books. One of my goals for 2018 is to read 100 books. And so I think I'm at number 62 right now. And just absorbing information is important, but also putting yourself in the actual situations to learn. So I've gone to various local meetups that we have around Sacramento for real estate investing.

Really being around David and learning from David as much as I can has also been a positive thing. So not only am I just trying to learn the information, but actually putting myself in those situations and those scenarios and building relationships with other people has been very helpful. I think that's a phenomenal approach to education where you're just, you know, absorbing as much content as you possibly can proactively. And then also verifying that and learning and applying that knowledge in conversation with people who are actually doing it, no better way, I think, to learn rapidly. How does that, how does this compare to your formal education? Because you have several degrees. You have three degrees, right? You have bachelor's and then

two graduate degrees. Correct. So it is completely different. Looking back, I know that I obviously need the speech-language pathology degree to work in that field, but the other degrees I don't need. And the reason is because I know that I could have learned the same information on my own without having to go through formal schooling. And that's something that both my wife and I have learned personally over this last year to

the point where we are actually deciding to place our son in a private school. he'll be in first grade this year, but this private school, it's called Acton Academy. They specifically focus on kind of stepping away from the traditional educational norms and focusing more on ideas like entrepreneurship and coming up with ideas, coming up with a product, and learning at their own pace much different than the mainstream education. So it's made such a big impact on us that we've actually stepped away from putting our kids through kind of the traditional industrial school where you go and they tell you what to do and you sit in one place all day and follow instructions the entire day. All right. So how do your friends and family react to that versus how they

reacted to the housing situation? So similar again, it's a mixed plate. So we get a little bit from everybody. A lot of questions we get, especially from people that work in education, are is this something that is going to benefit your child? Is it accredited? What's the research statistics? what's the scholarship rate? How many are graduating from college? And so there's a lot of naysayers. This school has been around for about 10 years. And so they've gained a lot of traction.

They were originally founded in Texas, I believe. So we get a little bit of a mixed bag from everybody, but also other people say they think it's a great idea. And they definitely applaud us for moving that direction with our kids. Awesome. And then as an individual, as an adult, I guess, do you think it would be possible to get an equivalent education to the one to the one you're getting with your hundred books this year? Like if you went to school full time and paid 50 grand to Stanford, could you get a similar amount of learning out of the experience?

Are you getting more based on the 100 books and the networking that you're going to in the field of like business or real estate, I guess? I think it's similar, to be honest. There's obviously going to be pros and cons to each side. I can tell you one thing, a lot of the books that I've read, a lot of them are, are similar concepts and ideas and just told in a different way. But still, the experience of actually getting out there networking, getting to know people, I do think that I could be just as successful without a formal education than I am with, especially when it comes to working in things like real estate or if I wanted to be a doctor,

absolutely not. You know, I should definitely go to a traditional school for that. Gotcha. Okay. You just said informal education. And I, and a couple of minutes ago, you mentioned bigger public. in your list of enormous, your list of places to get real estate education. And I wanted to share with the people who are listening to this show who maybe found us through another site other than

Bigger Pockets is that there is a whole enormous website behind this podcast where you can learn how to invest in real estate. I hear from so many people who listen to the Bigger Pockets real estate podcast that David Green hosts with Brandon Turner. And they say things like, oh, I didn't know there was a website. I was listening to this podcast. podcast and all of a sudden I discovered you online. We have a blog. We have two podcasts, a video channel, webinars, and a forum where you can ask specific questions and learn how to invest in real estate the right way so you don't lose any money. You're not breaking any laws. I mean, real estate is not hard. So you increase your odds of success. You can still lose money,

even if you do it all correctly, right? So you increase your odds of success. There's no guarantee. You're not going to lose money. I mean, you know, the market could drop tomorrow, whatever. Thanks, Scott. But real estate is not hard. It's not easy. It's work. And you can do it the right way, which makes it a whole lot easier. Or you can do it the wrong way, which makes it a whole lot harder.

So I just wanted to share, if there are people listening who really are interested in real estate and don't know, BiggerPockets.com is this enormous, amazing resource for learning how to invest in real estate. So end plug. Awesome. Kyle, before we move on to the famous forward to thing, is there anything else that we should have asked you or that, you wanted to talk about that we didn't get to cover here in this conversation? You know, the one thing I will say is in the last kind of decade of my life, I definitely feel like I've hit some obstacles in the road where I've had different failures. And one of the books that really kind of got me excited this year that I read was Failing Forward by John Maxwell.

And he has a quote where he says, the difference between average people and achieving people is their perception of and response to failure. So for me, my whole, mindset and kind of paradigm shift has been how I look at failure within this last decade. In the past, I used to look at failure as if it was the worst thing in the world. And now I kind of welcome it. We welcome it in our home. We welcome it with our kids. We want our kids to fail fast. We want them to fail early and we want them to fail often. So that's been probably for me one of the biggest changes that I've seen in my financial journey. Okay. So before you read that book, the peak of you're spending, you were spending, you know, 8,900 and making 9,200. Was your fear of failure

lessening, has it increased before reading this book and kind of, you know, putting it in words, did that confidence, your ability to take risks, your desire to pursue your goals and dreams and kind of do what you need, you want to go forward? Was that increasing as your financial position improved? Did that have an impact on your mindset to some degree? Yeah, that's a great point. It didn't just change from one morning where I woke up and I said, okay, I'm feeling great. I'm going to go swim two miles across the Atlantic Ocean or whatever. Instead, it was one small step after the other and kind of stepping out and doing, I think it was Eleanor Roosevelt who said, do one thing that's scary every day. And it was kind of like that,

taking one small step at a time and then seeing some growth from it, then taking another step and seeing growth to the point now where I'm feeling more comfortable taking big steps and bigger steps and bigger steps. So it wasn't just kind of this overnight snap of the fingers where it just happened, but it was more of a kind of a slow, you know, slow pace of moving forward. I mean, why I do what I do, why I love this podcast and my job so much, is because I believe that there's a huge correlation between the progress you make financially and the confidence that you as an individual have to pursue your passions, dreams, and whatever it is that you want to make an impact on the world rather than maybe the career that you chose 10 years ago, right? And that power

that comes with that I think is just so important and so the word powerful is the same word I just used. But I'll use powerful anyways. That's what that's what this is all about, right? You move your financial position forward so that you can do the things that you want to do and that you believe will lead to a fulfilling life. And that, I think, is really hard to do if you're in the position that you were in a few years ago, where you're spending almost everything that you make, and there's not really any wiggle room. And it gets easier and easier and easier as your savings rate increases as you pile up cash and as you tack on passive cash flow. So I hope that that plays out, continues to play out for you over the next couple of years. Absolutely. And I definitely

agree. Kind of with the more growth comes more confidence. So that's definitely something I'm looking forward to. And it seems like every kind of every few months, there's this new chapter that kind of opens up and we're excited to kind of walk through that together as a family. Awesome. Awesome. Okay. So we are going to switch over to the famous four questions now. These are the same four questions that we ask every person on our podcast. The first question is, what is your favorite finance book? So there's definitely the popular ones, rich dad, poor dad, the richest man in Babylon. But I'm to give you a new one today, one that really did open up my eyes. I actually read it this year. It's one of the books that I'm reading. And it's called The Soul of Money by Lynn Twist.

And it really, she opens up your eyes to what is your relationship with money? How do you view money? And how are you interacting with money? And it's really been something to me where it's helped me to kind of step back and look at money more of as a tool than as something that was potentially scary or or dangerous. That's fantastic. Yeah, I've not read that one. I'll have to pick it up and check it out. Yeah, I haven't heard that one either.

I like these new, I mean, it's nice to have the continued books being recommended. This book was recommended 47 times. Hey, I'm going to pick that up. But I also like hearing these new books that I haven't heard of before, the soul of money, soul, like S-O-U-L. That's correct, yeah. Okay. Well, moving on, what was your biggest money mistake?

I'm going to say taking out that line of credit to finance the design and landscape of our backyard when we only had about $300 in margin every month. Did it look nice? It looked very nice. Yeah, it was really well done, very pretty. Except the concrete that we put in, it was that stamp concrete. So anytime it gets wet, the kids were like slipping all over the place. I felt like there was a huge liability in the backyard.

Anytime we had kids playing back there. But other than that, it was very, very pretty. I'll just bounce off of it. Yeah, exactly. What is your best piece of advice for people who are just starting out? My biggest piece of advice would be that it really is never too late. Part of us when we decided to kind of take this journey was it kind of, you know, we were just entering into our 30s, which is young, but you know, you feel like you're getting older.

You're not in your 20s anymore. And part of us felt like it's too late. We're not going to get to where we want to get. And so why even start? And so my whole thing is that it's not too late to start. You can start at any time, whether you're 30, 40, or 50. because even just taking that start made a drastic change immediately for us. And how old are you now?

I don't think we actually discussed. 34 now. 34. Okay. Yeah. Awesome. That's great advice. What is your favorite joke to tell at parties? All right.

So what did the janitor say when he stepped out of the closet to scare some people? I don't know. Did he rev his broomstick? Room, broom. That's not a very good guess. We'll try again later. What is it? Supplies.

Okay. There it is. I see. That was great. I thought I was going to get it. Oh, and how old is your son? He's six, and we have a two-year-old daughter. Scott, six.

His six-year-old son thought that was a great joke. And you. Well, let's mop this up with the last question then. Oh, my God. He is very quick. Scott, you are very quick, and I'm always impressed at how quick you are. Just I don't like the jokes.

Where can people find out more about you? I'm on Facebook, Instagram, under my name, Kyle Renke, R-N-K-E. And I also have a website that I started where I kind of do a little bit of blogging about financial independence, finance in general, a little bit of real estate, just things that I'm learning. And you can find me on those social media pages, Facebook and Instagram under my name. Okay, Kylerenke.com. And we will include links to all of this. in our show notes for the show, which can be found at biggerpockets.com slash money show 37.

All right, Kyle, thank you so much for your time today. I really appreciated it. And I love your message. It's never too late. It is never too late to start. And, you know, people who might be under $90,000 of student loan debt might feel, oh, I can't ever do this. Well, like I said last week, whether you think you can or you think you can't, you're right.

So switch your mindset. Think you can. Look, Kyle did it. Kyle did it. You can do it too. Totally. Well, thanks for having me, guys. It was a lot of fun. Okay, we'll talk to you later. Bye.

Bye. All right, that was Kyle Renke from Kyle Rankie.com. That's K-Y-L-E-R-E-N-K-E.com. Mindy, I thought that was an awesome show. What did you think? I love Kyle's story. And I love the message from the story. It's just, you can do this too. We had the couple from planting our pennies on the show a couple of weeks ago, and their message was, hey, this could be done by anybody. as well. And so often this is true, whether you think you can or whether you think you can't, you're right. So start thinking that you can. Take the tips from this show from episode 32, from episodes 1 through 36, and start applying them to your life. Track your spending. Make a budget,

reduce your spending, you know, increase your income. There are so many ways to get this done. Yeah. And I think the other part of it, I'm going to throw out a little challenge and, you know, be a little mean, I guess, for a second here. But a lot of people aren't going to do this, right? They're not going to say, you know what? I'm not going to resell my car and buy a less nice car. I'm not going to move down-size my house for square footage. I'm not going to have one of the spouses stay home and watch the kids to save money. I'm just not going to do any of that. And guess what? They're just not going to accumulate investable liquidity. It's just not going to happen. The only way it's going to happen is if they somehow earn a ton more money or they start

a business in their extraordinarily limited free time. Most of middle class or upper middle class America that's got these two household income with the $80 to $100,000 a year per working spouse and that's spending all their money just isn't going to go anywhere. And guess what? They're just not competition for you, me, Kyle, anybody else in the investing sphere. They simply will not be able to accumulate the liquidity needed to begin investing and they'll never move towards early financial freedom. It'll take them 40 years. And that's just just the fact of reality, right? Kyle chose to make these decisions and move his family towards it, not using, you know, the fact that he had children, you know, as an excuse, but as motivation and a way

to build his, you know, create freedom for his family and himself. Right. And what you've just said is, is really mean, but also true. I guess it's not that mean because the truth is not always pretty. But yeah, it's not going to happen if you don't do something about it. Yeah. I mean, those are drastic decisions that he made one by one over the course of 18 months that really changed his lifestyle. And I'm sure his friends and family had their comments on it like he mentioned, right? He's talking about not everyone's going to be supportive of it. And it's going to be uncomfortable. It's going to be scary. It's going to be a change. But it's just if you can't increase your income, if you're not going to come into a huge chunk of liquidity and you can't reduce

your spending and you can't start a business, you're not going to move towards five. There's not really any way around it. You have to do some of those things. And the most high probability way is to do, in my opinion, exactly what Kyle did here and begin with cutting those expenses and preparing himself for entrepreneurship and investing. Right. And did you catch the part where he said, oh, so for six years, I didn't look at my bank statements. Was it six years? For a while, he didn't look at his bank statements. Well, guess what? All they did was continue to deplete. All his debt did is continue to grow. because he's not looking at them, he's not paying attention to them. He doesn't have that in his head all the time.

If you are going to ignore the problem, the problem is not going to go away. But the good news is Kyle is an extraordinarily positive example of how to reverse that trend quickly, build some net worth, and then be prepared to rapidly accelerate towards financial independence because of his savings rate, because of the choices he's made with his family, and because of the fact that he's self-educating, 100 books in a year, 60 books already, right? He has, in my opinion, an extraordinarily high probability of rapidly achieving his goal in a way that's fun and gives his family freedom and is enjoyable along the way. I will be very surprised if his income and his business do not dramatically explode over

the next three to five years as a result of the savings rate he's producing and the amount of self-education that he's putting in and the networking that he's doing. And the networking that he's doing with his free time. Yes. And what is he doing? He's taking action. He's choosing to make a difference in his finances. And then he's acting upon that choice. And then a few years, everyone's going to say, oh, I could never do that because he earned so much money. You know, the guy has a graduate degree that he got a lot of debt for and is a speech pathologist, right? This is not like an incredibly lucrative career. It's a good job, right? But over the next couple years, I bet you again, his income's going to explode because what he's doing with his agent,

with his agent work, and his investing is going to explode as he continues to read, educate, network, and take action. I mean, and then people are going to be like, oh, well, I could have done it too if I made all this money. But no, it starts here. It starts today. It started two, three years ago when he made the first big steps towards this. Anyways, we're rambling on here.

No, I'm rambling on. We're having a discussion. We're having a discussion that's just taking a little bit longer. All right. Shall we get out of here today, Scott? Let's get out of here, Mindy. Okay, from episode 37 of the Bigger Pockets Money podcast where we talk to Kyle Renke from Kyle Renkeey.com.

This is Mindy Jensen over and out.