BiggerPockets Money Podcast - 395: Finance Friday: House Hacking, Side Hustles, and the Path to FI by 45

Episode Date: March 24, 2023

Want to hit FIRE? You’ll need a smart side hustle. We’re talking about income-doubling, cash-printing, serious side businesses that will allow you to leave your job and grow a substantial income stream, so you can invest the rest andreach the early retirement you’ve dreamed of. And for today’s guest, Alex, this is exactly the goal. Alex left college and went straight into the corporate world, only to realize that her potential wasn’t being met and there were alternative income goldmines that she could be chasing. So, she got her real estate license as a side hustle, helping buyers and sellers get into and out of homes. Her commissions boosted her income to unforeseen amounts, and now, Alex is sitting on a stack of cash that could help launch her to financial independence. But, even now, with a better job and a serious side hustle, Alex wants to venture deeper into the entrepreneurial realm. The next big dream? Becoming a financial coach for those that want to be in her position. But, before she starts, Alex needs help figuring out what to do with the savings account she’s been diligently growing. Should she use it to put twenty percent down on a house hack that would limit her living expenses? Or, is there a savvier, more creative way to finance her next property that could put Alex in a FAR better position? If you’re trying to hit FI before, after, or at forty-five, this episode is one you can’t afford to miss! In This Episode We Cover Starting your side hustle and boosting your income by turning extra time into money Creative financing and how to buy your first property at a rock-bottom mortgage rate How to know if you have too much cash (and what to do with it) HSAs, IRAs, 401ks, and other retirement accounts you should be throwing cash at  Becoming a real estate agent and whether or not it’s worth it for the commission checks Designing the perfect portfolio for early retirement (even if you’re just getting started) House hacking and how to use your primary residence to generate passive income And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Scott's Instagram Mindy's Twitter Listen to All Your Favorite BiggerPockets Podcasts in One Place Apply to Be a Guest on The Money Show Podcast Talent Search! Subscribe to The “On The Market” YouTube Channel Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets Check Out Mindy’s 2022 Live Spending Tracker and Budget Money Moment Finance Friday: Why “Doing Everything Yourself” is Costing You THOUSANDS How to Make Extra Money in 2023: 21 Ideas for Part-Time Gigs & Side Hustles From Extreme Poverty to DIY Wealth and 2 Full-Time Incomes w/The She Wolfe of Wall Street Click here to check the full show notes: https://www.biggerpockets.com/blog/money-395 Interested in learning more about today's sponsors or becoming a BiggerPockets partner yourself? Check out our sponsor page! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast, Finance Friday edition, where we interview Alex and talk about real estateing and entrepreneurship. It's zooming out and saying, okay, do I want two or three house hacks and portfolios? Do I want a stock portfolio? Do I want a business? Just kind of thinking through that at a really high level and saying, here's how I want to be in three to five years. And the actions I'm taking conducive to getting me there. Or am I just continuing to throw a lot of cash onto this pile, which is great, but it's not a strategy. It's not as effective as putting together a thoughtful plan that you're backing into. Hello, hello, hello. My name is Mindy Jensen.

And with me, as always, is my real estate super nerd co-host, Scott Trench. Thanks, Mindy, but I don't think that one really was able to land. Mindy 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. That's right. you want to retire early and travel the world, go on to make big time investments in assets like real estate, or start your own business, will help you reach your financial goals and get money out of the

way so you can launch yourself towards your dreams. I can't believe you took my spot. Scott, you stinker. That's not all, Mindy. We have a new segment of the show called The Money Moments, where we share a money hack tip or trick to help you on your financial journey. And today's money moment is, want to save money and help the planet switch to LED lightbul. You can cut the amount of energy used by up to 90% using LEDs, and they also last 25 times longer than regular light bulbs. So I think a lot of people skip these because they're slightly more expensive than regular light bulbs.

That's because they use a lot less energy and last 25 times longer. So swap out all of your light bulbs with LED ones, and you're going to save yourself a lot of money and a lot of time over the long run. If you have a money tip for us, email MoneyMoment at BiggerPockets.com. and Mindy will likely read 90% of them. I can't believe you totally, it's not even April Fool's Day. All right. Now we're back to our regularly scheduled slots.

So I'm going to say the contents of this podcast are informational in nature, 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, before... For any financial decisions you contemplate. For any financial decisions you contemplate. I can work on my memorization, Matt. That wasn't that good. All right.

So, Scott, I am excited to talk to Alex today. She is a newly, highly paid employee, and she's a real estate agent. She has a little bit of variable income, but also some pretty rock solid income and nice expenses. She's doing pretty well, and I'm excited to give her a bit of our own income. perspectives. Yeah. I mean, this is the result of a lot of work, a lot of intentionality, probably a lot of self-education in personal finance and real estate and really just hard work. And the culmination of that is a really strong, positive life cash flow. And a lot of people, it seems like we've talked to a number of people now on the Finance Fridays who have come into

this position after a good been on time. And it's almost like you pop up and you're like, wow, I'm going to, I accumulated tens of thousands of dollars in cash in the last 12 months, last year, two, three. And I'm going to accumulate 50 to $100,000 in cash in the next year or some large amount relative to that. And I don't really have, wow, what do I, what do I do from here? I've got so many options. It's overwhelming. It's a really good problem. And that's where I think, you know, it comes down to what is the plan that you're going to back into three, four, five, seven years from now. And how do you begin making decisions that move you towards that because you do have a lot of good problems, but you still have a problem when you have

a lot of cash to play. And you've got to be intentional about it to maximize the opportunity and the abundance in your life. Yeah, absolutely. She has a lot of great options and opportunities. And now it's just deciding and narrowing down. And I think really focusing on which one she wants to pursue first. Before we bring in Alex, let's take a quick break. 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 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. 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, and wondering if that bad sushi lunch with Scott 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. Found 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 F-O-U-N-D.com. Found is a financial technology company, not a bank. 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. 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. And we're back. Alex is a real estate agent who left corporate America to pursue a job she liked much better. Kids are in the future and she's pursuing FI. So Scott and I are here to take a peek at where she's at and give suggestions for how she can get to financial independence. First, we're going to take a look at her finances. I have a salary of $53,000, extra money of $1,800, real estate commissions of $55,000, project commissions of $27,000, for a total of approximately $138,000 or $11,500 a month. She has savings and investments of $37,000 in a Vanguard brokerage account, a Roth IRA of $6,000, $6,800 in a 401k, $5,000 in treasury bonds, $20,000 in savings, and $100,000 in a high-yield savings account.

We're going to talk about that a little bit more. Her expenses total around $4,000 a month, and I'm not seeing really anything egregious. household rent is 1,400, car is almost 900. That's the one thing I do want to talk about. Medical, 121. Phone 75, dining out 180. Groceries 160. Subscriptions 55. Business expenses for 10. We're going to talk about this at the end of the episode. Travel and vacation, $167. A grand total of $4,000 with an income of 11.5. I think she's doing pretty good on the spend. Yeah, she's crushing it. Alex, welcome to the Bigger Pockets Money podcast. I'm so excited to talk to you today.

Excited to talk to you guys too. Thank you for having me. I appreciate it. Let's look at your money story. What does your history with money look like? Sure. So I grew up with a single mother and a retired grandmother. So we were very middle class.

You know, we got by, but we didn't really dine out every week. We ate at home. I was telling Mindy before that. You know, I didn't even really ever know that people ordered appetizers until I was in my 20s or I started dating my boyfriend. I always looked at the numbers on the menu and I made sure that I was, you know, keeping it under budget. So I grew up kind of with that scarcity mindset growing up. I think that's a very common theme with a lot of people who grew up in that sort of situation. And as I went on, you know, I went to college.

I graduated college with about $25,000 worth of student loan debt. And then that same year, I thought it was a great idea to buy a new car. I mean, I did need a new car, but it was new. I did no negotiating. And I ended up with another $15,000 in debt. So that kind of rounded me out the first year out of college with $40,000 in debt. I got a corporate job, you know, was fine. It was paying my little to no bills.

and all of that. But I was really not fulfilled in that work. And that's kind of when I started to explore other options for my career, as well as income, just extra income, kind of getting different side gigs. And one being real estate. So I became a real estate agent part time while I worked my corporate job. And, you know, I thank bigger pockets for that as well. I stumbled upon bigger pockets. And that really helped me network with a lot of people in my area. And I really fell in love with real estate and real estate sales. So eventually being in that job, I tried to create kind of what Scott usually refers to as a financial runway to kind of take a risk, take a new career risk, whether that be going out

on my own or what I ended up doing, which is my broker is also has a construction management company for new development homes down in Long Beach Island, New Jersey. and he is also, you know, my broker. So I was able to kind of be a full-time agent and also work with him on that company full-time as my full-time career now. And in the process, I was able to pay off that $40,000 worth of debt in about five years out of college. And that, I guess, brings me fast forward to now where I'm really looking to concentrate on,

of course, growing my wealth and all that. And also kind of taking more entrepreneurial. risk and feeling more comfortable with that, with the consideration of, you know, me wanting to be essentially coast by about 45. So that, those are sort of the two things that I'm balancing and along the way wanting to have a house purchase and all of that good stuff. So I appreciate all of your input on on those items. Okay. Well, let's focus on what you're doing right. Income and spending. 115 in income with 4,000 spend leads you with a giant chunk less. to save for a down payment for your house or save for a down payment for an investment property

if that's what you're into. And if it's not, that's fine. You can start investing in your after-tax brokerage, which you actually already do. I don't think your problem is spending. And I mean, everybody can tighten up everything. You can eat rice and beans. You can have no cell phone. You can live with your parents. Like, you could have a totally miserable life and save way more money. But you're doing really good right there. I don't think that's your problem. And I don't think income is your problem either. I wonder if focus might be needing to be tweaked a little bit. Where are you focusing your extra $7,500 on? So I mainly contribute to my after-tax brokerage. All of the, so my take-home pay every month is about $4,400, a little bit more than that.

maybe $44 to $4,500 a month. So that pretty much covers a lot of my expenses. So the extra is between my commissions and all that, which isn't exactly a monthly thing. It's maybe in every other month, maybe one month I have, you know, a lot in commissions. And another month I don't have any. So usually I try and split my focus is, okay, every month I'll have the $4,400 to cover all my expenses. And then when I get commissions, that's kind of where I allocate about, I put aside 30% for taxes. And then after that, I put about 60% into my after tax brokerage. And then another,

the other 40% I put in cash. I'm pretty cash heavy. I know that. A lot of that is due to wanting to kind of diversify with, say, a house hack multifamily property and all that. And I want to have that as a cushion for the down payment as well as any sort of repairs that come up. So that's how I'm allocating that money currently as it comes in. I think it's great. I think it's really well thought through. And I think you have an outstanding allocation here. Zooming back out, you paid off $40,000 in five years.

I'm guessing that the current level of income is a relatively new state of affairs. Is that correct? Yes. That's really the last year. Prior to that, I kind of wrote it out. it looked I averaged about 88,000 a year, maybe a little bit under that prior to that. Awesome. So your income has jumped 50 grand in the last 12 months over what you're used to seeing. And all the money is starting to roll in. And you're kind of like, okay, what do I do now from this with this

excellent problem? Is that, is that a good way of framing what we want to accomplish today? Definitely. Awesome. Well, congratulations. That's great. And the reason you're doing that is because you're working essentially two jobs here. And you've got a very, and you've done it really creative. I think that's really good inspiration for someone listening. How do I, if I'm looking to leave my job here, how do I go into like real estate as an agent, but then maybe also take on a gig that can give me full time, but it's acknowledges that license. There's probably a lot of opportunities there, property management, construction, working for a

flipper. The list could go on there and that could be really exciting for folks. Okay. So you have right now $20,000 in cash. Is that correct? I guess that's my main checking account. I have about $20,000, but my high-investment savings account or high-yield savings account is about another $96,000, call it $100,000.

So I have about $120,000 in cash. Well, I missed that. So we're in really good shape here. And you're going to accumulate about $60,000 a year. I'm guessing at that because there's a lot of variable puts and takes here with that you have to set aside 30% of the income from your real estate commissions for taxes, all that kind of stuff. But is that a good guess, $60,000 a year and in cash accumulation is very achievable for you in the next 12 months? Yes. Awesome. So we have $180,000 at the

end of this year. And your goal is to get into real estate. Is that, you want to make a real estate investment? Yes. Initially, of course, I want to have a house tax sort of property. Being here in northern New Jersey, it's very expensive to live here. My rent, I mean, I know Mindy said it was relatively good, which it is for the area, but that is also half of it. My boyfriend pays the other half, and it also doesn't include parking, so that parking is technically part of my rent. It's not really separate. How much do you pay for a paved piece of a land? What's going into that $900 car payment?

Oh, the car payment is gas, easy pass, just maintenance that I've done. the past year or so, I kind of averaged it out. So that's all, and oil changes all of that. But I go very frequently. My commute down to Long Beach Island is about two hours round it each way. And I go three times a week. So it's pretty expensive for gas and tolls and all of that. And I try and have regular maintenance on my car so it will last me forever, ideally. So that's really where that $900 comes in. Okay. Walk me through an investment you would make in real estate. What are some of the options you're considering for a house hack or similar? Sure. So in this market, of course, being a realtor definitely helps me understand what's available, what's realistic, what the rents and the numbers look like. Realistically, what I want them to look like is definitely different. But on the market, I think that I could probably find a property that's a good deal.

for about $600,000, maybe both units bring in $2,500 a unit. So I know that's not exactly the 1% rule, but the idea being maybe, you know, we live in it. We have a lower cost of living, of course, and kind of with the mentality of holding for appreciation and appreciating rents in the long term. So I think that that's kind of the most realistic. I shouldn't say most realistic. But of course I would love to find a better deal than that. But I guess from what I see on the market, I've been doing a lot of off market marketing as well.

But just for example, like a $600 to $650,000 to family in this northern New Jersey area is kind of a little bit on the lower side even. So I think that's attainable, but it's, yeah, that's what we're looking at as a potential investment. Awesome. So one thing, so how would you finance it? Would you put 25% down? I would put 20% down. And then you use a conventional loan? Yep.

So I think this is a really good, you are a perfect use case for someone I think who should be exploring creative finance. Okay. If you can assume an FHA mortgage or a VA mortgage, you have the cash or will by the end of the year have the cash to bridge that gap. Right. So what about talking about here? If someone has a VA or FHA loan, you can take on their mortgage payment. It's an assumable mortgage. So you can essentially use their three and a half, probably four percent, you know, even lower payment. That changes the math on this investment dramatically. The gotcha, the big gotcha is that you have to bring

cash because their loan balance is not going to be 20 percent of the property value. It's going to be, you know, I'm sorry, 80% it's going to be 65 or 63.2 or whatever it is. So you need to be able to bring cash to bridge the gap between whatever your purchase price is and the amount of the loan balance that they've got. You've got 120 grants. You're well on your way there. You may need some other source of financing, maybe friend, family, or even a hard money loan to some extent to bridge the extra 40, 50, 60, whatever the random amount that you're going to need in order to close on a property would be. Or you can just wait. a little bit longer and you're going to stock up, stock away, 60 grand in cash. Have you considered

this angle as part of your purchase criteria? No, I guess I haven't. With a FHA being an assumable loan, I guess that would be, of course, the seller would have purchased it with an FHA loan and then I'm bringing, you know, that to pay them out. But I guess it would be finding that. I guess that would be my one question on how to kind of go about finding something like that. I think if the agents start to learn about this FHA being assumable and VA loans are assumable too, even by people who aren't eligible for a VA loan normally, I think as agents find out about this and people start to put their house on the market, agents are going to start asking, do you have an FHA loan? Yes, I do. Holy cow, I'm going to advertise that. This is a,

an assumable FHA loan. You can, like Scott said, you could only assume the balance. So let's say they paid $80,000 for it. They got an FHA loan for 75 and they've paid off $3,000. Now they're at 72 and you're coming in and you're going to buy it for $100. You have to bring $27,000, $28,000 to closing in order to cover the difference. But you get the bulk of your purchase finance at their lower rate, presumably lower rate. It doesn't really work if they bought it last month and their rate 7%. You don't care. Yes, but this is a challenge. So your unique position is that you have a hundred grand in cash and you're in a really strong financial position. So you can pull this off. But the issue is like a first time house hacker who is looking to do this. They don't have 150, 200 grand or a reasonable

way to getting there very quickly in order to bridge that gap. So you have a little bit of a really good advantage in that capacity. So surely somebody is going to come up with a solution and to this from a technology standpoint. If anyone knows that, please, you know, send me an email that's got at biggerpockets.com or ping us in the Facebook group at Facebook.com slash groups slash BP money. But in the absence of a technology product that I'm readily aware of to find this kind of financing, I'd encourage you to just simply ask, does this prop, you're a broker. So you just literally contact a listing agent and ask them in a simple email, this has come with FHA or VA financing. What does it come with an assumable loan?

The seller would be willing to entertain that. And that's going to allow you to purchase a lot more. And the math changes dramatically when you're using a three and a half percent interest rate mortgage versus a... Yeah, I think I got quoted, yes, 6.8 recently. So... Do you have a search set up in the MLS? Yes. I have my own...

my search and then, yeah, pairing that with kind of letters and postcards recently. So I got a couple of calls. They didn't really turn out to be anything, but something. The way that I set up my search and when I was looking for a property, I would write letters. I would write them by hand. And I would say, even though I'm an agent, I'm not looking to list your house. I'm looking to purchase it myself. So I didn't want, some agents will try to get in like that and then flip the switch on them. Oh, yeah, I just really want to list it. Or, you know, I just wanted to be upfront with them. I'm saving you commission because I'm not taking the commission for either side. I'm, you know, I'm going direct. I'm going to give you the fees that would equate whatever you're paying

for an attorney. So you are represented so that you don't. feel like this, there's a power imbalance or anything, I really wanted to put them at ease because getting the property is more important than saving $1,000 or $10,000. Like to get in is really key. I do want to say that New Jersey laws are really strict and lean toward tenant. If you're house hacking, I think it's different. But if you're an agent, I think it's now not different. So just that's a bit of a homework assignment for you is just to look into the thing that I dislike the most about New Jersey landlord tenant laws is that you technically, not technically, you can't non-renew a lease except for cause.

So if they haven't paid their rent, of course, you can evict them. But if they're just incredibly disruptive, you're living next door to them, they have parties all night long. They are stomping and just they live above you and they're very, very loud. they have like brick shoes or something, you can't non-renew a lease except for cause, which on the one hand is good for the tenants. On the other hand, you can't get rid of a bad fit. So something to be aware of. So one last point on this Assumable Finance piece, one other thing you can consider doing,

depending on the seller, of course, and the seller has to get comfortable with this. And I think that they will start doing it because it's really just some paperwork at the of the day. But imagine you have a $650,000 duplex that you're looking at. You're going to bring $120,000 down. The loan balance remaining is $350,000. So what are we at right now? For 70 minus $650. We need $180,000 to come up with, right? Perhaps, and this might be too big of a balance, but perhaps you could say, would you willing to sell or finance that amount? And then I will pay it back over a three, four year period at this interest rate. that could even be higher. You might want to get closer in an example like that. I hope maybe the

balance is 450 and you're only asking for a $50,000 seller financing. But the more cash you stack up, the more attractive an option like that will be to a prospective seller if it means an extra, you know, $10,000 and the purchase price for them. So just make you more competitive. And I think this is the year of creative finance for a lot of folks that are in your position. Any feedback or thoughts on that? Does that way, is that helpful? Oh, yeah. That's very helpful. I appreciate it. Yeah, Even in past episodes, I had been thinking about the seller financing only recently because, yeah, you guys had brought it up before. And it definitely, it definitely makes sense for creative financing. What's another area that we can look into today?

Do you want us to keep going deeper around real estate? I think that's been great. I know I mentioned to Mindy, too, a lot of that is just a lot of my own analysis paralysis. So I really appreciate the feedback and kind of reframing things in a more creative way to kind of open up some opportunity. and some options for me. Other than that, I think that another area is really balancing, wanting to take more entrepreneurial risks with my goal to also still be in a coast-fi type of position by about 45 is where I put it at,

where maybe I have children and I want to spend more time with them, have more flexibility. But I also, the position that I have right now is great. I consider myself to be a full-time realtor, and I'm also, of course, working with my program on his construction business, which is a small, you know, essentially a startup, small business, private business. And I know that I would like to do something on my own at some point. So I guess for me, a little bit of fears come up with taking that leave, similar to how I did

before, but with less of a consistent. income and foundation. So kind of just also, yeah, balancing those two wants, essentially. What sort of entrepreneurial endeavors are you looking to get into? Yeah. So I guess, ironically, I would love to get into financial coaching. I think that even though I don't know everything, of course, I think that I know enough of the basics and I've learned enough of the basics of how to save and invest. And I feel like I can coach people through that effectively and get to a position similar to mine or, you know, not that it's all-star, but it's okay, I think, for where I'm at. And I would love to pursue something like that. I really feel like I can contribute and help people

with that piece. And of course, pairing real estate with it, just that's a big financial component for people. And I feel like I'm, I could use that knowledge. along the way as well. So that's mostly what I would love to pursue. Do you by chance have a master's degree? I don't. That could help you if you wanted to apply for like a CPA license, for example, as part of that. Okay, so the goal is to become a financial coach and explore that as a potential business opportunity. A services based business, you charge hourly, I presume. Yeah, I would say. Or have sort of a program and have like a fixed cost. program, that's another area where I thought might be better.

Well, the best way to do it is to sell whole life insurance. Oh, you think. We won't teach you how to do that one. I'm sorry. No, no, that's great. Okay, so we want to start this business. Like, you are in a great position if you want to explore entrepreneurship. You have a ton of cash and you bring in a lot more than you spend.

You only need one of your two jobs in order to cover your costs right now. and you could divert all of the time you dedicate to either being an agent or to the construction work to your side business. And if you didn't make any income for a year, like, for example, if you were to leave your construction job, if your current situation, you could survive for two and a half years prior to needing to go back to work in order to burn on that. So that, you are in position to take a great shot right now. Obviously, that changes a little bit if you do a house hack and use up all the cash.

Now all of a sudden your runway is diminished a little bit, but you also will probably have lower expense profile. So there's good tradeoffs there. But I think you're in position to do that. So the next question would be how to go about making that transition if that's what you want to do and how soon can you do it? Yeah, I think that that's a lot of my own questions as well. I definitely plan to, you know, this year is kind of where I did want to start kind of picking that up as a part time. endeavor, just finding the time to do it, of course, working essentially two jobs. Mindy, I'm sure you understand even the weekend is showing houses and all that.

So it's definitely been a challenge there, not to say that I can't make the time for it. I don't ever want to use that sort of thing as an excuse. But that's the biggest, I guess, barrier and kind of just the steps to take to begin something like that is what I'm, really my next step on how to approach it. The first thing I thought of when you said financial coaching was the she-wolf of Wall Street, Amanda Wolfe. She is the she-wolf of Wall Street on all-social and she's particularly active on Instagram. She makes videos and videos, you can make a video with your phone. I mean, the iPhone cameras from like iPhone 7 up and the pixel cameras from like pixel three up are so high quality that you can record a video and upload it to YouTube in like 20 minutes.

If you want to start doing financial coaching, how are you going to get clients? You get clients by showing your expertise. How do you show your expertise? By splashing it all over the internet. We were actually just talking the way that we ended up recording the episodes. Their episode is releasing on Monday. this one releases on Friday, but we've recorded it already. So next Monday, listen to that episode and you'll hear how she got started on her business essentially with no money. There's a very

small amount of money that you need for like website hosting. She didn't even have a website at first. She just had an Instagram account. I believe there is plenty of room in the space because everybody's voice is different. You are going to be able to speak to people that I can't speak to that Scott can't speak to. So what is it that you have to offer? You could be the financial real estate agent or, you know, whatever, the East Coast finance girl, or, you know, whatever it is that you specialize in or have a big passion about, start thinking about what your angle is. And I hate the word angle because I don't mean it like like skeezy, but what is your angle? What do you have that I don't? What do you have that Scott doesn't?

What do you have that the She Wolf of Wall Street doesn't have? Because there are things that you have that they don't, that people will listen to Alex versus Mindy. So start making a list of the topics you want to talk about. Start making videos. It's really hard. You should see some of my first videos. You'd be like, oh my God, that was awful.

Like cringe. So cringe. It takes a lot of time to get comfortable in front of the camera. And then as you gain a presence online, people start. reaching out, hey, I really like what you have to say. You really make me feel comfortable or you've really kicked my butt into gear and now I'm ready to take charge and, you know, can you help me? And or you, you know, you offer it up. But like, go check out what Amanda's doing. She's really doing some amazing things. What does a successful coaching business look like to you in three,

four or five years? Oh, that's a good question. That's a good question. It would be, of course, in terms of an income, I would be earning about the same, I would say. I don't think that I really feel like, and hopefully this isn't my scarcity mindset creeping in, but I don't feel like I need a large income to be able to save the way I want and invest the way I want. So really, if I would be able to, say, in three years, have a coaching business that earns $100 to $150,000 a year, that would be incredible and more on the more real what I would like to do being helping people. You know, I don't know what that looks like in terms of the quantity of people, but I would love to, you know, have coached at least over 100 people, you know, in three years, a three year period of time and be able to impact them in some way and help them either get out of debt or help them invest a little bit better and maybe make more money. Yeah, maybe even like you were saying, Scott, like figure out, help them figure out a way to have that financial runway to take a kind of a quasi-intrepertorial risk before they maybe want to jump into something entrepreneur real themselves.

So that's, I guess, a short summary of what I see it looking like. Awesome. Yeah, we just talked to someone recently who is basically a physical therapist. So and there's a lot of a lot of similar I mean it's the same type of business, right? It's a it's a services based business You're charging likely per session per client So to back into what you just said, you know you if you wanted to work a thousand hours which is 20 hours a week Over the course of a year in this business in three years you'd need You need you know with a

Basically a thousand hours billed at a hundred fifty dollar an hour rate which would be very reasonable for those services you'd have to a established credentials, expertise to do that. There are ways to do that. One of them that I think is very, very hard from starting from scratch, but not impossible. And probably you should do is what Mindy said, building a social media presence, videos, content, those other types of things. Another way to go about that would be in this field to go and get your certified financial planning designation, CFP designation, which you can take a test. It's a rigorous test. It'll take you some time. It'll require a lot of study. It'll probably be about the same level of commitment from a financial perspective as getting your real estate license,

but perhaps much more intensive from a study perspective. So that could be something you would do. You will immediately get recruited or may get risk getting recruited after getting that designation by, you know, the Edward Jones and other institutions that charge assets under management and whole life insurance policies. And again, we're not big fans of those types of policies and that type of financial planning. But that is how you make the big bucks is you get a lot of assets under management. You charge 1% of the fees.

That's what attracts most people to this space. So that would be how you back into something like that. And yeah, you could start sooner and see if there's a plan there. But I think it'd come down to your value proposition. I'm a real estate friendly financial planner in northern New Jersey and western Pennsylvania or whatever it is. that helps people that are looking to become financially independent with a couple of properties do this. I specialize in 1031 exchange, tax preparation, you know, tax strategy in planning, financial planning, building portfolios with real estate as part of it. Building out the very

specific niche might be very impactful. And yeah, getting clients from there. First you have to set up the business and then, you know, make sure you can deliver on that value proposition. Yeah, I think getting in front of the camera would probably be the hardest thing for me. So this is good practice, I guess. You don't need to do that necessarily. There's a whole bunch of guys on bigger pockets, for example, who haven't really been on the camera. Don't get on there for, but they post one, two, three, four times a day about those related topics. And they become experts in those, they already are or they become experts in all these different

niches in the finance world, and that's how they get clients for services like what you're talking about. Cool. Thank you. I do want to bring up. I looked up how do you get the CFP certification? The experience requirement prepares you to provide personal financial planning to the public as a CFP professional.

There are many ways to satisfy this requirement. Ultimately, you must complete 6,000 hours of professional experience related to the financial planning process or 4,000 hours of apprenticeship experience that meets additional requirements. So CFP is a, it's a bigger undertaking, which is, it's a better undertaking than just like being online. Hey, I can do this. But it's harder. It's a harder is not the right word that I want to use.

It's more of an commitment. Commitment. I was going to say obligation. Commitment is the word I was looking for. It's a much deeper commitment, whereas you could start making videos and be like, oh, I love this and want to be a CFP or, oh, I hate this and I want to figure out something different. So just, you know, Scott and I are here to give you different perspectives. If we were the same person, there wouldn't be no need for both of us. Absolutely.

And one way to go about that, I will admit I had kind of forgotten about the several. It's the same thing with the CFA as well, which is what you want from an investment perspective. But one way to go about that might be to say, okay, the construction job is great, but maybe I could get a job more locally with an accounting firm or something like that and learn the ins and outs of tax preparation for real estate investors for a firm here. Probably a similar salary. That's direct experience there, working you towards your goal of being a financial coach with a legitimate designation that will mean something in the space.

So that might be a very powerful, okay, I'm going to do that for a year. Then the next year, I'm going to work with, I'm going to work for a CFP and be bookkeeper, tax prepar, whatever that is to some degree that will help me do that. And these are probably all jobs that would pay, that would offer potentially an opportunity to pay at a similar level. And if you're a real estate, if you can bring real estate expertise to that, there's, there's value add in addition to the skill set that you're providing. So those would be all things to think about.

If that's what we want to back into, how do you, you know, in three years, you could be a CFP with a very credible set of experiences in tax preparation, estate planning, and other ins and outs, for example, for real estate investors. Yeah, that's cool. And one of the things you wanted coaching on was not having a 401K. 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 taxed 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 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 sponsored 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.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. deed 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 Registeredagent.com slash money-free and start building something amazing. Get more with Northwest Registered Agent at Northwest Registeredagent.com money free.

Marvel Television's Wonder Man an eight episode series now streaming on Disney Plus. A superhero remake. Not exactly what we'd expect from an Oscar winning director. Action! Sign me Williams.

Audition for Wonder Man. I'm going to need you to sign this. Assuming you don't have superpowers. I'll never work again if anyone found out. My lips are sealed. Marvel Television's Wonder Man. All eight episodes now streaming.

Only on Disney Plus. What other accounts do you have access to? Do you have like a 403B or a 4057 or anything like that? Not at my current job. We don't have any sort of account through that. But I have just a Roth IRA on my own. I have a SEP IRA for when I do my real estate commissions and all of that at the end of the year.

I can contribute to that. Okay. And then I just opened an HSA. I haven't contributed yet, but that was last month. Other than that, that's really the extent of it. I love the HSA account. You'll hear next week on Monday, you'll hear how much Amanda Wolf loves the HSA account and also how much Kyle Mazz loves the HSA account because it's such a great account.

You don't pay taxes on the money that goes in. It grows tax-free. And then you pull it out tax-free. And some people are using that as a way to fund their current medical expenses. But if you can cash flow your medical expenses, what you can do is save your receipts. And let's say, I mean, there's a lot of things that qualify for FHA or for HSA funds that like contact solution, band-aids. There's like 5,000, 20,000 things. It's a giant list of stuff, including all of your prescriptions and your co-pays and all of that stuff.

You pay it with your current cash. You save the receipt and you keep putting money into your HSA. You max it out as much as you can. You allow it to grow tax-free. You down the road, you decide, okay, now I'm going to cash in. I've got all of these receipts. Now I can pull that money out. When you've got $3,000 in there and $1,000 worth of bills,

it's you just took a third of your balance away. A third of your balance can't grow. But you've got $3,000 in there every single year. I think it's $3,800 this year. Every single year, you're growing this giant balance. And then you've got $1,000. You pull out $1,000 when the balance is $40,000. It's not such a big hit.

That's a thousand tax-free dollars. And you can do this as long as you have an HSA, as long as you have a tax, a high-deductible plan, you can cash full your expenses and then save those receipts. Cool. For pulling out at the end. And then if you don't use all of the funds that are in there, I think it's 59 and a half, you can start taking that money out.

That's really cool. But eventually you're going to need that for, I think for regular medical expenses, even though you don't have an HSA plan anymore. But that's, it's such a great program. As long as you have the opportunity to do it, I would recommend doing that. Well, thank you. I really overall like the decisions you've made and how you set yourself up with your portfolio at this point. I probably wouldn't have changed a thing.

At this point, you now need to do something with the 120 grand in cash that's sitting there not earning a return. That could be buying a house hack. It could be using it as runway to start to fund your business. But there's no sense in accumulating additional cash at this point unless you have a clear cut planned. to use it outside of your retirement accounts. So I would think about how do I max out down this stack. You're in a privileged position where you have this option. And I would, I think that, yeah, prioritizing, taking an employer match if your day job

offers that is a good one. I like the HSA next. I like the Roth IRA after that. I like your SEP and 401K options following those. So I think that's right. And if you don't have a plan to deploy the cash, I just start dumping it all into those at this point. Because you already have 100 grand. There's no, you know.

Yeah. I love the flexibility it offers you. Use it or start or start piling up the tax deferred wealth. Yeah, I know. I feel like I'm always very cash heavy. Just, you know, I like the buffer. But I guess that to your point, it's, it's, it's, Definitely, I think, enough of a buffer even putting 20% down, if that be the case, the way to go and all of that.

Another thing to think about is you just said you like having the cash buffer. How would you feel if the ideal property came up tomorrow and you needed to use $120,000 for your down payment? Is that going to make you so nervous to not have any cash buffer? And if it is, and it would make me nervous as well, then don't put $100,000 or $120 down. Can you, like, what is the minimum cash buffer that you can comfortably live with and start, like, you don't need to answer me. You don't need to have that answer right at the top of your head, but start thinking about that so that when you are looking for a property, the perfect one pops up, but it's

going to take every dime of your cash that's going to give you. so much nervousness that you're not even going to be able to sleep that kind of makes it not worth it. Yeah, absolutely. I agree. I think the biggest single takeaway here, though, is you are fresh on this kind of new world of earning $140,000 a year, give or take, and having tons and tons of extra cash coming in. And it seems like you've just been stockpiling for several years in your savings account. Now it's time to pop up and say, okay, if I keep this up for the next five, 10 years, I have a path to a million dollar net worth. And I talk about this a lot, but it's zooming out and saying, okay, what does that position look like in five years? I easily will have

six, seven, six to seven hundred fifty thousand dollars, even if I don't generate a return on my wealth at that point. I have, I have a path to potentially getting into that ballpark. What do I actually want that portfolio to look like this much in a house hack? Do I want two or three house hacks in portfolios? Do I want a stock portfolio? Do I want a business? When do I want by how do I sequence that and get to a place that makes sense and and begin acting at the highest level on that. And that will mean big moves. And it will also mean kind of evaluating the value of your time, which is dramatically higher now than it was a few years ago.

And it will be, if you keep doing it, keep this up, higher still in a few years than it is now. That means you have to stop doing certain things or outsource them and whatever. And so just kind of thinking through that at a really high level and saying, here's what I want to be in three to five years. And is the actions I'm taking conducive to getting me there? Or am I just continuing to throw a lot of cash onto this pile, which is great, but it's not a, it's not a strategy. It's clearly going to work and building wealth, but it's not as effective as putting together a thoughtful plan that you're backing into. I appreciate it. It's true.

Awesome. Well, Alex, thank you so much for your time today. This was a lot of fun. I like talking real estate. I like talking real estate agent stuff. and I am excited for what lies ahead. I would love to hear what you do with your house heck search. So please let us know when you find a property.

Thank you so much. I appreciate your time, you guys. Thank you. Thanks you. Bye. All right, Scott, that was Alex. And that was a really good set of problems to have. Which bucket do I put my money in?

and which goal do I focus on? And I think narrowing and I think focus is the key here. Which goal do I focus on or which goals do I focus on? It can be hard when you're in this position of you've paid off your debt. You have a lot of income. Where should it go? So sitting down and figuring out what you want can be really key. Absolutely.

She's doing fantastic. She's got all these things that are going to make her. super successful over the long run, it's backing into a plan there and making intentional choices to move towards it. And I think that she's still kind of in the I have all these options phase instead of here's my plan and the most logical choice to move me towards that plan is A, B, three logical choices are A, B, or C. And I'm going to go with A because that's the one that moves me the most direct impact, whatever. If she can get there, everything's going to be going to start falling into place for her. And we can begin to begin.

backing into that. The three big takeaways, though, that I have for today are in addition to, first, having that plan. Second, thinking through the house hack decision in the context of creative finance, right? Creative finance requires you to come up with something either super creative, like I'm going to assume the loan and I'm going to do seller financing and I'm going to bring a little bit of cash, or to have a lot of cash. And she's in that privileged position of having a lot of cash, which makes this really accessible to her in a way that it may not be for many of her competitors in today's market, right? She's in a unique position for a house hacker of having both cash and the willingness to move into a property. That makes a simple financing,

like FHA and VA, really available to her in a way it wouldn't be for me as an investor, or it wouldn't have been for me as a first-time house hacker eight, nine years ago, because I didn't have $120,000 in cash to bridge that gap. So that's number two. Yeah. And then number three, I think it's this entrepreneurial bend and understanding, okay, when is it time to pull the trigger? And how do I set myself up for success in that endeavor?

So it's a smooth transition from my current state to the future state of being an entrepreneur, business owner and this. And I think that in her case, she had some opportunities to think through education, certifications, brand building, and then just generally rounding out of her. expertise. So I wouldn't be surprised if there's a job change coming up in the next year or two that aligns better with her goal of entrepreneurship in the financial coaching space. That would be very interesting. I hope she checks back in with us. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the Bigger Pockets Money

podcast. He is Scott Trench and I am Mindy Jensen saying shake, shake, rattlesnake. Bigger Pockets Money was created by Mindy Jensen and Scott Trench, produced by Kaelin Bennett, editing by Exodus Media, copywriting by Nays. Wynetrob. Lastly, a big thank you to the Bigger Pockets team for making this show possible.