BiggerPockets Money Podcast - FinCon Bonus Episode: Debt Free in Three Years With Zina Kumok

Episode Date: October 13, 2018

Zina Kumok’s parents immigrated to the United States, with no money education and completely unprepared for the consumer society they found themselves in. They quickly got into credit card debt in order to have the lifestyle they “deserved.” An avid listener of Dave Ramsey, Zina quickly determined she did not want to ever be in debt. However, she graduated with $24,000 in student loan debt and made it her mission to pay that off as soon as she could. Every single extra dime she found, she threw at her debt until it was all gone. So once the debt is gone, Zina realized that she needed to ramp up her investing. Not one to just ‘show up and wing it,’ she set about learning how to invest properly. Zina’s story illustrates that you CAN pay off debt while making a lower salary, you CAN pursue financial independence while self-employed, and that your past does not define you. Links from the Show FinCon Dave Ramsey’s Podcast Behavior Gap (Carl Richards) BiggerPockets Money Podcast 35 with Craig Curelop Learn more about your ad choices. Visit megaphone.fm/adchoices

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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. I'm Scott Trench, and I'm here with my co-host, Miss Minnie Jensen. How are you doing today, Mindy? Scott, I am doing fantastic. Should we get right to it and bring Zina in?

and talk about money? We should do it right away. We should do it quick because we only have a 20-minute spot today. We're getting ready to go to the keynotes. But we stopped Zena in the hallway to talk to her. Zena, how's it going? I am having a great time, a little tired, I think, as we all are, but learning a lot and hanging out with a lot of fun people.

Yeah, awesome. Well, let's get right into it. Zena, can you walk us through maybe the foundation of your journey with money? Where would you say that your journey with money begins? I was born and no. That's my line. Really? I was born in a small town.

I was not born in a small town. No, but my parents were always, I mean, really, like as a kid, they always talked about money. They got into credit for debt, and they felt like no one had really given them a financial education because they immigrated here from Ukraine. And I was the little kid. And I think they were, they just really wanted to impart that to me. So I always grew, like, I remember listening to Dave Ramsey as a kid on the radio. And I always sounded really, really intriguing when he would talk about, you know, someone would call in and say, I have credit card debt.

I've got a mortgage. I've got, you know, a tax lien or something. And he would create a simple plan to help him get out of debt. And he was just very reassuring. And that always captivated me. And then when I graduated college, I had student loans. And I never had debt before. You know, I didn't have a car loan or anything like that.

And I just hated the feeling of being in debt. I knew I should have been saving for retirement, saving for an emergency fund. but I felt like, okay, I have all these loans to pay back. And I just, I really felt the physical weight of it. So I started a blog about trying to pay off my student loans in three years. Awesome. You know, one thing that I, I don't know why this is coming to mind, but I know that your parents are Ukrainian or Russian ancestry. The millionaire next door actually was published around the night in the 1990s.

Oh, really? And they mentioned that their folks of Russian descent were some of the wealthiest. demographic in the United States. So I was wondering if there's like any cultural things that were around, you know, good financial habits that you maybe noticed in the community or of parents' friends, those kinds of things. I think a lot of it probably was that if you came over, if you were lucky enough to come over, you probably had a really strong education. You were probably coming from a professional background. So my mom has a master's in nuclear physics. My dad is a typical software programmer. And then my mom got her CPA when we were here. And I think just from when I

seen with their friends, it was just like doctors and lawyers and engineers, just professional people coming over. And, you know, English is hard to learn. But if they weren't it, then they could, yeah, they could set up a good life and make a good living here. Awesome. Yeah, I don't know why that point blew into my head, but I just wanted to kind of talk about that. So let's talk about what you kind it did to pay down the debt over those three years. And what kind of debt are we talking about? Just student loans. Well, how much? Uh, 24,000 in principal, and I think it ended up being 28 with interest when I paid it off. Okay. So you just won the lottery? Basically, I wish. Um, no, I mean, I wish I was more interesting. It was the typical. This is going to be boring that I wish you were

more interesting too. Well, it's funny because at one point, a story about me paying off my student loans, up by time and they posted on their Facebook page and it went viral. And you know, you get the dumb comments. Like, she probably sold drugs. And I think drug dealers like, man, wait, make way more than $30,000. I think. I don't know if you take the risk if you're only making that much, which is about how much I was paying. When I was started paying off my student loans, I was a newspaper reporter making $28,000 a year. And then at the end of my student loan journey, I was making $31,000. ever made more than that. I was living in Indiana, which is a low cost of a living city. For two years, I paid rent by myself and my rent was like 30% of my take home pay so pretty high.

So I just did the typical things of like anytime I got extra money, you know, like visit your parents that give you like, you $100,000 immediately toward my loans. If I got like a birthday check toward my loans. You know, I was very much like, oh, I don't need anything. Just give me cash. I'm going to pay out my loans with that. I remember one time my in-laws gave me like, money for a trip I was going on. And they said, like, we want you to use this for the trip to enhance your experience. Don't use this on your student loans. And I did. And maybe if they listen to this, they'll find out. But it was a lot of, you know, I learned how to budget. And I had probably, not like a shopping addiction in college, but if I was bored, if I was feeling sad or anxious,

I would, yeah, I mean, just walk off the door and go shopping. and my friends would always tease me about the size of my closet. Like my drawers were just stuffed, things that had tags on them or that I'd worn only a couple of times. I mean, I flew back from a study abroad trip and I had to pay an over-j fee on my luggage because I just spent so much money there. When I entered in New York, I remember at one point I was eating out three times a day. So really a lot of emotional spending going on. Wait, wait, what, in the three years where you're paying this off, though, you were extremely frugal living in Indiana, right? So, you know, because if you're saying your average income those years is less than $30,000, that means that you're living off of $20,000 in cash or less to get through that, right?

Yeah. So what does that look like? What's your rents? How are you getting around transportation-wise? So I was lucky. My parents had a, you know, they'd given me a car when I was in college. So I didn't have an auto loan, which is really nice. So my rent, I believe, was $5.50 that first year I was paying off my student loans. And then it was $6.25. So a decent chunk of my take-home pay. I think it was around 30%.

The first year, I wasn't saving anything for retirement, but I was trying to build up an emergency fund. So I think I had probably like $5,000 stashed away in an emergency fund. Oh, wow. That was solely built from the ground up. Like I remember starting my first job and like borrowing money from my parents for the security deposit of my apartment. And it's funny because I was spending a lot on probably 200 a month on gas because I was visiting my boyfriend every weekend in a different city. And that's when gas is $4 a gallon. But except for that, like I didn't buy beer. I didn't go out. I didn't go out to

eat. I tried to spend like $150 a month on groceries. If I bought makeup, it was from a drugstore. I stopped going to Sephora. If I bought clothes, it was from Goodwill or a thrift store. you know, really trying to be lean in that way and going to the library instead of going to the bookstore, just really, really cutting back. What about when you, so, you know, after a couple years you got to zero? Yeah. So first of all, how'd that feel? What was your emotional experience kind of getting, going through the final stages?

There's a Jim Carrey quote. I wish everyone could become rich and famous so they could see that their problems wouldn't go away. I thought being debt-free would relieve my financial anxiety, and it didn't because suddenly I realized I'm 25 and I don't really have much saved for retirement. I'm behind in saving for retirement, which some people would say, well, now you've paid off your loans, and my loans were at 6.28% interest. That's a good return to get. But I now suddenly it was, oh, I need to catch up for retirement, so I had anxiety about that. So I wish I could say it was this momentous feeling. And I I was proud of myself, but suddenly I thought, oh, okay, now if I want to save, you know, 10, 15% of my salary for retirement, you know, I have to catch up really quickly to do that. So I think that's the dirty truth about achieving any financial goal is that if you think it's going to make you feel more secure or more stable in your life, I mean, I've talked to plenty of people here at FinCon make way more than I do.

and they're still looking at a $6 bottle of water. I'm like, that's crazy. Well, yeah, that's crazy. It is. It is. I went out to breakfast yesterday with somebody, and I wasn't that hungry. And he's like, well, let me buy you breakfast. I'm like, well, I don't want $18 worth of a buffet.

Yeah. Oh, I do. Well, I'll just, well, yeah, Scott Cuddy. Growing boy. Yes. Scott Cuddy 12 times out. But no, it's, I can't spend that. He's like, well, I'll just put it on my expense account.

I'm like, I can't have you. I could put it on my expense account, too. I'm just not going to because that's $18. That's like a whole day's worth of groceries. Yeah. So I totally get that. You should know, though, that at age 25, having $0 in debt and also zero saved for retirement puts you like in the top 10% of 25-year-olds. I mean, it's not like you were doing a bad job having nothing saved.

You know what's crazy, though? When you see the stats, like, how many Americans have less? than $400 in liquid assets to, or for an emergency fund or how many Americans have $20,000 or less for retirement. And I think we're all doing bad. Everyone is messing up right now. Like, yes. Just because you're in the top 5%, it doesn't mean that you're doing enough. And that's what is so scary when you look at the numbers. It's almost terrifying. Like, I have friends who I think, oh yeah, you seem to be responsible and then they tell me numbers and it never mind i mean it's so it's it's so rare to find someone who's doing all of the right things well how do you know your parents came over here your

mom's what is she a nuclear physicist so she ended up getting her accountant degree because surprised they weren't hiring nuclear physicists from the soviet union at that time wow so she's a nuclear physicist, the last I checked, you have to be remotely smart to be a nuclear physicist. CPA exam is kind of difficult to pass. Very difficult. From what I've heard, I haven't passed it myself. So your mom sounds like a smart person. Very smart. And what was your dad? A software engineer? Yeah. Also a field not actively hiring idiots. So, you know, there's some intelligence there and they came into America and immediately went into debt, you said. And that's, Because people told them, oh, you need to buy that?

Put it on a credit card. Don't worry about it. They don't know about money either. Yeah. They haven't been taught yet. And now they've been a very good job of playing catch up these last, I would say, 20 years that they've, like, real, you know, gotten out of debt and like really, really ramped up retirement, plan to retire early, which they can do because they have good paying jobs. But it's kind of scary when you look around and you see, oh, there are, I mean, how many are. articles do we read like save this amount for retirement, save this an emergency fund, save money

to fix your car if it breaks down, or have enough to pay part of your health care deductible. And then you think, oh gosh, like how many of us are actually doing most of the things we should be? Yeah. And I think you can, you know, what is what you should be doing, right? Well, there's no benchmark. There's no milestone. But the closest we can maybe get to that kind of like what should we be doing is a high savings rate. which you had, right?

Yeah. Even in spite of a fairly low income, you had a high savings rate. And I assume, it presumed that you continue to have that high savings rate and that you're beginning to deploy that in various and wealth-building aspects. Is that right? You know, what's funny is some people said I should move to Denver. I'm looking at the two of you. I moved to Denver.

Denver's a great place. Okay. When I had the last year, I was paying off my student loans, my rent was $266 a month. in Denver? In Indy, in Indianapolis. I was going to say, where did you get a place in Denver for 266? Probably on the street. Yes.

You should have stayed at Indianapolis. I did the math one day. I lived in Denver for three years, and I did the math. Like, what if I had stayed in that cheap apartment and I had roommates? I spent $35,000 in rent. Yeah, I spent more in rent. What if three years ago, Scott, she would have bought a property? property in Denver.

You would have made more than $35,000. But we're not here to bash you about not buying real estate, but you should tell it by real estate. I just bought my first house. Oh, you did. Yeah. You didn't tell me this. Tell me about your house.

I did tell you. You weren't listening. Okay. Maybe I wasn't listening. Tell me now. Carl does not tell me anything. Okay. I just bought my first house.

Yay. Not as a, just like for my own. Not to house heck or anything. like what you do. Still. No one send me mean comments. Anybody sends you mean comments. You forward them to me and I will send them mean notes back.

Okay. This is great. Do you or do you not need a place to live? I do. Yes. And now you own it. Yes. And my neighborhood is, it's not like scary gentrifying, but it's, you can see like things

are getting put in. The people that we bought it from, and I should have bought three years ago in Indy, they only lived there for two years. and they made $40,000 more. They bought it for 140. We bought it at 180. Oh, wow. So there's appreciation.

And Indianapolis is a great... That's a huge appreciation for two years. For two years, $40,000 is nice. Yeah. I mean, it's not Denver. Well, I will say that, you know, you lived in Denver a couple of years, but it seems like now you're prepared financially to buy a house. So, you know, at least you were...

It seems like your overall savings, right, was at least still something. And you're still accumulating wealth. Can you walk us through maybe what... your financial portfolio and decisions and lifestyle look like after the debt was paid off. Yeah. So it's funny for a while, all my investing decisions were whatever dad tells me to do because he had taught himself a lot about investing so he could make better decisions. And then I realized at some point, I think, as we all do, no offense, Mindy, that our parents

don't know everything. Are you saying that I'm old enough to be your mom? No, you're definitely not old enough from my mom. Yeah. I've done the math. So I'm going to ban you. But I realize, oh, they don't know my situation. My dad is investing for himself.

He's middle-aged. I need to invest for myself. We have totally different savings schools right now. And I remember it was actually Stephanie O'Connell of Broken Beautiful Life. And she wrote at one point, why aren't women writing more about investing? Why is it that women write about living frugally? or living on a, saving for a family. Why don't women write about investing?

And it's mostly a male-dominated space. And I was like, well, I'm not, I don't write about it because I'm not qualified. She goes, but why don't you become qualified? And I thought, who are you to tell me what to do? Because it made me really. Yeah. And I thought, it made me really insecure. So I thought, I'm just scared.

I don't know anything. Those are big, scary words. And then I started slowly teaching myself, actually reading, like Money Magazine and Kiplingers kind of helped because they're, they're pretty, not low level, but they're easy to understand. And I actually took a financial para planar course, concert by Carl Richards, if you guys ever read his stuff. And I sort of taught myself a little more, like, okay, like, you know, you want this much midcap and this much large. And I did an experiment a while back where I set up for an IRA from my husband through betterment, and I set up an IRA for myself

through Vanguard and I picked my own Vanguard stocks and over the year I calculate like I just and I was slightly edging him out. I thought oh okay I'm doing as well as this robo advisor which is vetted and a lot of people use and like and I'm doing the same thing and I'm smart enough to do that and I think that's been something that I never felt that empowerment before like now I feel like I can look at my friend's investments and say, okay, like, you're too, I mean, not specifically, but I can say you're too aggressive or you have too many bonds. You know, I feel like I could do that. That's awesome. So what do you, what do you, what's your kind of a philosophy then? How are you allocating yourself? I try to be pretty aggressive. I should probably have more bonds, honestly.

I'm 30, so I should probably have a few more bonds. But yeah, I just really like Vanguard index funds, U.S. and then I think of few emerging markets. So I'm not anything, you know, I mean the basics, just not anything fancy. So you're not picking stocks. You're just choosing index funds. Yes. Okay. I don't do any kind of stock picking. I definitely don't think I'm interested or educated enough to do that. And I feel pretty comfortable where we're at. But I am hiring a financial planar soon to make sure I am actually diversified enough. Awesome. So one of the things that I want to touch on is, you know, in the years following your debt paydown, what was your kind of rate of cash accumulation and savings looking like at that point? You know, where you, you moved to Denver,

so your ranking went up. But what did that look like from a cash flow perspective? I think I don't remember the exact percentage, but I think we were somewhere at a 25% savings rate and a part of that was going to saving for a down payment because we knew eventually we knew living in Denver was temporary. We knew we'd move back at some point to Indy. So I knew I needed a safe for a down payment and moving and honestly just buying nice furniture and sort of setting up a home and still saving the 15% for retirement. Okay. So is your projected retirement date and early retirement date? So far, I've set the goal at 60, which I tell myself, well, my friends would be retired at 70, so I'll still have a heart start. Right now at this very moment, I've got some,

big medical, like thousands and thousands of medical bills coming up next year. So I'm saving the max and an HSA for that. So that will probably, that's also been a big focus this year. So, and that's what I think a lot of people don't talk about is we've got big medical bills. In this country, it's really going to cut into your savings rate. What are you doing for income right now? I am a full-time freelance writer. And that's how I make 100% of my income. Oh, that's awesome. Yeah.

That is awesome. What's something about your financial journey that we haven't covered yet that you think would be that's important to talk about? You know, it's heard all what I said earlier. Like, now that I have paid off the debt, someone did the math for me recently of the years that I was paying off student loans so aggressively. We were in a really, really amazing bull market. And if I had invested that money, would I actually have more money now? and that's something that I almost worry about because

I have a good friend who just bought a house and he said, oh, I'm paying my mortgage off early and I said, well, are you saving in an IRA and kind of a waffly answer? And I said, you have a really, he had like a 3.5% mortgage rate. And I said, don't pay your mortgage off. You should be investing right now if you,

he's a little bit older than me. If you don't have anything safe for retirement, you need to be investing. But I think I now worry that all the of stories of me, other people, you know, I paid off 80 grand in five years. I worry that we're losing the investing portion of it because that's really important. Because it's really easy to pay off. If you have that capital and you have the desire to pay off your student loans or you just send in the check. But to invest, you have to either set up a 401k or set up an IRA if

you don't have that employer option. I think that's really good advice. What you're talking about is opportunity cost, right? Yes. And you're saying that the opportunity cost of choosing one course of action over another may have paused to... So single-mindedly, yeah. Yeah, so we had a guest on a recent episode, Craig Kierlob. Craig Kirlop.

I always get it. I don't know why. You always must be. But Craig, I think, had a very thoughtful approach to the same problem. He's all the student loan debt. He decided to house hack first, right? And then he got his second house hack, right? And now is when he used to be a need to know.

deploy a lot of money towards the student loans because he went through this thought process that you're bringing up here where, hey, you know, the house hack in his mind is a really good high probability return. But after a certain point, you know, it makes sense for his overall portfolio to begin focusing on the guaranteed six, seven percent return to go down there. And I think there's a there's a balanced approach of thinking, hey, are there really low-hanging fruit where I can go, that I can go after with a very small amount of money that is really high return? And then once I get past that now how do I go for that risk-free, you know, high-interest rate returns? And I have to say that I spent, we all spent a lot of time thinking about what we could have

done, what we should have done. When I called my prospective mortgage lender for a pre-approval letter and I said, okay, this is my income. My husband and I are both self-employed. And he said, okay, and how much debt do you have? And I said, none. He was, no, I mean like student loans, auto loans, personal loans, like a credit card. balance. I said, I don't have any debt. And he said, you have no debt. And I said, I have no debt. And I mean, that made it so much easier. So hindsight is 2020. No, and you didn't, it's not like you did anything bad. Yeah. You did a great job. You like the end of the day, this shows, hey, what matters is your savings rate and deploying it somehow. You're going to get to the finish line

and be very well off financially if you have a high savings rate and you deploy it in any way that you think is reasonable. You don't always fiddle back about whether you were the most optimal or not. That's secondary to what you're, the fundamentals of what you're doing, I think. Well, and I think you just have to make a decision and stick with it because questioning yourself is not going to change what you did. Yeah. You're not going to be able to go back in time and decide to keep your student loans and invest more. So you made a decision. And there's this big debate. Do I pay off my mortgage? Do I keep my mortgage? Well, I'm in the keep your mortgage department, but I can can also sleep at night with a mortgage. If having these student loans weighs so heavily on you,

then pay them off because being able to sleep at night is way better than having like an extra thousand dollars in your investment. Well, and sometimes I think, you know, someone asked, what would you do with $100,000? I think I could pay off a big chunk of my mortgage and I think, I've invested. I've invested right now. I would too. Okay. It's now time for our famous one. Where can people find out more about you? You can find me. I am currently in the process of finishing our rebrand at Consciouscoins.com where I teach people how to be mindful of their money, whether it's about investing or paying off their student loans or whatever they need. If you'd like to hire me as a freelance writer or just look at my portfolio, it's www.

www.zina Kumak, zina kumok.com. And of course, follow me on Twitter and Instagram at Zena Kuma. Awesome. Okay, Zina, thank you so much for your time today. This was a lot of fun, except that joke that we're editing out. Now everybody's going to be contacting you. What joke did you tell? And then you can tell them all personal.

Yeah, ask Zina for her incredibly inappropriate joke. I didn't write it myself. She did warn us that it was inappropriate. I just didn't realize the level of the appropriateness. Okay. From the FinCon bonus episode of the Bigger Pock's Money podcast, this is Mindy Jensen, Scott Trench, and Zena Kumach. And Steve is kicking us out.

So, bye.