How to Invest Your Money in Your 20s

2021 7 28 KM Money Honey Rachel 8 | Ken McElroy Image

How to Invest Your Money in Your 20s (with Money Honey Rachel)

How DO you get started with real estate in your 20s? Do you REALLY need lots of money to get started? Join Ken McElroy and Rachel Richards, author of Money Honey, in a discussion about how to be a real estate investor your 20s with no money, overcoming the helpless mindset, and how easy it really is for beginners in real estate TODAY. 

Ken McElroy:
It’s Ken here and I am so excited to have Rachel on the podcast though. Rachel is a big tick tock star for, so for all you guys that have kids or yourself, or you’re under 30 or, or you’re trying to figure stuff out. This young woman here and her husband have acquired 40 doors, they have a lot of cashflow they’re on their way to financial freedom. And, uh, they did it in a very short period of time. And they’re both still in their twenties. Uh, she’s got two books already, guys. Let, let me tell you something, you, you know, you gotta, you gotta pay attention to this girl here. She’s you, you won’t, you won’t keep up. So she’s written money, honey, and another book called path of income, aggressive retirement. Uh, welcome to the show. Rachel. Welcome. Thank you so much, Ken. I really appreciate it. Why don’t you talk a little bit about how your channel started and, and you know, and what you’re trying to do with it? Uh, you know, cause I know it’s, it’s, you know, just immediately went viral and obviously there’s a massive need for this information. And what do you plan on doing with it?

Rachel Richards:
There’s truly a big need. You know, we are in a financial education crisis at no point in our lives. Are we taught how to manage our money? And the problem I saw in the marketplace was that finance is boring. It’s a boring, dry, complex topic. No wonder all my female friends don’t like to learn about it. So I thought to myself, well, how can I make this topic sassy and fun and simple. And it really started with my books. Um, I, I wrote in self published money, honey in 2017, it took off. And that was kind of my, my first business that I started. I didn’t start the tiktok until later, but TikTok’s been a lot of fun and it’s certainly gone viral quickly. There’s just such a need for concise, engaging, funny content where you can learn about financial literacy. Cause I know every single millennial I know, wants to improve their themselves in that area.

Ken McElroy:
Oh, for sure. So what did you put in that book? You know, I love the name and obviously it goes with your channel itself and where you guys don’t know go over to money hunting and Rachel, she’s got great videos on this stuff. Um, and what did you put in the book? Because I know it was a success. Uh, why do you think that happened?

Rachel Richards:
Thank you. Yeah, I think I just was able to talk about money in a very casual way. I, I have, I have memes, I have acronyms and phrases that, that young people use and understand. And it’s really about the basics of money management. So saving, budgeting, investing, debt taxes, and insurance, and it took off one of the most common feedbacks I get is that it feels like they’re having coffee with a friend and they’re talking about money. So that was really my goal. I basically wrote it from my best friend and I’m, I’m so happy. It’s resonated with people.

Ken McElroy:
Good for you. Good for you. So when you guys got the courage and I know that you start off as a financial advisor and, and you’ve obviously been a hustler your whole life and, and, and really drilled into, you know, financial education and read a lot. So, but that first deal is always scary. Right? And that a lot of people ask me, you know, how do I start? And basically they get kinda held back and you guys didn’t, and not only did you just do that first duplex quickly, but you jumped and scaled very, very quickly. So you, can you talk about the mindset and how you got over, you know, and that first deal. And then also how you felt confident about, you know, what to do. Yeah.

Rachel Richards:
I’m really glad you asked Ken because we did procrastinate. It may not sound like it. If we bought, you know, I bought my first duplex and I was 24, but I did drag my feet and looking back, I could’ve gotten started a lot sooner if I had known about things like house hacking and the bar method, I just didn’t know enough at that time. But here’s the thing you’re talking to the biggest type, a control freak perfectionist ever. So I had a lot of fears and a lot of limiting beliefs at the time I fought, I don’t know enough. I don’t have enough experience. I don’t have enough money. And I was afraid of making mistakes. That would cost me money or cost me my time. So for awhile, I didn’t, I didn’t even try. I really didn’t make much progress. And then I finally had to just accept the fact that I was going to make mistakes.

Rachel Richards:
So I needed to give up the perfectionism in me and just accept the fact that I was going to make mistakes. And if I wanted to get started in real estate investing, there’s no way to avoid that. And I’m years into real estate investing, I’m still making mistakes. So we’re all going to keep making mistakes for the rest of her life and learning and that’s unavoidable. But once I gave myself the grace of accepting that that really helped me get over the hump. And there’s also this quote by Zig Ziglar that I love. And he said, you don’t have to be great to start, but you have to start to be great.

Ken McElroy:
Right. Right. Well said, look at you. That’s awesome. That’s awesome. Okay. So we’re going to take a quick break after the break. Rich, I want to talk about, you know, you, you obviously got your first duplex, which was, I think a hundred grand and then you scaled up to 38 more units at a very short period of time. So right after the break,

Ken McElroy:
Welcome back guys. We’re here with Rachel and uh, okay. So Rachel, I know you and your husband bought the first deal with the savings that you had. You didn’t raise a lot of money. You didn’t syndicate. Like a lot of people are out there trying to do right now. Um, but you, you did have the fears of not having any money and you obviously had the fears of buying your first one and knowing whether it would work. And um, so can you talk a little bit about that deal? You know, obviously you put your own cash in, how does it cash flow? And then the bigger question is how did you scale to 38 more doors?

Rachel Richards:
Yeah, absolutely. And just to get some things out of the way, cause a lot of people are like, oh you’re a trust fund baby. And no, I’m not a trust fund baby. And I never made six figures from a job or a salary. So coming up with that first down payment came down to being very frugal with our money being very disciplined and both my husband and I saved 10 grand each over the course of a few years. That’s how we got that 20% down payment for that first duplex. One of the things that I did well from the very beginning and I’ve said, I’m a finance nerd before. I’m very much a finance nerd. I’m an Excel spreadsheet nerd. And one of the things I’ve done well is just being very conservative with my estimates. I think what a lot of new investors where they make mistakes is they think, oh, well here’s the wrench that I’m going to make minus the mortgage payment. And here’s my profit. And that is not at all accurate.

Rachel Richards:
There’s like 10 other expense categories you need to account for there’s vacancy. There’s utilities, right? Who’s going to pay for the water and electric. You were the tenant. What about pest control? What about HOA fees, maintenance, lawn care, property management. I could go on and on. So clearly you have to account for all those different buckets. If you can do that correctly and conservatively, you’re gonna do really, really well. And that’s what I did a good job of. I wanted the property in real life to actually be performed better than what I had projected in my spreadsheet. And that’s been the case for all of them except for one. So that’s how, and when we first bought that duplex, just to give you an idea of the numbers, um, one side was completely unlivable. We had to do a total renovation. The other side was being rented for 600 a month. So it was very under rented. I thought we could get more like 7, 7 50 per month, but after we did finish that renovation, the property was cash flowing. $500 per month in profit. So it was already really strong. And now several years later to this present day, it’s cash flowing more like $800 a month in profit. That’s wonderful.

Ken McElroy:
Okay. So let’s just sum that up. You put 20 grand down, you got 10 back in commission.

Rachel Richards:
I didn’t get that much. I may have got, probably got $2,000 back.

Ken McElroy:
So, um, so you got a little bit of cashback because from your real estate license and now the thing’s producing almost 10 grand a year, right? Yes. So guys, if you don’t know what that is, that’s, that’s called a 50% return cash on cash annually. That’s what we do. Plus the tax benefits, plus your tenants paying down your mortgage, you know, plus plus plus plus, and I’m sure that that you improve the property and you, you generate some equity. I know every time we buy a property, that’s, uh, like that you, you actually improve the neighborhood and you improve the value and there’s all kinds of, there’s massive, massive benefits around this, which I, I know a lot of people do do understand. Um, I’d like to shift gears a little bit and talk about your family and your friends because, um, you know, they, obviously your parents have gotta be wildly Fox, you know, proud of you guys and, and w w w w what you’ve done, but was there some resistance, uh, on, you know, like, are you sure you want, you know, you just got done with a degree and, you know, you know, what’s this corporate world versus this entrepreneur world.

Ken McElroy:
What, what was going on during all that?

Rachel Richards:
Yeah. You know, I think my parents learned that if I was setting my mind to something, they were going to stay out of my way pretty much, because there, there were, there were other instances in my life where I was like, oh, I want to do this. For example, when I want us to sell Cutco, you know, my mom, she, wasn’t thrilled about the idea of me selling sharp objects to our friends and family. But I think they learned over time that when I say I’m going to do something I’m going to do with it. So they, they really have been very supportive my whole life. And I think they just knew that I was going to figure it out one way or another. So I was very grateful for that. Um, same with my friends. You know, there’s always going to be someone in your circle or sphere that just doesn’t get it.

Rachel Richards:
And that doesn’t, and that can look like jealousy. Sometimes it can look like envy. And so you do have to deal with those people a little bit, but the biggest demon you have to deal with is yourself. So in 2019, when we got to the point where we were making $10,000 a month in passive income, by then we basically counted ourselves retired. We were financially independent because our passive income more than covered our expenses. So this was the year I was, I was going to quit my job. It took me months and months and months to actually go through with it. It was one of the scariest decisions I’ve ever made. And I remember thinking, what are people gonna think of me? They’re going to think I’m crazy. They’re not going to get it. You know, they’re going to have all these assumptions about me. And also at the same time, I was like, I’m walking away from a lucrative finance career. What am I thinking? So I had to overcome all of those limiting beliefs and all of those fears to actually go through with it. And thank goodness I did. I mean, if anything, I waited too long, but quitting, my job has opened up the door for so many other opportunities. Yeah.

Ken McElroy:
Th that’s a thank you by the way, because I know there’s, it had to be emotional. I mean, you know, a lot of people are trying to do this in their thirties or forties or fifties. A lot of people have never done this. They felt like they need that steady paycheck. And, and to be able to untether yourself from that and completely rely on the cashflow, uh, that’s an emotional decision, right?

Rachel Richards:
Absolutely. It’s scary. It’s vulnerable. Definitely. One of the scariest things I’ve ever done and, you know, a lot, a lot of people listening might be thinking it’s too late for me, or it’s too blink for me or whatever. And I just encourage you that it is not too late for you. I started, you know, I started off making $36,000 out of college. I certainly didn’t have advantage. So I wasn’t a trust fund, baby. I wasn’t making some enormous amount of income. And I went from that to, you know, now here I am just a few years later, so I encourage you. You absolutely can do it. Anyone at any age on any income can achieve financial freedom. Right.

Ken McElroy:
You’re, you’re absolutely right. Okay. One more question. I’ve been wanting to ask this question because one, because you guys are still young, um, you know, what is the one thing that you had wished you had learned when you were younger?

Rachel Richards:
You know, one of them I’ll give two, I guess, because one of them is the lesson of just getting started and just doing it like the Nike slogan, just do it. And don’t overanalyze and overthink, which is hard for perfectionist. Um, but one to an, especially when it comes to like investing, whether in the stock market or real estate investing, just knowing that it is a lot simpler than most people think. So a lot of women, my age get really intimidated to invest in the stock market because it’s this big scary thing. And it certainly feels that way. I completely agree with that. But when it comes down to it, if you just follow a few simple, you’re going to do amazing. You know, don’t get caught up in the latest trends don’t ever chase trends, stick to what is tried and true, which in my experience has been investing in ETFs and index funds for the long run and not trying to buy and sell based on what’s happening in the market.

Ken McElroy:
Very good advice for somebody who’s done it. Somebody who was a financial planner and, and manage other people’s wealth and then broke off of that completely to create our own passive income so that her and her husband are financially free. Well, Rachel, it’s been a pleasure and a blessing to have you on the show today. Uh, how do people get ahold of you? And what’s the best way to reach out.

Rachel Richards:
Thank you so much, Ken. It’s been an absolute honor. I really appreciate it. So, uh, both of my books, money, honey and passive income, aggressive retirement are available on Amazon and ebook, paperback, and audio. And what I’d love to do for your listeners is if anyone wants to download my passive income starter kit, I will give that for free. So you can go to money, honey, rachel.com/bonus. Okay, great.

Ken McElroy:
And we’ll put that up on the screen for when we put this up on YouTube as well. And you know, I can’t wait to keep following you. I can’t wait to, you know, keep tethered to you and see what you’re up to over the next few years, I have a feeling that, um, it’s going to be big and congratulations to you and your husband. Thank you so much, Ken. You bet, Rachel. Good chatting with you.