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Retiring Young & Making Your Money Work for You with Money Honey Rachel

To join Ken McElroy’s Newsletter, follow this link: https://www.kenmcelroy.com/news — Join Ken McElroy and Tik Tok Finance Personality, Money Honey Rachel, in a discussion about acquiring 40 units by the age of 27, retiring in your 20s, and making the best out of any situation.

Ken McElroy:
So, Hey everybody, we’re on with Rachel. She’s a TikTok star and her, her handle, I guess, is Money Honey Rachel, is that right, Rachel?

Rachel Richards:
Yes, that’s correct. Yeah.

Ken McElroy:
Welcome. Welcome to the show. Uh, you know, I was really looking forward to doing this because, you know, I talk to a bunch of old guys, it seems like a lot of times, you know what I mean? Like Robert and I, when we’re together and all the advisors or whatever. And so it’s really exciting, you know, to talk to somebody that’s educating, you know, our use because rich dad, poor dad. I know you read that book, but gosh, you know, it’s, it’s over 20 year old book now and I did a lot of your generation people your age, uh, my kids, um, you know, I, I handed them the book and I said, you must read this. Right. It’s a must read in my house, but, but not everyone has read that book. Right. Right. So what was your experience after you first read that book and, you know, obviously you’ve had massive success on your channel and by the way, congratulations.

Rachel Richards:
Thank you. I appreciate that. Rich dad, poor dad was a game changer for me as it was for millions of other people. And I still push it really hard. So I try to get all my people to read it as well, but I first read it in high school. And by then I was already very much a finance nerd. So this was just another book that I was reading in my repertoire. And, but this one was different because it was the first book that turned me onto real estate investing. And that’s what part of what lit the fire in me to pursue real estate investing at a later age. So that’s what I credit that book for doing.

Ken McElroy:
And then 27 years old, you got two books they’re right behind you there. Money, honey, uh, obviously has done very, very well and, and passive income, uh, and aggressive retirement. Is that the second one? Yes, that’s correct. Yeah. So congratulations on all your success. You’re only 27 years old at the moment, right?

Rachel Richards:
Yes. Uh, well, 28 and I’ll be 29 later this year, so yeah.

Ken McElroy:
All right. Well, I think everyone wants to know, like, what was it, you know, cause even I, myself, uh, I didn’t have, I wasn’t investing or studying like you in my twenties. Like I probably should have been. I started later in my thirties and um, obviously had, have had good success from there, but what was it in your twenties that made you like all of a sudden go, you know what, this is what I’m going to do.

Rachel Richards:
There were a few things I’m really, it started earlier on in my childhood. I grew up in a really wealthy County. It was a very unrealistic bubble to grow up in, in Kentucky. And just to give you some context, some of the kids in my high school got brand new BMWs. When they turned 16, my family was not operating that way. We were not going out to eat. We weren’t going out ever on family vacations, nothing like that. So at a young age, I felt like I didn’t fit in and that’s not the way you want to feel in middle school. And in high school, I remember thinking to myself at some point that I didn’t want to end up like everyone else struggling with money. I didn’t want to have to operate on a strict budget or borrow money from my family and friends to make it to my next paycheck.

Rachel Richards:
I want it to be different. And I had this epiphany then that what I did then would either set me up for wealth or for poverty. So I started taking it very seriously, reading everything I possibly could. Um, you know, they say that fear can be a big motivator for you. And I do think I had fears growing up, just being in a household where money was very much a stressor and living in a environment where there never was enough money. So I inherited a lot of those limiting beliefs and that fear kind of drove me to become really ambitious and want to pursue financial independence.

Ken McElroy:
Good for you. Good for you. I, I think, you know, in a lot of cases, I grew up very similar and you know, it’s interesting people that are handed money, but people have this perception that, you know, they’re actually in good, you know, uh, gonna be just fine. The truth is that’s actually worse in my opinion is because, uh, you know, now I’m around lots of parents that do that with their kids and the kids, you know, they don’t know how to make it, you know, they th there’s no, there’s actually no drive inside of them that, that, you know, because, and so I always tell people, I say, you know, the fact that I grew up poor, um, was, uh, um, uh, a benefit to me because I was like, okay, how do I get out of this? As opposed to ha you know, it’s kinda like what’s going on with a lot of the stimulus. I dunno, there’s articles out coming out this week about nobody wants to work, you know, cause all this money is flooding, you know, out in the economy. So I, you know, do you look back now and, and think of that as, as perhaps a blessing?

Rachel Richards:
Oh my gosh, absolutely. I mean, at the time I was young and, and I was upset, I was resentful about it. You know, why can’t we have the same lives that my friends have? Why can’t we do the same things and why can’t I have a car, you know, all these different things. And then, but later on, I would not be the person I am today. I would not have achieved any of the things I’ve achieved today. If everything had been handed to me. So it was very much a blessing and I’ve thanked my parents for that experience over and over again. Cause it, it, it made me a really ambitious person.

Ken McElroy:
Well, I love your videos. One of them made me laugh. You know, you’re pretending to be in school and asking the teacher, you know, these investment questions and she keeps responded by telling you how to measure a parallelogram or some other needless information. Um, you know, I think that was pretty a pretty good video. Uh, can you, why do you think it is that schools don’t teach kids how to manage money?

Rachel Richards:
Yeah, that’s a great question. That me makes me laugh at something like, thank goodness I learned about parallelograms. It’s really come in handy, this parallelogram season. So it’s classic, but you know, there’s a lot of reasons I think for it, one of them being that times have changed a lot in the last 50, 60, 70 years because you to go to school, you were basically guaranteed a high paying job and you had a pension, so you didn’t necessarily need to be a wizard with your money to do well in life. And to be set for retirement, you were pretty much taking care of it. I feel like it was more comfortable back then, but now times have changed in that we’re more responsible for our savings and our retirement. We are more independent now we’ve been given more independence, but then we weren’t given the tools and resources.

Rachel Richards:
We need to, to figure out how to succeed in that. So it’s a little bit of that times changing and then the education system not changing. And also just this failure to recognize financial literacy as one of the core skills needed to succeed in the 21st century, which is a shame. I mean, I can’t tell you how many of my female friends and my family members come to me with these feelings of guilt and shame and embarrassment that they don’t know how to manage their money, which is sad. Cause they just weren’t given the resources they need to succeed. So that’s what I’m so passionate about what I do. We’re in a financial education crisis and I I’m hoping I can teach as many young people about it as possible, but the education system absolutely needs to change.

Ken McElroy:
I completely agreed. I love your videos cause you kinda are hitting on all the, you know, the sacred cows, you know, if you will, and you’re going right after it and not to mention the fact with really, uh, powerful media, you know, the kids are actually listening to you and your channel, you know, as opposed to school. Right. So, so I, I just love the channel. Um, you know, why did you pick real estate as an investment tool? You know, I know you’ve kind of gone deep on that one specifically, obviously there’s a ton of choices out there, super confusing. And a lot of people don’t get to real estate till much later because you know, the school system pretty much says, you know, turn your money over to somebody else.

Rachel Richards:
Yeah. I mean, there’s a lot of ways you can put your money to work for you, but I’ve never seen anything to this day that has as many financial benefits as investing in real estate. So when I first wanted to invest in real estate, I was all about passive income. Passive income was my path to early retirement. I wanted cashflow. So that’s why I initially started investing in real estate. But then I didn’t realize all these other benefits that came along with it. There’s pretty much four, three or four things, depending on how you look at it. There’s the passive income or the cashflow. There’s the equity buildup because your tenants are paying your mortgage for you over time. So after 30 years you own a property free and clear having only pay the down payment, then you have number three is tax benefits. Depreciation is a huge one and that can really help you save money on the tax side. And number four, I sort of count this as a bonus because you can’t always count on it, but that’s appreciation your home could then increase in value and that’s even more equity that you have. So I’ve never seen another financial tool that is as beneficial to someone as investing in real estate.

Ken McElroy:
Right, right. That’s for sure. And, and so it’s interesting to me, how are you like you, obviously you’re, you’re, you’re almost an anomaly right now because of your age and you’re teaching people your age. Uh, is it interesting to you to like, are you having conversations with, you know, 28 year olds as well, or, uh, you know, are you, uh, you know, kind of, you know, 20 years ahead in chatting with people that are kind of in the business now and because it’s gotta be, uh, you’re you’re, you’re like a fish out of water a bit, right?

Rachel Richards:
Yeah. Yeah. It’s funny because after I graduated from college, I was actually a financial advisor and I graduated at age 20. So I was financial advising as, as a 21 year old woman telling 60 and 70 year old people to invest their life savings. So you can imagine how that went down. But, um, now I work with mostly female millennials and gen Z years and young professionals just because that’s who I attract my whole goal with, with spreading financial literacy is to take this topic that is so dry and complex and boring for most people and make it something that sassy and fun and simple. And that’s why I think my videos and my message has really resonated with a young crowd because it’s just, it’s just making this topic easy to understand. That’s what I want to do.

Ken McElroy:
Yeah. I, I really liked that because it’s, uh, I, I’m not a massive tick talker, but I know what are the, is it one minute? Is that what you have? Yeah. So I know, well, I do know this, my kids’ attention span is less than one minute. So I think that’s probably why that, that platform is so good, but that’s how they learn stuff. Right. And they send me TikTok videos all the time, Instagram videos all the time around financial education. So there’s a lot of stuff happening through DMS and texts and things like that. And I would imagine, um, you know, how’s the success of your challenge on so far?

Rachel Richards:
It’s gone. Great. Um, my channel, it’s actually funny. It was unintentional for me to ever be a Tik TOK person. I was creating funny videos to send to my sisters and then one of them went viral and then I was like, well, I guess I can teach finance on this now. So that’s what I started doing. And I’m not very consistent. I need to be putting out more content, but it’s a lot of fun and people are eager for the information and because you only have 60 seconds, it really forces you to be creative and think about how can I teach this one lesson really, really quickly.

Ken McElroy:
Yeah, for sure. Sure. So right. We’re going to take a quick break and right after that, let’s get into good debt and bad debt. And I want to talk to you a little bit about that. Okay guys. So we’re back with Rachel and now we’re going to get into, you know, good debt and bad debt. So Rachel, let’s talk about that. Cause I know, especially at your age, I remember in college, I’ve getting bombarded with credit cards, you know, credit card, like sign up for this sign up for that. And I had gas, credit cards and visa cards and MasterCards and all that kind of stuff. And I was running up debt and I didn’t know anything about it. And, and uh, you talked a little bit about this. Can you, can you explain what the difference between good debt and bad debt is?

Rachel Richards:
Yes, absolutely. And in my book I talk about it in terms of bad debt and tolerable debt. So that’s how I kind of look at it. Most debt is bad debt and it’s base. It’s just a waste of money. It’s a very inefficient use of money. But when I think of tolerable debt or good debt, that is really debt that backs and appreciating or cash flowing asset. Okay. A great example of this is rental properties. I have mortgages on all of my rental properties and that’s because I’m using money to leverage money essentially to get a higher return. So that’s an example of tolerable debt and example of bad debt is almost everything else. So consumer debt, car loans, um, depending on how you look at it, student debt could be your, it might not be. And credit card is a really big example of bad debt because you’re just paying such a high interest rate for something that you’re essentially consuming and that’s not going to have any future value. So that’s the kind of the way I look at it.

Ken McElroy:
Yeah. Well, it’s clearly worked for you. So, and I completely agree with the answer. I think a lot of times people don’t understand good debt, especially some, you know, it’s confusing, you know, people, lot of people get on the, uh, on, you know, like Dave Ramsey has a different view that since Susie Orman has a different view or Robert Kiyosaki has a different view, I have a different view. So, you know, there are lots of different views on this issue. Uh, but I have, I completely agree with yours. You know, if the, the, the, what people don’t understand is when you go put money in the bank, it’s a liability to the bank. It’s actually an expense to the bank cause they owe you interest on your deposit. So they have to lend it to people like us, and then we invest it. So that’s called good debt.

Ken McElroy:
You know, you’re using the bank’s money and a, which is ultimately other people’s money. And, uh, and you know, and that’s what we’re talking about instead of credit card debt, where things can depreciate and do depreciate. And, um, you know, it’s a lot, lot harder. And plus you have these high interest rates, et cetera, et cetera. Uh, a lot of times, uh, around those as well. Um, you know, one of the things that I saw in some of your videos was, uh, w w you were talking a little about savings, you know, and, you know, I think, I think, um, you know, younger people are told to save money for investing. I think they mean that, you know, you can’t any longer have any fun, you know, how can, how can they balance saving, having fun. And then also, you know, stay cognizant of inflation, which I think is coming as a result of all this money.

Rachel Richards:
Absolutely agree with you on inflation. Yeah. So the way I look at it is money and fun are not mutually exclusive. You don’t need money to have fun. So I really think it starts with living intentionally. I did an exercise with my husband recently, and we listed the top 10 things that bring us fulfillment and that bring us happiness. And it was things like calling my parents, hanging out with friends, going on a hike, you know, going on a walk together around the neighborhood, playing with our dog. Those were the top things that brought us fulfillment. None of those things have anything to do with money. And I think it’s a really powerful exercise list out the top 10 things that make you happier, that bring you joy. Chances are most of them, you don’t need money to do them. It’s really about relationships and it’s about love and it’s about experiences.

Rachel Richards:
So I think that’s one thing to keep in mind. And if you can just live intentionally in that way, you’re going to realize that you can sacrifice a lot easier and you can make your future self a priority because that’s what needs to happen in order to become wealthy is you need to prioritize your future self over your present self. That’s a really, really hard thing to do, but if you can just set your sights on that and not get distracted, you will be very successful. And you’ll, you’ll be able to have fun now and have a very financially successful future.

Ken McElroy:
Slightly agree with that. And the other thing I always laugh because Robert Kiyosaki told me the story. He wanted to buy a new Porsche. And, um, so Kim, his wife said, no, like, you need to find a way to spend that money that you would’ve spent on a porch, buy an asset that pays for the porch. So that’s what he did. So he bought an asset to produce cashflow, to pay for the porch. So he still, so he still got what he wanted, but he had an, uh, cash flowing asset producing passive income to be able to pay for what he wanted. And ultimately that’s what we’re trying to teach.

Rachel Richards:
Yeah. And that’s such a great way of looking at it, just having an abundance mindset of, Hey, if I want to go spend 400 bucks on new clothes. Cause I haven’t bought new clothes in a year and this is a true scenario that just happened to me. Then I ask myself, well, how can I make $400 elsewhere? Or how can I invest in something that’s going to give me $400 a month in cashflow, once you do it that way you get to have the best of both worlds.

Ken McElroy:
Right? It’s a, it, it is a mindset that is for sure. Okay guys. So next, we’re going to dive into how Rachel and her husband were able to build a rental portfolio of here this 40 houses by the age of 27 years old. We’re going to do that right after the break. And for those of you guys want to go out, check this out, go to kenmcelroy.com/premium.

Ken McElroy:
Yup. Yup. Well, great. Rachel, thank you so much. Uh, you know, I really appreciate what you and your husband have done and, uh, you know, congratulations on 40 doors, you know, and just a few years and being financially free at such a young age and of course spreading the news and trying to help educate the world. I appreciate everything you’re doing. Thank you so much. Same to you. You bet.

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Ken McElroy has lived and breathed real estate for his entire adult life, learning from the ground up. He shares his insights and experiences on his podcast, “Real Estate Strategies with Ken McElroy,” and on his wildly popular YouTube channel. Ken is passionate about educating others so that they too can experience financial freedom through real estate investing.
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