The Cimifly Money Series — Nicole Pendergrass

Financial freedom? It means you have options.

What does financial freedom mean to you? This week, we’re talking to Nicole Pendergrass, a multifamily investor with a very interesting take on the power of financial freedom. Nicole started her real estate journey with no money, no credit and no connections. She bootstrapped a couple of unsuccessful ventures while building her credit and savings to finally purchase a three-family house-hack. A few years after, she refinanced her equity and diversified that capital into several wealth-building buckets, two of those being joining coaching and mastermind groups. She then closed on her first commercial apartment building as a JV after maximizing connections in her new networks. She currently is Founder and CEO of Noirvest Holdings, a REI firm with the mission to close the gap by bringing ‘privileged’ investment opportunities to overlooked investors and help minorities build generational wealth. Nicole is passionate about marginalized communities having equal opportunities to build wealth.

1. Your name and what you do?

Nicole Pendergrass and I invest in cash flowing assets — right now [I am]focused on multifamily real estate. I’m also looking to start short term rentals very soon.

2. Do you have a budget? What tools do you use for budgeting?

I don’t budget in the traditional sense of placing a spending limit on a certain category… But I do track my monthly recurring expenses. I’ve created a google-spreadsheet with all my recurring monthly income and expenses, some are exact and some are estimates — It’s like my personal P&L Statement. I look to see how much cash flow I should have at the end of each month. One of the expense line items is “Misc” which is for irregular purchases like food, clothes, entertainment, etc. That’s the only category where I put a “max” on how much I’d like to spend. Every paycheck a certain amount gets auto deposited into a separate bank account from the one I use for bills, that way I can more easily track my irregular purchases (when I actually do it).

The caveat is for clothes/entertainment, I spend very little and very infrequently — but when I do, I try to keep costs as low as possible. But for food, I probably spend too much during the day while I’m at work. I’m not eating out at fancy restaurants, but I’m also not a “cooker” so I tend to buy food while I’m out instead of planning meals to pack. Being transparent, my “Miscellaneous” bucket is where I need to pull in the reins — I often will just use my main bank account when I have to make a bigger miscellaneous purchase — instead of telling myself I can’t buy it.

If I had to give any advice, I’d say calculate how much “cash flow” you have at the end of each month and set that up to auto-deposit into a separate account.

Truth be told, I tracked my expenses much more closely when I was living paycheck to paycheck. I’m blessed to have increased my income enough to where I don’t have to watch every dollar, and admittedly, that’s dangerous. Before, by the time I got to those last few days before payday and I was trying to make that last $20 stretch, THEN I turned into the budget master, LOL.

Besides Google Sheets, I’ve used Mint, but primarily to track my Assets/Liabilities without having to look up all the balances to calculate my net worth. That’s a great time-saving hack, especially if you have a ton of separate accounts you’d need to log into to get updated balances.

3. What’s the best savings advice you have received and would give? What’s one tool you use for savings? Do you believe in saving your money in the bank or would you rather invest it?

I don’t think I’ve ever gotten advice on saving specifically — the only financial advice I ever got from my mom was, “Don’t open a credit card.” I’ve heard the typical advice about cutting expenses like Starbucks or cable or getting a cheaper phone plan and putting those ‘savings’ in a separate account. I personally don’t think those things make that big of an impact on your savings — unless you’re getting like 3 Starbucks coffees a day! LOL

If I had to give any advice, I’d say calculate how much “cash flow” you have at the end of each month and set that up to auto-deposit into a separate account. Don’t manually transfer it! Out of sight out of mind… soon you won’t even notice it’s “gone.” Also pick a bank that’s NOT convenient and doesn’t have ATMs everywhere (actually — don’t even have a debit card!). It just discourages you from expending the extra effort required to go get the money out — and since most electronic transfers take a couple days, pulling from your savings won’t be ideal for emergency on-the-spot decisions.

I don’t believe in saving for the sake of saving. You should be saving to build a large enough capital bucket to then invest. Once invested, start saving again for the next investment! If you’re saving for a rainy day, all you’ll get are rainy days. Yes, you should keep a small amount invested in something liquid in case you need to access it for emergencies, but that should be the very last option!

4. What type of investments do you have in your portfolio? And what’s your advice for folks on investments? Also, can you provide one hot investing tip?

I have a 3-unit and 6-unit multifamily buildings, I’ve invested passively in a 96-unit apt complex, and I hold some silver.

I have to say this, too: you need to figure out your goals and resources FIRST — not every strategy is a good fit for everybody. Do you need to build cash flow so you can quit your job? Is your cash flow great and you love your job but you want to build equity to pass down to your kids? Then study various asset classes and investment strategies and decide which one lines up with your goals the best. After you’ve spent time building your portfolio in that area, then you can look at adding an additional strategy.

I don’t believe in saving for the sake of saving. You should be saving to build a large enough capital bucket to then invest. Once invested, start saving again for the next investment!

My hot tip is don’t chase hot tips! Don’t get SOS (“shiny object syndrome”) — trust me it’s hard to resist! Get knowledgeable in one area at a time and take ACTION.

5. What’s your advice on retirement? What should we be doing now that can prepare us for it?

Wow, this is a very in-depth question — so many thoughts on this!

My advice: Don’t rely solely on your 401k/403b/etc to fund your retirement. If you look up its history, retirement accounts as we know and use them today, were never created for that purpose. They were initially created to supplement the retirement accounts of high-earning workers. It got adopted into wide use because it transferred the responsibility of saving for retirement FROM the employer (pensions from big companies) TO the employee (you) — which saved the companies tons of money. Then they put a pretty bow on it to say that they wanted to empower individuals to take control of their future (cue side-eye).

If you think about it, Wall Street and most financial advisors will say don’t worry about the taxes now because you’re going to make less when you retire plus you can only take out a certain percentage each year for it to last you until you die. They also say you can travel and do all these fun things because you’ll have time — but how can you afford that if you’re making less than you make now? Most people don’t want to make less in retirement but don’t realize how much they actually have to save in order to retire the way they imagine.

My advice: Don’t rely solely on your 401k/403b/etc to fund your retirement. If you look up its history, retirement accounts as we know and use them today, were never created for that purpose.

Once I learned the truth, I didn’t plan to use my retirement account. This may be drastic for some people’s taste — but I withdrew all my retirement money, which wasn’t much as I was only contributing up to the match. I didn’t have an opportunity at that time, but then I was able to use it as a down payment/rehab money for the 6-unit purchase. My partner and I are basically doubling the value of the building through renovations and rent increases…. Therefore building equity we can pull out and invest in another building. I plan to continue to grow the initial retirement capital and roll it into larger and larger deals. Real estate has tons of tax benefits, cash flows and appreciates. That will be the cash flow I need to live on once I ‘retire’ plus I still have the asset to pass down to my children, instead of drawing down on all the principle like I would be doing with a traditional retirement plan.

The second part of my retirement plan is using a Bank on Yourself structured whole life insurance plan. (These are not the same as the whole life that everyone normally thinks of. The strategy is called by many different names… Infinite Banking, Bank on Yourself, Family Bank, etc). Ultimately, it is a fast accumulating, high cash value, whole life policy with a dividend-paying mutual insurance company with about a 100+ years old track record. The difference is, it's more about the ways you can use it while you are ALIVE and the death benefit is a secondary perk for your heirs. I’ve seen many examples of how you can use the policy for retirement, end-of-life care, etc. Do a little research, contact me and I can send you an email I’ve drafted and sent to numerous people with tons of info on the strategy … I highly recommend adding this to your portfolio.

6. We all have one thing in common: we have a passion for money and are ahead of the curve or more disciplined than others. However, we are all human and have a vice. What’s your vice, what do you like to spend your money on? Do you plan for it or not? (Reason I ask this loaded question is to have people understand that you can love expensive things, but you have to be disciplined in acquiring them.)

Hmmm… my vice is probably traveling and staying in really nice hotels. I will spend money on trips, experiences, and services that make my life easier/free up my time. Since 2016, I’ve only gotten to take 2–3 real vacations, my honeymoon and a babymoon (both pre-Covid), because money was tight and I had young babies. Luckily as the kids got slightly older, I was able to take an extended-weekend girlfriends' trip this year. Every once in a while, I may want some expensive things, but expensive is relative. I’m not at the spot where I’d ever consider paying $1,000 for a purse or shoes — but I will definitely pay that (and more) for a trip!

7. What’s your definition of financial freedom?

To me, financial freedom means I have options: freedom of time and freedom of location, because my income is not tied to my time or location. It’s not just that my expenses are covered by my passive income. It’s that if there’s an emergency and I need to hop on a flight tomorrow, I can afford the ticket, the hotel and the rental car and not worry about the costs. It’s not that I just have enough to cover my bills, but that I have surplus to help my family/friends and can impact different community and worldwide initiatives.