Fearlessly Paying off Massive Student Debt on $30,000 per Year with Sarah Wilson

 Scott: Welcome to BiggerPockets Money, Show Number 6.Mindy: Live, from Fincon, 2017, in Dallas, Texas. This is the BiggerPockets Money Show.

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’s creation, you’re in the right place. This show is for anyone who has money or wants more, this is the BiggerPockets Money podcast.

Scott: Hey everybody, I’m Scott Trench, here with my co-host, Mindy Jensen. How are you doing, Mindy?

Mindy: I am doing really great, Scott. How are you doing?

Scott: I am pretty good. While FinCon was awesome, it was nice to be out of that really hectic conference there. It was kind of a whirlwind, isn’t it?

Mindy: Yes, it is. We recorded this show live at FinCon, which is a Financial Conference for Money Media. And I want to give a special thanks to the FinCon podcast network for sponsoring our live podcast recording at FinCon 2017.

Scott: Yeah, it was awesome. And for those of you who don’t know, FinCon is this big conference of financial bloggers and financial media like us—

Mindy: Not just guys.

Scott: Who talk about money. Well, “guys” in general. You know, “you guys”.

Mindy: Guys and girls.

Scott: Yeah, it’s for those of us that write or talk about money on podcasts, on blogs, and in the media. And so, it was really a great kind of chance to meet a lot of our colleagues that write on this stuff as well.

Mindy: Yes, and to keep up with the colleagues that we’ve met in years’ past. How many FinCons have you been to, Scott?

Scott: I’ve been to two now and I’ve made some great friends at these two things. There’s a lot of common interest.

Mindy: It’s a really, really fun show. That was my fifth FinCon and as soon as we got back, I booked us tickets for Number 6 next year.

Scott: Yep, I remember that. Thank you.

Mindy: Okay, so today, we’ve got a really great show for you. We are interviewing Sarah Wilson who is YouTube’s budget girl. She is a vlogger, or video blogger, who makes videos on how to pay off debt, live a frugal and fun life, and be financially fearless. Sarah, today, shares her story of paying off $33,000 of student loan debt in three years.

But wait, why does that make her so special? She did it on a salary of $26,000 a year. That is why I wanted to interview Sarah. That’s amazing. There’s a lot of bloggers who are talking about how they paid off their student loans while making $200,000 a year. Oh wow, how’d you do it? Like, that’s still impressive that you paid off debt but to be making—that’s really close to the poverty level. Isn’t it?

Scott: Yeah, this is the reason I was so excited to interview Sarah is because, again, you hear these stories about people paying off debt but what’s behind that is some kind of creative way of earning a lot of extra income or a high salary. Just a high-paying job in general and living a reasonable lifestyle in order to pay off those things.

Sarah defines hustle. Not everybody can go out and start a business or you know, earn and extra $50,000 to pay off their debt in a year. Sarah did this on a low-income and she is probably in a situation that many Americans are in. This is a position that may seem hopeless to a lot of people that are attempting to pursue financial freedom, a position where that debt can seem almost insurmountable in your income.

Mindy: Not even pursuing financial freedom. Just trying to get out of debt. And you know, it can seem hopeless like you said. You can just be so overwhelmed by this that you can’t even see the light at the end of the tunnel. And Sarah shares a lot of really great tips for cutting back expenses. She didn’t have the opportunity—there’s two ways to pay off debt. You cut back on your expenses or you increase your income. She didn’t have a way to really increase her income. So she cut back expenses. She did actually increase her income but like by delivering pizzas. It’s not like she went from $26,000 to $500,000. Now, she’s doing these small things. I don’t want to belittle what she’s doing but they are unskilled labor. Anybody can deliver pizza. Anybody can—

Scott: Well, that’s what makes it so impressive is these are just pure hustle. She hustled her way out of this large amount of debt.

Mindy: Yes. And I just love her story. So let’s let her tell her story.

Hi Sarah, welcome to BiggerPockets Money. How are you doing?

Sarah: I’m doing great, Mindy. Thank you so much for having me.

Mindy: Thank you for coming on.

Scott: Sarah, you have a great story here about how you have paid off a lot of debt on a not-that-high income. And I think that’s a problem that a lot of people have struggled with and might see as kind of like an overwhelming challenge. So how did you get into that position in the first place, and what made you decide to pay that off?

Sarah: Absolutely. I took out student loans. All of my debt were student loans. I went to college. I got a degree in Communications and Journalism and I thought I would be making a lot more than journalists make because apparently I never Googled that. So when I got out of school, I was making $26,000 a year. This is a couple of years out of school even. And I realized, I looked it up and I had $33,000 worth of debt and I was screwed.

Mindy: Yeah. What I like about your story is that you weren’t making a ton of money. It’s great that Brandon Turner paid of $11teen million dollars in debt when he was making $46 million dollars. When you’re making $100,000, $200,000, $300,000 a year, it’s still great that you’re out of debt but it’s not—you’re making $26,000 a year. I’ve been there and that’s rent and food and kind of that’s the end of your money. To have extra to pay off an enormous amount of student loan in relation to your annual salary is really impressive. So I want to know how you did that.

Sarah: Well, a lot of people don’t like the basic answer I give, which is that you have to make some sacrifices.

Mindy: You didn’t just continue living your life normally?

Sarah: I did not. And I didn’t keep shopping all the time. I didn’t eat out. And honestly, if you’re just graduating from college, you think you’re not doing that much of it anyway, but you’re frittering away so much of your money. You’re just kind of like letting it get away from you and you really have to reign it in completely and become a master of your money to meet a goal like that where you’re trying to pay off something that’s so much bigger than your annual income.

Scott: So where were you living right out of college?

Sarah: I was in Columbus, Mississippi and I actually lost my job. The newspaper was doing layoffs I was working at. And so suddenly I’m sitting here without a job. I’m on unemployment and I realized I had all this debt which I had been ignoring. I had been deferring. And I was terrified. Scared doesn’t even cover it. I was absolutely terrified because I was like, this wouldn’t be that bad if I didn’t have any debt, if I just had to pay my normal bills. But I was just in such a bad situation, so I decided that when I got a new job and I did, that I was going to do whatever it took to get out of debt so that if that ever happened again, I wouldn’t have this giant burden on me.

Scott: So what were your monthly expenses and what was your debt service that you had to pay to get current back on everything once you got that new job? What was the baseline you needed to maintain in terms of spending in order to survive?

Sarah: Gotcha. It was pretty close. I moved to Hammond, Louisiana. I got a job. I was making $26,000 a year, before taxes. I was paying about $400 a month in rent, a couple hundred dollars a month in food, and my student loan bill was about $350 at the time. So when I actually started my debt journey, I was barely making all of my bills and that minimum student loan payment.

Mindy: So one of the things that I hear from so many people when they’re trying to get out of debt is, I have so much debt anyway—why does it matter that I’m paying this off? I’m never going to be able to pay this off. It’s like so overwhelming. How do you get over that hump? What’s a really good tip for people to keep in mind when they’re going down this journey?

Sarah: Well, I would say that a lot of people probably don’t realize that that minimum monthly payment that they’re making might not even be covering the interest it’s accruing. Which means you’re making a payment every month and your loans aren’t getting any smaller. A lot of people are on an income-based plan and they are literally only paying a fraction of the interest. So you can’t just pay the minimum payment if you want to get anywhere with it.

You have to make some major cuts, maybe increase your income somehow. I delivered pizzas at one point. I did a lot of things. We can talk about that more if you’d like, but you have to increase your income. You have to cut your expenses. You have to get mad, because when I was faced with those numbers of seeing how I’m paying a lot of money–$350 dollars is a lot of money on $26,000 a year.

Mindy: Right. That’s like half your income, almost.

Sarah: Yeah. I was taking home like $1200 a month after tax.

Mindy: So then $350 is what, a third of it.

Sarah: It’s a huge chunk but I was actually looking at my loans on the website every month and they weren’t going down.

Mindy: No, the number stays the same or even gets a little bit bigger every month.

Sarah: And that can be so disheartening. Or you can get furious and you can decide to do whatever it takes to make that number go down. And you can either do that by cutting your current expenses, adding additional income somehow, or fleeing the country. I wouldn’t recommend the third.

Scott: I love that concept of getting furious about your finances. That is the first time I’ve heard that and I love it. I think that’s fantastic. Can you tell us about the sacrifices you made on the spending front and then what did you do—what were some of the things you tried out in this period where you’re furiously attempting—

Sarah: There were so many second jobs. They have to go hand-in-hand, the cutting your expenses and the adding additional income. So essentially, what I ended up doing was not doing anymore of my hobbies that cost money and instead, my hobbies would be making money. So I did secret shopping for like fast food restaurants online and that would be my meal, which would also cut the grocery budget down a little bit.

Mindy: So what is secret shopping for people who aren’t familiar with this concept?

Sarah: Oh, right. There are companies out there that will ask you or hire you to go into restaurants, stores, etc. and essentially evaluate their services, make sure they’re doing what the companies that are hiring them to do. Make sure the bathrooms are clean. Make sure they’re giving you x amount of chicken tenders when you order this meal. And you can just look for those online. Any service that asks you to pay them to go secret shopping is a scam.

Mindy: Oh, that’s a good tip.

Sarah: Yeah. Secret shopping companies—MarketForce is an excellent one. There are a dozen wonderful ones out there. There are a lot of roundups online, legitimate secret shopping companies. Often, they will have you pay for like the meal or a certain amount of stuff. It’s usually under $10 and they will reimburse you for that and then pay you on top of it and you just have to fill out all the information they ask you. They’ll ask you like time, how long it took you to get your order. Very simple things. And that kind of became my hobby. Honestly, I ate so much Raisin’ Canes during one of the years I was getting out of debt because they kept hiring me to go back there and do that. I haven’t eaten it since.

Scott: So what about on the expense side? Was there much to cut there or was it really renting and eating?

Sarah: I didn’t think that there was a lot to cut, but when you’re that mad, you figure it out. Like, I started meal planning instead of going into a grocery store multiple times a week. I’d start going once. I’d shop these sales that were happening. I’d actually have a meal plan so I wouldn’t be wasting any of my food and letting that money go to waste. I didn’t really have a restaurant budget for three years.

Instead, I invited friends over and I’d feed them baked potatoes and I promise you, that was way more fun than like going out to a bar. We’d watch a movie on a laptop or a TV, depending on whose house we were at. It was so much more fun than going out to a restaurant and spending so much money on that. You know, we’d play like Cards Against Humanity.

I had my friendships develop more deeply during that time when I was actively not spending. People didn’t even ask me to go out. They were just like, we would love to do something this weekend. We know you’re not going to spend money for it. Let’s go to somebody’s house.

Mindy: You know what, that’s really important, is to have friends who understand and want to encourage you in your journey. Because if you’re being tempted at every turn, eventually your real power is going to break down and you’re going to get sick of missing out on everything. You’re going to just go and blow it. So people who are constantly tempting you to go out—if you tell them to hey, stop asking me out, and they still do, maybe they’re not really your friend. Maybe they’re not really looking out for your best interests.

Sarah: Oh, absolutely. There were certainly relationships that never became deeper because they only wanted to go out to lunch every week and I brown-bagged everything. And that’s fine. I just made me friends that had the same mindset that I did, that ended up helping each other. They started maybe adopting a more frugal mindset, too, asking me about how to help with their budgets, help with their student loan debts.

So it turned into a really good thing. Some of my best memories from when I was living down in Hammond, Louisiana were just hanging out in my tiny apartment with my dog. This was a 500 square foot apartment. We’d cram 12-13 people in there. But you know what? A bag of potatoes is like $3. Everyone brings something. Some people bring a tub of butter. Some people bring some bacon bits.

Scott: I love it. I think that’s fantastic. You’re doing all this stuff, you’re crushing it on both sides, the income and the expense side in order to attack this debt. When did you notice that you’re making this progress? How is your mental state as you’re moving through these phases?

Sarah: At first, it’s disheartening. Because when you sit down and look at the money situation, a lot of people don’t entirely see their money situation. Like, you kind of ignore it. I didn’t realize that I had $33,000 worth of debt right at first. And you do the math to see how long it’s going to take you. Original projections were it would take me about six years to get out of debt which just seemed like an eternity. I mean, that’s longer than I was in college. And so, you just kind of have to make the commitment and then celebrate as you go along.

So one of the things that I did that was key to me in being happy and kind of sticking to the program is every $5,000 that I paid off, I would set aside maybe $50-100 to do something really fun. And that has helped a lot of my viewers, too, kind of like get through the sloths. Sometimes it does get heavy. Sometimes you just want to go buy new shoes or you just want to go to the theme park. It can be hard. But if you make that situation like a milestone, it can fuel you to get to that milestone faster.

Mindy: Yeah, that’s one of the biggest things that people have such a hard time with is just, oh, I’m just going to be deprived for so long. Scott gave a talk at work about his book, Set for Life, and one of the first comments is, oh wait, I have to give up everything when I’m in my twenties? This is my time to party. You don’t have to give up everything. Small tweaks if you’re not in debt and larger tweaks if you are can really help you out. And the bonuses, the rewards are really motivating and I’m really glad you said that. Like, what percentage of $5,000 is $50? Like, one percent?

Scott: Yeah, one percent.

Mindy: One percent. Yeah, that $50 compounded over time, yeah, that’s going to be a lot of money but that reward, it boosts you and it gets you back in.

Sarah: It does, and you have no idea how much I enjoyed like that one manicure or pedicure I got a year.

Mindy: Yeah, it’s like, oh, I feel so pampered.

Sarah: Yeah, and then when you get out of debt, you really fully enjoy when you get to treat yourself and get to pamper yourself more often because you put the work in. You put the work in, you’re not taking for granted any of the little things anymore, any little extravagances. Like I still get so excited about good wine and good cheese and good chocolate because I did like the Wal-Mart cheese for three years.

Mindy: Yeah, the little things really are more special when you don’t get them all the time.

Sarah: I feel like I can appreciate life more now.

Mindy: That is such a good statement. You appreciate life more because you had to work for it. So I know that you are a Dave Ramsey fan.

Sarah: Big fan.

Mindy: I think Dave Ramsey’s awesome but I have one difference with him in that his debt snowball approach—I want to know your opinion of the debt snowball versus the debt avalanche.

Sarah: The debt snowball is you line up all of your debt, small, middle, largest, and then you pay them off in that order and the reason is Dave Ramsey recommends that is because it’s a momentum thing. If you start with the $26,000 debt and you have to get through that before you get to roll your snowball, as in take the payment that you were paying to that first debt and attribute it into the second until you just knocked out all of them, that’s going to take a really long time.

Now, my situation, I had a $26,000 federal student loan and a $4,000 private student loan. The private student loan had less of an interest percentage but for me, being able to knock out that $4,000 first was such a victory. He recommends it because it’s a mental thing. Once you can start eliminating those debts and then putting all that money you were putting on the debt you just paid off to the next debt, it’s really a momentum thing. It keeps you going.

And I understand the debt avalanche, you pay off your largest interest first so that over the long-term, you save some money. Now, I think I did the math at one time and it was about $300 that I lost out on paying off the small student loan first and then the big student loan. I’m okay with that.

Mindy: You know, I never did the math with it. I have done, just looking at the basic numbers and oh, okay, you’re paying 18% here while you’re paying off this smaller 10% loan. Why would you do that? You could throw the money at the 18%. I like kind of a combination where you line them up highest to lowest interest rate and then you line them up lowest to highest debt and you throw money at both of them. So you’re getting the win of the small little $4,000 debt while still attacking the higher interest rate. And then go back and forth or pay them down at the same time. So you’re paying less interest. But I’ve never done the math to that to see if it actually—

Sarah: I was worried.

Mindy: Maybe I should do some research on that.

Sarah: Because people asked me, how much did you lose by doing the debt snowball versus the debt avalanche and so I did the math and I was like, I’m okay with it. I’m okay with losing $300 to get that win about a year in where I was just like I’m done with this one debt. I never have to pay it again in my life. So doing either way, you just have to commit to it. You just have to decide that you are going to get out of debt and I think kind of arguing over a few percentage numbers might slow your momentum a little. So do it either way. Just do it.

Scott: I have a three-part question. So the first part is, how long did it take you to pay off that first $4,000 debt and then how long did it take you to pay off the rest of the debt after that?

Sarah: The $4,000 debt took about a year. And then the $26,000 debt took about two years and a couple months.

Scott: So you’re accelerating during this process.

Sarah: So much. Yeah, this entire time, I was upping my income. I was getting more and more mad. I found new jobs during this. I moved to a different state twice for better jobs so I was increasing my income both on the side gig and on my regular professional job. I was still figuring out new ways every single day to be more frugal and save money and it started going so much faster. It was really fun to watch, especially towards the end.

Scott: And was your credit score improving during this process as well?

Sarah: Yeah, even though I wasn’t using credit at all, I had an excellent credit score because the only debt that I had was student loans and I was paying it off so fast.

Scott: Awesome. And then the last part of my question is, what advantages did you see in terms of opportunities to get more jobs, that kind of stuff, as a result of your debt, if any?

Sarah: I think because I was so focused on something and I was just so driven, that sort of dribbled for three and a half years of paying off my debt. And just working harder and working harder every opportunity that came up that could get me there faster, I was like, let’s do it. So I started looking for another job. I became the editor of a newspaper in Arkansas which was not an ideal place to live. It was a town of about 5,000 people.

And I lived there for a year and a half because the salary was bigger. It was a low cost of living and also there was nothing to spend money on there. All I could do was do YouTube videos and then putting it that way. I just—the more driven you are, the more mad I got at debt, the more I worked towards that, the more my career advanced. The better I got at my craft because I was working so hard towards this one specific thing.

Scott: What’s life like after the debt? What are your financial goals now and how do you kind of approach money now that you’ve conquered your major goal here that took you so long?

Sarah: Well, when I had debt, I was barely keeping my head above water. I was kind of like bobbing under the surface, gasping for air. And now, I feel like I’m flying. And it’s so kitchy, it’s so kooky, but that’s what I feel like. I was putting up at one point, more than half of my income towards debt, that I get to keep all of it now still just gives me the craziest thrill every month that I log into my bank account and I’m like, I get to keep all of that.

Every single month, I get to move money from my checking account to my savings instead of from my checking to someone else. It’s fantastic. I’m obviously saving money now and since I’m a Dave Ramsey fan, I’m on Baby Step 3, which is just saving up a three to six month fully funded emergency fund. So if a situation ever happens again like I were to lose a job, which is what started me off on this, I would be financially set for three to six months while I found a new one. And then I will be investing and travelling and living.

Scott: That’s so awesome.

Mindy: What area of the world are you living in?

Sarah: I am now in College Station, Texas.

Mindy: Okay.

Sarah: I’ve bopped around quite a bit during my debt-free journey. I went from Mississippi to Louisiana to Arkansas and now I’m in Texas.

Mindy: Do you plan to stay in Texas?

Sarah: Yes. I love Texas. I would love to stay here. I knew this last move, I was so close to being debt-free, I was trying to figure out where I wanted to be longer term, where I kind of wanted to set up a real life. If another opportunity comes knocking, maybe, but I specifically came to Texas because I wanted to live here.

Mindy: Are you still in journalism now?

Sarah: I am now a Communications Specialist for Texas A&M so I’m kind of an advocate journalist. I write articles about the college on behalf of the college. So I no longer work for a newspaper or a media outlet. I work for a university list and I promote the things that they do.

Scott: And what are your career aspirations now down the line? Are you happy doing that for a while?

Sarah: I do like it. I like it a lot. I enjoy reporting on the really cool things that the next generation of really amazing people is doing. It’s one of my favorite things to kind of like tell their stories and talk about these developments that are coming from today’s youth, because they are doing amazing things.

Mindy: Yeah, they are. Rapid fire here, we are going to do our Famous Four questions. Scott.

Scott: All right. What is your favorite finance book?

Sarah: Total Moneymaker by Dave Ramsey. It’s the Bible, essentially. It’s not the Bible, but it’s the finance bible for me.

Mindy: That is a really great book. Dave does an excellent job of taking you from negative all the way to zero.

Sarah: Yeah, he gave me the guidelines for getting out of debt and then I feel like I talk about the day-to-day how to save, but I used his framework.

Scott: It sounded like he gave you some motivation as well.

Sarah: So much.

Mindy: Yeah, he’s awesome. What was your biggest money mistake?

Sarah: Student loans. If I could go back, I would not take out more student loans than I needed to live off of. I went to college and I didn’t have money to pay for it and that’s one thing but I took out extra money to go shopping and to go eat Taco Bell and I was paying for it for years, Scott. Like I just feel like shaking every 18-year-old I see, like don’t do it.

Scott: What is the best piece of advice for people starting out that you have?

Sarah: No one is going to fix your finances for you. No one’s going to come in and just fix your money situation. You have to do it. So you have to make a budget and you actually have to make a plan for your money because no one is going to make it for you.

Mindy: Amen and hallelujah. What is your favorite joke to tell at parties?

Sarah: What did the beaver say when he ran into the wall?

Mindy: What?

Sarah: Dam!

Scott: Ha.

Mindy: Thank you. Scott’s going to tell that joke at the office next week like a thousand times.

Scott: That was a dam good one.

Mindy: Oh, my God.

Scott: All right, where can people find out more about you, Sarah?

Sarah: I can be found on YouTube.com/BudgetGirl where I do weekly videos on frugal living and becoming financially fearless. I have done that for three and a half years so you can walk with me as I paid off all $33,000 worth of debt. I am also on Instagram, Twitter, Facebook, and Snapchat @GoBudgetGirl.

Mindy: And we’ll link to all of that in the Show Notes.

Sarah: Thank you.

Mindy: Thank you. Sarah, this was awesome. Thank you so much for taking time out of your day today. We’re recording at FinCon, which is a Financial Media Conference out in Dallas. So thank you so much for taking the time to talk with us. I really enjoyed your interview.

Sarah: Thank you so much for having me, guys.

Scott: Thank you so much. This was awesome.

Wow, that was awesome. What a story.

Mindy: You know, I am going to go home and I am going to have a baked potato bar. That is such a great tip. So cheap. I mean, how much is a bag of potatoes? $2 bucks? Some butter, some bacon. Some cheese. You put some broccoli on there. You can still have a healthy meal. It doesn’t cost anything and everybody gets to make their own meal. I’ve got two kids and they’re both so picky. One of them is a vegetarian. One of them only eats bacon. A bacontarian. This is great. They both love baked potatoes. I love that tip. That’s easily my most favorite tip from her out of this whole show.

Scott: And now I kind of feel a little bad about some of my hobbies that might cost a little bit of money. You know, Sarah has taken this to such an extraordinary level with her hustle and her—how she spends her free time to optimize for this. It’s just incredible. It’s just so fantastic and inspiring.

Mindy: Yes. I really like how she got her friends on board, too. And when you’re 26 years old, none of your friends have money either. Eat in. Have an ‘everybody brings something to my house’ party. Drink in. Play board games. Watch a movie in your house. There’s still a lot of good movies—here you go. If you’re looking for a movie to watch with your friends on a cheap night, watch The Princess Bride. What’s your favorite movie, Scott?

Scott: I like The Princess Bride. You know what I’ve been watching recently? My girlfriend’s last name is Hornblower. No making fun of her name. So I’ve been watching the Horatio Hornblower series, which is about this English Navy officer and they’re awesome. I’m so excited about them. I’ve been enjoying them so much. But they’re free. They’re on YouTube.

Mindy: I didn’t know her last name is Hornblower.

Scott: Yeah. Hey, what are you laughing at?

Mindy: I was caught off guard. Miss Hornblower, I am not laughing at your name. And Horatio Hornblower was the first thing that came into my mind when you said that was wait, what’s her last name? You’ve been dating her for like two years. I had no idea that was her last name.

Scott: Yep. But yeah, I’ve been watching those. I’m really into those right now. I’m going to say that those are my favorite movies right now.

Mindy: Okay. Great. And those are inexpensive. Having a Netflix account is like $9 bucks or something? $15 bucks a month. Maybe I’m dating myself because it’s been a while—

Scott: It’s like $11 a month now?

Mindy: Is it? Okay. So that—you know what. If you’re paying down debt and you still want something to do, $11 isn’t a huge amount. I mean, that’s the cost of one movie.

Scott: Yeah, and I mean regardless of what your hobbies are, really the theme that I think Sarah brought to the table today was get furious. Get committed. Get angry about that debt and attack it. Do whatever you need to do to get out of that. And once you are free of that, how great of a feeling is that? How great is it to go back to zero and then be able to begin building real wealth for yourself throughout the rest of your life?

Mindy: I have to say, I am debt-free and when I married my husband, he still had student loan debt and we’re older—this was back when you had to use a check to pay it off—writing that last check to pay off the last payment of the student loan—even if you’re paying it online, I recommend writing a check. That is the happiest check you will ever write. I am so glad I’m done with you. And just a huge weight lifts off your shoulders. You can feel it lifting off.

Scott: Is it worth the sacrifice? Is it worth the hustle?

Mindy: Absolutely. Get rid of that debt. Kill it.

Scott: Well, I am looking forward to seeing what Sarah does next and what she does now that she’s in the positive and how she attacks her personal finances. So hopefully we’ll have her back on the show in a year or two.

Mindy: Oh, that’s a great idea. I’d love to have her back and see what she’s doing.

Scott: All right, before we go, we want to ask for a favor from you guys. If you like the show, please go out and give us a rating, a review on iTunes or whatever medium that you’re listening to this podcast on. Those reviews mean so much to our egos and we really appreciate those. No, but seriously, they help share the show with other people. They encourage new people to listen to the show, so if you like what you hear and you want to share it and you want to help other people find the show, that’s the way to do it. Give us a review on iTunes or the other medium that you’re listen to the show on.

Mindy: You can also share us on Twitter, Facebook, LinkedIn, Instagram—what are the other ones?

Scott: I don’t know, are there any other ones? Is there Pinterest? Can you share us on Pinterest?

Mindy: Oh, you can share us on Pinterest.

Scott: Pin us.

Mindy: Pin us. There you go, Scott. That’s great. Okay, for BiggerPockets Money, this is Mindy Jensen. Over and out.

 

How’s it going, everybody? I’m Scott Trench here with my co-host and actually, I don’t know if you’re my co-host today. You might be my guest. But either way.

Mindy: I’m just a guest today.

Scott: How are you doing, Mindy?

Mindy: I am doing very well, Scott. How are you doing?

Scott: I am doing okay. I think I had a bit of an embarrassing morning today. What happened this morning when you came into the office?

Mindy: So when I came into the office this morning, I saw a pair of men’s underpants on the floor near the bathroom. And I’m like hmm, what’s going on with those? Why would somebody just leave their underpants on the floor? So we have an internal chat in our company and I took a picture of it and posted it up there. I’m like, who left their underpants on the floor? Turns out that our very own Mr. Scott Trench left his underpants on the floor. Scott, do you just make a habit of running around the office naked? Why were your underpants on the floor?

Scott: So let me see if I can explain this away. Yesterday, I was wearing—I have one pair of jeans and I needed more pairs of jeans but—

Mindy: One pair of jeans? You’re taking frugality too far.

Scott: Too far. I took it too far. And I spilled hot chocolate all over the jeans. Just a huge gaping mess right down the side of my right leg. So I was like, okay, I’m going to change. And I took off my boxers and my—I went to the bathroom and I took off my pants and boxers, put on some athletic shorts, spent the rest of the day in athletic shorts as an exception.

And then when I was going home, I must have walked past the bathroom with my jeans and my boxers over my shoulder and they must have just fallen out and I didn’t notice so I come back and there’s a picture of my boxers all over the internal. I’m very embarrassed today. Things are not going well.

Mindy: I was just surprised that there were underpants on the floor. And then I wasn’t even the first person in. Evan was the first person in this morning and he said there was some R&B music playing like Barry White and ooh, romantic music. And I was like, oh, I don’t know what’s going on at work but that’s not appropriate office conduct.

Scott: I don’t know how to explain that one away.

Mindy: Somebody else was just listening to music.

Scott: It’ll be a couple of years before I live this one down. So I hope mom’s not listening.

Mindy: I hope she is. I’d like her to know that. I’d like everybody to know that there’s actually more than one pair of underpants in your office. I went in there today looking for a copy of your book and there’s those red and blue ones right there.

Scott: No, no, no. Those are flannel shirts. I can show you. Those are my flannel shirts. I don’t have multiple pairs of underpants lying around my office. Just the one that got ruined and I had the other pair in my car.

Mindy: Do you have any socks in your office, Scott?

Scott: I don’t know. Maybe. I’m going to restock my little drawer of clothing just in case, for the exact reasons it happens.

Mindy: Don’t you have 42 pairs of socks in your office, Scott?

Scott: Oh yeah, so I mentioned on a BiggerPockets podcast that I needed more socks for Christmas. I was just kind of joking, I guess, but somebody sent me 42 pairs of socks. Seven boxes of six pairs of socks and they’re actually right here in the office. I can probably show them if people are watching the video version of this.

Mindy: Yeah, go grab those. They’re kind of pretty. There’s a couple. There’s like some definitely male socks. There’s some could be male or female socks.

Scott: They are. They’re Christmas style socks.

Mindy: Hold them up a little bit more. We can only see three pairs.

Scott: Four boxes of these and I’ve got another type of socks that I also brought home. So I am good on socks for now.

Mindy: I just thought it was funny, Scott sends me a Slack message. It’s like, Mindy, did you send me socks? I said, no, I don’t think so. He’s like, I have 42 pairs of socks somebody just sent me. That should cover you for a few days. Forty-two days before having to do laundry.

Scott: Well, moving on from Scott’s wardrobe or the visibility of my wardrobe, my Tommy Hilfiger pants. Let’s go to the purpose of today’s show which is to learn about you and your story and how you got here in life. And I’m really looking forward to this because I know Mindy’s story but it’s really exciting.

It’s really repeatable. It’s something that I think that everybody that listens to the show will learn from and be able to kind of see how the decisions that she made enabled her to move toward financial freedom, free up time for her husband, free up the ability to hang out with her children. Just a great story I’m really looking forward to hearing again.

Mindy: Oh, well thanks, Scott. So I was born in a small town in southern Illinois and then I moved. And I moved and I moved and I moved and I moved times like 27. I have never in my whole life lived in a house for more than five years. And moving around as a kid kind of sucked. I went to three different schools in second grade.

Scott: Oh, wow.

Mindy: But what that taught me, in my first school in second grade. My second school in second grade, I was still pretty shy because it was like, I hadn’t moved mid-year before, and I was the new kid and I was just—but I loved to talk as evidenced by the past episodes of the show and the future episodes of the show. I really love to talk so you can’t be shy and talk to a lot of people at the same time.

So the moving really got me out of my shyness. It also taught me that moving is easy and okay to do and that has set me up in life to do the kind of investing that I like to do which is called live-in flipping. What that is, is you live in a house while you’re flipping it, while you’re doing the rehab work and the reason that you do that is not because you love messes and untidiness. It’s because you can, if you live there for two years, you can avoid capital gains taxes, since I’m married, up to $500,000.

Scott: It’s tax-free.

Mindy: It is tax-free. Uncle Sam never sees it. This is a gift that the IRS gave me because they love me so much and it’s only for me. I’m just kidding. This is a gift for everybody from the IRS because they love you so much. If you live in a property for two out of the past five years and you own that property for two out of the last five years, any capital gains that you make outside—which is the difference between the price you purchased it at plus any improvements that you made and the price that you sell it at.

Let’s say you buy it for $500,000 and you put $100,000 into and you sell it for $700,000, you just made $100,000. If you lived there for two years and it was your primary residence, you pay zero dollars in capital gains taxes which is quite a gift, quite a bonus from the IRS. So I have taken this model and I have done it eight times.

Scott: Wow. Can you tell us, I would love to hear about the start of this journey but because it’s so relevant and fresh, can you tell us about the property that you currently live in and how you bought that and rehabbed it and what it’s worth now and all that?

Mindy: Yes, I would love to. So I bought the property that I live in now—we had moved to the state of Colorado and bought a big, brand new house. It turned out we didn’t like that neighborhood and that area at all. So we moved to a different city in Colorado called Longmont and by the time we moved there, the market was starting to go up. We couldn’t find anything. We wanted to sell our current house before we bought our new house so we couldn’t get a contract on our old house. So we had to buy a new one. We found this house because it was a Fannie Mae Home Path foreclosure property and in the first 30 days that a home—

Scott: And what year was this?

Mindy: This was 2013.

Scott: Okay.

Mindy: The first 30 days that a Home Path property is listed, they won’t even look at investor offers. They will only accept owner-occupant offers and they’ll kind of accept anything. I saw this on day like 32 and made an offer, I think we were at day 40 when we made the offer and there was one other offer. It was now opened up to investors but there was one other offer. Fannie Mae wants to put owner-occupants into property so they said, if you will live here for a year, you will get preference over this other bid. Well, I’ll live there for a year if I get preference over this other bid. I had outbid and lost out on all these properties just in the short time that I was looking.

So we put in an offer. We said we’d live there for a year, which we did because if you say you’re going to live there and then you don’t, that’s mortgage fraud and that’s a whole another story. We bought the house, we moved in, and when we bought it, it was two bedrooms and one bathroom. We paid $176,000 for it. It was 1300 square feet and it was one of the ugliest houses I’ve ever lived in. I’ve lived in a lot of ugly houses and this one was pretty tops.

We put in pretty much new everything. We have new siding, new windows, we popped the top and added 500 square feet upstairs. We took this large, unusable space in the back of the house and turned it into a dining room, bedroom, bathroom. So now, the house has four bedrooms and three bathrooms and it is 1800 square feet and I estimate, as a real estate agent, I estimate that I could put it on the market today for $550,000 and get an offer instantly.

Scott: So what would you net profit after tax be?

Mindy: Oh, you’re going to make me do math now. Okay, so we paid, let’s open up a calculator—we paid $176,000 and we put $100,000 into it so it’s worth $276,000 minus 550 equals—I would probably make $274,000 if I sold this property today. And if I listed it at $550,000, I could sell it today.

Scott: And that’s all after tax. What kind of, I don’t even know how to do this one, but what kind of income do you think someone would need to make in order to achieve that level of after-tax income in a year? $300,000 or $400,000? $350,000?

Mindy: Probably $400,000 because up there, you’re at the top tax bracket and I have not paid attention to the new tax changes yet. What is the top tax bracket, like 38%?

Scott: Oh, I couldn’t tell you that one either.

Mindy: I think it’s like 38%. So let’s see.

Scott: This is such a phenomenal way to create so much investable liquidity. The ability to create so much equity and be able to harness it tax-free is just such a powerful thing to do and you know, was this a big part of your ability to achieve the current level of net worth that you have, those eight other flips?

Mindy: Yes. Absolutely. I’m looking through my mental stack and I made $20,000 on my first one, which was a total accident. I bought a condo. I lived in it for four years. I got married. My husband had a house so we sold the condo and we sold it for $25,000 more than I paid for it. And I think I put in like $1000.

I put in a new tile floor that I did myself with the help of my dad. I didn’t pay somebody to do it. I painted all the walls. I put a new light fixture in the kitchen. Like that’s it. Over the course of four years, I did pretty much nothing to the house and I made $25,000 which I put right in my pocket and then moved onto another one. Like, I want to do this again.

So we flipped my husband’s house and we flipped a condo in the city of Chicago and then we moved out to the suburbs and flipped a bunch of houses out there. And living in it for two years means that I don’t have to pay any capital gains taxes. So $100,000 from this house, $150,000 from that house. $50,000 from that house. You know, that’s a salary. That’s a couple of salaries. That’s three or four salaries. And it’s all just tax-free.

Scott: So I like to house hack, so I buy duplexes and live in them. One of the things that happens with the house hack is I had to treat my property as three quarters, or at least half—if I live in a duplex, one half. Half of it is an investment property. Half of it is primary residence. So the way I was doing it, I had a roommate in my half. So three quarters was an investment property and one quarter was a residence.

I am excluded from three quarters of this benefit that you are able to receive by doing a live-in flip and that is a huge drawback of one of my strategies of house hacking and a huge advantage of what you’re doing. You get the house to yourself and you get to you know, exclude the entire purchase price from a potential sales tax, unless it’s over $250,000 or $500,000.

Mindy: Yes, and let’s clarify that for people who aren’t so familiar with it. $250,000 is the capital gains tax exemption if you’re single. So you would be $250,000. Since I’m married—my anniversary is tomorrow. I’ll be married 16 years tomorrow.

Scott: Happy Anniversary.

Mindy: Thank you. I have done this my whole married life and I have the exclusion up to $500,000. I haven’t ever hit that. I think that my current house, I’m not anxious to move. I actually want to see if I can stay in the house longer than five years, but I really like the neighborhood.

We had a massive flood about four months after we moved into the property and the neighborhood was kind of cut off from everything else. So all of our neighbors got together, we had a big party, we really got to know each other and I love the neighborhood. So I don’t want to move. So I think down the road, I am going to hit that $500,000 but honestly, that’s a really nice problem to have.

Scott: Yeah, absolutely. So let me ask a couple of questions here. Number one, you started in 2013.

Mindy: On my current house.

Scott: On the current house. How old are your girls?

Mindy: My girls are almost 11 and just turned 8.

Scott: So 10 years old and 8 years old. How old were they when you moved into the house?

Mindy: 6 and 3.

Scott: 6 and 3. So this is something you can do with small children, right? That’s a barrier to financial independence that some people have. And you’re shaking your head so what are the challenges of doing this with children?

Mindy: Okay, so it sounds like all unicorns and rainbows. Like yay, you get all this money. But you have to live in a construction zone. We are jump in with both feet kind of people so we did the whole house. We tore out everything but the kitchen and the bathroom and started rebuilding and we added the second story and we had plastic over the doorway to the back of the house for probably a month and a half. It happened to be extremely cold then, which was awesome.

I had the washing machine actually in my kitchen. I knew I was taking out the floor and replacing it so I didn’t care but I had to drill holes in my kitchen floor to put the waste pipes and the water pipes to my washing machine so I could do laundry. There wasn’t heat in the back of the house at that time. So there’s a bit of sacrifice. However, if you’re going to live there for two years, you don’t have to jump in with both feet.

You can start by remodeling the bathroom and you know, remodeling the bedrooms and knocking out a wall or whatever it is that you need to do. I do recommend that you keep at least one room untouched at a time so you have a place to go that isn’t just covered in dust and construction supplies. I would say, to kind of batch your projects together. I knew that we were going to have to rewire the whole house. I think it had 60 amps service, 60 in electrical service and we went up to 200 or 220. I am drawing a blank now. We went up to 200, I think.

Scott: I think it’s going to be 220, right?

Mindy: 220? I can’t remember now. I am completely drawing a blank on that. 220 sounds right. Whatever. We had the electrical service upgraded and to do that in the whole house, you kind of have to open up all the walls at the same time. We were pulling wires through, like underneath the kitchen and in the crawl space and up through the garage and a lot of stuff that if you do it room by room, you may have to call your electrician back multiple times.

Scott: Mhmm.

Mindy: I am very blessed in that my electrician is my father-in-law so he just came and stayed with us for a while. He loves the girls. The girls love him. So they’d play in the morning and then he’d go rewire the house in the afternoon.

Scott: Now, suppose you don’t have this advantage that you’ve got with the father-in-law, how much would that electrical work have cost you in that scenario?

Mindy: $10,000-$15,000.

Scott: Okay, so you’re still up $240,000 even after the electrical bill on the property, right?

Mindy: Yes. And I put in a couple thousand dollars just in supplies and permits. I did everything permitted and I totally recommend that you consult your permit office of your city and get everything permitted because if you’re going to significantly increase the value of the home and significantly increase the layout of the home or upgrade the electrical, the plumbing, or whatever. You want to get that permitted and approved by the city so you don’t have to go back later and try to get it re-permitted. When you go to sell the house, people are going to ask about permits and having the permit there is a better choice.

Scott: So you mentioned that, it’s not all sunshine and roses in this process. Tell me about moving with a family. Because I am a single guy and I don’t like moving. I understand the value of moving and I do every year or so to buy a house hack, but that’s a big thing that families don’t like to do. What’s it like moving school-aged girls, 6 years old, to a new place?

Mindy: Well, it’s a lot of work. You have to pack up, you start packing up things that you don’t necessarily need. We moved in the summer so it was very easy to pack up all the big coats and the sweaters and the winter gear as you’re starting packing. And then you pack up some toys that they won’t miss. You pack up, it’s just like moving as a regular person, you just have more stuff to move. If they’re school-aged kids, they’re not going to be very helpful with the packing. The three-year-old was not all that helpful packing. She would be like, oh, I want to play with this toy. I just put it in the box. But you get through it.

I was a stay-at-home mom at the time, which I think was really, really helpful. Being a stay-at-home mom allowed me to do a lot of the running around, a lot of the errands that my husband, because we do most of the work ourselves, he didn’t have time for during the day. He was actually working a real job and then at night he would stop working and he’d put a movie on for the kids and you work on the house.

Scott: And one of the things, if I’m correct here, you bought a house that was probably well within your means to purchase at that $175,000 price point, is that correct?

Mindy: That is correct. And I don’t want to be like preachy but we could have paid cash for the house because we had sold another house. So, we lived in Wisconsin. We moved to Douglas County, Colorado and put down 25% on the house there, which was like $400,000. So we put down the $100,000 there. And then we made more than $100,000 on the other house, so we just had this extra money. It’s not extra money, you can always put a use to it. But we had this extra money sitting around.

We had gotten a loan, or applied for a loan for the house in the current house in Longmont but there was a series of snafus and we thought we weren’t going to be able to get the loan. We applied for the loan because we could have a low down payment, 20% of $176,000 is what, $40,000 or $30,000, something like that. So I took my $100,000 that I made from selling the other house, or that I got after selling the other house and I didn’t have to put it all back down on this next house. I could put down a small percentage of it and then just keep the rest and invest it. So I had the low down payment and I think my interest rate is 3.25% for 15 years, which is kind of unheard of. That’s almost the lowest you can go.

Scott: That’s fantastic. You financed at a great time when rates were super, super low and you got a 15-year mortgage which allowed you to get even lower rates, right?

Mindy: Yes, and in hindsight, would have gone with the 30-year because it was like 3.5% or something and I can take that money and invest it in the stock market in other rental properties, in other real estate ventures, and make more money than that 3.5% that I’m paying out. So, we’re actually looking at refinancing the property back into a 30-year loan while I have a job. My husband does not work anymore at a job that pays him. He still works.

Scott: Well yeah, to summarize what you’ve talked about so far, you started off by house hacking, you made a cool $20,000 grand and then you just parlayed that—sorry, not house hacking. Live-in flipping. You parlayed that eight times now and each time you have more and more, plus I’m assuming you’re saving in your personal life and being financially responsible throughout the whole process.

So you’re stockpiling cash and then realizing these huge gains that are all after-tax, readily accessible wealth that you can use. And then you get to the point where you are now where you bought this $175,000 home and can easily put down $100K in expenses for you know, the rehab. And now you’re sitting on a big pile of equity and you’re financially independent alongside your husband who just quit his job, right?

Mindy: Yes. He has been retired, or financially independent. He quit his job in April of last year.

Scott: Yeah. I mean, I think it’s awesome. I guess one question I would have here is suppose you are—at what point did you become competent and confident at your ability to manage the rehab work yourself? You mentioned that you do a lot of it yourself, right? It scares me. I own real estate and I have worked on my houses. It scares me to think about doing an electrical work or drill a hole in my kitchen floor so I can connect the waste water pipe from my washer and I’m assuming attach it to the sewer system. Like, that’s stuff that’s pretty outlandish, it seems like pretty scary. It seems like it’s going to be a lot of work and a lot of money and could go horribly, horribly wrong. How’d you develop that confidence to do all of that stuff?

Mindy: So that’s a personality flaw that I have. I just know that I can do everything. It sounds really cocky and it is kind of cocky but I don’t think, what could happen. Like I said before, I jump in with both feet. I read a book, I mean I didn’t just cut open the sewer pipe and be like, oh, I’ll just stick this in this hole. But I checked out books at the library. How to repair your plumbing. YouTube will show you how to do literally everything. So a lot of YouTube videos.

The electrical work, mostly that was my father-in-law and my husband and they do the work and my father-in-law was a union electrician for 40 years. So he went through the apprenticeship and journeyman and all these steps to be an electrician. And my husband grew up with it so he would just watch him do it and learn from him.

But the plumbing, I mean plumbing really isn’t that hard. You could do plumbing. I have a hard time getting everything tight enough. I don’t have the physical strength to tighten all of the clamps and all of that with the plumbing so that it doesn’t leak. But they have this new thing called—it’s not even new, it’s called PEX and it stands for some giant chemical word but it’s called PEX tubing and it goes together with this little ring and connector and like a $75 dollar tool. And all you do is close it like this. It crimps the thing completely closed. I can’t explain it any better than that.

Go to YouTube and look at like a YouTube video and it really is as easy as it looks on YouTube. The tool is $75 and that has saved me thousands of dollars in plumbing repairs and plumbing costs and you know, hiring a plumber because we were able to do it all ourselves.

Scott: Awesome. I love the do-it-yourself mentality and how you’re able to just, I don’t know, confidently approach all of this stuff.

Mindy: And another thing is we had a hard time finding contractors. I mean, if you have a project that you need to bid for, call up a contractor. They’re not going to call you back. Ten times out of ten, they’re not going to call you back. You have to call 25 people and maybe three of them would call you back, which is not ten out of ten, but still. That’s just illustrating a point. Maybe three will call you back, possibly one will actually show up to give you a bid.

It’s so difficult to find a contractor and especially now in the real estate boom that the Denver area is experiencing. But even back when we first started doing this, we were experiencing the same, early 2000s, the same market where it was just going up and up and up and we couldn’t find anybody to do it. And finally, my husband’s like, forget this. I’m just going to do it myself. And I don’t even know if YouTube was available then. I think he just got a book at the library. So all you people just starting out, you’re even more advantaged because YouTube.

Scott: That’s awesome. So let’s say you’re approaching a project and you’re like, if Mindy can do it, I can do it, too. You’re a listener. What kind of planning needs to go into this? I assume that you didn’t just like buy a property and be like, oh, we’ll figure it out after that. You had some sort of plan. You kind of had a vision of what it was going to look like. How did you get the knowledge and confidence and expertise necessary to know what you’re going to do with the property once you bought it?

Mindy: We knew we wanted to add more bedrooms. We have two kids. Growing up, I always had my own bedroom. I wanted my kids to each have their own bedroom. We knew we had this—we just walked around the house. This space is unusable as it is. How can we change it? Oh, we could make it into a bedroom. Well, we should add an extra bathroom. Oh, I would like to have a dining room which in retrospect was a stupid idea. We never eat there ever. We always eat at the kitchen table.

Scott: The dining room?

Mindy: I have a dining room just off the kitchen towards the back of the house as you walk out to the backyard.

Scott: Oh, yes. I’ve been to Mindy’s house several times and I didn’t even recognize it as a dining room.

Mindy: It’s just a space where I keep the kitchen table. My dining room table. So I would definitely recommend, if you’re buying a house, live in it for a couple of months and really get a feel for the house. Oh, it would be really great to have this. The sliding glass door that was there off the kitchen was not there. It was just a solid wall and the only door in and out of the house was the front door. There was like a garage door and a door to the backyard but you had to walk out to the front door. And we don’t even use the front door now.

In retrospect, I would have liked to change the windows in the front of the house and wall off that stupid front door. I put a stupid couch in front of it right now. We never ever use it. So, walk around the house and live in it for a couple of months and see how it works and see what you would change differently. You know, this is our eighth house so we knew we wanted to do this. We knew we wanted to do that. Pete, actually Mr. Money Mustache, suggested the sliding glass door and that was the best suggestion I’ve ever gotten from anybody. That was such a helpful suggestion and I don’t know that I would have come up with that by myself.

Scott: He gives good in-person advice, too?

Mindy: He gives great in-person advice, too.

Scott: Oh, wow.

Mindy: So yeah, I don’t really know that I learned it any one place.

Scott: It sounds to me like it’s a lifetime confidence and mindset of I’m going to be able to do this myself and I’ll figure it out. And when I can’t figure it out, I am good enough with money that I’ll have the resources necessary to go hire it out in those few cases. I assume you hired out the pop top portion, right? Where you added new structural components to the property and a new roof and all that kind of stuff, right?

Mindy: I did. I hired a guy off Craigslist, which I recommend zero percent doing again. I hired a guy and he came out. He was so excited to do this job. He came out every day for the first week, gung ho, on time, stopped at the store on the way there or gave me a list of stuff to go get and just like jumped in with both feet doing this.

And then by the second week, I don’t know if he was bored or if he just doesn’t have good time management skills, but he started coming later and later, and leaving earlier and earlier and taking a longer lunch. And arriving, and oh, I have to go to Home Depot to get this. Well, I could get it. I’m a stay-at-home mom. I’m not doing anything except cleaning the house. I could wait to go get this. Let me do these things. And it just kind of turned into a debacle that devolved over a couple of months.

We eventually fired him and we hired people that as we were walking around the neighborhood, we saw them working on this house and they did really amazing work from the outside. And we went up and talked to them and they said, hey, you want to come in and check out the house? Go ahead. Drywall is next week so you can still see everything that we’ve done right now. So we went in.

The guy showed us how he did stairs, which I still don’t exactly know how he does his stairs to make them so amazing. But they don’t squeak. They don’t shift. They don’t move. I mean, they’re not supposed to shift or move. But a lot of stairs squeak but his stairs are like rock solid. And it was just beautiful work. He didn’t just nail things together. He glued them and then nailed them so it’s more secure and just the way he did things was really amazing and it was great to see it in person.

So I would recommend if you’re contemplating starting off on this, when you find a contractor if you’re not comfortable doing it yourself, go to their current job site and look around. Also, this job site was spick and span. They were so neat and tidy. They would clean up every day after themselves, which really makes a difference when you’re living in the property.

Scott: Now, one thing I’ve heard in the BiggerPockets real estate podcast is, I forget who said this, but with contractors, you get two out of three things. You get on time, high quality, and on budget. Would you say that those clean guys who were doing high quality work, was he a pretty expensive guy?

Mindy: No. Actually, he was the unicorn that did it on time, on budget, and high quality work. There’s no other guy like this. He actually moved to San Diego. If you’re in San Diego and you want to house hack, let me know. I got a guy. But yeah, they did an amazing job. They did phenomenal work, on time, I think it might have been delayed because of supplies or something because we were doing it over the winter. Or it extended into the winter. We started the project in June and it extended into winter because of the first guy. But the delays were not their fault. It was like supplies or it was too cold to work or whatever.

Scott: Awesome. I think it’s fantastic how you solved many of the problems yourself, found high quality contractors, fixed problems, got this thing together and have achieved hundreds of thousands of dollars in financial benefit. Can we talk quickly about your story? We know that you’ve been doing this for a long time, for eight different house live-in flips. At what point did you and your husband decide, we’re going to actually parlay what we’ve been doing here into financial independence and what did that process look like? How did that kind of transform into what you were doing from the before and after from the decision to pursue FI?

Mindy: So we discovered the concept of early retirement and financial independence—one day, my husband was having a terrible day on the job. He worked for a government—he was doing some sort of medical device that could kill people. And they had found a bug in the code. He was writing the code and they had found a bug in the code and he was like, I can’t do this anymore. How do I quit my job? And he banks this into Google and Mr. Money Mustache pops up. He was like, what is this? He reads this site and he’s like, this is garbage. There’s no way this is true. But he keeps reading and he’s like, oh, math doesn’t lie. This is actually the real thing. I could do this.

Scott: This was before you were neighbors with Mr. Money Mustache, right?

Mindy: This was before we were neighbors. We’re actually neighbors because of his love for his city. He just keeps talking about how great this city was and we’re like, hey, would you ever give us a tour? And he’s like, sure, come on up anytime. He was super nice about it. Like I said, this was five years ago. And he just showed us this amazing city. But anyway, to parlay this into financial independence, we discovered that you can retire early. We read about this concept called the Four Percent Rule. We did our math and we’re like, oh, we’re halfway to the Four Percent Rule right now.

Scott: And the Four Percent Rule, by the way, for those of you who are listening is a concept, I believe it was started by this thing called the Trinity Study.

Mindy: William Bengen did the first study, and then the Trinity Study came. I want to give credit where credit is due.

Scott: Ah, fair enough. I did not know that so I’ll have to look him up. But basically, the theory is that, let’s say you want to spend $40,000 per year. The theory is if you amass a portfolio of $1 million dollars, you’ll be able to withdraw $40,000 or Four Percent of that per year and have an extremely high likelihood of never running out of money. Your portfolio will regenerate itself because you’re pulling out a small enough percentage of the gains that you’ll last through most market scenarios.

And I believe that study focuses mostly on having that money invested in stocks but there’s other ways to tweak your portfolio. Maybe you’re more conservative or you have even higher probabilities than that. But the Four Percent Rule is often touted as a rule of thumb that if you have accumulated 25 times the amount of your annual spending or you spend 4% of your total asset base, that you’ll be able to retire indefinitely. And that was your goal. You’re halfway through it. You automatically realized that at the point where you had discovered financial independence.

Mindy: Right. just by being frugal. We knew that we had to invest in our 401Ks. So every year, we would max out our 401Ks. We were frugal enough that we could do that. He had a job. I had a job. And basically, my job covered the 401K contribution. So I would start off every year, I would donate to my 401K, or I’m sorry, contribute to my 401K 100% of my salary and it would take three or six months to get to that and then I would start collecting my salary. So it’s called frontloading your 401K where you load it up in the beginning of the year and then he would continue to contribute to his 401K. So that counted for a lot, but then 2007-2008 happened and our portfolio lost of lot of its value. But we were still doing this real estate stuff and we just kept churning that over and over.

Scott: So you had that portfolio going into 2007-2008. Did you discover financial independence before the great recession or after the great recession?

Mindy: After. It was in 2012 but we were still kind of at the bottom but Denver was starting to pick up. He had read a couple of blogs like Get Rich Slowly, Early Retirement Extreme. Early Retirement Extreme is a great blog but just like the title says, it’s extreme. It’s like eating beans and rice for dinner every night and having peanut butter sandwiches for lunch and then you can retire and have like $12.00 in your bank account. And it’s not doable for a lot of people.

But these other blogs were like, hey, if you’re just a little bit frugal, save money on things that don’t matter so you can spend money on things that do matter. We don’t live a beans and rice lifestyle. But I don’t have brand new clothes all the time because I don’t care. I have a really cool car because I wanted one since high school so I bought it when I could. But I bought it now instead of in high school when it would have cost me a lot more opportunity-cost wise.

Scott: So what was your timeline like once you realized you were halfway there and you kind of discovered this? Did you set yourselves a target or anything like that or a timeline in order to move towards this goal?

Mindy: We did. What an amazing question. We set a timeline. We set a goal of 1500 days from January 1^st, 2013. Which was sometime in February of 2017, that we wanted to hit. Our original target was $1 million dollars and then we adjusted it because we don’t believe in paying off our mortgage early. We had about $120,000 left on our mortgage so we adjusted our goal to $1,120,000 dollars so we could pay off the mortgage if necessary. But if not, we can just keep, if everything was going great, we could just keep going the way we were going. So we don’t have a paid off mortgage. We ended up hitting our goal in 2016 right before my husband turned 40. 2015? I don’t remember when we hit the goal, but we hit the goal significantly early.

Scott: You hit the goal in late 2015 or early 2016?

Mindy: Yes. So it just has kept going. The stock market is on a super tear right now. We’ve actually pulled some money out of the stock market and put it into real estate investments. I just bought a 46-unit mobile home park in Maine with Brandon Turner and Ryan Murdoch. Ryan actually lives in Maine so he’s kind of like our boots on the ground. I have invested in real estate syndications and I do private lending which is me lending money as the bank to individuals who pay me a higher percentage rate. I think I’m making 10% returns on that, which is probably not as good as I can get in the stock market right now, but significantly safer.

Scott: I mean, it sounds like you have what I have discovered, a lot of millionaires have, which is their hands in a couple of different investments. You’ve got a large amount of home equity. You’ve got a substantial stock index portfolio. You’ve got a real estate investment. You lend money. This is what I think a lot of people who have achieved financial independence realized, is that they have a lot of options and ways to diversify and sustain their investments in really smart, creative ways that make sense for their portfolios.

Mindy: I agree. Thank you. I think diversification is really important when you are building your portfolio. Especially when you’re first starting out, you have all your money in Apple stock and then all of a sudden, it turns out that Apple goes out of business. Like that would happen. You have nothing. Ask all of those people that invested in Enron. Not only do they not have a job, they don’t have any investments and now they’re working at Wal-Mart as greeters because they’re 65 and nobody is going to hire them.

Scott: I actually took a slightly different approach when I was starting out. I would actually have all my money in index funds that I put all into a house hack. One asset that I could work on and guard very closely. But as I’ve got past six figures, now I’m starting to diversify a little bit more because of exactly what you said as well. But do you think it’s sometimes hard for someone with like $25K to really diversify and maybe build up these first few properties?

Mindy: Well, I think that an index fund is pretty diversified. You’re not in just one stock. You’re in the entire stock market. So a rising tide lifts all ships. So when the market is on a tear, you’re on an index fund that is going up with the market going up or if the market is going down, then your index fund is going down but it’s not dependent on just one company or one stock. Regarding starting out, I love the house hacking idea. I think you could safely argue that live-in flipping is a form of house hacking.

I am forcing a ton of appreciation by making improvements on the property. So you need a place to live. Why pay rent to somebody else when you could own the property and rent out a room? Or you could own the property and fix it up? Or you could own a property and rent out a room and fix it up? There’s a lot of different ways to cobble something together but it doesn’t have to be this huge outlay of cash. I mean, granted if you’re in New York City, you’re probably going to have a harder time. But you could go across the bridges and get a far less expensive home.

Scott: Awesome. Do you have anything else you want me to ask about, to cover before we move onto our Fire Round equivalent?

Mindy: No, I don’t think so.

Scott: I think we’ve pretty much covered everything. Or not pretty much everything but the big high levers of how you got started, what you did after that, the big lever which I think is live-in flip for you.

Mindy: Excuse me, yes.

Scott: All that good stuff.

Mindy: Yeah. No, I think we covered a lot of it.

Scott: All right. Well, this has been awesome. Let’s move onto our Famous Four and put you into the hot seat, Mindy. What’s your favorite finance book?

Mindy: My favorite finance book is called The Richest Man in Babylon by George S. Clason. So what I really love about this book is it was written in the 1920s and a hundred years ago, that information is still valid today and it’s basic concepts like be frugal. Don’t spend all the money that you make. Invest the extra money that you don’t spend outside of your living expenses. Invest with people that have experience in this or expertise. It’s just really basic information. Investing isn’t hard and I think that just saying, here’s this book that’s a hundred years old, giving you the exact same advice that you’re getting now.

Scott: Yeah, I think it’s fantastic. It’s one of my favorite books as well. I love it and there’s timeless wisdom in that book that applies. It’s crazy how well it applies to the real world today.

Mindy: It really is. Like, we’ve got all this technology. Think about the world in 1920s and the world in 2018. Vastly different. Investing advice is still the same.

Scott: Awesome. What is your best piece of advice for people who are just starting out?

Mindy: So you’re going to make mistakes. Maybe you started too late. Maybe you invested poorly. Maybe you didn’t invest at all. You spent every dime you had. Tomorrow is a brand new day. Start tomorrow. Start today. Today I a brand new day. Spend less. Save more. The best way to spend less is to track your spending. If you are not currently tracking your spending, start today.

Use Mint.com to track your spending. Use a spreadsheet that you make. Do it yourself. Write it down in a notebook. That actually helps me. I use a notebook, like a spiral notebook. I put it on the island and as I walk in, that’s the first thing I see. If I spent any money, I write it down. And as you track your spending, you’ll see things that you can cut out. When I first started tracking my spending, I was shocked to discover that I went to the grocery store every single day. And it was on the way home. I lived kind of up a hill and the gym was over here, so I would drive past the grocery store.

Oh, I need that one thing for dinner. Well, that one thing turns into like, seven things. And you do that every single day, you’re buying like 35 things you don’t need. Every single week. It adds up and the money adds up and the space adds up. So my best piece of advice for people who are just starting out—track your spending. There you go. That’s even better.

Scott: Awesome, I love it. It’s not necessarily a budget, right? It’s tracking your spending and know what’s happening so you can make those decisions and figure out, hey, this was not worth it, right?

Mindy: Yeah. I didn’t need that.

Scott: What is your favorite joke to tell at parties?

Mindy: Ask me if I’m an orange.

Scott: Are you an orange?

Mindy: No. I have small children.

Scott: Orange you glad I asked that question, though?

Mindy: No. Sorry, that’s a terrible question. I still love it.

Scott: That’s all right.

Mindy: It’s still awful.

Scott: I got a pun in there.

Mindy: Yes, you did. You always slip them in.

Scott: All right, before we peel out of here, let’s ask one more question here. Where can people find out more about you?

Mindy: Well, funny you should ask. I am on BiggerPockets.com. I am all over BiggerPockets.com. I am the community manager there so I am in the forums all day, every day. You can e-mail me at [email protected]. You can tweet me at @MindyatBP for BiggerPockets. Instagram is the same. MindyatBP. I think Facebook is also the same. MindyatBP. Pretty much, I am everywhere and I would love to chat with you. Not you, Scott.

Scott: Mindy is everywhere. Mindy is a legend who has been so ridiculously active over the last couple of months, writing books, starting podcasts, hosting podcasts, doing all this stuff.

Mindy: Ask me about my book, Scott.

Scott: Oh yeah, did you have a book? Can you maybe mention that?

Mindy: I do. I wrote a book called How to Sell Your Home and the reason I wrote this book is because there’s this guy named Morgan Housell and I have been following him forever. He’s unbelievably brilliant. You know, he’d be a good guy to have on this show. He is so smart about money and he wrote a post after he bought his first house. He lives in like a major metro area like New York City or something where it was normal not to have a house. And he finally bought a house and he was like, every time I talk to my real estate agent, I was back on Google looking things up because there was so many things you don’t know about buying a house. And the way that our publishing schedule worked, it made more sense to publish How to Sell Your Home first and then next year, we are publishing How to Buy a House.

Scott: You’ve written two books?

Mindy: Well, I’ve already written one. I’m writing one more.

Scott: What a legend.

Mindy: That’ll be out in 2019. I think January but that’s not set in stone yet. But yeah, so if you have a house to sell, there’s so many things that you have to do in order to do it right and you don’t know what you don’t know.

Scott: Your agent may not know what they don’t know, right?

Mindy: Your agent might forget to tell you something. Maybe they’ve been doing this for a thousand years and they’re like, oh everybody knows you need title insurance. I was in the BiggerPockets forums and somebody said, oh, I didn’t know I needed title insurance. Oh, well I know you needed title insurance. So I put that in this book and I am going to put that in the How to Buy a House book, too. So there will be a link in the Show Notes to How to Sell Your Home. It is available wherever books are sold. It’s also available at BiggerPockets.com/Store.

Scott: Awesome. Well, that was a nice plug.

Mindy: Thanks. Thanks for the opportunity to plug my book.

Scott: Well, this has been great. Do you have anything to add here before we close out and let everybody go home or do whatever they were going to do?

Mindy: I do not have anything else to add. If you have any questions about today’s topic, please hit me up. We’ve got a new forum on the BiggerPockets forums specifically to discuss the BiggerPockets Money podcast and the episodes. So if you have any questions, hit me up in the BiggerPockets forums. If you are not a member of BiggerPockets.com, the membership is free and always will be and we would love to have you. You can come over and talk about money or real estate investing or real estate in general. We have more than 900,000 members who are happy to help you out in almost every aspect of finance.

Scott: Awesome. Another great plug. Thank you, Mindy.

Mindy: Shall we wrap it up?

Scott: Let’s do it. From Episode 5 of the BiggerPockets Money Show, this is Scott Trench. Over and out.