Subscribe to The Next-Level Income Show
Are you tracking your spending and managing your money well? If not, you have to start now! Listen to your host Chris Larsen as he talks with Rachel Richards about building passive income, money management, and financial independence. Social inequality is what drove Rachel to start earning money even while she was young, working at 16 years of age with only a minimum wage salary. She seized the opportunity to learn the skill of sales that eventually led her to greater things. Driven by her motivation to be financially independent, with a background in sales and having majored in financial economics, she quickly discovered ways to build passive income. Tune in to find more on how you can get started even without having lots of money!
—
Watch The Episode Here:
Listen To The Podcast Here:
Retiring At 27 Through Passive Income With The Money Honey Rachel Richards
At the age of 27, Rachel Richards quit her job and retired, living off $15,000 per month in passive income. Rachel is the bestselling author of Money Honey and Passive Income, Aggressive Retirement. She built a real estate portfolio of 38 rental units by the age of 26. She’s a former financial advisor and has been featured in CNN as well as Business Insider. By making the topic of money management fun, entertaining and simple, she has helped thousands of Millennials work their way out of financial despair.
—
Rachel, welcome to the show.
Chris, thanks for having me.
I’m so happy we finally got to catch up. You got to tell the audience. You have been traveling around the country for how many months?
For several months.
For those of you that aren’t familiar with Rachel, we met and talked and Rachel was telling me, “We’re selling our house and we’re going to travel for the next few months.” I was like, “That is amazing.” Tell the audience a little bit about your travels and how you got to do it.
I grew up in Kentucky and then we moved to Colorado Springs and lived there for a year. We both worked remotely and we had this opportunity where we could travel around the country, and we could do it now. What better time to do it when we were working remote and during COVID? We don’t have kids, so we decided to do it. We sold half of our stuff, put half of it in storage, and sold my car. Everything that fit into my husband’s pickup truck is what we took with us. We have been living in Airbnbs. We went all around the West Coast and it was an amazing adventure.
Many people are reading are like, “I would love to do that but I can’t do that because.” I have not traveled that long but I did a three-week trip into the Grand Canyon a few years ago. I was so nervous before the trip. I was afraid like, “I’m not going to be able to check my emails. What’s going to happen?” Was it nerve-wracking getting prepared for that?
A little bit. We didn’t change our lifestyle a ton. We were both working the whole time. It’s not like we took months off of work or anything. He and I worked remotely. We still had Wi-Fi and everything in our Airbnbs. We weren’t going into any super remote areas. Our lifestyle stayed the same. A lot of people see other people traveling around the company and they’re like, “That’s so glamorous. That’s amazing. I wish I could do that.” There were aspects of it that were not glamorous and that were super stressful.
I don’t know if we had bad luck with our Vrbos and Airbnbs but something went wrong at every single place that we stayed at like the weather was 90 degrees and the AC was broken, that happened at two with them or arriving and we were locked out and couldn’t check-in. They had to find us a place to stay for the night. Things like that happen over and over again. We had bad luck but after a while, it became stressful, feeling like we didn’t know what we were walking into. It did get old after a while but I’m still so grateful we got to experience that.
I love what you said before the show. You’re like, “Andrew and I are pretty tired of Airbnbs. We’re ready to be home.”
You have to share the realistic side of things as well. It’s not all that it appears to be.
For some, I used to spend 70 to 80 days or 80 nights in a hotel a year. It’s nice to have your own bed and do that. We have a couple of Airbnbs and we, unfortunately, had a leak from one of the toilets in the brand new house. The toilet leaks shorted out the hot water heater. Here we are going on vacation and we’re half an hour away from the house.
Fortunately, we’re able to turn around but we had to call an emergency plumber. If you’re reading and you’re like, “That’s why I don’t own real estate.” There are advantages, disadvantages, and ways you can be a passive investor. We talked in the intro that at 27, you’re retired and financially independent. What were you doing? How did you do it?
Money Management: Encourage yourself to want to learn about different aspects of business and building financial wealth.
Our journey started with building passive income in 2017. I was 24 to 25 at the time. Before that, we didn’t have anything going for us except for our full-time jobs. By 2019, we built up a huge real estate portfolio and all this passive income. I quit my job. I always clarify because I get this question all the time. People always assume I’m a trust fund baby because we built this real estate portfolio so quickly. I always tell people I’m not a trust fund baby. I never made six figures from a job or a career.
I started off only making $36,000 after college. In my next job, I was making $32,000. In my next job, I was making $42,000. By no means was I in this six-figure high-paying job. In 2017, early that year, we were both working full-time, normal jobs, we didn’t have any other income. That year, we purchased and invested in our first duplex. This was in Louisville, Kentucky. The duplex was $100,000. People in California are like, “What are you talking about?”
Their Tesla costs more than that.
That was a big advantage. It’s just that we lived in Louisville, Kentucky, which is a very low cost of living place. It’s an affordable place to invest. I recommend if you do live in an expensive city, you need to be willing to invest out-of-state. Now that we have our rentals in Kentucky and we’re traveling all over and living in Colorado, it is easier than I thought it would be to be a long-distance landlord.
Be willing to invest out of state. People ask, “Where did you come up with the down payment for that first duplex?” Besides the fact that we lived in that city, which was affordable, we also both graduated without student debt, which was a huge advantage for us. I sold Cutco Cutlery. Have you heard of Cutco Knives?
I sold Cutco. It was an amazing experience. People make fun of me sometimes. It’s like a fraternity or sorority. People that sell Cutco get it. Did you do that through college?
Yes. Right after I graduated from high school, I started selling knives. Mom hated that at first. She was not thrilled about the idea of me selling sharp objects to family and friends but that’s what I did.
It’s door to door.
A little bit. It’s not strangers. It’s all based on referrals. You ask your friends for recommendations. You’re going into people’s houses.
I can see being a parent and being a little nervous.
Once she saw how much money I was making, she was always super supportive. It was a great opportunity. I paid my way through school on my own and graduated debt-free. My husband is a veteran, so he used his military benefits to pay for school. We both graduated debt-free, which was a big advantage. The third thing that helped us is that I had my real estate license and that helped us scale later. In initially saving for the down payment, we were also very frugal.
Even though I wasn’t making six figures, I saved half of my income. Even before I met Andrew, I was single, I was living off something like $1,500 a month. I was saving half of my $36,000 income. Even after a few years, I had over $10,000 saved at a pretty young age. By 2017, my husband and I each had $10,000 saved. We pooled that money together to get to our $20,000 down payment. That was how we purchased that initial duplex, got started, and the real estate investing began.
Later in 2017, I self-published my first book Money Honey and that was the other passive income stream. We had the rental income and the royalty income. We focused on growing those two passive income streams as much as we could. By 2019, we had $10,000 a month in passive income. That’s when I quit my job and we counted ourselves as financially independent.
Hearing those lessons, you say to keep expenses low. That includes debt. If you’re a parent, you have children, and you’re considering this, these are valuable lessons as well to instill in them. 2) I talk about this in Chapter 3 of my book but, have an opportunity fund and a place to put your capital for it. 3) Get a side hustle, as you write in your book, so you have another source of income aside from your job in the real estate, as you did. Those are three awesome lessons that you have there.
Let’s go back to Cutco. I just don’t want to talk about Cutco but I finished another episode with somebody who has a relationship with Robert Kiyosaki. We were talking about some of the lessons from Rich Dad Poor Dad. It’s interesting. You hear about Rich Dad Poor Dad, and this just popped into my head, talk about the four quadrants, owning real estate and becoming a business owner and investor.
One of the big things that Robert talks about, and this made an impact on me is, “Your first job is to go out and get a sales job.” Can you talk a little bit about how being in sales, selling knives, and having to cultivate those relationships and doing that? What impact did that sales role play on your future success do you think?
It had a huge impact and here’s the thing. My first job was at American Eagle when I turned sixteen.
I apologize. What is American Eagle?
It’s a clothing company.
I’m a little older than you, so I might have missed a little bit of that. I’m an engineer, so we’re not the most stylish people.
I grew up in a household where there wasn’t a lot of extra money to go around. My parents were living paycheck to paycheck. Compared to my friends, we grew up in this very wealthy county. I always felt like we were poor, even though we weren’t. We were a middle-class family. My friends were getting brand new cars. My friends’ families were going on trips and we weren’t. We didn’t have any of that.
I felt poor, and we didn’t have enough money. Money was always a stressor in our family. Right when I turned sixteen, I wanted a job so that I could afford clothes and go to the movies with my friends. I started working there. I remember feeling frustrated right off the bat of working all these hours and getting paid $200 every other week. To remember specifically, it was a $216 paycheck and being paid minimum wage.
When I first had the opportunity with Cutco, there was no hesitation on my part. I was doing the math and adding up the commissions. It was the first time I had been exposed to a job where the harder you work, the more money you get paid. I knew I could outwork anybody. That’s exactly what I did that first summer. I’m not an extrovert. Being a salesperson doesn’t come naturally to me but I forced myself to learn.
I forced myself to learn the techniques, the words to say, the body language, how to approach people, cold call, handle rejection, drop down, do a sales pitch, many amazing techniques and all the other stuff. You can go into management training with Cutco. It was about leadership, managing other people and public speaking. Overcoming my public speaking fear was huge for me at such a young age. I was a freshman in college learning these things.
When I was graduating from college and doing the job interviews my senior year, the thing that helped me stand out from my peers was not my 3.99 GPA. It was not my impressive academics and extracurriculars on the college campus. It was my sales experience with Cutco. It’s because of the Cutco experience that I had five job offers where some of my fellow peers had a hard time finding a job when they graduated. I am forever grateful for Cutco. I’m still involved with the organization. I have a finance course for the reps now. It’s a lot of fun. I love the Cutco organization.
No Bank Real Estate: If you don’t have money, you better have time and expertise because that’s all you have to gain and you have to figure out how to profit without money.
Sales are like anything else. It’s a skillset. You can argue the same thing with poker and being a surgeon. It’s a skill and you develop those skills. It’s also communication. For anyone that’s out there, learn how to communicate better in whatever you do, like going out and having a sales role. Robert Kiyosaki talked about starting a network marketing company. He said, “Go work for some marketing companies. Learn the sales techniques.” I love Cutco and my guess is you made more than that $216 on one sale at some point when you were working for Cutco.
I have made $1,000 on a single sale for sure. I made $10,000 that first summer, which was enough to pay the tuition for my first year.
You mentioned that it helped you get your first job. What was that first job?
I was a financial advisor starting out.
People are saying, “It’s not fair.” You had all the financial knowledge. That’s how you got where you are.
It was helpful to have that background. My thought at the time was I was very passionate about helping people with money and investing. I was a finance nerd for as long as I can remember. I started reading books about finance in middle school and was obsessed with it all during high school. I read Rich Dad Poor Dad in high school. I majored in Financial Economics. With a sales background, I figured being a financial advisor was the dream job for me. It was perfect the thing for me.
It took me a while to figure this out. Sales didn’t come naturally to me. I’m an introvert. Although I could be good at it, it was always forced. At the end of a day of cold calling or doing sales appointments, I have never been more mentally drained in my life. I did that for nine months and then gave that up. My passion for helping people was always there for helping people with finance. I always wanted to figure out how to do that. It wasn’t until a few years later that I finally figured that out and wrote the book. That’s where Money Honey came from.
Where did you get that nickname? Isn’t Maria Bartiromo the original Money Honey?
Yes, which I didn’t know until after the book.
I’m a finance nerd, too. I was like, “Money Honey. That’s Maria Bartiromo.” She was on CNBC first and she’s on Fox Business now. I don’t watch TV anymore. Where did you come up with that name?
She’s the original for sure. I wanted something that was catchy, that rhymes and that people would remember. I came up with it not knowing that she had already taken that name but it stuck. People know me as Money Honey Rachel and call me Money Honey all the time. It’s fun.
You don’t look like a finance nerd, to be fair. Although I don’t even know what a finance nerd looks like. I want to go back. I can relate a lot, growing up very straight down the lane middle-class. Aside from school, you said you’re reading those books in middle school. Is that how you learned those lessons? Was it the desire to be more like your friends around the neighborhood? What drove that?
It’s because it was hard feeling like the odd one out. It was hard growing up seeing my friends have things and then my family struggle. I remember thinking that I don’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 family and friends to make it to my next paycheck. I want it to be different. I realized at some point that what I did then would either set me up for wealth or poverty.
I started taking things very seriously. Even at a young age, I was such a finance nerd. The first book I read was in sixth grade and it was The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of. I was like, “That sounds awesome.” I was reading it at summer camp and all the other kids were going down the waterslides. I was sitting at the pool reading this book.
It was this motivation to achieve financial independence and not have to be dependent on anybody. I wanted to be able to take care of myself but also my loved ones if they needed my help financially. I had a lot of fear. I didn’t want to ever have to be dependent on somebody or be constrained by finances. They say fear can be paralyzing or motivating.
Luckily for me, it was very motivating. It’s the reason I have been so ambitious and driven to achieve what I have achieved. It’s still motivating. Even though I have achieved financial independence and beyond and have more wealth than I ever thought I would, it’s still there. The fear has never gone away. It’s a lot smaller. I have a much more abundant mindset now but it still drives me to this day.
That’s common in people like us that you start off, and if you’re reading, you’re going to start nodding your head up and down, and you save. I was listening to a podcast with Ramit Sethi from I Will Teach You To Be Rich. I quote some of his stuff in my book. He’s talking through this. When you spend your life saving and doing that, that’s your entire adult life, it’s hard to learn to then spend and enjoy it, and get away from that fear. That’s one thing that Ramit talked about. It was very impactful here.
You have to learn to spend the money after you save it. He says, “After you have won the money game.” It’s a skill to save, which you have mastered. It’s also a skill to learn how to enjoy it. I bought tickets for the World Series for myself and my two boys. It’s more money than I have spent ever on any type of event in my entire life. It was scary to push that button but it was one of the best things I have ever done.
I had a $50,000 launch. I launched a new online course. That was a huge achievement for me. I can’t believe I made that amount of money with this new launch. My friend was like, “What are you going to do to celebrate?” I was like, “Celebrate? What do you mean?” She’s like, “Aren’t you going to celebrate?” I was like, “I should. I have never celebrated any of my milestones or accomplishments this entire time.” She was like, “You should go do something nice for yourself or buy something.” I was like, “Maybe I should.” There are these rings that I had always admired online.
I’m not even a big jewelry person but I finally went and spent the money on the rings and did this whole Instagram Live reveal. I was building it up. I was like, “I’m going to tell you all how much I spent.” Everyone was expecting that I had spent $10,000 on these rings. I spent $2,000. For me, I was almost embarrassed to say how much I spent on these rings. I was like, “I can’t believe I spent this much money.” They were like, “You deserve it. You need to celebrate these milestones.” It’s definitely something I’m working on and getting better at. It’s important to celebrate and reward yourself.
If you have “won” the money game, the challenge that Ramit threw out was, “Take $100 and go spend it on yourself. If you have a bigger net worth, multiply that number up.” Go enjoy it and do that. People were saying, “I want to win the money game.” Let’s talk about that. If you’re reading, we’re going to tell you how to get all these resources from Rachel like how to get her book and some free bonuses that she’s going to give away to you. Let’s talk about your favorite passive income strategies that you use to build that passive income, which you talk about in your Passive Income Starter Kit.
There are so many passive income streams. I first thought real estate investing was the only way. It’s still my favorite, which I will talk about. In my book, Passive Income, Aggressive Retirement, I talk about 28 different passive income streams. Trust me. If real estate investing is not for you, there are tons of opportunities out there for other ways to build passive income.
There’s royalty income, portfolio income, ads, eCommerce, and coin-operated machines. Those are all the five big categories that I outlined. There are tons of different ways, but real estate investing is absolutely my favorite way because there are so many other financial benefits than passive income. The way I see it is that there are four financial benefits. You have the passive income or the cashflow.
You have the equity buildup because your tenants are paying your mortgage for you over time. After 30 years, you own a property free and clear, having only paid the down payment. That’s enormous. You have the tax benefits, depreciation being a huge one. This one, I count as a bonus. You can always count on number four just being there. It’s a bonus. Finally, you have appreciation.
If the value of the property increases over time, that’s appreciation. That’s even more wealth that you can accumulate by owning real estate. You don’t even have to have the 20% upfront. You can invest with 0% down if you have a VA loan, 3.5% down with an FHA loan or as little as 5% to 10%. That could be a fifth benefit, leveraging and using other people’s money.
I get so excited about this. There are so many benefits and you don’t even have to have a lot of money to get started. You have all of these financial benefits. In my opinion, it’s the everyday man and woman’s way of becoming a millionaire and really wealthy. More men and women have become millionaires through real estate than through any other industry.
For most people that are reading my story, I bought my first property that was about $100,000 with $3,000. People might say, “I don’t have good credit. I don’t have this.” I had my mom co-sign on the loan with me. I have a coaching client. He put an offer on a property. He found a partner and needed a couple of hundred thousand dollars. His partner didn’t have the time but my coaching client had the time.
Find a partner. If you say, “I can’t get a VA loan,” maybe you have a partner that can get a VA loan. If you don’t have the down payment, maybe you have a partner that has the down payment. If you have the knowledge, the strategy, the time or even the ability to find that, there’s always a way to do it. Don’t worry if you can’t do it all by yourself.
There are so many ways to invest without having a ton of money. There’s house hacking, wholesaling, the BRRRR Method, and finding a partner. Where there’s a will, there’s a way.
Money Management: You don’t want to be dependent on somebody or be constrained by finances.
You spent months traveling around and staying in Airbnbs. That’s one of the most amazing ways to do that. As I said, we’re going to share all these resources. Tell us a little bit more about the programs that you have. You got a coaching program and I believe you’re starting a new mastermind. Tell us about this new mastermind you have going on.
I’m excited about this mastermind. It’s called the F.I.R.E. Mastermind, which stands for Financial Independence through Real Estate. It’s the second year I’m doing it. I changed it a little bit in 2021. This is for ambitious and aspiring real estate investors who want to make massive moves and start investing in real estate in 2022. I remember having a lot of fear and being frustrated when I wanted to invest in real estate. You can be overcome with analysis paralysis because there are so many ways to get started, strategies and methods. It can feel very overwhelming.
I wanted to give investors a space where I teach them the methods and give them personalized advice of, “Focus on this. Do this.” I give them a small group of people who are committed to taking action. I’m limiting this to ten slots. I will do monthly training and bring guest experts. My goal is to have everyone invest in their first property by the end of the ten months. That is what it is all about. I’m very excited.
I was reading down through it. It looks fantastic. If people want to get your book, if they want to learn more about your coaching and mastermind, and you have another coaching as well, what does that look like?
I do offer one-on-one coaching. If anyone wants to learn more about my programs, you can go to MoneyHoneyRachel.com. That’s my website. My other program is more of a group coaching program. That is my Rental Property Bootcamp that will open and launch in January 2022. I have done this before. It’s a live twelve-week group coaching program.
When I asked aspiring real estate investors, “What are your two biggest obstacles or struggles?” They told me two things. 1) It’s hard to find good deals, especially now. 2) They didn’t know how to analyze deals and know whether it was even a good investment. This bootcamp teaches you how to find and analyze good deals. That’s all it teaches. I wanted to focus on those two specific things. I talk about the nine ways to find off-market deals. If you’re only looking on the MLS, you’re not going to find anything.
It’s like in LoopNet. They’re all taken. I’m like, “You can’t look on LoopNet.”
Get off the couch and stop looking at the MLS. You have to get out there and be willing to do what others are not willing to do if you want to find a good deal. I teach how to do that in a lot of detail. I walk people through my cashflow analyzer, which is a spreadsheet that I have taken years to tweak. It tells you, whether it’s a good deal or not. That is what I teach over a course of twelve weeks.
I have talked to talk to several of your clients. Rachel’s clients love her. Check out her resources. If this is something that’s a fit, it’s certainly worth checking out. I’m a little challenged here because normally I say, “If you can go back to your 25-year-old self and give yourself some advice, what would it be?” I feel like you’re a little bit wise beyond your years. I’m going to ratchet that down a little bit. If you had to go back to your 21-year-old self and you’re in college, what advice would you give yourself back then?
Honestly, I could answer for 25 pretty easily. I will stick with the original question. The problem that I had a few years ago was being too cheap. We already talked about how you can be good at not spending money. That was a big problem for me. When you take anything to the extreme, it’s bad. When you spend too much to the extreme, that causes problems. When you spend too little to the extreme, that causes problems.
There’s a difference between being cheap and being frugal. I was too cheap in many ways that ultimately hurt me and cost me a lot more in the long run. I’ll tell the short story version of it. There’s this property management story that I always share. It’s so embarrassing. When it came time to hire a property manager, we were at 27 units or something at the time.
My husband and I were both still working full-time. I’m writing books in the evenings. We are acquiring real estate and managing tenants on the weekends. We couldn’t manage them on our own anymore. We needed to hire a property manager. Instead of going with a reputable property management company in town, we hired these two people that have been working for us and doing cleaning for our building. We trusted them. You can see where this is going already.
In hindsight, it’s like, “How naive were we?” They always worked so hard. We were like, “Let’s make them employees of our company. We can save a little money and train them.” It started great and then about six months in, my husband Andrew went to collect rent from our on-site lockboxes one weekend and noticed that a lot of money was missing.
It turns out they stole $6,000 of rent that weekend. We found out they had been squatting in vacant rooms and units in our properties for almost a year. It was horrible. What a violation of trust and what a big learning lesson. I look back on it now and think, “How silly were we?” It’s so obvious in hindsight. I share that mistake in the hopes that others will learn from it.
The moral of the story is don’t cut corners. When you hire a property manager or contractor, don’t go with the cheapest person because it’s the cheapest person. A lot of times, that’s a sign that they’re not going to do good work. Being cheap can end up costing a lot more money in the long run. I continue to have to learn that lesson, too. I wish that I could tell myself that a few years ago for sure.
It’s a fantastic lesson. If you expand on that being cheap is the same thing as somebody, like you or I, that’s an individual producer that’s used to doing everything themselves, mowing the lawn themselves, and managing their properties themselves. You can’t scale that. You have to learn how to go from doing everything yourself to being able to find the who instead of the how. That has been my theme. It’s who, not how.
That’s Dan Sullivan.
It’s fantastic but it’s a real challenge, being too cheap and thinking you should do it all yourself. If there are people that are smarter than you and are better at things than you, it takes a challenge to find those people, especially in this market. It has been awesome seeing you here. Thank you so much for sharing your story with the audience.
Thank you so much, Chris. I appreciate you.
Rachel, it was great having you on.
—
I hope you found this episode valuable. I have one more thing to give to you. We have a page for my coaching clients where you can get a free copy of my book as well as much more from previous guests on the show. Check out NextLevelIncome.com/coaching to get a free copy of my book, audiobook and much more. I’ll send you a copy of my book and cover all the shipping costs as a thank you for reading the blog. Also, please like, share, and take 90 seconds to give us a rating on Apple Podcasts.
Important Links:
-
Apple Podcasts – The Next-Level Income Show
About Rachel Richards
At the age of 27, Rachel Richards quit her job and retired, living off $15,000 per month in passive income. Rachel is the bestselling author of “Money Honey” and “Passive Income, Aggressive Retirement.” She built a real estate portfolio of 38 rental units by the age of 26. She is a former financial advisor and has been featured in CNN and BusinessInsider. By making the topic of money management fun, entertaining, and simple, Rachel has helped thousands of millennials work their way out of financial despair.
Love the show? Subscribe, rate, review, and share!
Join the Next- Level Income Show Community today:
Tagged: traveling, real estate portfolio, trust funds, paycheck, passive income, financial independence, Group 3
Subscribe to The Next-Level Income Show