Mindy:
What does it take to go from $90,000 in the red to Coast Fi with $2.5 million? Erica and her husband did exactly that and Erica is here to walk us through how they did it. We’re talking about their debt payoff, the investment approach that accelerated their wealth and their portfolio today.
Mindy:
Hello, hello, hello and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen and with me as always is my budgeting pro co-host Scott Trench.
Scott:
Thanks Mindy, great to be here and today we’re going to talk about a wonderful financial model in Erica and her fantastic journey. We’re so excited to welcome Erica Young, a financial coach who’s experienced financial rock bottom so that you don’t have to. We’re going to break down her journey from $90,000 in debt to $2.5 million in net worth and Coast-Fi and discuss some of the options that she’s considering with her own personal portfolio, including whether to pay down her mortgage, buy a rental or pursue other investment alternatives like building a cash position. Welcome Erica to Bigger Pockets Money.
Erica:
Thanks for having me. I’m glad to be here.
Scott:
Awesome. Well, let’s kick things off and start with this this debt background. How did you rack up $90,000 in debt? And what did that feel like?
Erica:
Yeah, you know honestly I was pursuing the American dream. I think it’s really easy to go in debt. It’s just hard to get out and or I I would say you need consistency to get out and we did what everybody told us to do. My husband and I um were both, you know, people who wanted to get a good job and we thought that was the path to go to college and that was some of the debt. That was a good portion, more than half of the debt and then we wanted decent cars. We’re from the Motor City and so you got to have a nice ride and that came with a loan and both of us had one and then we also got, you know, taken to the cleaners when we were in school when everybody was on campus trying to get us to get the credit cards and we both fell for it to the tune of about three apiece and max those out. So honestly, we did debt well, right? Like we just knew how to like take it on. That is how our $90,000 came to be and like I said most, you know, half of it was the student loans and we thought we had to and we didn’t have people who could help us financially go through college. But honestly, this is what a lot of people go through when they don’t necessarily have the cash to pay for stuff or know how to navigate without debt. We ended up being, you know, just the poster child for all of the different kinds of debt you could have and we lived there for a hot second.
Mindy:
At what point did you realize that this wasn’t how you wanted your financial life to look?
Erica:
I’m an engineer by trade. So my degree is electoral engineering and I had a good job. My husband had he started in sales and so his career grew but in the very beginning I realized an engineer shouldn’t have this much trouble paying the bills, right? So we got married and for about a year we floundered. We got pregnant right away. We had child care and the expenses were adding up and the money just wasn’t stretching as far as we wanted it to go because um when we looked at our student loan debt at the time, this was years ago and I won’t date myself, but it was years ago and that student loan payment was $451 because we had consolidated it and we had, you know, child care and we had car payments. We had a lot of obligations and when we added it all up, it was over $1200 a month in debt payments. And so that was scary and we had our child in that first couple of months our car died and we had no credit, we had no cash to fix the car and they’ll give you a terrible loan when you don’t have great credit and we did that in order to get another car. So that was kind of our rock bottom moment when we realized we didn’t have like $1500 to fix the car, but we could go get a loan for another 20 grand. That was pretty crazy.
Scott:
What happens next? This wake up call happens, how do you begin resolving the situation?
Erica:
Honestly, we found Uncle Dave. My husband had a long trek to work and he found Dave Ramsey on the radio and that was our first insight into there could be a way out of this. But I’m also an engineer. So when I heard about, you know, what it looks like to create a budget to get out of debt, I was like, okay, I like this. And so I just started number crunching in Excel and figuring out what would work for us. But um there had to be the trigger and it really was finding someone else who, you know, would hit hit you upside the head and kind of talk to you real sternly because there was no one out a-, you know, telling us to do something different than to keep the debt um besides him. So we went down that path and it took us about five years to get out of the $90,000 in debt. We used the debt snowball and budgeting was a big part of that puzzle to stay on track.
Scott:
What was your lifestyle like on a day-to-day basis before and after this mindset shift?
Erica:
We didn’t have a whole lot of fun at first. I mean, we didn’t have a lot of money. Our incomes didn’t stretch enough with these payments in order for us to have a whole lot of fun. So there wasn’t a bunch of travel, there wasn’t a bunch of spending money. Little thing that I did without sharing with my husband was dining out for lunch with friends at work because that was the thing that was accessible. You know, just spending $10 or $15 without his knowledge on a credit card and when we realized that that was sabotaging our efforts to move forward, he put them on ice. Like he literally took all of our credit cards and put them all in a bowl of water in the freezer to physically represent not using it again.
Mindy:
I love that suggestion because it’s still there. If you get a $1500 car payment or car, you know, repair bill again, you can go over there and saw them out and go use it, but it’s such a block. Literally, it’s a block of ice, but it’s such a block to just swiping and swiping and swiping. And it’s not, I don’t think it’s the big expenses that are the budget killers, it’s the little death by a thousand cuts, the $10 here and the $15 there and it’s only a dollar. It’s only $10. Well, only $10 every day is a lot of money that adds up every month coming out of your ability to pay off your debt.
Erica:
Absolutely. And for us, $10 every day at work was over 2000, almost $3000 a year and we just didn’t have that. And so we had to stop the bleeding in addition to do some more aggressive things in order to get free of all of that debt.
Scott:
During this period while you were paying off the debt, was there any accumulation, did you just literally follow baby step one, build a $1000 emergency buffer and pay off the rest of the debt or did you take a 401k match or begin investing in any way while you were attacking the debt?
Erica:
Yeah, so that’s where Dave and I disagree. We always got our free money. We definitely always got our free money because we could afford to do so. I mean if we were in such dire straight that we couldn’t afford to do that, maybe we would have said no, but no, we wanted that free money. We were young, and you know, with time on our side, that that stuff can grow and that’s a 100% return in my book. So yeah, we definitely took that on and um didn’t touch it.
Scott:
Do you take your 401k match and then applied the rest after that to your debt?
Erica:
Absolutely. Yep.
Mindy:
I think Dave Ramsey sometimes gets a bad rap, especially because of these baby steps because so many people think, well, you know, baby step one is great. If you’ve got no emergency fund, then yeah, save up $1000 for an emergency fund. But there are, you know, is $1000 enough? Hey, it’s better than nothing. So yeah, start there. When you have a goal of $1000 and you currently have zero saved up, that can seem unattainable. So having a goal of $10,000 is even more unattainable. And when you have unattainable goals, it’s easier, so much easier to be like, ugh, I’m never going to get there. Why bother? So I love Dave Ramsey as a first introduction to this just because he can be a little mean and I’m not a little mean. I’m like, hey, you know what, Erica, you made mistakes. That’s past Erica. I’m talking to present Erica. So let’s just, these are just facts now and let’s move on and build from that. But Dave is like, oh, I mean, sometimes he can be like, oh, you’re a terrible person for making all these bad mistakes. It’s like, well, I’ve never had the education. So how am I supposed to feel so bad? But he is a great first introduction to this idea that you can fix your finances. Here are some little ways to do it. So I love that you found Dave. When did you find FIRE, the concept that you could actually retire or retire early?
Erica:
Man, a lot later, a whole lot later. I mean, almost to the point where we were at Coast Fire when we figured it out. It was a long journey to be honest with you and I honestly wish that we had found it earlier. We realized that this was um a a community that we were, we call it adjacent to and not and didn’t really know it. It took a long time. I’m going to say it took over 10, 15 years for us to actually find the FIRE community.
Scott:
Let’s go through a couple of stages in the journey. You know, it sounds like one year after you graduated college is when you began to really transition the way you were thinking about paying off debt and aggressively pay it off. It took you five years and during that time period, you mostly just attacked the debt, but took the 401k match or other free money at work. When you paid off the debt five years into your journey. What was your net worth at that time? Was it a few thousand bucks, tens of thousands of bucks? What what what do things look like?
Erica:
Yeah, it was just a couple few 10 thousands of dollars. I mean, it wasn’t a whole lot to speak of, but we were consistent um because it was around five or six years where we were taking that minimal, the minimal amount to get the match. We didn’t make aggressive progress with our financial future until there was the point when our kids didn’t need the the childcare and um the business, the financial coaching business was actually born and we were making some money. and so it took a few years honestly after that to actually get a little bit more aggressive. So we weren’t doing more than that minimum for a few years and then when we really started to get aggressive, we just would add every single year, every single time we would increase our income over time until we could max out um all of our pre-tax retirement dollars and that took a little time. It took a I it took a good 10 years before we were able to max it out fully.
Mindy:
We have to take a quick break, but while we’re away, we’d love if you would head on over to YouTube and subscribe to our channel. You can find us at youtube.com/biggerpocketsmoney.
Scott:
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Mindy:
Welcome back to the show.
Scott:
So, after five years of debt payoff, we’re at zero, and you just continue to save. And, but now, instead of paying off the debt, it’s going in a tax-advantaged order of operations. It sounds like the 401k. You were maximizing out the 401k and applying every dollar to that that you could. There wasn’t really much after that because there wasn’t enough of a surplus to go down the next layer into the stack into the Roth or those types of things. But as your income grew, you were able to then begin maximizing out the Roth and some of these other accounts. Is that the right way to describe it?
Erica:
It is Scott, and I will add one thing that I think is real life for a lot of people is there was a point when we were out of debt and we had these child care payments and we said, let’s really go like give me the opportunity to go all in and help other people with their finances because I wanted to utilize our journey to help other people get free of their own debt um through the use of coaching. And so I left my job. So, you know, I did coaching on the side. I moonlight um nights and weekends and then after a year of doing that, I was like, okay, you know, engineering is not suited honestly to my personality. I enjoy the the the creation and the statistics and that kind of thing, but some of that was just not something I could see myself doing long term and I really wanted to be people facing versus computer facing. And so I left my job. So that was an income dip and that was part of the shift as well is, you know, this is why for a while we were just doing kind of the minimum into our retirement accounts because we needed to regrow income in a new space and that took a little bit of the time into why we weren’t necessarily growing our investment portfolio.
Scott:
Got it. And before you switched full time to this entrepreneurial pursuit, did you build up a cash position outside of the retirement accounts for time?
Erica:
We did. Yeah, but it wasn’t big enough. Like I tell people all the time, I wish we had 12 months of expenses. We had just over three months of expenses. We were just out here thinking this would be enough and thankfully nothing traumatic happened and it took about two years in order to really grow the business into some income that we could see at home. But yes, we did have an emergency fund. We didn’t necessarily have to use it thankfully. But I think that that’s a smart thing to call in into this conversation because you don’t want to leave without any money.
Mindy:
Yeah, three months is actually on the lower side from other entrepreneurs that we have talked to. We’ve heard, you know, 12 months, we’ve heard 18 months from uh one particular entrepreneur which I thought was a little much. When you left your job, did you do the math and make sure that you could live just off of your husband’s salary while you were building your new business?
Erica:
I will tell you, I was the budget queen when I figured out how to create a budget. So, we made these dollar stretch and work. And and honestly, I will say that once a year we still would drop, we lived in Arizona at the time and we could drive to Disney and stay in a hotel for a couple days or go to San Diego or be with family um on a vacation. So we didn’t deprive ourselves of those types of things. Again, it was just once maybe twice a year and we use cash. So we didn’t say no to everything, but when we were at Disney, we didn’t eat their food. We had our little sandwiches and our little thing that we got from the grocery store in the car and then we went back into Disney to to have our little fun. You know, we just had to do it differently in order to still enjoy ourselves and not spend a ton of money doing so.
Mindy:
I love that you incorporated fun into your journey because uh I didn’t and my journey I bet was uh a lot different than yours. There were lots of times when we weren’t having any fun and we, you know, we didn’t live close enough to drive to Disney, but we didn’t go to Disney and we didn’t do all of these fun things. We put our nose to the grindstone and we just kept going. I think it’s just so important to incorporate enjoyment into your life so that you can then continue on the path.
Erica:
Absolutely. I think that having fun along the way is how you are sustainable. Like it makes a real. And then we had two kiddos. I mean, so I think the other part of this was life is short and we just wanted to enjoy those younger years and find a way to do it on a budget. you know, We and one of the biggest things that we did in their childhood was they had a like a pass, a city pass um in our in our town and we did all of the museums, all of the free things. We went on the free days, the free evenings. So we had lots to do that didn’t require cash out of our pocket and that helped us tremendously because we really got a chance one to see the city, but also to make sure that, you know, we weren’t stuck in the house, aring our thumbs or just, you know, playing with crayons all the time. Honestly, like we got out the house.
Mindy:
It’s so easy to just throw money at things and spend money to do things, but it’s equally easy to use your creativity and the internet. I mean, we’ve got the internet now and it tells you all the free things you can do in your city and surrounding cities. So it is really easy to get out and do things with your kids without breaking the bank.
Erica:
Absolutely.
Mindy:
Okay, so let’s look at some real numbers. You were $90,000 in debt. What was your income at that time?
Erica:
When we got married, we were right at around 65,000 between the two of us. I mean, let’s let’s be real. This was a long time ago. And then it grew a little bit. So when the both of us um after around six or seven years, um we were right at around 100 because my husband was in sales and basically half of his income was from commission dollars and then he found another job where it was just a bit more stable than that. And so we were able to, that’s when we were able to say, all right, Erica, you know, we can let that income go for a while until we build up this business and so frankly, for a while, we just hovered right beneath 100 grand for a while until the business started to grow. But we started at like 65. We had more debt than we had income. It was scary, especially with with two kids.
Mindy:
Yeah, and I think it’s really important to note that this was several years ago. When you said 65,000 I was like, wait, you’re at EE. What do you mean 65,000? But I remember back when I got married and my income was a whopping 24,000. So of course you were 40. So…
Erica:
Yeah, yeah, who’s who’s 40?
Mindy:
You’re 40.
Erica:
Me?
Mindy:
In my mind, you’re 40.
Erica:
Oh, you know what? I’ll take it. I’ll take it.
Mindy:
Just looking at these two numbers, you were $90,000 in debt and you were making 65,000. If you could live totally for free, which you cannot, it would take you a year and a half to pay that off.
Erica:
Yeah, for sure.
Mindy:
So, paying that off in five years, that’s awesome. What were your expenses when you were making the 65,000? Were you spending all 65,000 of it?
Erica:
Well, okay, so let’s be very clear. We were givers. So we definitely were people who prioritized giving. We were people who, you know, when I learned how to get the budget down, we were spending quite a bit of money on paying down the debt. But we did live on the rest. I mean, there was about 3% going into our retirement accounts and so we lived on a good 70% of that income and at the time we we had no choice. That was what it was requiring in order for us to to live as a family of two, then three and then eventually four within those four year first four years.
Mindy:
Okay, let’s talk about your Coast-fi numbers.
Erica:
Mhm. Mhm.
Mindy:
Have you used the Fioneer’s CoastFI calculator?
Erica:
Woohoo. Yes. So we stumbled. We realized that we were at Coast-fi a few years back and we were like, yes. So we hadn’t calculated until we were right about there and it took us about two years to kind of complete the number, but we were excited about that. So, um, yeah, so our coast five was about 1.5. And so we’re still going, we’re still going strong and it’s been a couple of years so that number has increased um and that’s only for our retirement assets. It doesn’t include our home.
Mindy:
Okay, so your Coast-fi number is your, that’s your FI number that you will have at age 65.
Erica:
Well, this was what we needed to hit so that we were there. So we needed to hit the 1.5 in order to hit our number when we’re that age. And frankly, we don’t want to wait till 65. My husband is dead set on it being 59 and a half. So we’ll see. We’ll see.
Mindy:
Good. Well, 59 and a half is attainable if you just continue to contribute nominally. And if you’re self-employed and he’s still doing his sales work, that could really reduce your taxable income by contributing to your 401Ks and your IRAs. There’s a lot of opportunities for self-employed people to like super contribute to their 401k’s.
Erica:
Yeah, we’re doing all of those things even though if we stop now, we would be fine and we wouldn’t have to contribute another dollar, but we’re we’re just continuing to stay diligent because you just never know. And I think the biggest thing that we’re doing now that we’ve learned from FIRE is to get our cash position more solid because at any time, what if we decided that this was the time where we’re like, you know what? We’re done. We’re done working. And we want to have um a more solid cash position or funds that are not necessarily tied to the retirement accounts and that’s the piece that we’re working on right now.
Scott:
So I’d like to go back to when you started your business. It sounds like it took two years for you to get that up and running, which is not uncommon. I want to focus on one, the low cash position and two, what the transition was like from a time perspective. Were you able to focus full-time on the business with two young kids or was that diluted in some capacity? And because it took two years, talk us through how much of that time was directly going to revenue creation and how much was going off on tangents which I think are normal for new business.
Erica:
That’s a really good question. So let me back up even further. When I realized that this was a business that I wanted to do, I spent about a year doing research and talking to people and having some potential, you know, clients just to kind of see if this is what I enjoyed. And then also getting trained. So I did do some training prior to jumping in with two feet. And then when I did, it was a good part-time business and I just reinvested that first year. So, you know, I I just put dollars in back in. I could have pulled money out, but I didn’t really want to so I needed a website and I wanted to do some other training and I wanted to figure out what was needed. It’s a low cost business. Let’s be very honest, but um, I didn’t want to pull funds for myself unnecessarily because, you know, we could live on that one income. And then I would say, it was a good part-time. I did um grow my client base. I did um have some people during the day. So I was working with a couple of businesses to see if that’s what I wanted to do as well to help businesses with their um cash flow as well. So that was something that I could do during the day and so that wasn’t taking up all of my nights and weekends. The beauty of all of that was that I figured out what I didn’t want to do because I did not want to do bookkeeping. And I think I had to do some of that because of course that for businesses can go hand in hand with their cash flow planning and forecasting and things like that and, it took it took not too much time for me to realize that’s not what I wanted to do. And so, um, I just had to double down on the business. One of the biggest things that I did that helped me to grow, this was back in the day when Snail mail was fun. Um, I sent snail mail to everybody that I knew. I captured all of their addresses and I just wanted to let them know, here’s what I’m up to. Um if you or anyone you know could utilize the help of a financial coach, send them my way and that was a big way. I mean, I sent it and I tracked who these people were and their referrals and all of that good stuff and it was awesome because that that that really helped me and today I would tell someone definitely text, email, send the snail mail, continue to, you know, do more than what I did. I did the the the letter and that helps me get off the ground for sure, but I would do a little bit more because we have more at our at our disposal as well. But that helped and then I said, okay, after a couple of years, you know, I’ve been in this work and I started just reaching out to partners, financial advisors, even, you know, tax people and just seeing, you know, how can we partner so that you one know that who I am and that you can refer folks my way. And that was a little bit of a boost as well to to getting into the full-time space.
Mindy:
So what is a financial coach exactly and how does it differ from a CFP?
Erica:
The way that I define financial coaching is a person who is um helping sometimes with the mental and emotional and the communication around money. So sometimes it doesn’t actually have to do with the numbers themselves, but specifically when it does have to do with the numbers, it’s the basics in personal finance, the foundations, the budgeting, the cash flow planning, um the reality check of what you’re spending. If we’re talking about the baby steps, getting you through baby step three. So making sure that you are out of debt and that you have an emergency fund. My goal is to hand off a good client to someone who is a financial advisor or planner so that they actually know how to take their next steps, should they choose to go that route or you know, if they want to look to do that on their own, but they are at a point where they they can invest a bit more aggressively because they don’t have debt in the way.
Scott:
Given this awesome career and business that you’ve built, what do you personally invest in and what does that portfolio look like these days?
Erica:
Oh my gosh, I am a very lazy investor. Let’s be very clear.
Scott:
40 rental properties, right?
Erica:
You know what? You know what’s so funny? We we did have a rental property, but I honestly feel like we did it backwards. I do definitely feel like we did it backwards. We got taken in the shorts a little bit on that one and didn’t return. So we are mutual fund, easy peasy, let it grow, makes, and we do work with an advisor. You know, we’re index investing. I mean, it’s it’s just simple buy and holding. Don’t touch it. Leave it and forget it.
Mindy:
There you go. I love that answer because so many people make it so complicated. It doesn’t have to be complicated. You don’t have to be in all the things. You don’t have to, I’m going to throw crypto under the bus again. If you don’t understand crypto or don’t want to be in crypto, you don’t have to. If you want to be a lazy investor and I’m using air quotes because I don’t believe that’s lazy at all. I believe that’s smart. Your investing should not be exciting because exciting means risk. Exciting means my portfolio’s up $100,000 today and then tomorrow, my portfolio is down $150,000 today. Like those those highs are great but those lows are really, really, really hurtful, uh especially if you don’t have the risk tolerance to ride the roller coaster. So lazy investing for a win.
Erica:
Yeah, I’ll take it. And I’ll I’ll say, maybe we can alter it and say it’s a little boring over here. Like that.
Mindy:
There we go. There we go. We’re going to do a rebrand. It’s a boring way to invest.
Erica:
It is. It’s not sexy. It it it it but it works. It works. I mean, the and I’m going to be very frank because y’all do numbers on this show. I know you do and so like the first million is hard. Like I feel like it took us a long time to get there. I remember when we were close and we were like, okay, it’s it’s going to be, I don’t know, we were thinking another year or two or something like that. Our overall portfolio is 2.5, 500,000 of that is our home. So that second did not take as long as the first at all. Like because we were being way more aggressive. So we’re more aggressive and with how much we put in to our boring investments that buy and hold so that we can have have it over time and I think because we’re also closer than most might think to making a decision if we want to like step away from working that colors it a little bit different for us too because, you know, my husband might tell you he’s less than 10 10 years away and I, you know, honestly, I’m not working if he ain’t working. You know, I might I might write a book and do a couple speaking events here and there, but I am not going to be working super hard if my honey is trying to travel the world. We’re going, we’re traveling the world. But I think it can get more boring um when you are closer to making a decision to want to tap into those funds.
Scott:
This is our final break and we’ll be back with more after this.
Scott:
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Scott:
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Mindy:
Thanks for sticking with us.
Scott:
Other things that I think a lot of investors listening to bigger Pockets money do is if they don’t have rental properties, they’re typically 100% in passively managed index funds allocated to broad stock market indexes. However, we’ve been talking a lot on the money show this year about the transition from that accumulation portfolio to a retirement portfolio. We’ve talked about 60/40 stock bond portfolios and we’ve talked about the risk parity portfolio which might have allocations to five different asset classes for example. Which one of those are you in right now and if you plan to transition, if you’re still in an accumulation portfolio portfolio, do you have any thoughts about what a retirement portfolio might look like for you or how you might transition?
Erica:
Yeah, we are definitely in the accumulation. We are still making sure that we’re, we have very little bonds, um less than 20% and we do still spread it around the different, you know, asset classes. We’re pretty balanced, I would say. So it’s still over 70% in stocks. I think we’re going to stay there for a little bit longer. We’re playing around, I shouldn’t say playing around but I you know, what we’re talking about cash, I don’t necessarily mean cash in say even a high yield account. We’re talking about a brokerage account with, you know, index investing. And so in that regard, we’re still going to be we’re still in market, right? So we’re not quite getting conservative with our dollars yet, but we do have a mix of mutual funds that we invest in.
Scott:
You mentioned that earlier. Are you building up that year of cash? Is that what I heard earlier?
Erica:
We’re building up to 10% of our portfolio. So it’s going to be more than a year of cash. It’ll likely be two.
Scott:
And then last question on the portfolio, many people, but not all, choose to, or actually I would say it’s a mixed bag frankly, choose to pay off the home mortgage in anticipation of um retirement early or otherwise. Um what is your plan on the home mortgage front?
Erica:
It’s so funny you asked that question, Scott. We were in this decision this year, do we pay the mortgage off or do we do a renovation? We have been in our home for 13 years and we had the cash to pay the house off and we were trying to decide because we had waited for about three years almost um for these bathroom innovations. It was just the bathrooms and nothing else. And we decided to do the renovation. And so we are within months of paying the house off and we just honestly part of our decision was because we didn’t want to have our goods cost more a year from now if we were to wait to do the renovation and so we said, let’s not let the tariff, you know, catch up to us on this one. Let’s get all the stuff and do it now. and we’re really glad that we did. We love what we have done and so we will be paying that house off. The other thing is I do think we’re going to get back into real estate uh because I am definitely interested. One of our next goals is to have a rental property that we can utilize for ourselves um but also for others. We do want like just a vacation home and so, um my grandfather had a cabin in upper Michigan and so we’re just thinking about outside the box on what it could look like to reclaim something like that. So that’s that’s one of our next steps in the next couple years.
Scott:
Let’s see I have a billion questions. I I I’m fascinated by all this. One, is the mortgage payoff and this potential rental going to come from just cash accumulation that you’re going to make and earn and save over the next couple years or do you plan to potentially sell off a portion of the stock portfolio or investment portfolio to fund those?
Erica:
That’s a good question. Um we use cash for the renovation. We’re done. We’re not planning on doing anything significant in the coming next coming years. It might just be some carpet, but that that won’t derail anything. And then for the rental property, no, I don’t know, I don’t think we’re pulling anything out. We are we are likely going to take on a mortgage, a small mortgage for that. We’ll have some cash for a down payment and make sure that we’re not taking on any additional fees because we don’t want that. but yeah, we’re probably going to take on a mortgage for that. That’s where my, see this is when we disagree and we are still working it out so we haven’t made a decision because hubby doesn’t want to take on a mortgage and I don’t mind and I want, you know, something nice. So we’ll see. We’ll see how that turns out.
Mindy:
Okay, I have a question. I think you said you have the cash to pay off your current home, but you have not yet paid off the home. Is that correct?
Erica:
That is correct, but we don’t want to dip that far into our cash. So the house will be paid off in a couple months. Yeah.
Mindy:
So, my thought is you probably have a lower interest rate primary mortgage loan on the current house. Rather than paying that off, I would take that the same amount of money and throw that at the rental because you won’t get two, three, 4% loan for the rental property right now.
Erica:
That’s true. That’s true. Thank you, Mindy. That’s a good idea.
Scott:
No, and the rental is going to be tax deductible and the home interest is often not tax deductible which is something to work through on those depending on how you file taxes.
Erica:
That’s a good point. I love it. I love it. Yeah.
Mindy:
Lots of different ways to look at where your money could be going. I am totally in camp, don’t pay off your mortgage. Scott is totally in camp, pay off your mortgage. So there’s both camps are valid.
Scott:
Yes, I I’ve paid off my mortgage or I bought my house in cash more specifically because interest rates are higher at that point in time with my rentals with a low interest rate mortgage, I do not pay those off.
Erica:
Yeah, that’s a good point though because um one thing we hadn’t thought about because it didn’t on our mortgage, I mean, yes, it’s a lower interest rate right now, but gosh, when I just looked at interest rates recently for someone else, I was like, this is a mess and I you’re right, I probably wouldn’t want to take that on. So it’s something to think about for sure.
Mindy:
So if you’ve got that money in the account that you haven’t thrown at your at your mortgage yet, maybe, you know, run those numbers and see, okay, I’ll continue making my nominal home mortgage payment while I then throw this money at something else because it doesn’t make sense to throw money at a 3% loan and then take out a an 8% loan.
Erica:
You’re right. Yeah, yeah, we’re definitely not doing that.
Scott:
Yep.
Mindy:
Yeah. There’s also second home mortgages and those have a slightly higher interest rate than your primary mortgage, but it’s lower than an investment mortgage. So talk to lenders, especially before you find a property, just talk to lenders and see what options are available for a house like this because right now lenders aren’t that busy. They got lots of time to talk to you and talk to mortgage brokers, talk to just different options. Credit unions are awesome. I’ve got a great credit union lender in Colorado, but he’s only licensed in Colorado. and I can call him up because I’m a real estate agent I I refer people to him all the time. I can call him up and I mean he’ll do this for anybody, but I call him up I’m like, hey, let’s talk about this that’s such thing. He’s like, oh, and by the way, did you know about this? Did you know about this? No, oh, those are new products or that’s a new thing that my company’s doing. So, there’s just there’s lots of options available, but you won’t know until you ask a lender. I’m not a lender, I just know enough to be dangerous.
Erica:
I love it.
Scott:
I got a question here and I don’t know how to phrase this so I’ll just I’ll just ask it fairly directly here. But you’re accumulating a lot of cash. So clearly things are going fairly well from the career front and low expenses. That’s enabling you to both or you know, simultaneously or in some capacity in some sequence, build up enough cash to build multiple years or at least at least a year of cash position, pay off your home and accumulate a down payment on a nice vacation home. I imagine that is coming at the expense of at least some aggressive investments in stocks to continue to pile on. Is that at all influenced by the market right now and stocks being at very high price to sales multiples, price to earnings multiples, those types of things or is that just a different course of, you know, priorities in life and where where where you want to um spend the next incremental dollar?
Erica:
Well, I’ll tell you this, it isn’t all happening at once, right? So we’ve been saving for this Renault or saving the cash, yes, for a couple of years. It’s taken us a couple of years to get to the place where this was something that we can do. And then the other part of it is likely the rental property is going to take a couple more years from now. It’s not like that’s happening in 2026 even. So we’re having conversations around how we’re going to get that done. And so that’s why I appreciate this conversation with you all because you’ve given me food for thought. And we have not reduced how aggressive we are in saving for retirement. We that that won’t change and we definitely believe in dollar cost averaging. So quite frankly, you know, things are looking fine right now. I know earlier this year, we everybody was taking a hit, but it didn’t deter us because we were still still buying and still um you know, sometimes you get them on sale. And so, yeah, our strategy again is pretty stable, boring and itt it works over time because it definitely has paid off so far.
Scott:
Well, thank you for sharing so much um about your story and your current situation and and what’s next. It’s been really fascinating to get to know that and learn that. Where can people find out more about you, Erica?
Erica:
Well, one way that they can find out about myself is um on for better and worth. For better and worth is the podcast my husband and I have um where we talk about the intersection of couples and money and just having those conversations that people have a hard time having. And so you can find that on all of the platforms as well as on YouTube. Professionally for the work that I do on a day-to-day basis, you can find me on Ericayoung.com and that is where I do all the things concerning financial health, wellness and working with financial institutions to ensure that their teams can employ financial coaches in a great way. So that’s where I’m at.
Mindy:
Erica Young is spelled E R I C K A Y O U N G.com.
Erica:
That’s correct. We’re a little extra over here so I need some extra letters.
Mindy:
Yeah, she’s the best of both worlds.
Erica:
There we go.
Scott:
Thank you for an extra detailed and specific and transparent episode today. You’re really I think going to inspire a lot of people. That’s a really tough position to dig out of and then blow past to a really elite net worth and tons of options. So, super excited to see what the next few years bring for you and let us know what happens uh on the rental property front if you decide to pursue that.
Erica:
Thank you so glad to be here.
Mindy:
Thank you, Erica and we’ll talk to you soon.
Erica:
Okay, thanks.
Mindy:
All right, Scott, that was Erica and that was a super fun story. I love that she shared her numbers. I don’t love that she was in debt, but I love that she was able to pull herself out and now go go from $90,000 in debt to positive $2.5 million. That’s an awesome story. What did you think?
Scott:
One of the best, most relatable, most inspiring, best examples of a money story ever on the Bigger Pockets Money podcast. Thank you so much to Erica for sharing all that detail. It was fantastic. It makes a ton of sense. There’s no particularly special or unrelatable or unachievable milestone on that. It’s just hard work over a 25 plus year career building and building and building, grinding it out, paying down debt, investing consistently. Loved it.
Mindy:
Yeah, nothing she did was not repeatable by anybody who is listening who has any level of debt right now. I love that she shared so those numbers. That’s always super helpful for our guests to share their numbers so our listeners could be like, oh, yeah, she did it. I could do it too. All right, Scott, should we get out of here?
Scott:
Let’s do it.
Mindy:
That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen saying stay keen, jelly bean.
Mindy:
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