Mindy: Welcome to the BiggerPockets Money podcast, where we have a discussion about what you should invest in if you only have between $100 and $5,000. Hello, hello, hello. My name is Mindy Jensen, and with me as always is my steady investing co-host, Scott Trench.
Scott: Great to be here with my stays the course co-host, Mindy Jensen.
Mindy: And joining us are both Amanda Wolf, the She Wolf of Wall Street, and Kyle Mast, unemployed bum.
Guest 1: Good to be here.
Guest 2: Great to be here.
Mindy: Scott and Amanda and Kyle and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.
Scott: That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business, or make your first small investment, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.
Mindy: We have a new segment here at the Money Show called Money Moment, where we share a money hack, tip, or trick to help you on your financial journey. Today’s money moment is, get creative when gifting. Not everybody needs a new gadget or fad item to feel special. A little elbow grease and a dash of thoughtfulness can go a long way. Bake some cookies, harvest vegetables, herbs, or flowers from your garden, make them dinner, or create a piece of art to show that you care. If you need to test out a cookie recipe, you can mail me a batch and I will give you my opinion. Do you have a money tip for us? Email moneymoment@biggerpockets.com.
Scott: All right. Today, we’re going to have a discussion about what to do with your money if you have only as little as $100 and maybe up to $5,000. We’ve brought Amanda Wolf and Kyle Mast to join us in this discussion. And ahead of the show, I just wanted to relate a couple of facts and some context about why we think this topic is so important. You know, so a couple of these are, 60% of Americans live paycheck to paycheck. As of 2020, only 64% of Americans had enough funds to cover a $400 emergency. And the median US savings account has just $5,300 in it. And so we’re acknowledging that not everybody has a nest egg large enough to start investing in some of the assets that we’ve talked about here on Bigger Pockets Money, like, um, you know, real estate or major stock investments or private loans or those types of things. But you can still get started with any amount of money. And that’s what we want to talk about today. We’re all going to have different opinions. That’s okay. There’s no one right way to invest. We’re just going to provide four different perspectives on how we would invest small amounts of money if we were just getting started with the, uh, these as first investments. All right, with that, let’s kick things off and let’s go around the the horn here, um, and and start with 100 bucks. So Kyle, what would you do if you had only $100 to invest?
Guest 1: Well, this is a fun show. Uh, this is this is really interesting. I if someone asked me if what to do with $100. So I’ve tried to frame this maybe what I would tell my sons to do, uh, because that’ll kind of give me a good idea of what I’d actually say. I would say don’t invest it in any stocks or cash or pay off debt. I would say buy books. Um, that would be my 100 bucks in my mind. You can move the needle really fast for yourself by buying books. And um, you know, I just off the top of my head, you know, a few books, uh, the one thing by Gary Keller and Jay Papasan, Rich Dad, Poor Dad by Robert Kiyosaki, um, honestly, Scott, your book, uh set for life is a good one. Um, covers some of these principles of what to do at each stage with different dollar amounts. The compound effect by Darren Hardy. You know, right there you’ve probably got $60 worth of books. Um you can pick up a couple more but as you read those, you’re going to be set in a place that’s going to change your mind about how money has been taught to you in the past if you have maybe some baggage regarding money but that’s how that’s where I go with it. I think you’re going to get the most return on your money going that route.
Guest 2: Yeah, I am with Kyle. He stole my answer, dang it. I was going to say education, education, education because for me, what I would invest in doesn’t necessarily change by amount, but I think the scariest part of investing whether you have $0 or 100,000 is just not knowing what you’re doing. So there are a plethora of free resources out there. So if you can get by on those, great, take your $100, invest it in the stock market in a low cost index fund that tracks the S&P 500. That’s my straightforward answer. But otherwise, if you know that you are not getting what you need to out of those free resources, go get educated, read a book, buy a course, hire a coach, anything that is going to help you move the needle, so you feel more comfortable actually investing that money is what I would recommend.
Guest 1: That’s a better answer. Uh, just use the library and keep the $100 and put it in the index fund. That’s that’s awesome.
Guest 2: I assumed the library in my answer, so yes. Yeah.
Mindy: I uh am not going to go with the education answer since that has already been shared but what does your emergency fund look like? If you are one of these uh 36% of Americans who do not have enough funds to cover a $400 emergency. I mean a $400 emergency is two tires. You’re driving on the expressway, you run over something, there’s your $400 emergency. So I would start with making sure you had enough money to have an emergency fund. I think that uh Dave Ramsey says $1,000, that seems horribly low, um but if you don’t even have that, that’s a good place to start. Uh, what does your debt look like? One of the things that Scott likes to point out on the show is that if you’re paying 25% interest on your credit card and you pay that off, you just got a 25% return or however you say that, Scott.
Scott: After tax.
Mindy: Yeah. That if you have debt, pay with $100, you should be paying off your debt and you should be finding a way to get another $100 and continuing to So pay off your debt, uh save up for an emergency fund. Do you have if you’re if those are taken care of, do you have a Roth IRA? Um I’m talking to our younger listeners, the more time that you have to grow your Roth IRA, the wealthier you’ll be with without paying taxes on it. I mean, you’re paying taxes now, but it grows tax-free. So the the $1,000 you put in there, the $100 you put in there now, you’ve paid taxes on, but it’s going to grow for however long it grows and not collect any taxes. You don’t pay any taxes at the end of it, you just pull it out, um, which is nice. So I don’t have any specific like if somebody’s looking for a hot stock tip, I don’t have that. Um, Tesla’s more than $100 now, so.
Scott: Yeah, so so my my uh I I wrote some rules down for myself. These are not rules that applied to everybody, but for me, I wrote some rules down to kind of guide my thinking. And so my answers will all assume that this person has a long-term investment horizon, the goal of ultimately attaining a sustainable position of financial independence, has already built an emergency fund, has paid off all their bad debts and is looking to truly begin investing at this point from a responsible position. So those are my rules that I set for myself. And my advice for the first 100 bucks is just buy a share of stock. I think that a lot of people mechanically in this phase with their first little investment are tripped up by the actual literal process of transacting and purchasing a a stock. I would not do this in a Roth IRA or a 401k. I do it in an after tax brokerage account. I transfer 100 bucks, set up, they go through the process of setting up the bank account with e-trade, Robin Hood, fidelity, Vanguard, you choose uh your your brokerage of choice and then just buy a single share of a company you know. I like to do this if there’s if it’s a uh kids, I’ll ask them, what companies do you know and some you know, someone might say Nike, great, we’re going to buy a share of Nike right now on on our our app. That’s a powerful moment. You can sell it and and go there and I would not be thinking about the return. So that’s that’s my answer for the first 100 bucks.
Guest 2: Yeah, and I also just want to add on. I know we didn’t set the stage by saying this is assuming that you have an emergency fund, assuming that you don’t have high interest debt, but my answers would also change um if that was not your situation. So I did want to add that disclaimer there. Um, and then the the piece for Mindy about the Roth IRA is just a reminder because I see this too many times. don’t forget the Roth IRA is just an account. So if you put your $100 in your Roth IRA, you have to actually buy stuff in the account. That’s just the account. Don’t forget to buy stuff or it’s not going to grow at all.
Mindy: Thank you. Thank you. Yes, I sometimes you just it’s so second nature you don’t forget to make those disclaimers. I really appreciate that.
Guest 2: Yeah, yeah. It’s just a a devastating mistake if you keep doing it.
Scott: All right. Let’s go on to what we would do with the first $500. So uh, Amanda, do you want to kick us off this time?
Guest 2: Yeah, sure. Again, my answers aren’t going to vary too crazy because in this day and age, you can literally start investing with $1, right? And I think Scott, you made a really good point that sometimes it’s just the act of literally going and buying a stock and once you do it and you see your computer is not going to explode. All is good. Um, I think it really helps get you over that initial hump. So for me, $500, assuming, you know, we set the stage, debt’s paid off, emergency fund is covered, any other upcoming short-term expenses are covered, I’m ready to start investing. That $500, I think I might start, you know, sitting down and figuring out how I wanted to craft my portfolio. So I am not your, um, find the needle in the haystack perfect stock person. I like to buy them all. And so for me, crafting out a portfolio that exists of the total US stock market, the international stock market, maybe I add in, um, you know, some midcap, small cap, but I might just take my 500 bucks and start breaking it apart, picking three different low-cost index funds and just keep buying those same things over and over.
Mindy: So, I looked up when we were preparing for the show, I looked up uh what other people are suggesting you do with your uh your money and in an article on good financial sense.com. It’s at how to invest $100. They have a little, a little chart that says, if you invested $100 in Google 10 years ago, that investment value today is $685. That’s not bad. Uh Tesla, that investment is $12,081. Amazon, it’s $1,190. And Bitcoin, it’s $380,692. So I’m going to change my answer to crypto again. Um, take away the joke of that. but also, I think that highlights what you said, Scott. Choose a stock and learn how to buy a stock. Pick whatever company because one share of a stock, unless it’s Tesla and you can go back in time and now it’s 12,000, like one share of stock isn’t really going to do much. But if the multiple shares, so to Amanda’s point, continuing over and over to invest on a regular basis, um, is going to be the key. And just like Amanda, the the difference between $100 and $500 isn’t really going to change my answer very much. I want to make sure you have an emergency fund and that your debt is paid off. and once it is, I want you to get used to investing in your Roth IRA, um, maybe start looking into after tax brokerage accounts, um, but you know, pick a stock and figure out how the after tax brokerage account works so that when you do have more money, you can buy and sell more easily if that’s what you want to do. I don’t endorse day trading. If that’s something that you’re hearing me say, you are not hearing me correctly.
Guest 1: Yeah, those are good answers. I I’m glad you gave the baseline earlier, Scott. That that’s what I’m going off of too as far as like no really bad debt. Um this is actually like getting it invest moving forward on investing. Um but I’m still going to be I’m going to veer away a little bit from from what has been said, um, just because I think at $500, um, there’s there’s not a huge amount of moving the needle, but what I would do and it’s funny that I we got on this podcast, I’m on a planning retreat. So every quarter, um I go on for two nights to a hotel and I look through my family’s finances, my businesses, um our goals for the next year, my goals for the next year, three years, five years, 10 years, our family goals for those time frames. Um go through, update things. Um, think, you know, where do I want to be 5, 10 years from now. So all that to say, you don’t have to do it every quarter. I’m kind of a weirdo that way, but I would say at least once a year, I would recommend it and it’s great to do it with your spouse too. But I would take the $500, $100 for some books, five $400, buy two nights at a cool place, cheap hotel on the coast or something and spend a day and a half, um, really thinking about like not, not granularly thinking about what you want to do. You know, like, do you want to be a real estate investor? Do you want to be a passive stock investor? What do you want your family to look like uh 5, 10, 20 years from now because that all dictates where you start putting your money when you have a little bit more margin and the income that you have coming in and you can start putting things away and that’s better than not doing anything. But if you can have a really good plan, the direction that you want to go and put those things as early as possible towards that plan, it makes a huge impact. And I can’t tell you how many times I have made changes in our family’s direction and my business direction and my investments that have made me or saved me tens to hundreds of thousands of dollars on these planning retreat trips because it’s a way to step back from the business of your life and actually think about what’s most important to you. So I would say still not invest it in a traditional sense, educate and think would be, you know, like invest in the sense of some time to step back and think about what you really want at this stage anyway.
Guest 2: I love it.
Scott: These are awesome answers and they’re all they’re all different and they’re all right and you know, they’re they they all may be right for you or wrong for you and and that’s that’s the point of this discussion here. And so, you know, I’m I’m going to keep it on the literal what do I actually mechanically invest it in um sense here and say if I had 500 bucks, I would set it aside in a savings account and set up an auto transfer to my online brokerage in the amount of $50 and move the money in because what I’m investing in, yeah I would move it into an index fund. Now that I’m moving, now that I’ve gotten trust in the system beyond buying individual stocks, I’d personally move it into an index fund. There’s a lot of research behind that. Uh I wouldn’t buy a book, I’d go to the library and pick out, you know, the simple path to wealth perhaps, uh, uh for example, um for for philosophy on why index funds. um because I’m not using education in this particular answer. Um but uh I would I would set up that system and I would have them recurring over there. So every month 50 bucks is going over to the index fund and I’m just continuing to stockpile that. And ideally some months there are there’s additional savings on top of that that I can allocate to that purpose. So I’m investing in building a a system and a habit of investing regularly.
Mindy: Okay, Scott, you’ve gone last the uh last two times. We’re going to start with you first. How would you invest $1,000?
Scott: All right. Now, now that, you know, again, for my train of thought, we’re I’ve comfortable with buying a mechanical mechanically buying an individual stock and setting up a system for investing. Now I’m going to start messing with retirement accounts, um which are going to be a key component here. So I’m taking the 401K match at my employer, which is not for everyone does not everyone has this option, but many people have this option. And that’s where I’m going looking for return there. And that’s where I’m going to get the best possible actual ROI um that I can think of for in a thousand bucks is 100% um 50 or 100% match, whatever your employer offers you, and I’m going to invest that in a uh index fund, um whatever the cheapest lowest cost index fund ideally offered by a big name brokerage like Fidelity or Vanguard is in my 401K plan. So I’m going to do the research to figure out what that is and set up the system for contributing a portion of my paycheck every month um or every paycheck to the uh 401k.
Mindy: Awesome. Amanda, what would you do with $1,000?
Guest 2: Yeah, I think that as I mentioned before, my what I’m investing in isn’t going to change much, but I’d like to stay on the same theme as Scott, which is where I’m actually putting the money. And maybe this will be helpful for some people if we have some newer investors in the stock market is differentiating what an account is and what things are that you can buy. So, my order of operations as I like to call it is first and foremost, if you are offered a 401k match. So this would be $100, $500, if I have any extra money at all, I I want to get that 401k match if my company offers one or 403 403B match or whatever it is that your company offers because that is a 100% return on your money. So that means if I put $100 in, they also give me $100. And $200 is better than $100, right? So for me, that is first and foremost, the first place that I am putting it and I agree with Scott like I’m just going to buy a low cost index fund. Next, my next favorite account is the HSA, the health savings account, if you are eligible. So this is something that not everybody is eligible for, but a lot of people also don’t realize this is an account and it is this like unicorn account that has triple tax advantages. No other account out there exists like this. So if I have extra money, that’s the next account I’m hitting, still buying the same type of stuff. After that, I go Roth IRA, then I’m going to hit the brokerage account. Um, that that’s kind of my order if you will. So I thought maybe it’d be helpful just to differentiate the accounts versus the things that we’re buying because the different types of accounts that you use to buy things can be beneficial depending depending on your own situation.
Scott: And they can be these things are all really complex and crazy and there’s a whole order of operations that people can get into about which one. So yeah, I think I think it’s crazy.
Guest 2: Exactly. and we can get analysis paralysis, but like sometimes just knowing where to start is is the is the first piece to it, right?
Scott: That’s why you should spend the first $500 on the plan. Right, Kyle?
Guest 2: There we go. Yeah. Go on vacation, drink a cocktail, think about where you’re gonna put your next $500.
Guest 1: Yeah, Kyle’s going to take it to Vegas. I take all these I take sticky notes and I’ll stick them up on big screen, the big screen TV or the the sliding glass door with all my ideas and then you start moving them around. It’s it’s crazy. It’s like beautiful mind going on in the hotel room. I bet the housekeeper wonders what happened in the hotel room when they clean it out.
Scott: I truly thought that I was the biggest nerd from a goal-setting perspective um on on on this recording here and I see now that I am mistaken, that is not true. So that is amazing and I love that answer. That’s probably yeah, yeah, I like that’s a fantastic uh exercise. I’ll have to ask you about that.
Mindy: I wanted to send our video team over and watch Kyle with his little sticky notes all over the place.
Guest 1: Yeah, I don’t know. Yeah, sometimes it’s sometimes yeah, we won’t get into too many details.
Mindy: Okay, well, where are you putting your thousand dollars, Kyle?
Guest 1: Um, this one I’m going to defer to our next one. We’re just going to put it in a savings account that has a good yield, like an online savings account, you know, these days it’s 4 to 5%. Um, again, I’m coming at this from the standpoint of what I would tell my own son, uh, say he’s 22 just out of college. These are the order of things that I would do specifically and um, there’s a short-term goal for the next amount, which we’re going to look at, um, or the next couple of amounts we’re going to look at. Um, and because it’s a short-term goal, I don’t want to stick this $1,000 in, in like a volatile index fund that um could be worth half as much a year from now. In the long term, that’s great. You know, not a problem at all. But when I have a short-term goal or a short-term spot for it, we’re just going to stick it in the savings account for now.
Mindy: And I think it’s interesting, Kyle, that you’re on a planning retreat, starting around $1,000, I think we’re starting to look at more serious money. And now you need to have an investment philosophy or an investment plan. What do you want? When do you want to get there? And I don’t mean to belittle the $100 investor, but at that level, getting in the habit of investing is more important than what you’re actually investing in, except for crypto 10 years ago, apparently. Um, but I really want people to know that, uh where they’re going and how they’re going to get there. So on episode 362 of the Bigger Pockets Money Podcast, Scott and I sat down and walked people through Scott’s investment philosophy. It’s a one-page document. We showed we’ve shared how he fills his out and gave advice on how you can fill out yours too. So I want you to have an investment philosophy and then I want you to follow that. In Scott’s philosophy, he invests in real estate. $1,000 not really going to get you a lot of real estate, but it could get you, can you do a REIT at $1,000? I don’t invest in REITs.
Scott: Yeah, you can buy a fraction of a REIT, exchange traded REIT, yeah.
Guest 1: Fractional shares.
Mindy: Yeah. So if that’s if that’s part of your philosophy, then a fractional REIT. Um but again, you’re getting in the habit of it, uh, and I’m actually excited to talk about the $2,500 level now that I’ve given you a little foreshadowing and talked about real estate. Um at $2,500, I am going to invest in my real estate license. And this varies from state to state. Even though we are the United States, there are 50 different sets of laws regarding what you need for your real estate license. But at $2,500, I think that covers every state. So get your real estate license because you can make boatloads of money as a real estate agent. I’m sorry, get licensed and be educated about what you’re doing. But that part’s free. Amanda, what would you do with $2,500?
Guest 2: Yeah, so for me, like I said, what I’m investing in is not varying greatly by amount. It’s more getting really strategic on where I’m putting it. And once you get to these larger amounts, um, you know, it really starts snowballing. So I know that there are a lot of shiny things to chase out there. So we talked about the returns on like Amazon and Tesla and what that looked like 10 years ago and what it looks like today. But you also could have chosen bed bath and beyond or Enron and then you would have like $0. So for me, I am not trying to go find the diamond. I just want to I don’t want to beat the market, I want to be the market. I you might consider me a little more risk averse, um, but that is like what makes me feel good at the end of the day. I know that I’m not going to lose all my money if I’m buying something like the S&P 500. The S&P 500 has never gone to zero. That would mean that every company in the United States went out of business and we have like a zombie apocalypse and we have bigger problems um than our uh portfolio. So for me, I’m sticking to my tried and true index funds in the accounts that I listed prior.
Mind: And uh just so you know, Bed Bath and Beyond is currently trading at 38 cents a share.
Guest 2: It’s not zero either. Look at that. All the stores are closed and it’s still not zero.
Guest 2: There we go.
Scott: $2,500, where you putting it?
Scott: Um, well, I’m not putting in Bed Bath and Beyond personally. I’m putting it into at this point, again, I I’ve already mechanically transacted on a stock. So I know how to do that and comfortable with that. I’ve built a system for recurring sending money in a recurring way to either an after tax brokerage account or now my 401k match. For most people with $2,500 to invest, I imagine you’re not in an upper income tax bracket. So you’re not making much more than $50,000 a year. That means you’re probably already taking if you if you take the full match with your employer, you still have some left over to invest. And so now I’m going into a Roth IRA. That’s where I’d set it up. I’d set it up with a uh a brokerage again like an e-trade for example, that’s where I’ve set mine up personally. um and I’d start contributing uh some money over to that Roth IRA and putting it into an index fund, um, like a VOO or VTI, one of those uh large S&P 500 index funds or a total stock market index fund.
Guest 2: Scott, are you choosing the Roth IRA before the HSA if you’re eligible?
Scott: You know, I thought about that and I I actually I didn’t think about that coming in and when you said it earlier, I was like, Ooh, the HSA is really good. All another really, really good one. So I think that if you have the HSA, yes, I would trump the Roth IRA with the HSA prior to the Roth. Um not everybody has an HSA, but if you are eligible for an HSA, um and you have one through your employer, I would I I think that’s actually I would actually trump my Roth observation with that.
Mindy: All right, Kyle, where’s your $2,500 being invested to grow to your billions?
Guest 1: It’s going into the savings account just like the last one. It’s this is the time when someone is you know, again, I’m telling my son, he’s hustling. There’s a one-year goal time frame here. You’re saving some money, hustle, we got to save just a little bit more before we do the next investment and I would say, um yeah, this needs to just go in a savings account for a short-term goal, uh for a little bit larger amount that we need.
Mindy: Okay, and when we switch that up to $5,000, where’s your $5,000 going?
Guest 1: So, now we get to the $5,000. Now this is where it’s hard for me passing up the 401K match especially earlier on, but I think I would recommend passing it up for this. and I would say, if this was my son especially, you’re young, you can take a little bit more risk. You know, this is something that I wish I would have done a little bit more when I was younger, realized that you have such a long time frame, you can take a little bit more risk. and I would look for there’s several programs out there for zero down for a house, for a primary resident. you know, uh, there’s for instance right now, and it hasn’t been this way for a long time. I remember when I was first looking for a house, the USDA had a 0% down for like a quote rural housing. Um, but you would be surprised what qualifies as rural. The the town that I grew up in, which is, I mean, I guess I grew up on a Christmas tree farm, but the town is a town. And there’s, you know, 20,000 people in it and it was USDA qualified for a 0% down loan. So I would suggest having your 5,000 in the bank as an emergency plan, as reserves, you’re young, you can work hard, you can hustle, you lose your job, you hustle, you go get two other jobs, get into a house and either house hack it or live in it a year and then do it again and then do it again and then do it again. Do it five times in the next five to 10 years and you’re pretty much set. You know, then then you’re then you’re done. But I think that’s your you will leverage the return of the debt that you can put on a primary residence by doing that. You will leverage how young you are at that point. And again, you know, this is this might be different for someone who’s not in the young age bracket. I’m thinking of this in terms of my son. So if you’re an older stage of life, this this might you might want to think about a little bit more, but for the return on your money, this is going to be the biggest thing. and then you can then hit that 401k match, you know, then hit the Roth IRA to give yourself some diversification from a tax standpoint, from uh from a return standpoint from a liquidity standpoint. Real estate’s not very liquid. You do Roth IRA, you can always take your contributions out anytime if you need to for a bigger emergency. Um some of those things, you start nailing those a little bit, but I would the 5,000 is where I feel comfortable, you’re going to a zero down payment house as your primary residence. As long as you keep, you know, well, within your means, maybe a little bit fixture up or if you got the skills to do it. Um but that’s what I’d go with it.
Mindy: Yeah, that’s a great tip. And the USDA map does not keep up with progress. So you it says this is a rural area and then you look and you’re like, well, there’s 500 houses on there. So definitely just Google USDA loan map to find out where uh that that’ll pop up. You can just type in the city that you’re looking for and it’ll show you where the USDA loans are eligible. and it’s not a gimmick, it’s a 0% down loan, but you have to follow up inside, you have to fall inside that map.
Guest 1: The interest rates are really good on it too. They have really good interest rates on those loans. and the time to do it is when your income is not too high yet because there are income requirements. So when you’re younger and you’re just getting into it and you don’t have a lot of expenses and your income’s lower, do it.
Scott: Yeah, that’s a great tip. All right, Scott, where’s your $5,000 going?
Scott: My my answer is almost verbatim what Kyle said. You know, what when you have when you accumulate 100 bucks or 500 or 1,000, these are a paycheck, right? or half a paycheck or something like that. When you’ve accumulated $5,000 on a median income, that is where you begin saying, oh, I’ve now accumulated two or three entire paychecks after tax in my bank account after cash. That says that’s a signal that you are going to continue accumulating cash most likely unless some, you know, you’re gifted it or won it or something like that. But if this is your your ability to accumulate that, that begins to that you’re on track to be able to responsibly purchase real estate in some period of time. There could be a zero down or low down payment option or within another year, you could be accumulating another 5 or 10 or $15,000 and be able to put down 3 and a half, 5% on those. And just like Kyle said, if you only have $5,000 to invest, your first $5,000 to invest, that’s also another signal to me that you’re in a low to moderate income category, which means you can take advantage of these great low down payment loans. And again, the goal here is to move toward financial freedom aggressively. We know how to invest. Let’s set aside that cash into a savings account in but with the express purpose of finding a house hack in particular. There is nothing that beats in my opinion, the opportunity for a of a house hack in most markets in most parts of this country. The returns can be 100, 200% ROI with average appreciation if you’re able to leverage that and you got to live somewhere. Um and so if you’re going to if you’re not living for free, then this is a really, really good option almost um most of the time. So, yeah, I’m I’m 100% on the house hack wagon uh uh for the aggressive aspiring investor with 5,000 bucks. Use that as the springboard to get into that first property.
Guest 2: Amanda, is anything changing in your strategy with the $5,000 limit now?
Guest 2: So, no, and you will see that for me, investing is really boring. It should be really boring. I don’t feel like you should get a rush. Maybe those first couple times when you buy that stock because you’re like, I’m doing it, I’m doing it. Like that’s amazing. But it should be fairly boring. Um, and I’m not changing my strategy at all. Now, as far as deviating away from the stock market, my whole thing is, I think if you can reach that $100,000 in your investment account first, like you you always hear the first 100,000 is the hardest, but once you hit that 100,000, which might sound so far away to you at this time. But once you hit it, it really, really starts snowballing, it really starts compounding. So my goal would be to take that $5,000 and as many $5,000 after that as I can to get to $100,000 in my stock portfolio, then I would start looking outside of the stocks and looking at real estate. I’m also not the real estate expert here. So, you know, I just want to add that disclaimer. But for me, $100,000 in your portfolio is the goal. So I’m taking my 5,000, I’m working towards that six figure balance and I’m keeping on, keeping on.
Mindy: I love it. And I would uh we we brought you on here not to be the real estate expert to give your opinion of what you would do because there’s plenty of people who listen who want to invest in real estate and just as many people who listen who have no interest in real estate. Um what I would say is if you don’t want to invest in real estate, then don’t. That’s the best time to not invest in real estate is when you don’t want to be in there. Um there’s a lot of asset classes, you do not have to be in every asset class. Um at $5,000, I would still continue to not invest in Bitcoin, even though it’s apparently some runaway home run hit uh from 10 years ago. I’m going to go back to the 2,500 mark and say if you have $5,000 and you like real estate, being a real estate agent can be an incredibly lucrative career. You could invest your uh 2,500 into your all the things that it takes to get your license and then the other 2,500 into marketing yourself trying to get that first few, those first few clients. But once you get those first few clients, it starts to snowball. That has been my experience. Um and now I don’t do any marketing to be a real estate agent. I can I could go out and get a lot more clients if I wanted to do some marketing, but I’m as busy as I want to be and it is a fairly steady source of income. I probably sell a house a month without doing much with doing no advertising at all. Um, so the beginning there’s a push to get clients, but once you prove yourself as somebody who knows what they’re talking about and isn’t just in it for the money. You know, those salessy schmy people, those nobody wants to be around those people. Those people aren’t going to be successful long term. But if you can be an honest, earnest real estate agent, you’re going to have a long career and you’re going to make a lot, a lot, a lot of money in which case you can then go back to your investment philosophy and put your millions into the stock market or real estate or however you choose.
Scott: And I will say if you’re going to uh take Kyle’s advice and do or and and the and my my favorite approach with serial house hacking, then getting your license up front as as the first step in that, um with the with the first 15, 2,500 bucks could be another great way to do that and might trump even an HSA or um uh Roth IRA, uh if you’re going to go downn that path and know you’re going to be doing 5, 10 transactions over the next 5, 10, 15 years. um save you a couple percentage points on each transaction, that can add up.
Guest 1: That’s a great point. Yeah.
Mindy: Yep, and get you you make money back when you buy, you can take that as a down payment, you can take that as income, you can take that as a discount on the purchase price. That’s what I do. Well guys, this has been a a great discussion. We’re all over the place in these answers. Hopefully, folks find that helpful and not confusing. Um yes, there are 401Ks and Roth IRAs and HSAs and after tax brokerage accounts and RE and index funds and individual stocks and real estate and emergency accounts and all that. But there’s again, no one right way to invest. You’re winning if you intend to invest these increments of money, um and I think build a system or a plan that they support that are that are in support of those. I think those are the common threads that we had amongst this group. Um and uh um lots of different opinions about the tactics about which is the best, most optimal way to deploy it, whether it be a specific investment, um a strategy or education or planning in a general sense. So I I think it was a fantastic discussion here.
Guest 2: Yeah, I was going to say, I think that for sure the common thread amongst all of us was investing in yourself. I think that’s something that nobody will ever regret doing. Nobody will ever say, oh, I wish I didn’t read that book. I wish I didn’t take that class. I wish I hadn’t spent time learning what to do with my money. I think we all spend so much time making money that it’s up to us to spend a little time learning to manage it. and I loved that we all had that common thread, whatever the angle it was was to invest in ourselves. So I think that was an awesome takeaway for me too.
Scott: a, if you had to pick a number to it, how many hours cumulatively have you spent studying personal finance, investing and these other types of things in your life. Like what what 100, 1,000 hours, 500 hours, 10 hours.
Guest 2: Well, I am like a little neurotic or a lot of neurotic. Um so definitely thousands of hours because I am self-taught. So I started really hunkering down and learning everything I could at 22. And now I’m in my 30s, I’ll just leave it at that. So over the course of that amount of time for sure thousands, but I would say before I made my first money move, maybe an hour, it doesn’t have to be thousands of hours before you get ready to do something.
Scott: How about you Kyle and Mindy?
Mindy: Well, Amanda has done thousands of hours and she’s in her 30s. I’m in my 50s, so you can do the math.
Guest 1: Uh, I mean, it was my job for a while, you know, day in and day out and I enjoyed it a ton. So I it’s it’s way up there. Um, but Amanda mentioned something right at the end there that was really good that she did like an hour before she did made her first move. Um, and I think that’s that’s even a bad tendency that I have is that I enjoy goal planning and making plans, but you got to you got to move that into action. And and take some action, make mistakes. It’s okay, especially when you’re younger, but anytime, um it’s you just got to start moving the needle. Do do it imperfectly. Uh progress is a lot better than perfection. Um but yeah, that’s that’s a really good point that A man made at the end there.
Mindy: Yeah, well, what’s the worst that could happen? If you buy a stock and it goes to zero, it just goes to zero. That’s the worst that can happen. So you buy a stock for $50 or $100. Whatever you paid for that stock, the worst that can happen is you lose all of that. And that’s I mean, that’s not exciting. Don’t get me wrong. I’m not excited to go to zero, but that’s the worst case scenario. So maybe it helps to reframe the, you know, what’s the worst case scenario. Start with Scott’s $100 suggestion and buy one stock. And not every stock is $50 or $100. They have penny stocks, they have like $5 stocks. Bed Bath and Beyond is 38 cents right now. Don’t buy that one. Um and but they have really inexpensive stocks. Buy one and follow it or just follow it. If you don’t even have the $100, just look at the stock, chart it every day for a month. so you can see what happens in real time watching it go up and down. That can be kind of fun to watch.
Scott: I think this is great. And the reason I was asking about the hours is because, you know, what if you’re thinking if you’re wondering how to invest the first little amount of money, right? Then what are you going to do? Wait until you have 1,000 hours of education before getting making a move? No, like you start right now, like Amanda just said with one hour of education and do something, right? This is your hour, it’s over. Go go transact on a stock or go set go book that hotel room and get, you know, on the beach and go do your planning session with 400 posted notes, or whatever it is that is an action for you, go go take that action and begin. Um and then also recognize like if you want to invest, you want to become financially independent, if you want to um get good at this over time, you’re going to be investing not just dozens, maybe not even just hundreds, but thousands of hours uh in the pursuit of of of mastery, um, which I would say, you know, we all uh have not attained yet, have plenty more work to do in this call uh to to get anywhere close to that, um in the world of personal finance, investing and uh all these other other areas. It’s a journey and start it with the first step after the show.
Mindy: All right. Should we get out of here, guys?
Guest 1: Let’s do it.
Mindy: We should. Scott, that wraps up this super fun episode of the Bigger Pockets Money podcast. She is Amanda Wolf, he is Kyle Mast and the other guy is Scott Trench. I am Mindy Jensen saying, hasta mañana, blue iguana.
Scott: If you enjoyed today’s episode, please give us a five-star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.
Mindy: Bigger Pockets Money was created by Mindy Jensen and Scott Trench, produced by Calen Bennett, editing by Exodus Media, copywriting by Nate Weintraub. Lastly, a big thank you to the Bigger Pockets team for making this show possible.
