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BiggerPockets Money FinCon Bonus Episode: Debt Free in Three Years With Zina Kumok

The BiggerPockets Money Podcast
19 min read
BiggerPockets Money FinCon Bonus Episode: Debt Free in Three Years With Zina Kumok

Zina Kumok’s parents immigrated to the United States with no money or education, completely unprepared for the consumerist society they found themselves in. They quickly got into credit card debt in order to have the lifestyle they “deserved.”

An avid listener of Dave Ramsey, Zina quickly determined she did not want to ever be in debt. However, she graduated with $24,000 in student loan debt and made it her mission to pay that off as soon as she could. Every single extra dime she found, she threw at her debt until it was all gone.

Once the debt was gone, Zina realized that she needed to ramp up her investing. Not one to just “show up and wing it,” she set about learning how to invest properly.

Zina’s story illustrates that you CAN pay off debt while making a lower salary, you CAN pursue financial independence while self-employed, and your past does not have to define you.

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Listen to the Podcast Here

Read the Transcript Here

Welcome to the BiggerPockets Podcast the Fincon Bonus Edition where we interview Zina Kumok.

It’s time for a new American dream one that doesn’t involve working in a cubicle for 40 years barely scraping by. Whether you’re looking to get your financial house in order or invest the money you already have or discover new paths for wealth creation, you’re in the right place.

This show is for anyone who has money or wants more. This is the BiggerPockets Money Podcast.

Scott: I’m Scott Trench and here with my co-host Ms. Mindy Jensen. How are you today, Mindy?

Mindy: Scott I am doing fantastic and I want to thank Ally Bank for sponsoring the live podcast at Fincon ’18.

When it comes to money and everything you’re working for do it right, do it with Ally. Ally is spelled A-L-L-Y.

Scott: Nice that’s awesome. Should we get right back to it, bring Zina in and talk about money?

Mindy: We should do it right away. We should do it quickly because we only have a 20 minute spot today. We’re getting ready to go to the keynotes so but we stopped Zina to talk to her in the hallway to talk to her. Zina, hello! How’s it going?

Zina: I’m having a great time, a little tired well I think we all are, learning a lot, hanging out with a lot of fun people.

Scott: Well awesome. Let’s get right into it. Zina can you walk us through the foundation of your work with money. Where would you say that your journey with money begins?

Zina: I was born in, no, wait.

Mindy: That’s my line.

Zina: Really?

Mindy: I was born in small town.

Zina: I was not born in small town. No but my parents when I was a little kid they always talked about money, got into credit card debt and they felt like no one really gave them a financial education because they immigrated here from Ukraine when I was a little kid. And I think they wanted to impart that to me.

So I remember growing listening to Dave Ramses as a kid on the radio and I always found it really, really interesting when they would talk about someone would come in and say credit card debt, mortgage, or I’ve got a tax lean or something and he would create a simple plan to help him get out of debt and he was very reassuring and that always captivated me.

And then when I graduated college I had student loans and I have never had debt before. I had never had a car loan or anything like that. And I just hated the feeling of being in debt. I knew that I should have been saving for retirement, saving for an emergency fund but I felt like, okay, I have all these loans to pay and I really felt the physically weight of it and I started a blog of trying to pay off my student loans for 3 years.

Scott: Awesome you know the one thing that I’ve analysed coming to mind is your parents are Ukrainian you’re Russian ancestry, right? The Millionaire Next Door was actually published in the 1990s and they mentioned that their folks are of Russian decent were some of the wealthiest demographic in the United States.

I was wondering if there’s like any cultural things that were around, good financial habits that you have noticed in the community, parent’s friends, those kinds of things.

Zina: I think probably a lot of it is that if you came over, if you were lucky enough to come over, you probably have a strong education, you were probably coming from a professional background.

So my mom has masters in Nuclear Physics and my dad is a typical Software Programmer. My mom got her CPA when we were here and I think from what I’ve seen from her friends it was just like doctors and lawyers and engineers just professional people coming over. You know English was hard to learn but if they learned it they could set up a good life and they’ve been living here.

Scott: Awesome. I don’t know why that point flew into my head and wanted to talk about it.

Zina: No it’s interesting.

Scott: So let’s talk about what you did to kind of pay down the debt over those 3 years.

Mindy: And what kind of debt are we talking about?

Zina: Just student loans.

Mindy: Well how much?

Zina: 24,000 in principal and I think it ended up being 28 with interest and I paid it off.

Mindy: Ok. So you just won the lottery?

Zina: I wish! No I mean I wish I was more interesting. It was the typical.

Mindy: This is going to be boring then. I wish you were more interesting too.

Zina: Well it’s funny because at one point a story about me on student loans got picked up by Time and they posted it on their Facebook page and it went viral. And you get the dumb comments like “She probably sold drugs.” And I think drug dealers make way more than 30,000 dollars. I think.

I don’t know if you’d take the risk if you’re only making that much which is how much I was paying when I was starting paying off my student loans I was a paper reporter making 28 grand a year. And then at the end of my student loan journey I was making 31 grand. I never made more than that.

I was living in Indiana which is a low cost to live in city. Two years I paid rent by myself. Rent was 30% of my take home pay so that’s pretty high. I just did the typical things of like any time I got some extra money, you visit your parents and they give you a few hundred bucks, immediately paid towards my loans.

If I got a birthday check, for my loans. I was pretty much like “Oh I don’t need anything just give me cash I’m going to pay off my loans back”. I remember one time my in-laws gave me money for a trip I was going on and they said, “We want you to use this for the trip and enhance your experience. Don’t use this on your student loans.” And then I did. Maybe when they listen to this they will find out.

But I learned how to budget and I had probably, not a shopping addiction in college, but if I was bored, if I was feeling bad or anxious I would just walk out the door and just go shopping. My friends would always tease me about the size of my closet, that my drawers were just stuffed. Things had tags on them or that I’ve worn only a couple of times.

I mean I flew back from a study abroad I had to pay for overage fee on my luggage because I just spent so much money there. When I interned in New York I remember at one point I was eating out 3 times a day so really a lot of emotional spending going on.

Scott: Wait in the 3 years that you were paying this off though you were extremely living frugal life though?

Zina: Yes.

Scott: Alright because you know if you’re saying that you’re average income is less than 30,000 dollars that means that you’re living off of 20,000 dollars in cash or less to get through that right?

Zina: Yes.

Scott: So what does that look like? What’s your rent? How are you getting around transportation wise?

Zina: So I was lucky my parents had given me a car when I was in college so I didn’t have an auto loan which was really nice. So my rent I believe was 550 that first year I was paying off my student loans. And then it was 645 so a decent chunk of my take home pay I think it was around 30%.

The first year I wasn’t saving anything for a time though I was trying to build an emergency fund. I think I probably had 5,000 stashed in an emergency fund that was only built from the ground up. I remember starting my first job and borrowing money from my parents for the security deposit of my apartment. And it’s funny because I paid a lot probably 200 a month on gas because I was visiting my boyfriend every weekend and in a different city and gas was 4 dollars a gallon.

But except for that I didn’t buy beer, I didn’t go out; I didn’t go out to eat. I tried to spend 150 a month on groceries. If I bought make up it was from a drug store, I stopped going to Sephora. If I got clothes it was from good will or a thrift store. You know really trying to be lean in that way and in the library instead of going to the bookstore. Really, really cutting back.

Scott: So after a couple of years you got to zero. How did that feel? What was your emotional experience getting through the final stages?

Zina: You know there’s a Jim Carrey quote, “I wish everyone can become rich and famous so they can see that their problems wouldn’t go away”. I thought being debt free would relieve my financial anxiety and it didn’t because suddenly I realized I’m 25 and I don’t really have much saved for retirement. I’m behind on saving for retirement. Which some people would say well now you’ve paid your loans. And my loans were at 6.8% interest, that’s a good return to get but now it was suddenly I need to catch up on retirement so I have anxiety on that.

I wish I could say it was just feeling. I was proud of myself but suddenly I felt if I want to save 10-15% of my salary for retirement I have to catch up real quickly to do that. I think that’s the journey to achieving any financial goals is that if you think it’s going to make you feel more secure or more stable in life, I mean, talked to plenty of people all the time who make more than I do and they’re still looking in a 6 dollar bottle of water. That’s crazy!

Mindy: Well yeah that’s crazy!

Zina: It is, it is!

Mindy: I went out to breakfast yesterday with somebody and I wasn’t that hungry. He said, “Let me buy you breakfast.” Well I don’t want an 18 dollar worth of a buffet.

Scott: Oh I do.

Zina: Growing boy.

Mindy: Yup Scott would. Scott could eat 12 times out. But no I can’t spend that and he’s like I’ll just put it on my expense account. I can’t have you, I can put it on my expense account too I’m just not going to because that’s 18 dollars. That’s like a whole day worth of groceries. So I totally get that.

Zina: Yes.

Mindy: You should know though at age 25 having zero dollars in debt and also having zero on retirement puts you on the top 10% of 25 year olds. I mean it’s not like you’re doing a bad job having nothing saved.

Zina: You know what’s crazy though is when you see the stats on how many Americans live on less than 400 dollars in liquid assets for an emergency fund or how many students have 20,000 dollars or less in retirement and I think we’re all doing bad. Everyone is messing up right now.

Mindy: Yes.

Zina: Just because you’re in the top 5% doesn’t mean that you’re doing enough. And that’s what so scary when you look at the numbers. It’s almost terrifying.

I have friend who I think oh yeah you seem to be responsible and they tell me numbers and never mind. It’s so rare to find someone doing all of the right things.

Mindy: Well how do you know? You’re parents came over here, you’re mom what is she a nuclear physicist?

Zina: So she ended up getting her accountant degree because to our surprise they weren’t hiring nuclear physicists so they ended up with that plan.

Mindy: Wow. So she’s a nuclear physicist. The last I checked you have to be remotely smart to be a nuclear physicist.

Zina: Yes.

Mindy: CPA exam is kind of difficult to pass from what I’ve heard, I haven’t passed it myself. So your mom sounds smart.

Zina: Very smart.

Mindy: And what was your dad a software engineer? Also a field not actively hiring idiots. So there’s some intelligence there and they came to America and immediately went into debt you said.

Zina: Because people told them you need to buy that and put it on a credit card and don’t worry about it.

Mindy: Well yes they don’t know about money either.

Zina: Yes.

Mindy: They haven’t been taught yet.

Zina: And now they’ve done a very good job playing catch up these last, I would say, 20 years gotten out of debt and really ramped up retirement plans to retire early which they can do because they have good paying jobs. But it’s kind of scary when you look around and see articles say how much you should save for retirement, save this for retirement, save this for emergency fund, how much it needs for your car if it breaks down or have enough to pay part of your health care. And then you think oh gosh how many of us are actually doing most of the things we should be.

Scott: I think you should know what you should be doing. There’s no benchmark, there’s no milestone but the closest we can maybe get to that kind of what we should be doing is high savings rate which you had. Even if you have very low income you have high savings rate and I assume that you’re resumed to have high savings rate and you’re beginning to deploy that various wealth in different aspects, am I right?

Zina: You know what’s funny is some people said I should move to Denver. I’m looking at the two of you. I moved to Denver.

Mindy: Denver’s a great place.

Zina: Ok at the last year I was paying off my student loans my rent was $266 a month.

Mindy: In Denver?

Zina: In Indianapolis.

Mindy: I was going to say where did you get a place in Denver that’s 266?

Zina: Probably on the street.

Mindy: Yes.

Scott: You should have stayed in Indianapolis.

Zina: I did the math one day. I lived in Denver for 3 years and I did the math, what if I stayed in that cheap apartment with roommates. I spent 35,000 dollars.

Mindy: In rent?

Zina: Yes I spent more in rent.

Mindy: What if 3 years ago Scott bought a property in Denver?

Scott: You would have made more than $35,000.

Mindy: We’re not here to bash you about not buying real estate but you should totally buy real estate.

Zina: I just bought my first house.

Scott: Oh where?

Mindy: You did! You didn’t tell me this.

Zina: Yes. I did tell you, you weren’t listening.

Mindy: Ok I wasn’t listening tell me now. Karl does not tell me anything.

Zina: Ok I just bought my first house.

Mindy: Yay!

Zina: Just for my own, not to house pet like you do. No one send me mean comments.

Mindy: If anyone sends you mean comments you send them to me and I’ll send them mean comments back. This is great! Do you or do you not need a place to live?

Zina: I do.

Mindy: Yes and now you won it!

Zina: Yes, and my neighbourhood is it’s not scary justifying but you can see things are getting put it. The people that we bought it from, and I should have bought 3 years ago in Indi, they only lived there for 2 years and they made $40,000 more. They bought it for 140, we bought it at 180.

Scott: Wow.

Mindy: So there’s appreciation and Indianapolis is a great real estate market.

Zina: And that was for 2 years.

Mindy: For 2 years $40,000 is nice.

Zina: Yes.

Mindy: But I mean it’s not Denver.

Scott: Well I would say that you lived in Denver a couple of years but it seems like now you’re prepared financially to buy a house so at least it seems like your overall savings has built something. Can you walk us through your financial portfolio and decisions and lifestyle look like after the debt was paid off.

Zina: Yes so it’s funny for a while all my investing decisions were whatever dad tells me to do. He did teach himself a lot about investing, he could make better decisions. And I realized at one point as we all do, no offense Mindy, that our parents don’t know everything.

Mindy: Are you saying that I’m old enough to be your mom?

Zina: No you’re definitely not old enough to be my mom. I’ve done the math.

Mindy: So have I. Yes you’re the best.

Zina: But I’ve realized that don’t know my situation. My dad is investing for himself, he’s middle aged and I need to invest for myself we have totally different saving principles right now.

And I remember Stefanie O’Connell of A Broken and Beautiful Life and she wrote at one point why aren’t women writing more about investing, why is it that women write about living frugally or saving for a family. Why don’t women write about investing, it’s mostly a male dominant space. And I don’t write about it because I’m not qualified and was just “Why don’t you become qualified?” and I thought who are you to tell me what to do.

Mindy: She’s Stefanie O’Connell.

Zina: Yes and I thought it made me really insecure. So I thought I’m just scared of it, I don’t know anything. Those are big, scary words and then I started slowly teaching myself, actually reading money magazine and Kipling’s kind of helped because they’re pretty, not low level, but easy to understand.

I actually took a financial planner course sponsored by Karl Richards if you guys ever read his stuff and I started to teach myself a little more ok you want this much midcap and this much large. I didn’t experiment a while back where I set up before an IRA for my husband’s with Betterment and I set up an IRA for myself through Vanguard and I picked up my own stocks and over the year I feel like I just slightly edging him out so I thought ok I’m doing as well as this mogul advisor which is vetted and people use and like and I’m doing the same thing. And I’m smart enough to do that. And I think that’s been something I never felt that empowerment before.

Like now I can look at my friend’s investment and say, I mean not specifically, but I can say you have too many bonds, I feel like I can do that.

Scott: That’s awesome so what do you do? What is your philosophy then? How are you allocating yourself?

Zina: I try to be pretty aggressive. I should probably have more bonds honestly, I’m 30, so I should probably have few more bonds but I just really like Vanguard, Index Funds US and I think a few more emerging markets. I’m not anything, the basics, nothing fancy.

Mindy: So you’re not picking stocks you’re just choosing index funds?

Zina: Yes. I don’t do any stock picking, I definitely don’t think I’m interested or educated enough to do that and I feel pretty comfortable where I am at but I am hiring a financial planner to make sure I am diversified enough.

Scott: Awesome. So one of the things that I want to touch on is in the years following your debt paid out what is your rate of cash accumulation savings looking like at that point? You know you moved to Denver and your rate went up, what did it look like from that cash flow perspective?

Zina: I think I don’t remember the exact percentage but it was somewhere at a 25% savings rate. And a part of that was going to saving for a down payment because we knew living in Denver was temporary and knew we’d move back at some point to Indi so I knew I needed money for down payment and moving. Honestly just buying nice furniture and setting up a home and still saving on the 15% retirement.

Scott: Ok.

Mindy: So is your projected retirement date an early retirement date?

Zina: So far I’ve set the goal at 60 which I tell myself well my friends would be retired at 70 so I still have a head start. Right now at this very moment I’ve got thousands and thousands of medical bills coming up this year so I’m saving the max you can save for that. So that’s also a big focus this year. And that I think is not being talked about a lot, medical bills. In this country it’s really going to cut out on your savings rate.

Scott: What are you doing for income right now?

Zina: I am a full time freelance writer and that’s how I make a 100%
of my income.

Scott: Oh that’s awesome.

Zina: Yes.

Mindy: That is awesome.

Scott: What’s something about your financial journey that they haven’t heard yet that you think is important to talk about?

Zina: You know it’s sort of what I said earlier, now that I have paid off the debt, someone did the math for me recently of the years I was paying off student loans aggressively we were in an amazing bull market and if I had invested that money, would I actually have more money now, and that’s something that I almost worry about because I have a good friend who just bought a house and he said he’s paying his mortgage off early. Then I said are you saving in an IRA a kind of like a waffle-y answer and I said, he has a 3.5% mortgage interest rate, and I said don’t pay your mortgage off early you should be investing right now.

He’s a little bit older than me and he doesn’t have anything saved in retirement, you need to be investing. But I now worry that all the stories or me and other people I paid off my loan in 3 to 5 years, I worry that we’re losing the investing portion of it because that’s really important. Because it’s really easy to pay off if you have that capital, you have that desire, and if you have student loans you just send out the check. But to invest you have to have 41K or set up an IRA if you don’t have that employer option.

Scott: I think that’s really good advice what you’re talking about is opportunity cost, right?

Zina: Yes.

Scott: You’re saying that the opportunity of us choosing one course of action over another may have cost you.

Zina: So single-mindedly, yes.

Scott: Yes so we guessed on our recent episode Craig Curlop. Craig I think he had a very thoughtful approach to the same problem and he’s obviously learned. He decided to house hack first and then he got a second house hack. And now he is speeding to a point where he has a lot of student loans because he went through this thought process that you’re bringing up here where hey house hacking in his mind is a really good, high probability of return but after a certain point it makes sense to his overall portfolio to begin focusing on the guaranteed 6,7% return to go down there.

I think there’s a balanced approach thinking the other way with a low hanging fruit which I can go after with a very small amount of money with high return. And once you get past that now how do I go for that risk free, high interest rate returns.

Zina: And I have to say that I spent, we all spend a lot of time thinking about what we could have done, what we should have done.

When I called my perspective mortgage collector for a preapproval letter and said this is my income, my husband and I are both self-employed and how much loans do you have and I said none. I mean student loans, auto loans, a credit card balance and I said I don’t have any debt. And he said you have no debt? And I said I have no debt. And I mean that made it so much easier. So hind sight is 20-20.

Scott: And it’s not like you did anything bad. You did a great job. At the end of the day it shows what matters is your savings rate, deploying it somehow. You’re going to get to the finish line and be very well off financially if you have a high savings rate and you deploy in any way that you think is reasonable. You always fiddle back whether you were the most optimal or not, it’s secondary to the fundamentals of what you’re doing.

Mindy: Well I think you just have to make a decision and stick with it because questioning yourself is not going to change what you did. You’re not going to be able to go back in time and decide to keep your student loans and invest more. So you made a decision and there’s this big debate- do I pay off my mortgage, do I keep my mortgage- well I’m in the keep your mortgage department but I can also sleep at night with a mortgage. If having student loans weigh heavy on you then pay it off because being able to sleep at night is way better than having a thousand dollars in your savings account.

Zina: Sometimes I think someone would ask what would you do with a hundred thousand and I think I could pay off a big chuck of my mortgage but I’d invest it, I’d invest it right now.

Mindy: I would too. Ok it’s now time for our famous one. Where can people find out more about you?

Zina: You can find me, I am currently in the process of finishing a rebrand at consciouspoints.com where I teach people to be mindful of their money whether it’s about investing or paying off student loans or whatever they need. If you like to hire me as a freelance writer just look at my portfolio its www.zinakumok.com and of course follow me on Twitter and Instagram @zinakumok .

Mindy: Ok Zina awesome, thank you so much for your time today. This was so much fun except for the joke that we’re editing out so now everybody’s going to be contacting you what joke did you tell and you can tell them all personally.

Scott: Yes ask Zina for her incredibly inappropriate joke.

Zina: I didn’t write that myself.

Mindy: She did warn us it was inappropriate I just didn’t realize the level of the inappropriateness.

Ok from the Fincon Bonus Episode of BiggerPockets Podcast this is Mindy Jensen, Scott Trench and Zina Kumok. Steve is kicking us out so bye!

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In This Episode We Cover:

  • Zina’s first orientation with money
  • Why she started a blog about paying off student loans
  • How she learned to budget
  • Why the anxiety never goes away
  • How people get into debt
  • What she learned by buying her first house
  • Where she invests right now
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “It’s scary when you look at the numbers.” (Tweet This!)
  • “It’s so rare to find people who are doing all the right things with their finances.” (Tweet This!)

Connect with Zina

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.