Paying Off Student Loan Debt with a Median Income and Two Kids in Northern California with Kyle Renke

by | BiggerPockets.com

Kyle Renke graduated from college and hopped right on the American dream bandwagon. He started off with a starter house, added a couple of kids and moved onto a bigger, better house—one that he could barely afford.

He then went back to grad school, tacking on another $40k in student loans. Kyle and his wife spent money left and right, never seeming to be able to get ahead. Finally, he got sick and tired of being sick and tired.

Kyle read books and connected with friends in a better financial position. He sold the big house, threw everything at the student loans, and rented a smaller, MUCH less expensive place.

Kyle’s story shows that you CAN make big financial mistakes, change your course, and work toward financial freedom—even with children.

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Read the Transcript Here

 Welcome to the BiggerPockets Money Podcast show number 37 where we interview Kyle Renke.

‘There are a few things that kind of pushed us over the edge to make a change. The first being that we were just, as Dave Ramsey says, sick and tired of being sick and tired. We were just pushing ourselves emotionally, obviously financially, even spiritually. Just we were drained and we were kind of redlining it the whole time and we just did not have the margin or the reserve to really kind of focus on what we wanted to do.’

It is time for a new American dream, one that does not involve working in a cubicle for 40 years, barely scraping by. Whether you are looking to get your financial house in order, invest the money you already have or discover new paths for wealth creation, you are in the right place. This show is for anyone who has money or wants more. This BiggerPockets Money Podcast.

Scott: How is it going everybody? I am Scott Trench. I am here with my co-host Ms. Mindy Jensen. How are you doing today, Mindy?

Mindy: Scott, I am having an awesome day. It is beautiful outside. It is about 85 degrees and just feels awesome.

Scott: Yes. I am very excited to interview Kyle. I mean what a fantastic episode we have coming up today.

Mindy: I love his story. We got connected with Kyle through David Greene who is the new co-host of the BiggerPockets Real Estate podcast. David said this guy has a really great story. I talked to him and this guy has a really great story. I want to get him on the show. We have been going back and forth and I am so excited that today we finally connected and had an opportunity to have him on the show. I love what he talks about.

The focus of his show is it does not matter what you have done in the past, you can still turn your finances around and move towards financial dependence. He is 34 years old so he is not a spring chicken like you but he is also not super old like me. But he had made some choices that were not the best financially. He accumulated some student loan debts, some credit card debt and decided one day, ‘You know what, this is not what I want to do anymore.’

Scott: Yes. I mean this this episode is applicable to you if you consider yourself a middle class American person, right? I mean here in the middle class, maybe slightly upper middle class, income in California, his family for a couple of years, had a very low savings rate as a result of a large number of liabilities. You know Rich Dad Poor Dad, the book, which has been referenced a ton of times and we assume that your listeners have read. If not, you should probably go read that. But we talked about accumulating liabilities.

That is what he did, he accumulated a lot of liabilities in the form of student loan debt, house payment, car payment, all this kind of stuff and then he one by one knocked these out and began saving on the path to financial independence and is chugging along. I mean it is just a great story that is a applicable to everybody that is middle class American with a family.

Mindy: Yes, you are saying oh this is applicable to you if you are and I am like American. America is a culture of debt. You got to have the latest thing, you need to buy buy buy buy buy. This is a really great show for just about anybody and something else you just said really inspired me. You said, ‘Oh if you have not read Rich Dad Poor Dad, you should.’ We have these famous four questions and the first one is what is your favorite finance book? I am going to ask the readers, I am sorry, I mean I am going to ask the listeners what is your favorite finance book?

Send me an e-mail, [email protected], and just tell me what your favorite finance book is. Let us start a list of all these books that people talk about. Today, specifically, Kyle gives us a book that I have never heard before. I want to know, Rich Dad Poor Dad, yes everybody but me loved it. Richest Man in Babylon, I love that too, but not everybody has read either of those books. First, read those two books and then send me your favorite book.

Scott: Awesome.

Mindy: Okay. Let us bring in Kyle but first quick word from today’s sponsor.

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Scott: Alright, big thanks to today’s sponsor. Alright,  Kyle Renke, welcomes the BiggerPockets Money Podcast. How is going today?

Kyle: It is going great, thanks for having me guys.

Scott: Awesome.

Mindy: Thank you for being here.

Scott: Let us start from beginning, can you walk us through kind of where your journey with money begins?

Kyle: Sure. I am going to run it back about a decade here because I want to give you a little bit of context but I graduated in 2006 with my Bachelor’s Degree in English. I was newly married and my wife and I moved down to Southern California to pursue my dream of becoming a college basketball coach. We had empty pockets, no money in our savings, no assets, and about $1500 in student loans. My wife enrolled in nursing school at that time at the same university that I was working at and I also started pursuing a master’s degree. We took out about and another $25000 in student loans at that time. Well, within about a year of being at that coaching job, my boss, the head coach, ended up getting fired which meant that as a result, because I am the assistant coach, I got fired as well.

Kind of at that point, I made an internal decision with myself to really start pursuing safety and security in terms of my career choice instead of pursuing kind of my passions and my dreams which can obviously be a more unpredictable course. At that point, my wife and I, we moved back up to Northern California. I found an entry level tech job to put her through nursing school and during this time things were tight. We were living paycheck to paycheck, never really gave much thought to saving or investing. The focus was just to get my wife through nursing school.

Our student loans, they were either alternating between being in deferment or paying the minimums. But I still kind of had that entrepreneurial burn, the kind of drive to want to do something different than just kind of sitting in a cubicle all day. During that time, I actually taught myself to write code and develop a software business where… Actually, we secured contracts with different athletic programs throughout the US including Stanford, University of Florida, and it was right about that time where it could have gone well but this time around I was more afraid of failure because of the consequences of the last time.

I took a risk so I was less inclined to step out and do something challenging this time around. Instead I hedge my bets and I did what I thought was smart and I went and pursued another graduate degree. This time taking out about $42000 and I ended up getting a degree in speech language pathology which is what I do today. Because that is much more predictable career path and straightforward in terms of the income that you make. Eventually, my wife finished her degree in nursing, we purchased a home, I graduated with my degree in Speech Pathology and at last we felt like we could have that stability and security that we were looking for.

A couple years later, our son was born and like most other people our age, we decided for our growing family, we need to buy a bigger house. We upgrade our house and we basically doubled the size of our square footage which pretty much doubled the size of our mortgage as well. Then we also needed, because it was a new construction home, felt like we needed a nice big backyard with a really nice fire pit and all the amenities. We took out about a $12000 line of credit to build that backyard. We are both working full time living in this nice new house. We are probably spending about $2800 a month on our mortgage, $1200 in student loans just paying the minimums, $1500 in daycare.

We were just so busy and so exhausted, both working full time. We did not even have time to cook. We were probably spending a $1000 a month eating out and we did this for about 18 months with our son at home. We just found ourselves stressed, exhausted, deeply in debt, very little margin at the end of each month. We just did not have any extra time or energy to pursue what we were passionate about. It was at that point we knew we needed to make a change. What we did was we sold our house, we downsized to a smaller rental, started budgeting. My wife actually dropped her hours at work to spend more time at home and we made large payments towards our student loans with some of the equity that we had and started focusing on long term goals instead of kind of short term goals of just making it month to month.

Right now, we are in a smaller home but we are in a position where we are able to save and invest much more each month with my wife working two to three days a week instead of full time. We now have much more flexibility and freedom currently to help us pursue our long term goals. We made this change about three years ago and the last three years have been a huge difference for us.

Scott: Okay, there is a lot there and we are going to have to dive into this chunk by chunk to go through kind of each kind of major pieces.

Kyle: Yes, many themes.

Scott: It is pretty clear from the first part of it where you are in school, you graduate from that first job and you are starting to put your wife through nursing school. Let us fast forward perhaps to right around when you bought that first house, about to have a child.

Kyle: Yes.

Scott: What was your position like that? How much total debt do you have and how much total income is coming in? What is your kind of mindset at that point in time? At about that time, we had about $50000 in student loans but I also, during that time, took out additional $42000. We are right at our max of about $90000 in student loans and our income was my wife had started nursing school and she was making about $72000 a year and I was at about $20000 a year. I was still actually working part time at the university where I got my graduate degree.

Mindy: Okay. You mentioned that you had a software company or you worked at a software company? You worked at a software company? Did you own the company? You had talked about entrepreneurial…

Kyle: Yes, I created it. I literally taught myself the code. I have no computer science background but I saw a need for something within the sports realm and created that software program that actually allows coaches to communicate with their teams. This was back in 2005 or 2006 when mass text messaging was not really a big thing back then and so it was a platform in the cloud where coaches could communicate with their team. I had no idea what I was doing in terms of building this thing. I partnered with former Major League Baseball player Division 1 baseball coach and he was able to help kind of you put his name on the product and market this thing but I had no idea what I was doing in terms of building a business, marketing, selling, that kind of thing.

Scott: What I want to ask is why was your mindset at this point in time that this is a risk? It is a risk to go start this business on the side while you are making $20000 a year. Why were you able to take that risk at that point in time? Mentally, you think.

Kyle: Yes, at that point in time it did not feel like a risk as I was building it because I had nothing to lose with the exception of time, just putting my time into this thing. It felt like a risk when it started to grow and it started to be something that could potentially do well. It was at that point that I was afraid to actually take that risk and jump into that more of a full time position rather than just kind of let it sit and be small like it was.

Scott: Okay. I am sorry, I am confused here. Were you working on this full time or did you work on this full time?

Kyle: I worked on it on the side.

Scott: Oh, I see. Okay.

Kyle: Yes.

Scott: It was not really a risk because it is kind of a side a more.

Kyle: Yes, totally. A side project for sure.

Scott: Okay. It sounds like… What I am trying to get at is during this period of time, you are making these decisions, you are accumulating debts, you are basically buying yourself into large expenses. Rich Dad would say you are accumulating liabilities like…

Kyle: Right.

Scott: Like the middle class, right? Your tolerance for risk is dropping. You are not pursuing your dreams as a result. You are hedging your bets in this period of time. Is that a fair kind of statement or assessment of that?

Kyle: Very fair.

Scott: As a result of the decisions that you are making one by one across this period of maybe five, seven, ten years, is that accurate?

Kyle: Exactly. I was about seven year run where I was truly afraid to take risk. I was pursuing more of stability, security, and perfection. To be honest, I was afraid to fail. I was afraid that if I failed it would find kind of me for the rest of my life and that I would kind of be stuck in that perpetual state forever.

Scott: Yes, awesome. The reason I want to get at that is because there is a shift coming in your story it sounds like later on.

Kyle: Right.

Scott: Let us let us fast forward now to the point where you have your peak spending, right? I was writing down numbers as fast as I could as you are saying them just there but you had $2800 on mortgage, $1200 on student loans, $1500 on daycare and a $1000 a month or more in food. Just between those four categories, is that four categories?

Kyle: Yes.

Scott: You are talking about $6500 per month in expenses. What was your income like at that point for your household?

Kyle: We were netting about $9200 a month and we were spending about $8900 a month.

Mindy: You are saving $300 a month, good job.

Kyle: Thank you. Yes, at least we were not in the negative.

Mindy: Well, that is a really good point. There are people who make, what did you say, $9600? $9200 a month and they are spending $9500.

Kyle: Yes, very true.

Mindy: I mean this is better than some.

Scott: I am assuming that a large chunk of that rest of that money that you are not being accounted for here is in transportation and fun and all that kind of stuff, is that right?

Kyle: Exactly, that is right.

Scott: Okay, yes, what were you doing with that $300 per month? Was that going into savings, is that going down to pay down a debt or…

Kyle: You know what? I think it was just sitting there, not really doing… We were just happy to have like a little bit of a buffer so we did not overdraw our account.

Scott: Got you. Okay. If this is the point I think that is really relevant to a lot of people, I think there is a lot of people out there who are in this position or similar one right now. I do not think this is extreme at all. This is what a lot of people would say this is a normal way to approach your life and accumulate assets but you are completely stuck, you cannot go anywhere, right?

You are saving less than 3% of your take home pay and so you are not even close. There is no possible way of accelerating toward financial freedom from this point for a lot of people’s thought processes. What happened? What was the mindset shift that came in to trigger you deciding, ‘Hey, this is not the right way to go about it. I am going to make some drastic changes here.’

Kyle: There are a few things that kind of pushed us over the edge to make a change. The first being that we were just, as Dave Ramsey says, sick and tired of being sick and tired. We were just pushing ourselves emotionally, obviously financially, even spiritually. Just we were drained and we were kind of red lining it the whole time and we just did not have the margin or the reserve to really kind of focus on what we wanted to do. That was one of the big game-changers. Another one is a really good friend of mine, David Greene, who was on BiggerPockets Money episode 12, he has been a big influence.

Him and I grew up playing basketball together and he kind of planted a seed in me. Not necessarily him just telling me what to do but just me as his friend watching the kind of the seeds that he planted along the way. Starting small and really seeing the potential of starting small and working toward something big and making a huge change and that it is possible and that you do not necessarily have to work a thousand hours a week to do it. Him and I had many discussions where he basically kind of mentored me in a sense and coached me in moving in the right direction.

Scott: Awesome. It is between kind of these… Did you hear about Dave Ramsey in addition to this or was this mostly David Greene and then maybe a couple of other sources corroborating that?

Kyle: Yes, it was a little bit of everything. It was just kind of different people in our life. David was one of them and he had heard of Dave Ramsey and so he kind of turned me on to that. I definitely listen to Dave Ramsey a lot and then just picking up different financial books at that point, wanting to learn, and kind of feeling like it was something that I could actually do. That was my fear. It is that this is not just like every other fear that I had that I would fail, this was an area where I thought I could potentially fail too and so I was afraid to actually make a change at first too.

Scott: What year was this? What year did you kind of decide to do this? Then let us walk through the changes one by one that you made to reduce those expenses.

Kyle: We made this change at the end of 2015, beginning of 2016.

Scott: Okay, awesome. What does that look like? What is the timeline of the reduction expenses here at the downsize of your house?

Kyle: We were in that house for about a year and a half. It was a new construction home. The best kind of decision we made was let us get rid of this house. It had a huge mortgage. We looked at our expenses and that was actually the first kind of the biggest thing for us. It was downsizing this house, getting rid of that $2800 a month. We asked ourselves what if we could cut this in half, look at the extra money we would have each month to be able to kind of move forward. That is the first thing we did. We sought out a real estate agent, figured out we could sell the house and we did have some equity in the house so we knew that we could use that equity to pay off a big chunk of our debt as well, particularly the consumer debt. That is the stuff we wanted to get rid of first because of the high interest rates.

Scott: What year did you purchase the house and then what year did you sell the house?

Kyle: Good question. We purchased our first house in 2012 and we had some equity in that and rolled that over into our second house, that is the big one, and then we sold that one in 2015. I am sorry, we actually bought that the first house in 2010. My son was born in 2012.

Scott: Okay, awesome. You bought the house in 2015, you sold it 18 months later in 2016.

Kyle: Correct.

Scott: Okay.

Mindy: Okay.

Scott: Then you used the equity there to pay off your student loan debt or a big portion there of?

Kyle: Yes. We had about $60000 in equity so we could not quite pay it all off but we took a big portion of, I do not think we used it all yet, but we took most of it and threw it at a big chunk of our student loans.

Mindy: Nice.

Scott: Okay. What did you do to live? Did you went back to renting or did you buy another place?

Kyle: We are actually chose to rent. The reason we chose to rent is for us it made more financial sense to kind of take that step backwards as opposed to getting into a slightly higher mortgage. The prices have been rising in California for a home so we are actually taking advantage of kind of the higher wages in California but we are also staying at a smaller rent.

Mindy: I would not say that is a step backwards. I say it is a side step so that you can get the rest of your portfolio in order the rest of your finances in order so that you can continue to move forward like you said. Until somebody finally phrased the question in such a way that really made me think, should I rent or should I buy? ‘Oh, you should always buy.’ ‘No, you should not always buy.’ Buying in the Bay Area, buying in New York City, buying in these super expensive areas may not be the best choice for you. Yes, you are missing out on the appreciation. You cannot guarantee that there is going to be appreciation and you are trading this potential for appreciation for possibly a lower rent price.

In my local area, I cannot buy a house for a mortgage that is going to be more than I can rent the house out or there is going to be less than I can rent the house for. It is usually about what I can rent. Okay, this is getting confusing, I am sorry.

Scott: I think what the point you are making though is that just renting a place can be more efficient than buying a place, than paying down a mortgage. With your mortgage at this home, it was $2800 per month. What was the rent you pay when you moved?

Kyle: $1280.

Scott: $1280. Now, you are like saving $1500 a month in cash outflows. Yes, some of that was going to mortgage and loan amortization on your home and yes you have the possibility of benefiting from appreciation. But are you benefiting $1500 a month on average and that appreciation when you could be investing that difference in the stock market or the real estate, I do not know? I think there is a strong case to be made when the numbers are that skewed that you made the correct decision and one that is going to accelerate you toward financial freedom much faster by downsizing and renting.

Mindy: Right. I think it is hard to make that argument on the other side, ‘Oh, you should have kept your house.’ No, you are saving this money and you are paying off your debt immediately. At some point, you are going to have to pay off your debt. The longer you have it, the more it is going to cost you.

Kyle: Right. Now, I would also add to that what it did for us was it allowed my wife to cut down her hours in half and now she is able to stay at home more and it gave us, it actually gave us more kind of reserve and energy ourselves so we are not both burning out.

Mindy: How much money did you save on childcare costs when your wife is staying home half the time? You were paying, what was it, $1500 a month in childcare?

Kyle: Yes.

Mindy: Now you are paying, what, $700?

Kyle: Yes, it comes out to about $800 or $880, yes.

Mindy: Okay. Still another significant chunk of change that is not going out of your pockets. That still comes out of your pockets and go towards paying down other debt.

Scott: You just created $2200 a month in additional savings or at least lower expenses with this move.

Kyle: Absolutely, yes.

Mindy: How much of the salary, when your wife cut her hours in half, how much less money was she bringing in then? Was she bringing in half as much? That makes sense?

Kyle: Yes. At her highest, she was making about $108000 a year and then she dropped down to about $72000 the next year and then in 2016 when we had our second child, she dropped down to about $20000 because she stayed home with our daughter for a good six months. That is another thing that it gave us, it gave us freedom for her to stay home and we did not have to take out any money from credit cards just to survive for her to stay home. It gave us that flexibility on that side as well.

Scott: There is a big offset there against the childcare expenses as well, right? Which is coming in to play.

Kyle: Yes, absolutely. They are pretty high here in California.

Mindy: What was your income during this time? What were you doing for a job? You had mentioned working for your software company and you had mentioned working for your old college.

Kyle: Correct. What I was making early on when I was putting my wife through nursing school, I was making at tops about $27000 to $30000 a year. I was not taking any salary from the software business that I started. It was all just kind of blood, sweat and tears and time that was put into that thing. We did keep a lot of the money in the bank and then when we eventually closed down the company, I took a portion of that. I think it ended up being about $10000 or $12000. This was probably two years ago that we took that money and just threw that towards loans. But at the top, I have been ranging about $100000 a year.

Mindy: Okay. What do you do for work right now?

Kyle: That is working as a speech language pathologist right now. I work in a medical setting, yes.

Mindy: Yes. Okay, okay. That and when did you get your degree in speech path?

Kyle: I got my degree in 2012.

Mindy: 2012, okay. You are a full time speech pathologist?

Kyle: I do that full time and actually I recently dropped down from working five days a week to four days a week, 32 hours a week again because it gives me more freedom and flexibility now to kind of focus on kind of my entrepreneurial pursuits. Now, I am actually working a few days a week with David Greene as a real estate agent.

Scott: Awesome.

Mindy: Real estate agent comes into play or real estate comes in.

Scott: Going back just a step.

Kyle: Sure.

Scott: We talked about the child care and housing expense. Were there any other changes that you noticed as well that your food budget dropped during this period or anything else going on that allowed you to spend less as a family?

Kyle: That is a great question, Scott. I would say one of the biggest things that we did, and you hear this a lot, is we actually started doing a budget. Believe it or not, it actually works. We did the Dave Ramsey, or I do not think Dave Ramsey came up with it, I think it was some grandmother that came up with it. But we did the envelopes. For us, we did not do any envelopes for every single line item in our budget but we did do envelopes specifically for the areas where we kind of have the high expenses, where we tend to spend more, which for us is groceries, any kind of dining out or weekend trip, weekend getaway. Using the envelope system has also been a great thing to kind of keep us on track.

Scott: The envelope system for those who are not aware is basically you just write down on envelope what your budget is for groceries for the month and you put in cash into this envelope, right? Or you literally write down the amount of money you are going to put in to these categories in these envelopes. That way, you can kind of control your spending a little better, is that right that?

Kyle: That is exactly right. I will add one other thing that we did do was we were paying about $120 a month for our satellite TV and we actually decided to cut that out completely, cut the cord as they say, now do everything just kind of… We do not even do Netflix because we want to pay the money for it. We just either watch kind of what is free and what you can kind of stream for free online and that has been a big thing as well.

Scott: Awesome.

Mindy: Yes.

Scott: When you did the envelope system, what would estimate kind of your net spending outside in the categories that you are using envelopes for dropped to? Or what was the total savings that you kind of got from that system?

Kyle: Just by actually budgeting and opening and taking a look at it and sticking to it, obviously it fluctuates every month. I reckon that we probably saved an extra $600 or $700 a month just from that.

Scott: Awesome. We are talking almost $3000 a month in after tax cash flow generation that you that you produced. A year and a half long period as you kind of discover and begin making these decisions to be yourself intentionally towards it. Big decisions, life-changing decisions. Where you live, right? What you are kind of doing with your lifestyle, how you how you are managing childcare? These are things that a lot of people that are in the position you were in a few years ago consider fixed expenses that they cannot change and yet you did it. I guess the question is are you happier or were you happier in light of making these decisions? How did that affect what your friends say, your family?

Kyle: It is crazy. We got a little bit of a mix, right? I maybe had some coworkers that thought we were crazy that we were leaving our big beautiful house and moving into, so you can kind of get an illustration of what we did, we moved from about a 2500 square foot house to a small two bed two bath halfplex under a 1000 square feet. I think it is 920 square feet. There is four of us living in here now. We love it. We are close, we are closer now as a result. I think my wife wants to get out of here eventually, right? We are growing and the kids are getting bigger and we need a little bit more space eventually but we are much more happier here then we were when we lived in our big comfy house. It is has given us more freedom and the ability to do things. We have also had friends that patted us on the back and said you guys made a great decisions.

We have got a little bit a mix too in terms of what people think and how they perceive us. My wife was just talking to me about this morning she said she kind of had to eat humble pie. It was kind of embarrassing that we moved into this new construction home and a year and a half later we were packing up and leaving. It was definitely humbling experience for us as well.

Scott: I think it is a tremendous amount of courage and intelligence and boldness to go through that process. I mean that house is what is eating most of middle class America alive right now. Most of the people in this country are stuck because of that house and the expenses that come but come with it. Like all of your effort as a family went to, financially, went to working these jobs at the highest possible salaries that you could possibly earn. A total optimization on the salary upfront for both you and your wife and you had no other choice but to continue doing that until you made that big decision in conjunction to the other ones. Now, the savings are accelerating. What is your position look like now as a result of these changes and what is going on in your life today?

Kyle: Our position has changed, I wrote the numbers down here. Net worth in 2015, I think we were at $15000. Today, it is as of I think a couple days ago, it is $139 in the positive. That has set us up to move in a direction that we never honestly thought was possible when we were living at our big house. For us moving forward, we kind of have a couple goals. The first goal is we obviously want to save for a down payment to get into a house where we can live in as a family but we are also saving and working hard towards a first down payment on a property as well. A lot of the money that we do have, the assets are in index funds but we have kind of slowed that down and I have more focused on accumulating cash for a down payment on the real estate side thing. Obviously, as you know, BiggerPockets is something that I definitely follow and it really has changed my perspective on real estate investing.

I will just give you a little example. When David first got into real estate investing, I thought he was crazy. He had his first, I think it was a second house that he bought, and he would he would occasionally, this was when he was still managing his properties, he would occasionally ask me to come help him do some kind of side project in the back yard to fix it up and make it nice. There was this bush that we could not get out and we were out there for eight hours in a 100 degree weather trying to pull his dang bush out. We hooked up at his dad’s truck to a big old chain and tried to pull it out, we never got that thing out.

Finally, David is like, ‘That is it. I am hiring a professional.’ I really was not turned on to real estate investing. I thought he is crazy, he is wasting his time. But now, kind of seen the firsthand experience watching David and the growth he has made and then obviously being part of the BiggerPockets community, seeing the growth that other people are making, really has inspired both me and my wife to kind of head down that path.

Scott: Awesome. Just to kind of piggyback to that story about getting a bush out, I had the same problem at my house, the duplex that I live. I spent an afternoon trying to remove a stump that was right next to the house just with an ax. Going after it, gets sore, sweaty and working without a shirt on. I guess my pants were hanging down a little low. I got this incredible sunburn that was all along my back and like halfway through my butt. Anyways, that was a nice picture. Everyone now has that image in their heads. You are welcome. Let us get back to the talking about financing real estate.

Kyle: I will remember that.

Mindy: I have a story really quick. I took out two bushes and like for trees in my house and I did it with a chainsaw and you get the stump as low as you can go, you paint it with gasoline on the top to kill the rest of it then get covered in dirt. Next time you need help get that stump out, call me, Scott. I will help you.

Scott: You know all the tricks.

Mindy: I do know all the tricks. I want to go back to your wife who had to eat humble pie and move out of this brand new build. No, anybody who cares is not a true friend and it does not matter what they think about you. You have to do what is best for your own personal self, your family, your finances and your situation. One of my favorite quotes is from Coco Chanel. She was so sassy, she is a fashion designer for those of you who do not know who Coco Chanel is, Scott. She said, ‘I do not care what you think about me, I do not think about you at all.’ I love that quote. I tell my daughter that all the time who is going through middle school and all of the pain that goes through that.

Scott: I hear Coco Chanel products are very fire friendly.

Mindy: Yes, every financial independence person that I know is totally wearing Coco Chanel. She is quite nicely. Anyway, that long segue or that long rant off to the wrong road. Time and again, we hear from our guests that real estate has either contributed to or even been the impetus behind their financial independence. You talked about you are starting to work with David Greene and getting your real estate license. You are saving up for a down payment on what kind of property? Is it going to be an investment property? Is it going to be a property for you to live in and then where are you putting that cash while you are saving it?

Kyle: Most of our cash right now is just going into a savings account. What we are focusing on is we kind of have two paths where we are headed. We are definitely focused on a down payment for a house that we can live in because my wife, just she will not be able to stay here forever. That is a big thing for us. Then we also have another kind of bucket that we are also putting money into and that is going to be for our first investment property. Where that is going to be, I am not sure yet. Probably out of state because I know the out of state expert. The biggest thing for me really is how much I am going to learn between the time that it takes me to start saving now versus when I actually make that purchase decision which is why I have gotten into real estate, which is why I got my license, which is why I am really a trying to come at this with a learner’s heart and a learner’s brain in a sense and just absorb as much as I can before it comes time to pull the trigger.

Scott: Yes, I love it. That initial period of saving for that first significant investment which sounds like your process right now is how do I accumulate cash to make my first significant investment or set of investments in your next home purchase and then your first real estate process. Like that is a process, that is a grind. It is like a year, maybe two. Maybe longer depending on what your savings rate is and how big you want that investment to be. The obvious thing to do in that time period is to continue saving, continue earning, and learn and you self-educate as much as you possibly can to give yourself the highest possible odds of success which I do know, I just love that mindset, going into that grinding process.

Kyle: Yes, totally. That is the thing. For us, in terms of saving, our saving kind of fluctuates every month because my wife, I call her The X Factor, because my… I work at kind of a set salary right now and so she kind of kick in, she can up or down her hours depending on what is going on with our family. She really is our X factor in terms of whatever extra income we get from her working extra shifts. She is really been fired up about this the last six or seven months. She has been picking up a ton of extra shifts and so all that extra money that we accumulate we just throw it into the savings account.

Mindy: Getting your spouse on-board is one of the best ways to reach financial independence. Because when your spouse is fighting you or when your spouse is not cooperative, you are going to have a way worse time. Money is the number one thing that spouses fight about. Having them on board and… How did you get wife on-board? Is this a conversation that you had, did you show her one thing, was she already on-board? Was she more savy, more spendy?

Kyle: She got me on board to be honest.

Mindy: Why are talking to you? Let us talk to her.

Kyle: Yes, she is the expert. No, honestly it was us both sitting down and talking about what our goals were individually but also what our goals were going to be as a couple, as a married couple, and as a family. Sitting down and talking about our core values and where we want to be in five years? Where we want to be in 10 years? Where we want to be in 20 years? Then aligning those values with each other to determine okay how are we going to get there? That is the biggest thing. If you and your spouse can just really focused on the bottom line but what the goal is or what it is that you guys have as your core values, that is what to me what drives productivity and what drives an increases that savings rate. The more we talk about what we actually care about and where we want to be, that is to kind of keep pushing forward and doing the best for our family.

Scott: Awesome.

Mindy: Kyle, do you and your wife track your spending? Do you use your budget instead of actually writing it down or this is the number one thing that we hear from people over and over again is you have to track your spending. Did you start tracking your spending?

Kyle: Totally.

Mindy: Just go to the budget. Okay, let us look at how that how that worked for you guys.

Kyle: What works for us was we definitely watched our budget. We use Mint mostly to track our spending and what Katie and I have is we have a monthly kind of financial meeting that we have and she is not always… She is not the spreadsheet geek like I am so she does not like to sit down and necessarily talk about it but she has actually got a lot better at it. What we will do is we will actually sit down and we will discuss how we did that month, how is our performance, what percentage are we over or under in a certain area and what we can do better the next month to kind of improve that budget area.

Again, the areas where we tend to have the most trouble which is why we did the envelope system is kind of eating out or kind of entertainment, grocery shopping, that kind of thing. But we will also do is we kind have a monthly balance sheet where we look at our assets and our liabilities and what direction those are headed at as well. Kind of review that. We look at kind of our short term goals, how we are doing on that, and then we also look at kind of the big picture item as well. How are we doing overall as a as a budget and that is where we can kind of have that open communication and talk about any issues that might be coming up.

Mindy: Okay. What I hear from you and what I hear over and over and over again from almost every guest we talk to is that couples who are on the same page are constantly talking about money, constantly is not the right word, continually talking about money. You have monthly money date, you have monthly balance sheet meetings. Hiding your head, hiding your finances, not doing the ostrich think. That is not going to get you down the path to financial independence. Does everybody want to talk about $90000 in student loan debt? No, but not talking about it does not make it go away. Paying it down makes it go away. Talking about it, keep it in your head, you are like okay now I have really got to get this out here. I have to pay this debt, I cannot stand having this debt anymore. When you think about it more, I think it really makes you more apt to pay it off.

Kyle: Absolutely. That is what we did for that six or seven year span. It was I literally did hide my head, I did not literally do it, but I hid my head in the sand. It was to the point where if I looked at my monthly bank statement, it caused a lot of anxiety for me to even look so I would not look. Because emotionally, I was not ready to have that relationship with money to kind of have the hard look. Now, it is something that we do no matter how hard it might feel. For example, we still have times now where man we just did not make as much progress this month as we wanted to. It is easy to kind of start ignoring it and then kind of let it be something where you do not track the spending any more. It really comes down to that daily, weekly, monthly discipline that you can have despite what you might even be feeling emotionally at that time.

Mindy: Yes, I like that comment. I was not emotionally ready to have this relationship, and now you are. Look, once you start paying attention to it, you actually get it paid off.

Kyle: Yes, absolutely.

Scott: How important was self-education in this process for you kind of both in the expense cutting and what are you doing now to prepare for those real estate investments?

Kyle: I am doing a lot of things. The self-education was and is very important. Again, really having the BiggerPockets community is a great thing. Listening to various podcasts, reading books. One of my goals for 2018 is to read a hundred books, and I think I am at number 62 right now, and just absorbing information is important but also putting yourself in the actual situations to learn. I have gone to various local meet ups that we have around Sacramento for real estate investing. Really being around David and learning from David as much as I can has also been a positive thing. Not only am I just trying to learn the information but actually putting myself in those situations and those scenarios and building relationships with other people has been very helpful.

Scott: I think that is a phenomenal approach to education where you are just  absorbing as much content as you possibly can proactively and then also verifying that and learning and plying that knowledge in conversation with people who are actually doing it. No better way, I think, to learn rapidly. How does this compare to your formal education? You have several degrees. You have three degrees. You have a bachelor’s and two graduate degrees.

Kyle: Correct. It is completely different. Looking back, I know that I obviously need the speech language pathology degree to work in that field. But the other degrees, I do not need. The reason is because I know that I could have learned the same information on my own without having to go through formal schooling. That is something that both my wife and I have learned personally over this last year to the point where we are actually deciding to place our son in a private school, he will be in first grade this year, but this private school is called Act In Academy, they specifically focus on kind of stepping away from the traditional educational norms and focusing more on ideas like entrepreneurialship and coming up with ideas, coming up with a product, and learning at their own pace. Much different than the mainstream education.

It has made such a big impact on us that we have actually stepped away from putting our kids through kind of a traditional industrial school where you go and they tell you what to do and you sit in one place all day and follow instructions the entire day.

Scott: How do your friends and family react to that versus how they reacted to that the housing situation?

Kyle: It similar. Again, it is a mixed plate. We get a little bit from everybody. A lot of questions we get especially from people that work in education are is this something that is going to benefit your child? Is it accredited? What is the scholarship rate? How many are graduating from college? There is a lot of naysayers. This school has been around for about 10 years and so there they have gained a lot of traction. They were originally founded in Texas, I believe. We get a little bit of a mixed bag from everybody but also other people say they think it is a great idea and they definitely applaud us for moving in that direction with our kids.

Scott: Awesome. As an individual, as an adult I guess, do you think it would be possible to get an equivalent education to the one you are getting with your 100 books this year? Like if you went to school full time and paid $50000 to Stanford, could you get a similar amount of learning out of the experience or you are getting more based on the hundred books and the networking you are going to in the field of like business or real estate, I guess?

Kyle: I think it is similar, to be honest. There is obviously going to be pros and cons to each side. I can tell you one thing, a lot of the books that I have read, a lot of them are similar concepts and ideas that is just told in a different way. But still, the experience of actually getting out there, networking, getting to know people, I do think that I could be just as successful without a formal education than I am with especially when it comes to working in things like real estate or if I wanted to be a doctor, absolutely not. I should definitely go to a traditional school for that.

Mindy: Okay. You just said informal education and I, and a couple of minutes ago you mentioned BiggerPockets in your list of places to get real estate education, and I wanted to share with the people who are listening to this show who may be found us through another site other than BiggerPockets, is that there is the whole enormous website behind this podcast where you can learn how to invest in real estate. I hear from so many people who listen to the BiggerPockets Real Estate podcast that David Greene hosts with Brandon Turner and they say things like, ‘Why they did not know there was a website? I was listening to this podcast and all of a sudden I discovered you online.’ We have a blog, we have two podcasts, a video channel, webinars, and a forum where you can ask specific questions and learn how to invest in real estate the right way so you do not lose any money, you are not breaking any laws. I mean real estate is not hard.

Scott: You increase your odds of success. You can still have this money if you do that, even if you do it all correctly right?

Mindy: You increase your odds of success, there is no guarantee you are not going to lose money. I mean the market could drop tomorrow, whatever. Thanks, Scott. But real estate is not hard. It is not easy, it is work. You could do it the right way which makes it a whole lot easier, or you can do it the wrong way which makes it a whole lot harder. I just wanted to share, if there are people listening who really are interested in real estate and who do not know, BiggerPockets.com is this enormous amazing resource for learning how to invest in real estate and plug.

Scott: Kyle, before we move on to the famous four. Is there anything else that we should have asked you or that you wanted to talk about that we did not get to cover here in this conversation?

Kyle: The one thing I will say is in the last kind of decade of my life, I definitely feel like I have hit some obstacles in the road where I have had different failures and one of the books that really kind of got me excited this year that I read was failing forward by John Maxwell. He has a quote where he says the difference between average people and achieving people is their perception of and response to failure. For me, my whole mindset and kind of paradigm shift has been how I look at failure within this last decade. In the past, I used to look at failure as if it was the worst thing in the world and now I kind of welcome it. We welcome it in our home, we welcome it with our kids. We want our kids to fail fast, we want them to fail early and we want to fail often. That has been probably for me one of the biggest changes that I have seen in my financial journey.

Scott: Okay. Before you read that book, with the peak of your spending, you were spending $8900 and making $9200, was your fear of failure lessening? Has it increased before reading this book and kind of putting it in words? Did that confidence, your ability to take risks, your desire to pursue your goals and dreams and kind of do what you need, you want to go forward, was that increasing as your financial position improved? Did it have it in impact on your mindset to some degree?

Kyle: Yes, that is a great point. It did not just change from one morning where I woke up and I said, ‘Okay, I am feeling great. I am going to go swim two miles across the Atlantic Ocean or whatever.’ Instead, it was one small step after the other. Kind of stepping out and doing, I think is Eleanor Roosevelt who said, ‘Do one thing that is scary every day.’ It was kind of like that, taking one small step at a time and then seeing some growth from it then taking another step and seeing growth. To the point now where I am I am feeling more comfortable taking big steps and big steps and bigger steps and bigger steps. It was not just kind of this overnight snap of the fingers where it just happened but it was more of a kind of a slow pace of moving forward.

Scott: I mean why I do what I do, why I love this podcast and my job so much is because I believe that there is a huge correlation between the progress you make financially and the confidence that you as an individual have to pursue your passions, dreams, and whatever it is that you want to make an impact on the world rather than maybe the career that you chose 10 years ago, right? That and that power that comes with that I think is just so important and so, the word powerful is the same word I just used, but I used powerful anyways. That is what this is all about, right?

You move your financial position forward so that you can do the things that you want to do and that you believe will lead to a fulfilling life. That, I think, is really hard to do if you are in the position that you were in a few years ago where you are spending almost everything that you make and there is not really any wiggle room and it gets easier and easier and easier as your savings rate increases, as you pile up cash, and as you tack on passive cash flow. I hope that plays out and continues to play out for you over the next couple of years.

Kyle: Absolutely. I definitely agree. Kind of with the more growth comes more confidence. That is definitely something that I am looking forward to and it seems like every few months there is this new chapter that kind of opens up and we are excited to kind of walk through that together as a family.

Scott: Awesome.

Mindy: Awesome. We are going to switch over to the Famous Four Questions now. These are the same four questions that we ask every person on our podcast. The first question is what is your favorite finance book?

Kyle: There is definitely the popular ones, Rich Dad Poor Dad, The Richest Man in Babylon. But I am going to give you a new one today, one that really did open up my eyes. Actually, read it this year. One of the books that I am reading. It is called the Soul of Money by Lynne Twist. It really, she opens up your eyes to what is your relationship with money, how do you view money and how are you interacting with money? It has really been something to me where it helped me to kind of step back and look at money more of as a tool than as something that was potentially scary or dangerous.

Mindy: That is fantastic.

Scott: Yes, I have not read that one. I will have to pick it up and check it out.

Mindy: Yes, I have not heard that one either. I like this new… I mean it is nice to have the continued books being recommended. This book was recommended 47 times, hey I am going to pick that up. But I also like hearing these new books that I have not heard of before, The Soul of Money. Soul like soul.

Scott: That is correct. Well, moving on, what was your biggest money mistake?

Kyle: I am going to say taking out that line of credit to finance the design and landscape of our backyard when we only had about $300 in margin every month.

Mindy: Did it look nice?

Kyle: It looked very nice, it was really well done. Very pretty except the concrete that we put in, that stamp concrete, so any time it gets where the kids were like slipping all over the place. I felt like there was a huge liability in the backyard anytime we had kids playing back there but other than that it was very very pretty.

Mindy: They just bounce off of it.

Kyle: Yes, exactly.

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

Kyle: My biggest piece of advice would be that it really is never too late. Part of us when we decided to kind of take this journey was it is kind of we are just entering into our 30’s, which is young, but you feel like you are getting older, you are not your 20’s anymore, and part of us felt like it is too late. We are not going to get to where we want to get and so why even start? My whole thing is that it is not too late to start. You can start at any time, whether you are 30 or 40 or 50 because even just taking that start made a drastic change immediately for us.

Mindy: How old are you now? I do not think we actually…

Kyle: 34 now.

Mindy: 34, okay.

Scott: Awesome, that is great advice. What is your favorite joke to tell at parties?

Kyle: Alright. What did the janitor say when he stepped out of the closet to scare some people?

Scott: I do not know. Did he rev his broomstick? Broom, broom, broom? That is not great, I guess. We will try again later. What is it?

Kyle: Supplies.

Scott: Okay, there it is. I see.

Mindy: That was great. I thought…

Kyle: That is my son’s favorite one.

Mindy: How old is your son?

Kyle: He is six and we have a two year old daughter.

Mindy: Six. Scott, six. His six year old son thought that was a great joke and you.

Scott: Let us map this out with the last question then.

Kyle: Nice.

Mindy: Oh my God. He is very quick. Scott you are very quick and I am always impressed at how quick you are. Where can people find out more about you?

Kyle: I am on Facebook, Instagram, under my name Kyle Renke. I also have a website that I started where I kind of do a little bit of blogging about financial independence, finance in general, a little bit of real estate, just things that I am learning. You can find me on those social media pages Facebook and Instagram under my name.

Mindy: Okay. KyleRenke.com. We will include links to all of this in our show notes for this show which can be found at BiggerPockets.com/moneyshow37. Alright, Kyle. Thank you so much for your time today. I really appreciate it and I love your message. It is never too late. It is never too late to start and people who might be under $90000 of student loan debt might feel, ‘Oh, I cannot ever do this.’ Well, like I said last week, whether you think you can or you think you cannot, you are right. Switch your mindset, think you can. Look, Kyle did it, you can do it too.

Kyle: Totally. Well, thanks for having guys. It is was a lot of fun.

Mindy: Okay, we will talk to you later. Bye.

Scott: Alright. That was Kyle Renke from KyleRenke.com. That is KyleRenke.com. Mindy, I thought that was an awesome show. What did you think?

Mindy: I love Kyle’s story and I love the message from the story. It is just you can do this too. We had the couple from planting our pennies on the show a couple of weeks ago and their message was hey this could be done by anybody as well. So often this is true, whether you think you can or whether you think you cannot, you are right. Start thinking that you can, take the tips from this show from Episode 32, from episodes one through 36 and start applying them to your life. Track your spending, make a budget, reduce your spending, increase your income, there are so many ways to get this done.

Scott: Yes. I think the other part of it, number three, a little challenge and be a little mean I guess for a second here but a lot of people are not going to do this, right? They are going to say, you know what, I am not going to sell my house, I am not going to resell my car buy a less nice car. I am not going to move to downsize my house for square footage. I am not going to have one of the spouse to stay home and watch the kids to save money. I am just not going to do any of that. Guess what? They are just not going to accumulate investable liquidity. It is just not going to happen. The only way it is going to happen is if they somehow earn a ton more money or they start a business in their extraordinarily limited free time.

Most of middle class or upper middle class America that has got these two household income with $8200 a year per working spouse and that spending all their money just is not going to go anywhere. Guess what? They are just not competition for you, me, Kyle, anybody else in the investing sphere. They simply will not be able to accumulate the liquidity needed to begin investing and they will never move towards really financial freedom. Will take them 40 years. That is just the fact of reality, right? Kyle chose to make these decisions and move his family towards it. Not using the fact that he had children as an excuse but as motivation and a way to build and create freedom for his family and himself.

Mindy: Right. What you have just said is really mean but also true. I guess it is not that mean because the truth is not always pretty but yes it is not going to happen if you do not do something about it.

Scott: Yes. I mean those are drastic decisions that he made one by one over the course of 18 months. That really changed his lifestyle and I am sure his friends and family had their comments on it like he mentioned, right? He is talking about not everyone is going to be supportive of it and it is going to be uncomfortable, it is going to be scary, it is going to be a change. If you cannot increase your income, if you are not going to come into a huge chunk of liquidity, and you cannot reduce your spending, and you cannot start a business, you are not going to move towards fine. There is not really any way around it. You have to do some of those things and the most high probability way is to do, in my opinion, exactly what Kyle did here and begin with cutting those expenses and preparing himself for entrepreneurship and investing.

Mindy: Right. Did you catch the part where he said, ‘Oh, for six years I did not look at my bank statements.’ Was it six years? For a while, he did not look at his bank statements. Well, guess what? All they did was continue to deplete. All his debt did is continue to grow because he is not looking at them, he is not paying attention to them, he does not have that in his head all the time. If you are going to ignore the problem, the problem is not going to go away.

Scott: But the good news is Kyle is a extraordinarily positive example of how to reverse that trend quickly, build some net worth and get prepared to rapidly accelerate towards financial independence because of his savings rate, because of the choices he has made with his family and because of the fact that he is self-educating a hundred books a year, 60 books already, right? He has, in my opinion, extraordinarily high probability of rapidly achieving his goal in a way that is fun and gives his family freedom and is enjoyable along the way. I would be very surprised if his income and his business do not dramatically explode over the next three to five years as a result of the savings rate he is producing and the amount of self-education that he is putting in and then networking that he is doing with his free time.

Mindy: Yes. What is he doing? He is taking action. He is choosing to make a difference in his finances and then he is acting upon that choice.

Scott: Then in a few years, everyone is going to say, ‘Oh, I could never do that because he earned so much money. The guy has a graduate degree that he got a lot of debt for and it is a speech pathologist, right? This is not like a incredibly lucrative career. It is a good job, right?

Mindy: Yes.

Scott: But over the next couple years, I bet you again this thing is going to explode because what he is doing with his age at work and his investing is going to explode as he continues to re-educate network and take action. I mean people going to be like, ‘Oh, well I could have done it too if I made all this money.’ But no, it starts here. It starts today, it started last… It started two or three years ago when he made the first big steps towards this. I am rambling on here. Now, I am rambling on…

Mind: We are having a discussion. We are having a discussion that is  just taking a little bit longer. Alright, we get out of here today, Scott.

Scott: Let us get out of here, Mindy.

Mindy: Okay. From Episode 37 of the BiggerPockets Money Podcast where we talked to Kyle Renke from KyleRenke.com. This is Mindy Jensen, over and out.

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In This Episode We Cover:

  • Kyle’s journey with money
  • What pushed him to pursue safety and security in terms of his career choice
  • Why he developed a software company
  • His financial position when he bought his first house and had a child
  • A conversation on a fear of failure
  • How David Greene helped him to shift his mindset
  • His timeline for reducing his expenses
  • Why renting a house is more efficient than buying
  • Other things that allow them to spend less as a family
  • Tips for budgeting using “the envelope system”
  • His financial position right now as a result of the changes he made
  • How BiggerPockets changed his perspective on real estate investing
  • The property he put a down payment on
  • How they track their spending
  • Why he has a conversation with his wife every month about their spending
  • The importance of self-education in the process of cutting their expenses
  • What he is doing now to prepare for investing in real estate
  • Formal education versus reading books
  • The book that helped him take risks to pursue his goals
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “I don’t care what you think about me. I don’t think about you at all.” (Tweet This!)
  • “The difference between average people and achieving people is their perception of and response to failure.” (Tweet This!)
  • “Do one thing that scares you every day.” (Tweet This!)
  • “It’s never too late.” (Tweet This!)

Connect with Kyle

About Author

The BiggerPockets Money Podcast is for anyone who has money… or want to have more! Join BiggerPockets Community Manager Mindy Jensen and Director of Operations Scott Trench weekly for the BiggerPockets Money Podcast! Each week, financial experts Mindy and Scott interview unique and powerful thought leaders about how to earn more, keep more, spend smarter, and grow your wealth. You'll get tips for getting your financial house in order and actionable advice from guests who have been in your shoes - and found their way out.

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