Financial Security Through Passive Income with Joel Larsgaard

Mindy: This is BiggerPockets Money. Show 16

Joel: Even making $24,000 a year at my first job at radio, I was able to save up 20% down to put down on my first house that I purchased in 2009. I think most people making that kind of money think that’s impossible, that, ‘Maybe I can get the 3.5% down to get an FHA loan, or maybe I can get 5% down and I’m still paying PMI every month.’

I’m not okay with that. I don’t want to pay PMI on houses. I don’t want to pay extra money that I don’t need to pay. I’m not cool with fees. I’m not cool with needless debt. I think you can save but it starts with a frugal lifestyle.

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, invest the money you already have or discovered 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: How’s it going everybody. I’m Scott Trench. I’m here with my co-host Miss Mindy Jenson. How’s it going, Mindy?

Mindy: Scott, I’m doing great. I am really excited about this new thing that we’re going to try. We are implementing a new money tip that we’ll share every week. These should be tips that can have a big impact but can be implemented in 10 minutes or less. Some of the money tips that we talk about on the show are really hard. These money tips should be easy. Alright, so Scott, can you give us today’s money tip?

Scott: Today’s money tip is simply to begin tracking your spending. Tracking your spending can be either really hard, where you go and download all your bank account and credit card statement, and just follow every piece of money that you spend online and put into a spreadsheet, or can it be really easy. I track my spending through Mint and Personal Capital, but you can go with You Need A Budget or similar many other sites.

Definitely go and look into signing up for one of these sites, and start tracking your spending. You should be able to set up your accounts and begin getting a clear overall picture of how your money is being spent within 10 minutes or less, on many of these sites. Go check that out. Get some sort of picture of how you spend your money. If you don’t do it on one of those sites, go do it somewhere else, in a spreadsheet, because that’s one of the important things you can do to understand your spending.

Mindy: Scott, this is my top tip that I tell everybody when they’re first starting out. You can’t know where your money is going if you aren’t tracking it. You can’t tell it where to go if you don’t know where it’s going right now. This is a really, really powerful way to start down the path to financial independence.

Scott: Everybody has the ability to do this.

Mindy: Everybody has the ability to do it. When I first started I was doing it literally on a piece of notebook paper. It’s really just that easy. You just want to know where your money is going.

Okay. Listeners, do you have any easy to implement tips to share with us? You can tweet us @BPmoneyshow. You can tweet me @MindyatBP, or you can tweet Scott, @STrenchBP.

Scott: Awesome. Let’s talk about today’s guest today. Today we interview Joel Larsgaard. I love his story. This is a guy who started from scratch. His parents went bankrupt at 12 years old. He started the real world out of college with $13,000 in student loan debt, and a really low income from his full-time position.

I think he said one of his first full-time positions couple years out of college was $24,000 a year. This is a guy who hustled, worked multiple jobs. This is a story for you if you want to learn how to make it on just pure hustle, and not having that kind of high based income. This is a guy who was able to really build an incredible financial position over time through that. Definitely keep listening if that’s the story you want to hear and learn from.

Mindy: Yeah, Joel has such a great story. I met him a few years ago at ThinkCon, the conference that we continually talk about on this show. Just listening to him talk and hearing how his parents bankruptcy affected his life forever, really is a powerful story.

Before we get into today’s show, we really want to thank everybody who listens. We are growing really, really fast and it is absolutely because of people who listen. If we don’t have listeners, what’s the point of making a show? I am a little greedy and I would like to have more listeners. I want to ask you, the listener for a favor right now. Sharing our show with your friends is a really great way to help us out.

As you listen today, keep in the back of your mind which one of your friends could really benefit from hearing this information. Send them a link to our show notes which can be found out biggerpockets.com/moneyshow15. Are all of your friend already on the path to FI, or avid listeners? You could still help us out. Leave us a rating or review on iTunes. That helps us share the show with other people too. Alright. Before we get to Joel, let’s hear a quick work from today’s sponsor.

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Alright. Thanks to our sponsor. Without further ado, let’s bring in Joel.

Alright. Welcome to the BiggerPockets Money show, Joel. Thanks for coming on today. How’re you doing?

Joel: I’m awesome. Thanks so much for having me.

Scott: Yeah. Well, great. You have an incredible story from what I’ve gathered. Can we just start from the beginning? How did you first become interested in money? What was your first introduction to money?

Joel: Sure. Yes. Well, my first introduction to money was actually going through some hard money times, growing up as a kid. My parents, awesome people. They’re the best people. Salt-of-the-earth. They just didn’t know much about handling money. They had a lot of tough times. They overspent. They had to work really hard to pay for the things that they were buying that they didn’t need. One day when I was 12, I found out that my parents had to declare bankruptcy. This just kind of dragged on. It was this process that it took months, and months, and months.

I remember waiting for someone to come and repossess the car that we had in the driveway, that we just bought months earlier, brand new off a lot. A car that we didn’t need. That was scary times, just waiting there and hoping that the car would be there the next morning. Then one morning, it wasn’t. Going through that as a kid really cemented in my mind that I wanted security in life. Having enough money, that’s a big part of having security.

Scott: How did your family get through that? What changed? That happened when you were 12. What happened to your family- from the years of 12 to 18? How did you cope with that as a teenager and going into college?

Joel: Yeah. I would say there was a lot of turmoil. Even before that growing up, my parents, I remember, they argued a lot about money. I heard that and that was a point of contention. I know my mom wanted to stay home with us kids. I’ve got two sisters. She wanted to be there, but she had to work to pay the bills that they had racked up. That was a point of contention and something that we heard frequently throughout the house. That was always tough. Then this period of bankruptcy happened.

It all started really from my dad losing his middle management job. He hadn’t saved very well, and so he just had to take the next job that came along. It wasn’t a job that was in his field. It was a job that he was overqualified for. He made less money. He had to work more hours. It just became this sick cycle that made things worse, and worse. It was really tough times.

Once they finally declared bankruptcy, they were able to start making small moves. They were getting better with their money. By the time it let up to me going to college, things were definitely on more solid ground. It was just really going through childhood and then seeing that with job loss and then the bankruptcy, yeah it shook my whole foundation as a person. It resolutely focused me on how I wanted to handle money in my life.

Mindy: By the time you got to college, had they figured out their finances? I’m thinking of how you paid for college. Did you live at home? How did you get through college? Did you graduate with a ton of debt? That can really saddle you for decades to come.

Joel: I’ve worked since I was a kid too. Seeing this, it put this drive in me that I wanted to work. I mowed neighborhood lawns. Then I started working at the Chick-fil-A across from my high school when I was 14. After school, I’d walk across the street and I’d work a 3 hour shift. I’d work on Saturdays. I’d saved enough money to buy my first car, cash. That was $1,800 old school Toyota Camry. I swear, if I hadn’t got into a wreck with it, I’d be driving it to this day. It was an awesome car.

Scott: I had a Corolla when I was a teenager. It would go from zero to 60 in 13.2.

Mindy: Minutes?

Joel: Seconds.

Scott: Yes. Seconds. Yeah, I guess I would be flooring it.

Joel: They’re amazing cars. I still think I would recommend a Corolla, should be the starter car for almost everyone these days.

Mindy: I had one too.

Joel: Nice. Nice. Essentially, I saw these things happen and I made a change right then and there when I was a kid. When I went off to school, I did go a private school for my first two years. I had a lot of scholarship, so I only racked up about 13 grand in student loan debt. Then I moved back in state, because we had a state scholarship program for people that had a B average or higher. I came back and I finished my last two years of school for free. When I finished college, I literally had $13,000 of student loan debt. I was able to pay that off in just a few years after school.

Scott: What was your degree in?

Joel: Communications. Media Studies.

Scott: First of all, let’s take a recap here. You had this bankruptcy happen at 12 years old. You had kind of a system shock, where everything in your life was scary, or uncertain because of these financial choices that your parents made, and some of the consequences of those choices. You resolutely were like, ‘I’m going to work hard. I’m going to save up. I’m going to crush it. I’m going to go to college. I’m going to get scholarships. I’m going to take advantage of all the opportunities to get a free education.’

You’re graduating with a very limited amount of debt, and in a pretty good position from which to start your career. That’s how you started life here. That’s pretty good foundation from which to launch this career, an aggressive pursuit of financial freedom. Is that a pretty solid recap?

Joel: Yeah, for sure. I think at that time too, when I was graduating from college, the concept of financial freedom was over my head. What I knew was I didn’t want to be insecure. What I knew was I wanted to work hard to make sure that wasn’t the case. Financial freedom was a concept that came along for me later on down the road, a couple years later when I started to wade into those waters. That changed me from frugal mindset, this penny pincher, who was just almost like scared of life, scared of losing whatever I had saved, or making a bad decision that would get me into rough waters like my parents have been in.

Instead of living life with this mindset that money has this opportunity, I was thinking of it as I have to hold on to this money, because if I don’t I could get into big trouble. That changed a few years later as I kind of grew, learned and read. I was like, money has this potential, has this power. It has this ability to create security, and to create a financial freedom in my life. That’s what I really want.

I think there’s a lot of people that I respect that have said similar things. I was kind of saving up, building, and investing, and I realized I don’t want to be a billionaire, but it can, instead of mega wealthy, it can make you mega secure and allow you to live the life that you want to live.

Scott: I think it’s funny because you talk about fear, and fear I think is the driving force behind why people don’t take on debt, why they save a lot of money, why they keep their expenses really low and live frugally. Some cases taken too extreme, it can be miserly. This change in mindset is what I think a lot of people that- by the way, that fear does instill I think a good set of habits, in terms of being able to save money. It can force people to go too far for that reason, but that shift into opportunity is I think where people begin building wealth and really seizing life.

Did this shift in thinking about money from a fear perspective to an opportunity perspective, is that about the time when you began to think about investing your money that you were accumulating?

Scott: Yeah, it is. I have to say a lot of this I owe to my second job out of school. I always wanted to work in radio. I will say this too. I think your job, if you can, and this isn’t the case for everybody, but if you can, and I think most people can do this, I think it’s important to work at a job that you like. I think it’s important to attempt to be fulfilled in your work, and I think we’re really lucky in United States that most of us have that ability. We have so much choice of occupation. We can go work for ourselves, and do something that we want to do and make money on it that way.

For me even though I had this fear in me of losing everything, of ending up like what I’ve seen happened with my parents, I still decided it was really important for me to do something that I got excited about going into work everyday. For me, I’ve always wanted to work in radio. I love the medium. I love the idea that just like this podcast, you can create this message.

You can get this message out there to tens of thousands of people in one fell swoop. You can communicate exactly what you want to communicate. You can build a tribe. You can create excitement. That’s something really cool that you can’t do in TV. You can’t do it in almost anything else. People that listen to the BiggerPockets Money podcast, they feel like they know you guys. That’s so cool.

I always wanted to work in radio. That was really important for me even though I knew it didn’t pay a lot. That was still a crucial decision for me. My second job in radio was working for this guy that you guys know, and many of your listeners have probably heard about. His name is Clark Howard. Clark is a money master, and really working with him, developing a friendship with him helped me to go from living my life, as a life of scarcity that I had to worry about all these dollars that were coming into my life that they might pass through my fingers, to this life of, I can use money as a tool to help build the life that I want, and I don’t have to be worried about it everyday.

Mindy: You touched on a couple of things that really, really hit home. The first one is being happy in your job. A lot of people who are listening to this show are listening because they want to attain financial freedom, financial independence at some point. That doesn’t mean that you have to stop working. That just means that you no longer have to work. Being able to go to a job that you enjoy, makes your life so much better. You spend 40 hours a week at your job. You don’t want to spend 40 horrible hours. You don’t want to wake up in the morning be, ‘got to, go to work.’

I actually feel guilty going to work sometimes. I’ll get up. The girls are fighting. Carl’s got to deal with them. I’m like, ‘Okay, see you. I got to go have an awesome day. Sorry you have to deal with girls that are bickering.’ I’m sure that never happens at your house, Joel.

Joel: Never. Never.

Mindy: Kids are great. Making sure that you have a job that you love is fabulous. If you have to work for money, having a job that you love is not always the first choice. It’s not always something that you have the opportunity to do. Like you said your dad had this job and then he lost it. He had to take whatever he could because money was such a factor.

Using money as the tool that it is to buy you this freedom doesn’t mean that, necessarily that you don’t have to work anymore. You can still have a really great life, and a fulfilling life. You help people on the Clark Howard Show everyday. You help them learn about how to handle their money properly. Sorry, I get all worked up. I really get a joy, I get excited about this.

Scott: Well, I got a follow up question here. Could you have taken a job that paid more that you might have enjoyed less? Did you have that option when you took his first job, or could you now?

Joel: Most definitely, to both. Coming out of college, I took a part-time job working for Clark. On the side when I first started working for Clark, I was pressure washing houses in the morning. I grabbed the company truck. I’d go out to like three houses. I’d pressure wash houses early in the morning. I’d go shower up and I’d go into my job at the radio station. I was working 25 hours a week in radio, and pressure washing houses on the side.

After a couple years, I was able to bump up my pay enough to where I could just work in radio. I could just focus on that. My goal everyday that I walked in there was, I want to see that I’m working hard enough that they want to make me a full time employee, and that I will pay off when that happens.

I developed this work ethic where I was willing to take multiple jobs, on willing to work as hard as I could, and do as much as I could. I didn’t want to be too tired from pressure washing. I had to get the motivation. I had to get the gumption to keep going. That was really important for me.

Scott: Do you think that the reason you were able to do that is because you were not living an expensive lifestyle?

Joel: Oh sure. Yeah. I think that was hugely important. I was still able to save money. Even making $24,000 a year at my first job in radio, I was able to save up 20% down to put down on my first house that I purchased in 2009. I think most people making that kind of money think that’s impossible, that, ‘Maybe I can get the 3.5% down to get an FHA loan, or maybe I can get 5% down and I’m still paying PMI every month.’

I’m not okay with that. I don’t want to pay PMI on houses. I don’t want to pay extra money that I don’t need to pay. I’m not cool with fees. I’m not cool with needless debt. I think you can save but it starts with a frugal lifestyle.

Mindy: How much was 20% down? You’re in Atlanta. You’re in Georgia where it’s not necessarily the highest cost of living in America. What was the cost of the house? How much money did you put down? How long did it take you to save at $24,000 a year?

Joel: Yeah. For me, I guess it took about three and a half years to save that money. My first house cost $89,000, so pretty cheap. The same house is in this neighborhood. I still live in the same neighborhood. The house is in this neighborhood. That particular one is worth probably four times as much now. I really got fortunate to buy it at a good time.

Someone trying to save up 20% down to buy a house right now is in a different situation. It’s just so much harder. Housing prices are so much more expensive almost everywhere in the country. It’s a different situation, but in any situation where you find yourself, when it comes to your salary and saving, you can find ways to cut. You can find ways to save more.

For instance, one of those things that I Iike to do, I think so many more people can cut back on their car cost, from riding a bike. ‘Riding a bike? That’s what kids do. That’s what the kids in Stranger Things do. I don’t ride a bike. That’s such a weird thing.’

I ride my bike all the time to work. Maybe you have to change where you live in order to be able to ride your bike to work. Maybe you can house hack. You guys talk about that all the time. We’ve got someone who lives in the back of our house now. It works out well.

I think people just don’t think outside the box enough. They don’t think about the crazy ways that they can save money, or the ways that they can completely change their lifestyle in order to make things possible. If you’re not willing to think on that level, you’re probably going to be a little more stuck.

Scott: Let’s sum up here. We got some interesting things. We just talked about how you graduated from college with a communications degree with $13,000 in debt. It sounds like you didn’t hold a full time job. You were working two separate jobs this whole entire time, pursuing your dream in radio, working for Clark Howard. It sounds like there might have been something else in there that I’m missing here. Basically you’re able to pay off this $13,000 over the course of graduating from college and save up 20K or so to put down on your $89,000 house.

This whole time you’re crushing it, because of this low-cost lifestyle and investing making aggressive moves. This is an incredible story. Most people are not able to do that when they’re working a full-time job, or part-time jobs that are less than $25,000 a year a piece. Is that an accurate summation of what you did post college, up to that point that we’re discussing here?

Joel: Yeah. Yeah. I’d say that’s pretty accurate. Yeah.

Scott: That’s amazing. You also referred to this house as a first house. One of the two keys that I come to when it comes to saving money are housing and transportation. You got a cheap house with $89,000 in the first place, and you’re biking everywhere. How did this house impact your financial position, was no longer your home, that you moved out or you moved on?

Joel: It was a great first house. When I first found it, I had a roommate. I paid $89,000 for this house. My monthly mortgage was in the 500s. I was able to rent out a room for $450 a month. I was able to cut my cost to almost nothing. Therefore was able to jump start my savings even more. Once that happened, I was just accruing a lot more savings every month. Instead of paying rent and living with buddies, I had been living with a few dudes in town, and we were probably paying like 550 bucks a month or something like that, a piece to rent an apartment.

Now my housing cost had gone way down after I purchased, and had a roommate. I saved, and saved, and saved. That savings I put towards a purchase of another house. It was my goal every two years to buy another house, and rent out the prior house. I think for anyone trying to get into real estate investing, that’s one of the easiest ways to do it.

Let’s say even if you only have 3.5 to 5% cash to put down towards the house, if you have a strategy in place where you’re not just doing it and basically paying the mortgage by yourself, if you have a strategy to have a roommate or figure out a way to rent a portion of it out, or AirBnb a room, to cut down the cost then I think it can be worthwhile. For me, it was a goal. Every two years save 20% up to buy another house, move into that and rent out the prior home.

Scott: I got to chime in here, because I’m assuming here and I want to know if I’m right, I’m assuming that your ability to save up that 20% became exponentially easier over the last couple years, as you racked up some properties, and maybe some things went correctly. Were you able to exceed that plan, or could you have exceeded that plan if you wanted to, after that first purchase?

Joel: Housing prices really started to shoot up. It made it a lot harder to save up 20%. If I was buying $89,000 houses every year or something like that, it would have been easier. I think too, part of my real estate investing philosophy, is I want to invest really locally. I want to be able to mow my own lawns, walk to the houses. To me that’s really important. I know a lot of people are down with investing all over the United States, and that’s awesome.

For me, I want to be able to invest in my neighborhood or at least close by, and be able to manage the properties myself, and make sure that they’re appreciating at the rate that I want to. I want to make sure that they’re taken care of, and looking good, and that I’ve got the right tenants in there. Yeah, I probably could have stepped that up, but I’m not like hook, line and sinker in for this fully optimized lifestyle either.

I think optimization is great in a lot of arenas, but I don’t want to overdo it. I don’t want to over leverage myself. I don’t want to stretch too far, when it comes to my time. I’ve got a beautiful wife, two daughters. My goal is to work smart, and not work hard. I don’t want to be busting my back everyday in order to manage 30 rental properties. I think if I go slowly at the pace two a year, and build towards financial independence and eventually that’s my full time gig, but for right now I just want to go slow and steady.

Mindy: You’ve mentioned financial independence a couple times. Clark Howards talks about this too. Is that how you discovered financial independence, was through Clark? Did you purposely go work for him because of his finance background, or did it just happen?

Joel: Yeah. Also, I had worked as an intern at that radio station. Then I got a job at a radio station just down the street for six months. Then I quit because I wanted to take a road trip across the country with my best friend in a station wagon. We did that for three months. By the way, I recommend that to anyone. You learn so much as a young person, traveling and doing something like that. We were able to do it for less than $5,000 for three months. There’s so many ways to camp for free, cheap, stay with friends. It was a life-changing experience, and so worthwhile.

I thought I was going to move to the West Coast, honestly. When I came back for Christmas, I had a return ticket booked, but there was this job up with Clark. I decide to apply for it. I think I didn’t know at the time, that this is perfect for me. It turned out, it was perfect for me. I got really lucky that Clark took a chance on me. I was super young kid, just really earnest and eager. It’s turned out to be a really, really great fit for me. I think a great fit for Clark. I’ve worked with him for over 11 years now. It’s just been fantastic.

Yes, the concept of financial independence, working towards that, I learned a lot of that from Clark. Like I said, I had this kind of fearful view of money. Working for Clark and with him, really opened my eyes to the ways that I can use money in a positive way.

Scott: I love it. What I’m hearing from you is you did all the right things at first without sacrificing the fun and joy in life. You were just able to build up this foundation from which to pursue financial independence, even if you weren’t intentionally or you more intentionally begin focusing on it, further on down the road. Had this kind of fear of money that morphed into the healthy assessment of money as an opportunity to live life on your terms.

Now you’re in this position where you’re saying, ‘Hey, I’m not going to go aggressively build out this portfolio beyond my means. I’m sitting pretty. I’ve got a great life. I’ve got a great job. I got a great family. I can continue just buying properties at my own pace with a very modest amount of risk, and I’m going to hit my target of financial freedom very soon and very comfortably.’

That is such a good position to be in life. You are not tied to any job. You’re not tied to anything. I’m sure that if you lost your job tomorrow unexpectedly, which seems very unlikely, that you could go out and finish out the journey to financial independence, or get part time work or whatever and be very, very comfortable still. What a powerful place to be in, approaching life. Can I ask how old you are?

Joel: Yeah. I’m 34.

Scott: 34. Yes. Most your life you’re going to spend in the state of very healthy comfort with your financial position, and working jobs that you love, and doing things that you want. This is just like textbook case of starting from almost disadvantaged position with these kind of part-time jobs, and really just crushing it in every aspect to finance.

Joel: I think I’ve been really fortunate. There’s hard work and luck kind of coincide a lot times. They’re both really important. Working hard’s really important, but sometimes that lucky break is really important. If you’re out there, working hard and you haven’t caught that lucky break, it’s coming. You got to keep working hard and you’re gonna catch one. That’s what happens when you work hard. The luck is going to find you.

My mindset about money is, like I said for a while I was fearful about it, and I didn’t want anything to slip through my fingers. I think at this point in my life, I’ve gotten a lot more comfortable thinking about what I want my life to look like. Not making sure that I’m saving 60% of my money. I think that’s a well-intentioned goal. That’s a great thing for a lot of people to strive for.

For me where I’m at, I want to work a job that I enjoy, I want to have a good savings rate, a good healthy savings rate, I want to be pursuing investments that are going to make me money over time, but ultimately I want my life to look like now, like I want it to look like in 30 years. I want my life to look like right now.

If I won the lottery tomorrow, it wouldn’t change much. I truly feel that way about my life. I’ve tried to order my life in such a way that I’m secure with money, and that I actually love my job, and I love the way my life looks on normal basis. I’m not working 60, 70 hours a week in order to make that possible.

I think it’s a really important lesson for people. I think sometimes they think they need to work more than it’s healthy. They need to put their nose to the grindstone at a level that it’s just terrible for your life, and ultimately makes you miserable. You’re missing out on the things along the way that are crucially important to being a human.

Scott: I’ll throw in that, you said that the harder you work, the more chances for luck will appear to you. I agree with that to a certain extent, but the underlying factor that helped you get some of these opportunities was your savings rate as well. It’s got hard work coupled with that low expenses, relative expenses that equals that. There’s people that are stuck working really, really hard all day long and never getting ahead, I guarantee you that a huge portion of those folks that are unable to catch a lucky break are in that position because they have nothing to fall back on.

They can’t take that three months and travel across the country. They can’t take that part time job that might lead to an awesome opportunity down a line, because they have nothing to fall back on. If you want that luck to appear, I think that there’s a huge component of it is, yes, work hard, but also build up your personal financial position that you’re prepared to take advantage of those opportunities.

Joel: I completely agree with you. For instance with my parents, my dad is the hardest worker I know. My mom is the second hardest worker I know. They’re pretty much the same. They’re skilled people. They’re wonderful people. They’re kind people. They work so hard everyday, their employers get way more than they deserve out them.

It’s incredible. It makes me want to work hard, makes you want to work harder, but you’re right. They didn’t combine it with the savings rate. They didn’t combine it with living below their means. That is what put them in a position of hardship when I was growing up. It wasn’t their lack of hard work, it was their lack of being able to save money.

Mindy: I’ve heard Scott talk a lot. We work together, all day, everyday. I’ve heard him say that ‘luck is preparation plus opportunity.’

Scott: I didn’t make that quote up, but I like to repeat it. Yeah. I think it was Arnold Palmer maybe. He said something like that. ‘The harder I practice, the luckier I get.’ There’s a lot of these things, but yeah. I’m a huge fan of that, but I don’t want to take credit for quotes that have been around for-.

Mindy: Oh, I thought that was yours. Okay.

Scott: No, no,

Joel: Arnold Palmer said, ‘Let’s make sweet tea and lemonade.’

Scott: Yeah, that was-.

Joel: It’s weird, I know.

Mindy: That is really weird. You can’t do that. You said you wanted to create passive income streams, in times that we’ve talked before. How much passive income do you currently have versus your expenses? If you lost your job tomorrow, you’d have no way to make any income. How long could you live on your current income streams? How many more do you need before you hit financial independence, this freedom number?

Joel: Yeah. That’s a good question. The actual number of how much I’m making on my rental properties every month is about $2500, which is getting close. Ultimately I want to have a few more rental properties, better generating, something similar, roughly $800 a piece every month. That’s where I am at. I’ve also been really lucky to buy properties that were undervalued and that were in a rapidly appreciating place.

Atlanta right now is crazy hot. People want to move here. They called Hotlanta. The movie industry is booming in Atlanta. People are moving here in droves. There’s a lot of Fortune 500 companies in Atlanta. Intown Atlanta in particular, is growing really quickly because the traffic situation here is God awful, because of all these factors where I live is changing like crazy.

They’re building constantly and the single family homes that I purchased in these areas have appreciated so rapidly. I can almost sell them all right now, and retire right now if I wanted to I think, if I lived incredibly frugally. I love the idea and I love where things are going, and having just that monthly income from them every month. Ultimately, my goal with that monthly income is to save it, put it in stocks and then also save it up even more so for the next rental property.

Ultimately, I would love to have three to five more rental properties. I think my next venture, I’d like it actually to be a multifamily house. I’m actually looking at a nine-plex right now. I don’t know if it’s going to happen or not, but I kind of like the idea of getting into something a little bit bigger with my next purchase. We’ll see how that goes.

Scott: Do you invest outside of real estate at all? Do you have a stock portfolio or other side projects that you been working on?

Joel: Yes, I’ve always put money every month into my 401k, getting minimum of the match. I think that’s really hard for people too. If you’re not investing in your 401k at work, you’re never going to get a better return than 50% on your money, if your employer offers a match. You got to do that. On top of that, I invest in a Roth IRA as well. I think that’s important.

I have begun to realize in the last couple of years, I think especially for someone who wants to be financially independent, real estate is probably the best vehicle for that. I think it’s great that I have stock portfolio. I’m so glad that I’ve been investing in that over the years and I will continue to do so, but I’m going to continue to allocate more of my resources towards real estate instead. It can provide that monthly income potential.

Then ultimately, like I said, where I live and what I see, I think for most investors considering appreciation, they probably weigh that too heavily, and I don’t think it’s smart. I think if you know your neighborhoods really, really well and you know what’s happening and you’re in tune the city, you can invest for appreciation at the same time as investing for a monthly return.

Scott: Yeah. I like that approach a lot. That’s what I do here in Denver. The first thing that I think makes sense for real estate investments is, from my philosophy, I agree completely with this. I have to cash flow. I have to produce a positive cash flow, but I’m willing to get slightly less positive cash flow if I can put myself on a position that I think will give me benefits speculatively, because I think the neighborhood’s going to improve or this construction project going on nearby, or just the local market’s going to improve.

I think that it’s foolish to depend on appreciation to make your investment, but it could also be foolish to completely dismiss its potential as well, if you’re not willing to do that a little extra homework. It sounds like you’re taking a smart balance of the two for your local market.

Joel: Yeah. When I’m looking at a deal, I’m essentially looking at three main things. First, I want to get a deal. I want it to be undervalued. I want the person selling it to be asking less than it’s worth. Second, I want it to be cash flow positive. I want it to be in my mind, the 1% rule. This nine-plex, they’re asking $750,000, and I think I can get gross rent, $100,000 a year, so that’s crushing 1% rule for me. Then ultimately, I also want it to be in a place where I think appreciation is going to happen quickly.

If I’m buying the deal and I’m getting good positive cash flow, and I think it’s going to appreciate well- this nine-plex is one block from a suburban downtown area. Young professionals might want to live there. It’s easy to get in town. They can walk to cool stuff. I think there’s a lot of stuff starting to happen around that downtown area as well. I see just a lot of positive benefits for rapid appreciation at the same time. If I can hit all three of those in the same deal and I’m always trying to do that, then I’m happy.

Scott: That sounds fantastic. This nine-plex, is it within a quick drive from wherever you live or you can manage it yourself pretty easily and fulfill your dream of mowing all your own lawns?

Joel: Yes I can. It will be the furthest one out for me. Honestly, the first two are within a mile. I literally walk by them. Then the most recent one I purchased, it was the first one that I didn’t actually live in, is about 10 minutes away. This nine-plex would be about 30 minutes away. I’m getting into that section where I’m getting a little bit further out, but which, perfect world I would not do.

When you’re looking at for the deal, when you’re looking to hit those three things with every deal, you have to be willing to do that. I think if it was a single-family home, I’d be much less likely to do it 30 minutes away. A nine-plex and you’re talking about the potential income of that generates, dude I’ll drive 30 minutes, three days a week in order to make that deal happen.

Mindy: There’s people that drive 30 minutes every one way to work every single day. There’s people who drive an hour. I don’t know how bad traffic is in Atlanta now, but I used to live in Chicago and traffic’s really awful. It’s an hour to get anywhere at least. 30 minutes, for money-.

Joel: I don’t understand those people. I don’t understand those people. I can’t do it.

Mindy: I currently live quite a ways away from the office, but I’m only in here twice a week, so it’s a little bit better. It’s actually kind of fun because then I can listen to grown up music, and no kids fighting in the back seat, and that’s kind of nice.

Okay. I want to talk about the house you live in right now. You said that you rent out the back of your house. How long have you done that? Is this the plan forever or is it just right now? Is it a full-time thing, or is it Airbnb? Is it like a duplex? Are you sharing your actual house? Most importantly, how does your wife feel about this?

I have heard stories from people who were like, ‘I don’t want to live with anybody. My husband wants to house hack, and no away.’ Go.

Joel: Alright. We felt so lucky when we found this house. It was the perfect setup for us. The way it is setup, it is essentially setup like a duplex. We have a front entrance and a back side entrance. The front entrance is ours. We live in a two-bed one-bath portion of it. It’s about 1300 square feet.

Then the back portion is, one of our friends rents. There is only a door separating our units. That’s not even like a wall. It’s just a door. On the weekends, she’ll come through and do laundry. Actually, honestly, it’s perfect. My wife loves it.

She was just telling me last night. ‘We don’t have more kids,’ because we’ve always assumed that at some point, since it’s just the door, we’ll take over the whole house at some point. She said, ‘If we don’t have anymore kids, I’d love to keep her back there forever.’ It’s awesome. It’s just nice to have someone else in the house when I’m away, and to have that income as well that pays for more than half the mortgage.

Mindy: Oh, wow. You said she has her own bathroom.

Joel: Own bathroom. Own small kitchen. We do share a thermostat. She has to be okay with my incredibly frugal cheap usage of electricity, but she is, so that’s cool. She knows how to wear a snuggie if she needs to stay warm in the winter.

Mindy: Or a mouse onesie, as Tanya did from Our Next Life, on Show 13. She keeps her house at 55 degrees, and she lives in Tahoe. It’s like really cold.

Joel: She’s a little more committed to the cause than I am.

Mindy: On a side note, your wife sounds like she’s onboard with the whole frugality thing. Did you guys talk about money before you got married?

Joel: We totally did. Oh yeah. She knew where I worked, what I did, how much it meant to me, my past and my history with it. Yeah, we were on the same page. I will say this. When it comes to us thinking about money together, it has taken a lot of time, and it has taken a lot of intentionality. For the longest time even as I was starting to think more positively about money, I just don’t want to either not buy anything, or get the cheapest deal possible.

When she would buy something, I would have been like, ‘Oh you should have let me shop for that for you,’ or something like that. We’ve had to create this dialogue, create a budget that allows for her not to have to bend her life to my rules. That actually sounds really strong. ‘Bend her life to my rules.’ I don’t think it’s quite like that. I don’t think I’m like a brutal dictatorship or anything like that, with money in this house.

We’ve created a budget I think that works for us, and that we feel flexibility that, a separate fund for her and fund for me every month. When she spends money, we don’t have to answer to each other. If I want to buy something stupid like soccer tickets, that’s on me too. We have the freedom to do that. We don’t have to discuss every little purchase with each other, which is helpful.

I think different couples do it in different ways, but you have to find a system that works for you where you’re not bearing down on each other for purchases that you want to make, as long as it falls within the budget. That’s why a budget is so important, and because I was so frugal for the longest time, I didn’t even budget because I didn’t feel the need to do it, but when I’m talking about these things with my wife, we have to be able to discuss it together and a budget’s crucial for that.

Mindy: That’s so important. You have to be able to discuss it together, and discuss not fight. You have to make a budget that works for you. I’m not in your marriage. My budget doesn’t have to work for you. It only has to work for me and my husband. You budget has to work for you and your wife. That’s great, but you got to discuss it.

Scott: I have cautionary tale related to this. One of my friends had a big fight with his wife because the wife bought a several thousand dollar purse. They had a big fight and they took the purse back. A few weeks later, they’re discussing what kind of car to buy. The wife got a very much nicer car in light of fight that they had over the purse. Sometimes the $3000 purse can actually be quite cheap [inaudible][00:42:37], so got to keep those things in mind when you set these budgets for your marriage or your partnership there.

Joel: You don’t want to win the battle and lose the war.

Mindy: Yes.

Scott: Yes.

Mindy: Scott, I have a question for you. Joel is married. I am married. Scott is dating. Have you and your girlfriend discussed money in broad strokes, or frugality. or anything like that?Have you started discussing finances?

Scott: Yes. You may have noticed, but I like to talk about money quite a bit.

Mindy: Yes.

Scott: All day long, everyday, with everyone. Yeah, we have definitely talked about money.

Joel: You were shocked and surprised when Scott said he cared about money.

Mindy: Yes, I was. That was so shocking. Yeah. Carl and I never talked about money. I asked this question one time of a bunch of people- did you talk about money before you got married? I was thinking back and I know we never did. On the other hand, I knew he was a frugal person because he drove in not a brand new car. It wasn’t like the coolest car ever, sorry sweetheart.

He used coupons. We went out on a date and he used a coupon. I wasn’t like, ‘Oh, that’s gross.’ I was like, ‘Yeah, go for it. Let’s save money.’ We didn’t have the conversation but we didn’t need to have the conversation. Looking back now, I can’t believe I didn’t have the conversation. It’s such a big part of my life now, back then nobody talked about money.

Scott: I would say that for my relationship, we handle it pretty well. She’s a teacher. At this point in my life, I’m probably earning a little bit more, probably a lot more. We live very frugally. We don’t have expensive taste. There’s no fights over that kind of stuff.

Our favorite type of night is to maybe go out and have some wings, and then watch a movie, or play Scrabble and have fun like that, or go to a brewery and get a couple beers with some friends. These are not like expensive outings for us. They’re very manageable, and there’s no fundamental disagreements is there at all.

Joel: I just heard beers and now I want to have a beer.

Mindy: Yeah. It’s only a 11:53 here, so we can’t drink. Plus we’re at work.

Scott: You can’t drink all day, if you don’t start in the morning.

Mindy: That is a Scott Trench quote. I quote him frequently.

Scott: I don’t know if [inaudible][00:45:00], but I heard it somewhere and I use it a lot.

Mindy: You didn’t, but I always attribute it to you.

Scott: Well, to go back to Joel’s story here, did we miss anything about your story that we didn’t cover here? Is there any kind of points you want to bring up for us, about your story start to finish here, before we move on to the Famous Four?

Joel: I’m trying to think if there’s anything else we didn’t cover. Man, I think we’ve covered most of it.

Scott: You had plenty. It was a great story. We are not pressuring you to come up with more. This has been fantastic.

Mindy: I have a question. I have a question. A lot of people when I meet them, I’m always asking about money, like, ‘What’s your money story?’ Lots of people don’t want to share that. Some people will hear what I do. They say, ‘Oh, I can never do that. I can never live like that. Aren’t you deprived?’

As a frugal person, do you feel deprived? Do you feel like you’re missing out on anything? I listen to your show. I hear you go to baseball games. You have a baseball jersey, even though it’s expensive. What are you missing out on?

Joel: Yeah. That’s a good question. I don’t think I’m missing out on much. Ultimately, when it comes down to it, I think I live this incredible life. When I look back to when I was my early twenties, what I wanted my life to look like when I was 33 or 34, it looks like that. I feel so fortunate. It’s so much harder to build a life that reflects exactly what you want it to look like.

I think there’s a couple of reasons why I don’t feel deprived. We also, my wife and I, we sit down intentionally think about what are the areas we want to allocate our money, that we feel reflect our values. There are a couple things that nobody else would buy, but we buy because they’re important to us. We like folk art. A lot people don’t even know what folk is.

Mindy: It’s behind your head if you’re looking at the video.

Joel: It’s behind my head. We have so many random, cool pieces of art in our house that you don’t get from home goods, or TJ Max or something like that. That’s really important to us. We buy a piece of art every years. It’s typically, $500, $600, $700 for a big piece of art that we love, that’s one of a kind.

We buy them in honor of our anniversary. I’m like, ‘That was our first anniversary, and this piece was our second anniversary piece.’

Mindy: That’s sweet.

Joel: For us, we want our money to be allocated towards the things that we care about, and then we literally just ruthlessly cut back on the things that don’t mean anything to us. Ultimately, I don’t feel like I’m missing out on anything. One of those things too, by the way, is craft beer. People are like, ‘You’re drinking a $20 bottle of beer.’ Yeah, because it means a lot to me. I care so much about beer. I don’t do that every night, but I drink really good beer. I pay money for beer that people probably think is exorbitant. I’m not spending very much money on all these other things that most people spend their money on.

Scott: You got to come to Denver. We’ve got craft beer that’s really great for $5.

Mindy: You have to come to Denver anyway.

Joel: I’ve been, and I love it. I think I could live in Crooked Stave probably. It’s a wonderful place.

Mindy: I will just say that Crooked Stave is not that far away from where I am currently sitting.

Joel: I’m coming very soon. I promise. I’m going to make it happen.

Mindy: You should. You can come. You can sleep over. Okay. Scott, shall we move on to our Famous Four questions?

Scott: Let’s do it.

Mindy: Okay.

Scott: You want to kick us off?

Mindy: I do. These are the four questions that we ask everybody. It’s actually five, because we don’t know how to count. These are the same questions that we ask everybody when they come on to our show. First question is, what is your favorite finance book?

Joel: Alright. My favorite finance book is the book, Beyond Wealth by Alexander Green. I think it’s my favorite because he pares financial advice with his life wisdom. I love reading that book. It’s really just this collection of short essays that he’s written over the years. One of my favorite quotes from that, he says, ‘Cultivate an attitude of restraint. It will become natural inclination overtime.’ I think that’s great wisdom. There’s like a million quotes like that in this book. I think everybody should read it.

Scott: They’re all my quotes.

Mindy: They’re all Scott’s quotes. Beyond Wealth, by Alexander Green, did you say?

Scott: I’ve never heard of this book. I’ve to go check it out. That’s awesome. I love having new book recommendations.

Mindy: Yes.

Joel: Really, really good. I think money is so psychological and money is so tied to your goals, and how you think about life. You really have to put all those inline together. This book my Alexander Green will help you create a life manifesto, and help you think about your life from different angles, and assess things, and then assess how your money is going out, whether it’s supporting the things you actually care about or not.

Scott: Awesome. What was your biggest money mistake that you’ve made?

Joel: I think it’s a lot of little ones. Here was my trip up, I think for a lot of years. I’ve changed that, especially over the last two years. I’ve buckled down. It was buying things because they were a deal, just buying something because it was on sale. I’d buy a shirt because it was sale for $8, but it was probably regularly a $40 shirt. I didn’t get much use out of it.

I started spending more money on things that I think I’m going to use a lot. I’ll buy a $50 pair of jeans because I literally wear jeans everyday of my life. I have two pairs of $50 jeans. I would rather wear the exact jeans I want to wear than buy something that’s on sale for $15 from H&M, and then never really wear it, because it’s not something I enjoy. I try to have fewer things now, and stop wasting money just when I see a deal.

Scott: A wise man once said, ‘if you don’t need it, it ain’t on sale.’

Mindy: Who said that?

Scott: A wise man. I don’t know.

Mindy: A wise man. That’s something that I see a lot of people doing. When they want to be frugal, so they buy things that are low priced. Okay, what is your best piece of advice for people who are just starting out?

Joel: I would say you can save money no matter how much you make. Whether you’re making $12, $14 an hour or you’re making an annual salary of $24,000 a year, whatever it is, you can save money no matter how much you make. One more thing. I think an hour spent working when you’re young, pays massive dividends later. I would work harder when you’re young, so that you can enjoy the fruits of your labor as you move along in life.

Scott: Awesome. Alright. This is the most difficult question of the Famous Four, but what is your favorite joke to tell at parties?

Joel: Alright. I thought about this one for a long time. I realized I just really like saying sarcastic things and I also love asking people awkward questions. Let’s say someone just got back from a trip, I like to ask, ‘What was the worst part of your trip?’ I like to know the weird things, the hard things. I like to, instead of small talk, get through with an awkward question and see how people respond. I feel like sometimes I can break the ice or build a relationship in a quicker way. I don’t really have a go to corny joke though.

Scott: Alright, fine.

Mindy: Lucky for you, Scott collects them. Scott?

Joel: Alright. Can you send me some that I can try out?

Scott: Yeah. I’ll give you one right now. What did Buddha say to the hot dog vendor?

Joel: Oh, I don’t know.

Scott: Make me one with everything. Do you know what the hot dog vendor said back to Buddha?

Joel: What’s that?

Scott: Sure, but change must come from within. Mindy’s little Buddha token, if you watch the video here, adds greatly to the joke telling. Check us out on YouTube.

Mindy: This is Rob’s little Buddha. Buddha token. There we go. I was hoping that was Buddha.

Okay, if you have a joke that you would like us to read when our guest comes up short, you can send it to [email protected], who will be much more appreciative. You can send it to [email protected] and I will start keeping track of these on a document so that we can bring them in, because this is the hardest question to ask, or the hardest question to answer.

Scott: I have a plug for my old defunct t shirt business that I started maybe five years ago, and probably loss money on. I have a t shirt that has the Buddha joke on it. I got the Buddha saying that to the hot dog guy, and the hot dog guy saying it back to Buddha. Trenches Tees. Check out on Facebook. I don’t even know if it’s still alive. I’ve to go check.

Mindy: [inaudible][00:53:51]

Joel: You could be the eighth follower on Facebook of Trenches Tees.

Mindy: There you go. If it still doesn’t work, you could send him nasty notes, at [email protected].

Okay, Joel, before we wrap this up, we do want to know where people can find out more about you.

Joel: Sure. You can go my website. It’s pournotpoor.com, as in pour a beer. Don’t be poor in life. You can listen to our podcast. I do a podcast about craft beer and money, with my best buddy Matt. Literally, it’s really just an excuse for us to get together, and drink beer, and talk about what we love to talk about. You can find us wherever you’re listening to the BiggerPockets Money podcast. We’re on there too.

Mindy: Yes. Pournotpoor. I will have links to this in the show notes because you want to make sure you’re spelling pour correctly both times.

Joel: I know. That’s the toughest thing about telling people where to listen. It’s easier when you’re looking at the visual. It’s harder to explain verbally.

Mindy: Yes. The show notes for this episode are at biggerpockets.com/moneyshow16. Okay. Joel, thank you so much for taking time out of your busy day to chat with us about money. I think it is really important for people listening to realize that, when you’re having a money issue, that doesn’t just affect your life, that can affect your kids forever. I guess it affected you positively, in that you are not just a spendy person who is mired in debt. I bet for a few years that was really difficult to deal with. Thank you very much for coming and sharing your story with us today. I really appreciate it

Joel: It was a true pleasure. Thank you so much for having me.

Mindy: You’re welcome.

Scott: I love your story. I love everything about what you’re doing. This is fantastic. Thanks so much.

Joel: Thanks, Scott. Had a great time, man.

Mindy: Okay. We’ll talk to you soon.

Joel: You all are the best. It was fun.

Mindy: Okay, bye.

Joel: Alright, bye.

Scott: Okay. That was Joel Larsgaard. What did you think of today’s show, Mindy?

Mindy: I love Joel. I love talking to him. I love listening to his story. He’s just a genuinely nice person, who doesn’t have these huge goals to be the next Warren Buffett, let’s say. He doesn’t have these aspirations to just own everything. He just wants to have a comfortable lifestyle and have fun. That’s really great.

Scott: Isn’t it amazing how people who work really hard, and spend very little money and invest intelligently, seem to just over, and over, and over again get really lucky? Isn’t that a kind of fantastic phenomenon that seems to occur with a bunch of these guests?

Mindy: I don’t think that the word that I would use is lucky. Fortunate. They’re very fortunate. They make smart choices. After 15 episodes of the show, what I see continuously is that this doesn’t have to be this huge thing. You don’t have to give up everything that you love just so you can retire a year early. You can still have everything that means something to you. You just cut out the things that don’t.

Scott: Of course, I am being facetious. Joel was not lucky. Everyone who even bought real estate or stocks in the last couple of years, saw a nice, booming market, but the fact of the matter is, Joel hustled, lived very frugally and made his own luck, and has been consistently apply his formula for wealth-building, and living an awesome life, over nearly a decade. He is reaping the rewards of that right now, and living an awesome lifestyle with a lot of options.

Mindy: Yes. Yes. He’s got a really great life. He does what he wants. That’s really what this is all about. Okay. So, Scott, shall we get out of here?

Scott: Let’s get out of here. For the BiggerPockets Money show, this is Mindy Jensen. Over and out.