Our Journey

I began investing at a very young age, but my first security was when I was 18 years old with handpicked stocks. As a young professional, many in my company recommended that I invest in our 401(k) plan, and I was not sure where to start. I had a friend that worked for a financial planner, so I ended up meeting with him to get some advice. The financial planner recommended that I set up a life insurance annuity that would have a cash value over time and develop into a decent-sized retirement account over by the time I came of age, so I started putting most of my savings there.

A couple of years after I began investing in the annuity, the Great Recession hit. I was young without much investing experience, so out of fear, I closed that account when banks started going under. I was still many years from having cash value in that plan, so the money was lost. I continued to dabble in stocks for quite some time and even tried penny stocks, which I did well on, but required much time managing. I later found out many of these were “pump and dump” schemes, and I was extremely lucky to have made any money on them. 

After I got married, I started to work with my wife’s family financial planner, and he did an excellent job of helping us put together a real budget and get control of our finances. We also started to take advantage of Roth IRAs and 401(k)s. My W2 income was rapidly increasing as I was successful in my career, and I started learning and taking advantage of all of the benefits of reducing taxable income. I began leveraging plans like HSAs, DCFSAs, LPFSAs, deductions, and anything else I could find. These are all great strategies that have benefited me much.

The next phase of my journey was to leverage my spending power to get rewards on my credit cards after a colleague at work explained how she had traveled to dozens of countries without paying for them using this method. My wife did not like the idea of us using credit cards, and I explained that if we are disciplined enough to pay them off each month, they can put thousands of dollars back into our pockets each year. We don’t travel often, so we mainly take advantage of cashback cards (like Alliant for all non-Amazon purchases). It is essential we do not get into the trap of paying interest on credit cards, so we manage these carefully and have auto-pay the full balance off each month. Debt can be a powerful tool, but we ensure we only leverage good debt that has a low or zero percent interest rate. We use that leverage to multiply our earning power (remember this part for the real estate section).

Next, I began to optimize other expenses. I started to review all my expenses regularly and became obsessed with running my family budget like I would a business. At this time, I was running a business and learned some valuable skills that, when applied to personal finances, are extremely helpful. I still have this habit and, at least once a year, review my internet service costs, streaming services, etc. Another tool is to use customer retention programs. Just about every company has one. For example, I use Audible quite a bit. After signing up, I can go through the cancelation process on their website, which immediately offers a discount as a retention strategy. You can often call companies and ask to speak to a customer retention specialist who will provide you with discounts.

The next strategy I found was the power of Amazon’s subscribe and save. If I order 5 or more items in a given month, I will get 15% off. I also get another 5% off with an Amazon credit card, so that is 20% savings on many items that are already cheaper than local stores. I still check local stores because sometimes, in rare cases, Amazon’s prices are much higher. Even if they are close to the same price, when I factor in the 20% discount, that usually makes buying from Amazon cheaper. I buy almost all of our household necessities on this program: toilet paper, paper towels, soap, toothpaste, toothbrush heads, snacks, dryer sheets, laundry detergent, dog food, etc. Something else I found out is if I am buying multiple of the same items, rather than having one subscription for the quantity I need, I add them as separate subscriptions. This helps ensure I have 5 subscriptions being delivered each time and bumps my savings rate up from 5% to 15%.

At this point, I had optimized all I could think of, and I had reduced taxable income and expenses, thus massively increasing my cash flow. With this extra cash, I was able to dabble in some more exotic investments like cryptocurrency, precious metals, auto-investors like Wealthfront, and even some venture capital. I did very well in these investments, but that was because I invested at the right time.

I was doing much better financially, but almost all of my income was still active. I still had to go to work every day to get a paycheck, and I earned very little from dividends on my stocks. I started researching online and found some other avenues to try like Lending Club. That program was fine but produced small returns. It was not moving the needle toward financial freedom to have a couple of thousand dollars a year in passive income. I also did not want to live a life of extreme frugality like some blogs I had read suggested to achieve financial freedom either. I believed there were smarter ways to achieve this goal.

It is incredible to me how hard it was to find a real and impactful source of passive income even after the hundreds of hours I had spent researching online, watching videos, and reading books. I think to some degree, I had told myself real estate was too hard, or I was still scared from the banking/real estate bubble that triggered the Great Recession and that is why I had avoided the industry. I also thought prices were too high after prices started making a big come back, and maybe that is why I did not get in sooner. However, one day I was digging in an old box with some childhood items and came across a book called Rich Dad Poor Dad that was given to me when I was in my early teens. At the time, as a kid, I did not read it because I thought the cover looked “stupid” because it was purple. What a mistake that was.

When I read this book for the first time, it was like fireworks were going off in my brain, and I knew I had just stumbled into something that would change my life. After I got into real estate, I was amazed at how many people had been led there by this book. It was such a fantastic introduction to the mindset of the rich and how real estate was the most popular investment vehicle among them.

I then spent about 1.5 years reading and watching hundreds of more hours of real estate investing content before I bumped into a fellow investor who happened to be my neighbor. He told me about a real estate education and mentoring group he was part of and suggested I join. I was hesitant, and it took almost a year before I joined, but when I finally did, it was another life-changing experience. I went from being scared and not knowing what to do to get started in real estate, to developing an actionable plan and making massive progress within just one month!

Since then, real estate has been my preferred investment vehicle, and I have liquidated the majority of the other investments I previously had to focus on real estate. Diversification is still important to me, but instead of different vehicles, I concentrate more on different regions and markets to minimize the impact of disruptions. Great investors and entrepreneurs like Buffet and Carnegie have been quoted saying something along the lines of “Keep all your eggs in one basket, but watch that basket closely.” Over the years, I have decided I was no longer going to put all of my money into retirement plans and hope for the best. I became educated enough to manage my own investments. This is not for everyone, as it takes time to put together a winning strategy, but the result, particularly for investing in real estate, is much higher returns and much much lower taxes. Here is why I think real estate is so powerful and the different ways I make money.

Stocks and most other investments only generate money in one way, through appreciation of the asset. Sometimes good dividend stocks will pay out quarterly distributions, and a second income stream is formed, but typically not at impressive rates. Real estate, when bought and managed correctly, can generate wealth at a much more rapid rate.

Not all real estate is managed the same, and I was fortunate enough to find the real estate education and mentoring group my neighbor referred me to, as mentioned above, to show me the correct way. The education provided helped me steer clear of some real estate investments I had been evaluating. These investments included blind pools, massive fees, and waterfall methods that, after I became educated, I found would have had a dramatic impact on returns. I also found one of these deals was simply a loan I would have been making so that the people sponsoring the deal could fund the property acquisition and claim all of the returns and tax benefits without having to share any of that with their investors. I quickly realized that there are tons of types of real estate investments that are suboptimal, and it is hard to tell which were right for me and my goals without help from experienced people.

Please see the Why Real Estate for more details on how we make money through real estate investing.