From 100K in Debt to Building Generational Wealth as a Couple with Josh and Ali (The FI Couple)

Transcript:

On this episode of the Personal Finance Podcast, we're going to talk to the five couple about paying off debt, real estate, and how to manage money as a couple.

What's up everybody? Welcome to the Personal Finance podcast. I'm your host Andrew, founder of Master money.co. And today on the Personal finance podcast we're going to be talking to the fi couple about how they paid off $100,000 in debt. We're going to talk about their real estate investing in house hacking.

We're going to talk about how they invest their dollars in the market. And in addition, we're going to talk about how to manage money as a couple as well. So this episode is jam packed. So, so excited to share this with you guys and if you guys have any questions, make sure you hit us up on Instagram or TikTok at Master Money Co and follow us on Spotify, Apple podcast or whatever podcast player you love.

Listen to this podcast too. And if you want to help out the show, leave a five star rating and review on Apple Podcast or Spotify. Cannot thank you guys enough for leaving those five star ratings and reviews. So today we are talking to Josh and Allie, the fi couple, and we're going to be talking about so many amazing things.

And one cool thing about their story is that they prioritize paying down their debt so that they could build a tremendous amount of wealth. And we go into so many details on how they paid off their debt, how they look at rental properties and building wealth with rental properties. What type of mistakes did they make with some of their first rental properties?

Then we go into how they invest their dollars in the market as well and how their asset elected is between buying rental properties and buying real estate and buying investments in the market. And then one cool thing we do is we do a rapid fire bunch of questions about how they handle money as a couple, how they talk through money, how they think about money and how they set financial goals as well.

So this episode is action-packed. I'm so excited to share this with you guys because Josh and Ali are absolutely amazing and I expect some major things from them. I think they're going to do some really cool things here in the future as well. Outside of what they've already done, they've done some amazing, amazing things. So without further ado, let's welcome Josh and Ali to the Personal Finance Podcast.

So Josh Giannelli, welcome to the Personal Finance Podcast. Thank you so much. We're super excited to be here today and to connect with you. Absolutely, Andrew. Thank you. Absolutely. So we are so incredibly excited to have you here because you've done some amazing things in a short amount of time. And I've seen you guys on Instagram and all over social media and you've done some really, really cool stuff, one of which you paid off $100,000 in debt, you bought rental properties, you invest in the market as well.

So I kind of want to talk through all of these things and see exactly how you guys did this. But before we dive in, I kind of want to get into your background a little bit and how did you get interested into financial independence? And were you both interested in financial independence or was it just one of you that kind of convinced the other one? Yeah, no, thank you.

I would say it started probably back in 2017, so about five years ago now. It was the year before our wedding. Ali was finishing up a masters program and for the first time we were going to have two full time incomes, which was going to be really nice because we were just living off my income while she was going through her masters program.

And I think it was the act of planning for a wedding that got us for one of the first times really starting to talk about just like money in general, budgeting and saving things of that nature. And in doing so, we started to look at like bank statements and balance sheets.

And I knew I had student loans and we kind of had an idea of alley student loans, but we'd never really like tallied them all up. We also had card debt. We never really put all of that number down on paper. And so just for a fun exercise if you will, we we, we started putting all of our personal financial situation down to figure out how we could save for a wedding.

And it was at that point we realized we had over $100,000 of debt and we are pretty much spending just about every dollar that was coming in. So that was really terrifying for us and kind of one of those like, wow, what are we doing with our lives moment like our financial situation is not good.

We're both in the Human Services field, so we're like, historically not making really good incomes. And they're like high burnout, intense careers. So I think for Josh, like, that immediately, like, lit the fire of like, we need to make some changes. I was kind of like, yeah, you know, like, everyone has debt.

Like, this is the life of everyone. Like, it's no big deal. But I think it really caused a lot of anxiety for you, which caused you to go down the rabbit hole of personal finance research. Yeah, I kind of went to the Internet and it was like, OK, well, we have debt. How do we not have debt?

And at that point, we were both working crazy hours too. And so it was like, how do we not have debt? And how do we maybe get a little bit of flexibility back into our life? And so the first resource I found was actually like the Dave Ramsey Total Money makeover. And I was like, OK, cool, now I know this is how we can pay off debt.

And it was, you know, rice and beans and cut out all the fun stuff and stuff like that. And I think we gave it a shot, but it still felt like it wasn't really going to work for our lifestyle or work with our goals or timeline. We did it for like a hot minute, but it kind of got to the point where it's like, if we continue with this, a marriage probably isn't going to happen because we were just like, really fighting.

And I was not on board with it. And it felt very like restrictive and like very deprived in a lot of ways. So Josh went back to the drawing board and did more research. Yep, and that was actually when I discovered Bigger Pockets. We now are real estate investors, but back then we never thought it was something that could be done, especially for people in our situation discovered Bigger Pockets.

And that was actually when I read the book Set for Life by Scott Trench. And that was when we became introduced to the concept of house hacking, which was, you know, buying a home. You could be a single family home with extra rooms, could be a duplex with an extra apartment, so on and so forth, where we could buy it using a low down payment, move into one side and then collect the rent from the other side as a way to reduce our total housing cost.

And in the book, too, Scott laid out the study that found I think it was like 63% of the average budget was housing, food and transportation. And so I was like, well, instead of cutting out like $10 Netflix and the occasional $3 Starbucks, what if we cut out our $1300 a month rent payment and our $240 car payment?

Like we will be able to pay off debt a lot faster. And so that became our focus. And all of that sounds really good. And to answer your second question, were we both enthused or on the same page? The answer was like, heck no, Josh was really enthused.

Josh did all the research and then kind of came at me like a human tornado and was like, this is what's happening. We're going to, you know, become landlords and sell our cars and reduce our cost of living. And it's going to be amazing. And we're going to retire early. And I thought he had, like, totally lost his mind.

And, like, it sounds very dramatic, but I was like, this guy's about to ruin my life. Like, what's happening right now. That was a big conversation and really overwhelming. So I love that because what we're looking at here is this is actually kind of what happened with my wife and I as well, where I kind of just threw everything at her when we first kind of, we're going through this process, the same exact process.

And she resisted it initially as well because the way I was kind of approaching it was we're going to cut everything out. And then from there, we'll, we'll be happy one day when we get to financial freedom doing lean FIRE or something like that. So really when you do this with a partner and you're kind of discussing some of these things, and I want to talk a lot about how to have these conversations with partners as well, 'cause you guys are the first couple we've actually had on the show.

That's awesome. But talking through this a little bit, 'cause I had to change my approach to start to have these conversations. So when you're discussing the idea of financial independence, how do you approach that with your partner, especially someone who maybe is brand new to this kind of stuff? Well, I'll start with what not to do, which is exactly what Josh did.

So he presented it in a way that was appealing to him, which wasn't necessarily communicating in my own language. So I remember the day like vividly. Like he threw a bunch of personal finance books in my lap and was like, these are the books you need to read. You need to watch this YouTube video and here's like 10 excel sheets to show you why the numbers make sense in the math maths.

And at the time, like I was really not like a math person. So I'm like, I see all these numbers. I really don't care because I had my life vision of like we, I are a nice single family home and we have 2.2 kids and fancy cars and I work my job and I get my pension and all these things.

And what you're saying is like very different and I don't like it. So I think it, we had so many arguments regarding it. I think it forced you to like go back to the drawing board of like, what's going wrong? Why isn't this computing? Because I know it's such a good idea, but like, Ali isn't hearing me, you know?

And I remember a friend of ours, Andy Hill, from Marriage, Kids and Money. I remember listening to his story vividly, kind of when we started down the path to its financial independence. And he had a similar initial outcome with his wife, Nicole, and it was when he learned to reframe his approach and start to speak Nicole's language in terms of her value system that the outcomes got a lot better.

And so I put all my Excel sheets away, my podcasts and everything like that. And Ally and I, one day we had a really, really hard day and we sat outside of our quote UN quote luxury apartment at the time. And I said, let's both list out the five or six things that are most important to us that we love the most.

Like, what's our rich life, if you will? What's our ideal day? And we listed those things, things out and then I said, OK, let's look at your six, let's look at my 6. The lifestyle we have today, how much of time do we actually have to do those things? And surprisingly or not so surprisingly, it was very limited.

And so I said the things that I'm talking about us doing, it's not going to be fun, it's not going to be easy. But all of these things that we say we value the most, we'll have the time to do more of those. And it was like at that moment, something kind of clicked.

And I mean, we still had to have countless conversations after that, but no longer was it like the dollars and cents. But I was speaking to Ali's heart and her values. And she was seeing everything that we were going to be doing was a bridge towards greater time, freedom to do the things we love the most.

I think it was also like shining a light on the reality of the things that I thought I wanted. Like, you want a single family home? Yeah, we can't afford one. And if we did get one, be living paycheck to paycheck and never seeing each other because we'd be doing everything we could just to afford it. And I think that often we romanticize certain things in life, but we don't always look alike the reality of what it takes to get there.

So it was kind of like instead of fighting with each other, like our debt became the enemy. And it's like, that is the reason we're in this situation. So let's work together as a team to eliminate it so we can have the life that we want. That is absolutely incredible and I think that's why I wanted to have you both on here because I mean, talking through some of these conversations is one of the biggest things.

And you guys did exactly what I did as well, which is figuring out, OK, what do we actually both want out of life? Because that's what really money is there to help you do is to get towards financial independence and use it towards having your dream life, your rich life, like you said. So that is one of the most incredible things that you can do and you guys kind of set it up that way.

Now, one big thing that you did was you paid off a lot of student loans and a lot of people graduate college with student loans. I know my wife did. We had to pay those down as well. So you went to the process of paying these down very quickly, so how did you pay off your loan so fast? Yeah. So once we kind of understood where most of our money was going and we discovered the concept of house hacking, 2018 was the year that we got married.

Our wedding was August. We saved as much as we could to get to that point. And then once we got through our wedding, we started more aggressively looking to buy our first house hack, which for us was going to be a duplex where we could live in one side and then move into the other.

And so after seeing a lot of properties that really wouldn't have been a good solution, we finally found them one that would be a good fit. So I would say like tangibly, what we did though, we did everything we could to reduce our expenses. And at first that was ordering outlets and cutting out some of the things we liked.

But as Josh said, by house hacking, I mean we cut our cost of living in half. We eventually paid off our cars and we got rid of a car that had a loan on it and bought a used car in cash. So we did everything we could to aggressively reduce our expenses. And then in turn, that gave us some breathing room to attempt to to increase our income by taking on different side hustles, applying for higher paying jobs.

So that combination kind of gave us that growing gap as we talked about in the personal finance world to be able to attack our debt. And at first that meant like an extra $500 payment that meant, you know, an extra 1000. But eventually, as we continue to reduce our cost of living, continue to grow our income, it really compounded.

And like our final student loan payment was like a $25,000 payment, which is like crazy because like there was a time when like we didn't even have $1000 in the bank account and now we're making a $25,000 payment. So the action of continually pulling those levers like really just paid off for us and compounded.

That is incredible. And it sounds like what you guys did was you reduced the major expenses 1st and kind of trickle down to some of the smaller things as well, which I absolutely love because that is one of the best things that you can do early on. And the cool thing about this is that you guys started investing obviously into a house hack. But one big question I get when people are starting to pay down debt is did you invest in the market as well or any other assets?

Or did you invest while you're paying down that debt? And what is your take on that while you're trying to pay down debt? I will say too, like we were looking to pay down debt and the reason why we bought real estate was not initially like we want to be real estate investors. It was literally like, what can we do to pay down the debt?

We need to reduce our cost of living. How do we make our housing cost lower? We didn't have parents we can move in with. So it was like we should buy a multifamily and that will do it. So for us, I personally didn't view it as like we're investing. It was just like we're lowering our cost of living.

We're buying a house. So I don't think we even had like a really great like investor mindset with that first property. Right. And we didn't really identify so much as like real estate investors per SE. So a question that we do get asked all the time, right is do I pay off debt or invest?

And I don't necessarily see it as a either or thing because I think if you have debt, there's a good chance it has an interest rate attached to it. And anything that you can do to pay off that debt faster, you're preserving that interest and it's staying in your pocket instead of going to a bank.

So there's a return on that investment. And so for us, we kind of would break a year down into sprints. And so all of it was investing. It was just a matter of kind of the hierarchy of investments. And so we bought our first property like literally like the third week of December of 2018.

We moved in the week of Christmas. And then we collected rent January of 2019. I would say the first 4 1/2 or five months of 2019, we were pretty much exclusively investing in paying off our student loans. If there was anything leftover like Ali had a workplace retirement account.

And so money was automatically going into that. But we weren't really overly focused on like taxable brokerage or Roth IRA. It was really like laser focused on how do we eliminate debt? We didn't have the additional money to focus on anything else. So I think it is so unique and nuanced to the person situation.

Like in the beginning, we did not have a large gap between our income and expenses, so we did what we could, but as our income grew, our expenses reduced. The gap just kept getting bigger. So we were able to consider different types of investments. Absolutely. And I completely agree with that as well.

I think it's a situational thing for people to figure out how to approach that. And what you guys did, like you said, is it's truly an investment in your future self as well to pay down that debt depending on what the interest rate is. If you have a really high interest rate, for example, obviously you want to get rid of that as fast as possible. But what you guys did was get rid of the debt 1st and then moving forward, then you can invest more dollars going forward.

And as your income rises, you're going to have so much more that you can invest there as well. So one big thing is, and obviously a big factor paying down that debt was reducing those housing costs and house hacking. So can you talk a little bit about that first house hack and how you found that property? Yeah. So we had seen a lot of properties prior to the wedding and most of them were in bad locations.

And again, I had to really reframe how I viewed like what a successful investment would look like because I was listening to all the podcasts and it was like, well, you have to get paid to live for free or it's a failure. And so as a soon to be married person, I was bringing my soon to be wife to look at like absolutely horrendous properties.

Like literally one of the properties we went to was so sketchy and like condemned pretty much. And I remember like there were prayer candles, like the vigil candles on the corner of the street. And like we saw cop and then I like Googled the neighborhood and like there had recently been multiple murders there.

And like Josh was like the alley. The numbers are so good on this property. I'm like, you're crazy. It's not happening. And so once I again, I had to revisit how to speak to my partner's language and making sure that this was a we decision and not just a me decision. And so as our criteria evolved and we started to better understand what winning really looked like for us, we actually found an off market duplex in a really nice neighborhood.

The property was $158,000. This is back in 2018. We did have a real estate agent at the time who introduced us to another couple who was house hacking but was now on their second child and had outgrown the space. And what was kind of cool is I think sometimes people think that when people are selling properties, they just want like the most money and sometimes that is the case.

This couple had put so much time and energy into the property and they really resonated with our story. So they wanted to work with a couple that they could have resonate with, but they also needed a long time to close because they wanted to buy a single family home for their family. And so we had scraped up every dollar that we had.

We said take as long as you want to sell the property to us just. Sell it to us. Just sell it to us. So we ended up putting 5% down. We used a 5% conventional loan which ended up being. It was 14,200 and we moved in ended December.

The payment was $13184 and we knew that the person upstairs was paying 725 and so which is? Well below market rent. And so instantly we knew we were going from a 13101 bedroom 1 bath into a three bedroom 1 bath with off street parking and our housing cost was going to get cut in half, which for us as human service professionals was going to be a huge after tax pay raise.

I love that. And the cool thing about this is you found an off market property and we talk about off market properties on this podcast all the time as well, because the best deals I have ever found, real estate investing are always off market because you can get so creative because a lot of times, like you were saying, you are solving a problem for the seller instead of just getting the maximum amount of money that they need.

And so sometimes you're solving a problem, but you're getting a reduced price by solving that problem. So you guys were willing to wait until they moved out, getting a longer period of time to buy that property. And there's so many different instances like that where, for example, I bought a, a number of properties from tired landlords, for example, that just don't like the property anymore. They're just not managing them properly.

So we take them over and we change the systems and put different systems in place. And so off market properties are so many different ways that you can get creative and real estate really is a creative endeavour when you're putting these deals together where you can figure out the best way that kind of fits. It's a win win situation for both sides. And you guys did a conventional loan.

That's the beautiful thing about house hacking is you can get conventional traditional financing on house hacking and then you know, you live in the property for a year or more and then obviously you can move on and do some other things with it as well. So that is really, really cool. So how did you start to see your wealth begin to compound as you started the House Act?

Obviously it helped you pay down the debt, but did you use those additional dollars to start investing in additional properties as well? So we closed the end of 2018 and like I said that most of 20/19 it was like landlord boot camp. We had to learn like how to actually be good effective landlords.

But priority one was really OK, we need to pay off student loans. And so we were working a lot of hours to earn more. We no longer had a car payment and our housing payment was cut in half. And so that gap between income and expenses was growing and every payment we are making towards our student loan, our net worth was actually going up, but we had a negative net worth and so we were getting closer and closer to 0.

I would say, though, I mean, we aggressively paid off $100,000 of student loan debt in three years. And when you think about like how many rental properties we could have bought with that amount of money, I mean, it makes me a little sick. But we also really view paying off debt as an investment.

And for us, like the emotional burden of having the debt was the biggest thing. Like the math told us to buy rentals and forget about the debt, but like our emotions, like it was crippling anxiety to have that level of debt. So I think that though the first house hack was really cool, we saw that gap growing.

In 2020, we did it again. We got a second house hack. We saw that gap continuing to grow. I really feel like it was like once we eliminated the debt, because that was where so much of our money was going, we were like, wow, we live for so cheap and we have all these different streams of income.

Now we're feeling like the compounding effect that everyone talks about, everyone says it's like a hockey stick, like, give it four years, Like you'll see. And we weren't seeing, like I was not seeing. I was like, everyone's telling me I'm going to see it. But I still feel really broke. And I don't know what's happening.

But it eventually got to this point. I really feel like after we paid off the debt that it was like, oh, we have all this free money and it doesn't. We don't owe it to anyone. It's ours other than our bank debt for our properties. But yeah, that was really powerful. I love that. And one big thing you talk about here is paying down the debt.

It was emotional baggage for you guys. And that's one of the big things that people don't consider a lot of times is some of the external factors. Sure, the math maybe that you pay down that debt faster, but sometimes if it's weighing you down, money is there to reduce your stress and anxiety. And so using that money as a tool to do that is one major factor you definitely need to be doing because you'll make better decisions in the future and you can use those dollars to invest as well.

So one cool thing about house hacking is you reduce the cost. You're able to pay down that debt faster, which help you reduce that stress, help you reduce that, then you did it again. So when you house hack for the second time around, what types of things did you change? And is there a specific amount of cash flow that you're looking for when you house hack?

Yeah. So I mean, when we began the journey, we always wanted to have like a $0.00 housing payment. And so I think after we bought the property, we were collecting $725.00 with that first property. About a year and a half later, that person moved out and a new tenant moved in and they were paying 925 S Now our housing payment was like.

In the 300. Like in the 300 and So what we're really seeing, our take home income really starting to grow. And then in 2020, we started the year with the goal of eventually buying another rental property. Then the world kind of shut down right there in March of 2020.

And so we weren't sure if it was in the cards, but I would say right around like May or June, we felt like, you know what, maybe we're going to start networking. And actually, it worked out. Another landlord on our street, we had made a connection with them.

We always made sure that they knew we admired the property that they owned and they had never expressed interest in selling. But in the second-half of 2020, they inquired if we'd be at all interested in buying their property off market because they needed money quick and they needed to sell quick so we could solve a problem for them.

It was actually crazy though, like our first property. I mean we had a realtor that was like a rock star realtor. He found us our off market deal and the property was completely, completely turnkey. It was like flawless, beautiful. I miss living there. And while that was a lovely experience and probably supported our desire to pursue real estate again, it did not prepare us for the reality of having like a different experience.

So for the second property, it was actually a lot harder experience because we decided not to have a real estate agent, which ended up being fine. We don't use agents anymore now when we acquire properties, but like going through it without an agent, like we had to figure everything out and do all the paperwork, which which was a little overwhelming.

And then the property needed a lot more work than our first property, which we radically underestimated like the repair costs and things that needed to get done. So it was like a twenty $25,000 plus opportunity for us to be like, wow, we really underestimated repair costs.

So I would say we did things different in that we were just like naive and inexperienced, but it taught us like this property was character building. This was like the make or break it property for us. I love that. And my second property was the same exact way where it need the most work and it cost me the most money and I underestimated once you do those costs one time in terms of like flipping over, then you overestimate them after that for a little while.

And so my my second one was the same exact way. It was one of those things where we had a ton of renovations that we needed, including some things we couldn't see. And it's the best learning experience ever because once you do that, you really won't get too close to making that mistake again unless something crazy happens. But I love that as well.

So are you guys planning on house hacking again in the future or are you just going to move on to maybe potentially buying a house and then and then buying rental properties that way? Yeah, absolutely. So we bought that house hack with an FHA 3.5% loan back in 2020. This is actually where we live right now. It's a much nicer place than when we bought it.

And then actually earlier this year, so we made our final student loan payment in January 2022, which is really exciting. And we're always networking. We don't buy rental properties every year, but we're looking at rental properties every year. We're always networking.

And someone within that network back in February of this year actually reached out and they let us know about an off market 3 unit that was in great condition. The owner did a lot of work to it but was kind of in a pinch and needed to sell quick it.

Was an owner occupied property too. Every property we had bought was owner occupied. Which makes them, you know, nice it. Does. And so for a split second I think we did think, well, OK, how are we going to move into that property because we'd only bought properties via house hacking.

But we decided that we wanted to buy the property A, not as a house hack, but B, this was actually actually our first time ever using private money to buy a property. Now, if people are familiar with the Burr strategy, typically this involves buying a property below market value and then there's a lot of renovations that go into it to improve the value.

Because this was an owner occupied property when we acquired it in April of 2022, it literally just needed some paint. We had to change out some locks and have it cleaned and then it was rent ready. And so we bought it using private money and then we actually ended up refinancing out of the private money into a 30 year fixed rate loan back in July.

And so I don't envision U.S. House hacking again, but there is something to be said about having a $0.00 housing payment. It's hard. I think we talk a lot about having like a starter modest single family home versus just getting another duplex, but it's more of like a luxury duplex.

It's nicer because there is an opportunity cost of living in one of your units. We don't cash flow the amount that we really could because we're gobbling up a lot of opportunity in rent. But there also is something nice about really not having, you know, a high mortgage payment, especially with the way interest rates are right now.

So it's definitely a daily debate for us about which direction we want to go. But I think we would both be open to house hacking a nice duplex or getting that starter single. It depends on what's available. I love that and I think what you guys are kind of going through now, I think what a lot of people do when they house hack is what point do we stop house hacking and move into kind of some of our single family homes or whatever where you can kind of move on from that point as well.

So what is your plan in the future for investing in rental properties? Do you have a number of units that you want or you're using like a financial independence number? What is your ultimate goal? Yeah. So our first goal was get a $0.00 housing payment so we could pay off our student loans. We did that. Then it was have enough rental units so that when the time comes or if the time comes we have a single family home, the rentals will pay for that and we now have that.

The next thing is, is figuring out what that enough number is. And we have no aspirations to have a huge 100,000 unit portfolio or anything like that. And actually us for our goals, 15 units is actually pretty much a sweet spot in terms of a portfolio that gives us the income that we need, especially if we cash flow that first mortgage that we took on in 2018 and pay that off early.

That's like an extra $11,000 of cash flow that would more than cover our essentials and give us the financial independence that we're really looking to achieve. And it would be very manageable, you know, maybe just a couple hours a week. For us, it's like the least amount of units possible to get us to where we need to be financially.

Like there's no like we have this big aspirational goal of owning 500 units and that's amazing for people that want to take that on. But the goal of all of this is not to be real estate investors. It's to simplify our life. Real estate is like the vehicle that gets us to the time, freedom and the life that we want.

So it's really just like, what's the least amount of work we have to do to get us to where we want to be? I love that because there's way too many real estate investors out there who are approaching it, getting as many units as possible. And I align exactly with you guys. I just want the least amount that I can have because the headaches grow as your portfolio grows and a lot of people don't see some of that part of it.

But I think that is 1 big piece that just people don't talk about enough. It's just getting to your enough number. And that's kind of what I want to talk about next is if somebody wants to pursue financial independence through rental properties, how do they actually figure out how to do that? What is the best way to do? We've heard people talk about all the time if you invest in index funds, you know, you can draw down the 4% rule, you can go through that whole process.

But how does somebody do that with rental properties? So as I've mentioned in the past, anytime we had a question, like I would always go to the Internet. And so we actually started off thinking like, you know, 4% rule, this is going to be our way to achieve financial freedom. And then when we started calculating how much we would need to have invested in index funds and the timeline, I was like, that seems OK, but it doesn't really work with our timeline.

And so then we discovered rentals and Paula Pan actually has a really cool article that we've adopted into our own real estate investing. It's 6% is the new 4% where she breaks down. If you took a rental portfolio with an unleveraged, meaning you have no debt against it, an unleveraged yield of 6%, how that would compare to a unleveraged index from portfolio that would give you 4%?

And I was like, oh wow, that's like a really cool way to look at it. And so then for us, we live in a pretty cool rental market where 8% is actually pretty common, at least the way we buy deals, the way we manage them and stuff like that. And so for instance, like say we needed $40,000 a year income from an investments to pay our bills.

We'd need about $1,000,000 in index funds using the 4% rule. But if we were to use say the quote UN quote 8% rule of a rental portfolio that has no debt against it, we don't need a million. We need $500,000 of a rental portfolio paid off, which we now have more than that.

And so I would say it starts with knowing kind of like what you're enough number is and figuring out kind of like what your ideal lifestyle looks like. Try to figure out how much you think that costs. And then you know, real estate maybe isn't for everyone.

There's definitely been times where we felt like wanting to give up, but figure out the investment vehicle that is most aligned with your interest, your hobbies, your time, and then figure out kind of like what type of income can those investments give you and then apply that to your lifestyle.

That's perfect. And I love that idea that Paula has as well because I think it shifts your mindset a little bit to how to think about real estate, especially when it's paid off. And there's so many different avenues on that side as well. But I love that because I think picking the right one for you and your personality is such a massive thing. You don't have to do everything.

You can pick the right one for you and what works for you as well. So you may have hinted at this a little bit earlier, but what was the biggest mistake you have made investing in rentals so far? Oh gosh. How much time do you? I would say, well, honestly, yeah, we, we talked about it earlier was underestimating renovation costs.

We were definitely spoiled on that first rental property because we were kind of doing everything ourselves. With our second property, we failed to have a contractor or someone more experienced walk the property with us. They probably could have spotted so many things that we totally missed.

I want to say too though, just like it's a positive reframe, especially for people listening. Like we, we used to be really hard on ourselves when things didn't go our way or there were problems. And now, like I think life and real estate investing has just beaten me down to where like, you know, shit hits a fan.

I'm like, oh, whatever, OK, we'll figure it out. But I think that I view the mistakes now as like very, very valuable lessons. And sometimes they're very expensive lessons. But like other things that we could have done better, we didn't treat our first rental like a business. It was our home.

We didn't know that we needed systems, we didn't document effectively, we didn't have just the business mindset going into real estate investing. So I think like these are common mistakes for new investors, though, underestimating repair costs, not keeping proper documentation.

We were hiring the cheapest help because we were so afraid of spending any money because we didn't have money. But like hiring cheap, like buy it nice or buy it twice. Like that is true with real estate. Like, we hired some shady contractors who did really bad work, and then we had to spend even more money to have it fixed.

And again, like, you could read that in a book, but you don't really get it until you're going through the motions and doing it yourself. So I don't even know if there would have been a way to avoid it. Like it just, it was what it was and we learned from it. One of my favorite quotes is you don't learn to ride a bike from a seminar, right?

And so podcasts, books, everything, yeah, they will prepare you to the best one can from those resources. But like, where you really Start learning is like, you have to get in. It has to get ugly a little bit. That's really where the best lessons come from. I could not agree more because the experience side.

I listened to Bigger Pockets for years and years and years before I bought my first property. I thought I had it all down. I listened to every single episode with the whole process. And once I bought my first couple of properties, all of a sudden I was getting smacked in the face left and right. And part of that was building out the right systems like you guys were talking about. And systems are one of the most important things.

And what I did like just to do my management systems, for example, is I bought Brandon and Heather Turner's book, the book on managing rental properties. And I used that thing like it was my rental property Bible where I would kind of go through, use all their systems or templates, all that kind of stuff as well. How did you guys kind of figure out how to manage your properties and what systems did you put in place to kind of make that more efficient?

I wish it was something as simple as like reading Brandon Turner's book and like, we use that as our guidepost, but I feel like we were a little sloppier with it. Like, yes, we develop ways to organize and figure out things, but sometimes it was like something went wrong and we're like, oh, we need to do it different next time.

And like most recently, like we had a tenant that had like a commercial vehicle parked on their property. And like we've never had to put anything in a lease about commercial vehicles or boats because we never ran into that. And now I'm like, man, we need to update the lease because that's like a no fly zone for future.

So sometimes it's like when things happen, it helps us further redefine like what needs to happen in the future. But I think strategically, like we definitely did our research to find the fundamentals. Something that's helped us a ton too is having a really good CPA because they were able to then walk us through how to better manage the finances of our properties.

And document. Exactly, because I mean, sometimes you'll go on a podcast or listen to or read a book and you'll hear about all the tax advantages of real estate and they can be really good, but you have to have the documentation to then make take advantage of those tax benefits.

And so having a good CPA gave us the kind of infrastructure to manage our properties that way, which has helped a ton. It's not even just ACPA though. It's so much bigger than that and I'm glad you brought it up. Like it's having a team, you know, like I have a kitchen guy that if something goes wrong in the kitchen and I need to redo it, he's my guy.

We have an electrician, we have, you know, a realtor that we can rely on for different things. We have a real estate specific attorney. So it's like when you build out those people, I don't have to know it all. We have other investors we talked to that support us with different processes. So I think like building the team is like the biggest strength you can have and that helps evolve and enhance your systems.

I could not agree more. That team is one of the most important things, people that will actually show up on some contracting sides and stuff like that, as well as one of the biggest pieces. Now you talk a little bit more about networking and I think that's one of the most important things in real estate investing. And we have local meetups that I used to go to here. We have one that they meet in the back of a Denny's and most of the investors in there are just swapping properties left and right and most of them have over 1000 units.

It's one of the like John Schaub from building well, one house at a time. He's in that group, in our local group there. And it's the weirdest thing because nobody looks like they're wealthy and they're all some of the most wealthy people you've ever seen. So we have meet ups and stuff like that. How do you guys network with other real estate investors so that you can, you know, find properties and or just figure out how to build out your teams, things like that?

A lot of that is me. I I love being out and about. I'm a little bit more extroverted in that sense. So going to the meetups, getting coffee with other investors and landlords and things like that. But what I will say is when 2020 happened, when we thought of networking, we always thought of like going to those meetups and getting coffee.

We had never thought of using social media until frankly, meetups and coffees weren't able to happen. That forced us to think different. And so now, while periodically we still will meet with people and network that way, social media has actually been a really nice way.

So we're a big part of local Facebook groups in our area. I'm in those Facebook groups, I'm networking with people. I'm responding to questions, things of that nature. And not only that, but like Facebook marketplace is actually a really cool resource because a lot of mom and pop landlords, us included, they will list their rentals for rent on Facebook marketplace and you can directly connect with other landlords.

And I probably send out five or seven messages every single week finding apartments and locations that we would want to own in. And I just let them know that I really admire their property. I tell them Ally and I story and I, I inquire if they'd ever be interested in. And we've actually seen a lot of properties that way.

And sometimes that's a great way to meet other landlords, especially ones who maybe they're a little bit older, they're a little bit more experienced, and they're starting to think more about retirement and not managing rentals and listing them on Facebook Marketplace. I love that. I think that's the perfect thing is kind of getting outside of some of those meetups as well and trying to find investors for off market properties because off market properties I think are some of the most valuable ways that you can find real estate.

So that's really cool as well. That's a great insight to add into there. So you guys also invest in the market. We align completely on how to invest your money in the market but. What is your? Favorite way to invest in the market? And then how do you kind of think through your asset allocation when it comes to real estate and investing in stocks?

Absolutely. So when we started investing in general, I was just like enamoured by Warren Buffett. I'm like, I'm going to be the best stock picker in the world. And so this is five or six years ago, I opened up an account with Robin Hood and instantly the stocks that I picked instantly went down in value and we lost money.

Thankfully, I read the book by JL Collins, Simple Path to Wealth. That was where I got introduced to the concept of ETFs and index funds. And so these are just very large baskets where instead of trying to pick the individual stock or the needle in the haystack as sometimes referred to is you get to own the entire haystack.

And so 100% of the money that we invest in the stock market is basically owning the entire stock market. And so when we're not saving up for rentals or buying rentals anything, the surplus we just put into like a taxable brokerage and it's entirely ETFs and index funds.

I think what's really nice about this as well is because real estate on the passivity scale, like is not the most passive investment, right? Like some months I only think about our rentals when a tenant sends us red. But other times I'm thinking about it every day because there's like crisis and, you know, things are breaking.

So I think because that does require so much mental bandwidth, it's nice to diversify with other assets that don't require any mental bandwidth. You know, like we have automatic withdrawals. If we have extra income, we kind of just dump it there and we don't have to think about it.

And that's just really good for us because we really do have to think about our rentals on a daily basis. I think because cash flow is our main goal right now, our portfolio allocation will always be. Heavy real estate. Biased towards real estate because it's designed to create yield versus appreciation, whereas index funds in the stock market are kind of the opposite.

And so right now we're still very much real estate centric. I think as we get closer to those 15 units, which might be next year sometime at that point, managing the properties, paying off a loan or two and then just really pushing as much of our extra money into the taxable brokerage and index funds, that'll really be our focus to kind of balance it out a little bit.

I love that strategy and I love how you guys are kind of focused on one, but you're still investing in the other one because a lot of people don't do both. They kind of focus and hone in only on one. And so that's what I love is that you guys are kind of diversified between the two because I absolutely love the two as well. And having a combination of both, I think just gives you some ultimate diversification.

And you mentioned the simple Path to wealth. I think that's one of the best books. If you are listening to this, I've never read that book before. It is in my top three books that you should start reading if you're getting into your finances and personal finance, getting your money together. It is one of the best books out there as well. So I kind of want to shift gears here because like I said, you guys are the first couple that have on the show and I kind of want to do either a rapid fire.

You can take as long as you want to answer these questions, but I kind of want to go through some questions on how to think through money as a couple and how you guys think through it as well. There's no wrong answers here, but I kind of just want to go through some of these as well. So first one, this is a big one I get and this is a touchy subject for some people, but do you believe in combined bank accounts or keeping them separate and why?

This is funny because we just made content on this and it was very controversial and I got a lot of angry people in my comments. Same here when I talk. About it. So we are really under the belief of like 1 bed, one budget. We have everything combined. I think that it helps with transparency and communication and we're working as a team and it simplifies our life.

I don't have to worry about like what percentage of my paycheck goes towards this expense. But I think that there's a huge caveat here in a nuance and This is why I think people get hung up on it. I think that in reality, we live in a world where there's a 50% divorce rate in our country.

And the one bad one budget really works well for the couples that end up not getting divorced and the couples that do end up separating or any couple where there is any like safety or domestic violence or financial abuse. Like money is a huge reason why people feel like they can't leave a bad relationship.

So I also see that there's a really ugly and damaging side of combining finances and not having your own separate income. So I see the pros and cons of it. I choose to be in my marriage of like, I'm happy with you, I love you, and I really plan to be with him for the rest of my life.

But I think everyone feels that way. So I think, again, it's so nuanced. Like, am I giving advice one way or another? I certainly am not, because I don't know what someone else's relationship is like, but I know that this is what works for us. I think that's one of the most important caveats to add in as well.

I think that that's a perfect answer because I think most people have to kind of think through their situation. And I'm in the same boat as you. We combine bank accounts. Everything is is all in one for me. It's just easier. It's streamlined for the way that we operate. But at the same time, there are caveats where you want to have separate accounts for a lot of people in their individual situations. So I love that.

How often do you guys talk about money? Every single day like. Multiple times a day, all. Day now, what I will say is the context of how we speak about money. It used to be a more strenuous and it used to be more of a scarcity mindset.

Today the conversations about money aren't usually as much about money, but more So what are some really cool and exciting things we'd like to achieve one day and how can intentional money moves help us get there faster? And so the conversation, the narrative has changed radically different over the last four years.

But in terms of the frequency, yeah, I would say we talk about money, everything. We used to talk about money never. And then when we started talking about it, it was painful. And like, Josh wasn't allowed to talk to me about money unless like we scheduled the money conversation because I'm like, it's too stressful if you just spring this crap on me, right?

And that was it for so long because I associated money conversations with stress and anxiety. And like, it was a big thing to have that happen. But I think the more you do it and the more you normalize it, money conversations don't have to be bad. And money conversations help you build wealth and get on the same page and be like a better unit.

So I think like the positive reframe of like when we talk about money, we're like helping ourselves now. It's just like, what do you want for dinner? Oh yeah, I put money in our index fund portfolio today. Like it's just easy, easy conversations now at. 1st, for a lot of people that are trying to get their money together, it's a source of stress to even have the conversation about it because it's your biggest source of stress in life.

And so as you start to talk about this more and as you start to build more wealth, it just becomes easier and easier. And you're exactly right on that as well. So I love that response. So one big thing that a lot of people have is money is a big source of disagreements for people as well, either whether they're going to invest their money or how they're going to spend it.

How do you approach money disagreements? In terms of approaching money disagreements, I would say that I'm actually like a really big fan of Ally's judgement, especially when it comes to like personal matters. Investing is a little bit the thing that I understand more.

So if there's certain things that we need for the home, we kind of have like certain thresholds to anything above $100 is typically like a joint discussion about that matter. Anything under $100 within reason, there's just a lot of trust there. And so I don't think we really butt heads over as many things as we once did, but a lot of it too is now that we have more financial stability and financial security, it's also changed how we look at the dollars that we have.

We used to fight about this a lot though, and we used to have a lot of money disagreements because we both valued different ways to spend our money. So I valued like getting takeout and buying clothes and Josh values like electronics and phone cases and like investing and like we didn't align with that.

But then I realized like if we have a certain amount of grace in our budget to be able to both like get the things that we want and do what we do as long as like our main buckets are paid for. Like we have our emergency fund. Like we're investing how we want. Like it's important to give your partner some space and autonomy to be able to if they want to purchase things.

But yeah, the $100 rule was very, very helpful. We've kind of deviated from it a little bit. Like it'll be like that was more than 100 and you didn't ask me, but it's because because we've gotten some flexibility back. But in the beginning we had to be very, very rigid to make sure, like because we didn't have a lot of money to spend.

So we had to make sure the dollars were intentional. I love that as well and I like that $100 rule and it's something I may use in the future too, because I think it's a, that's just a cool way to kind of go through the process. One thing we did was in our budget, we would put it together, line items for a blow fund where we're like, there's no questions asked, you can just blow this money, whatever, as long as everything else is taken care of and fill those up.

My wife would always get double what I give or whatever. And then so we we do that. And that was like an easy way where you just spend whatever you want there and be able to not have any conversations about it or have to worry about it as well. So that's a cool thing that people can look at as well. So one big thing discussing money with a partner is talking through your goals.

And the goals are a big, massive thing. And we discussed this a little bit earlier on, but how do you actually set financial goals as a couple? Do you sit down and just have that conversation or are you continuously talking about this? This is really good timing because I don't know when this episode's coming out, but we do something really fun for New Year's and it like sets the tone for the rest of the year.

So what we do on New Year's Day, it's a tradition that's been going for like 4 or five years at this point. We get together and we cook a nice dinner at home usually, and we write out like personal goals, relationship goals, financial goals and like fun goals.

We go in different categories of like, what are our hopes for the year? What are we to accomplish? And we each do this individually and then we like, share and compare. Like what did you think? What did I think? And then together we put like on a big white board our overarching like goals that we have as a unit in those different categories.

And we do that during the year. But then we actively like check in with those goals and discuss it again, like on a daily basis we talk about these things and we have a big whiteboard hanging up to remind us of that. But we like splitting our goals up into quarters.

So we talk about Sprint versus marathon goals. A marathon goal is paying off $100,000 of student debt, but a Sprint goal is quarter one, and we're going to focus on paying off 10,000 of it. So each quarter we have a different focus. So when we were paying off debt, it was like quarter one, all of our extra money goes to debt payoff.

Quarter two, we're going to financially recover. Quarter three, we're going to save up for a rental. Quarter four, we're going to buy the rental. So by breaking it up into smaller chunks, it made it more sustainable and realistic for us. And I think it helped prevent like fatigue and burnout big. Time. I love that breaking it up into quarters because I think that just helps throughout the process, kind of get you to that point.

You're reviewing them every single day and it kind of keeps you motivated to get to the point that you need to get to next. So I love breaking those up in quarters as well. So one big thing is you guys have had a lot of wins. You've had wins for paying down your debt. You've had wins for buying your first and 2nd house hack. So how do you celebrate those wins? And how are you gonna celebrate your win when you get to the 15 properties as well?

You know, I think that's definitely a blind spot for us right now. Hypocrites. But well, I think we're getting better. So, for instance, we made our final student loan payment and we had visualized this moment for years. We clicked submit January of this year and it was as if we expected like balloons.

To fall, I thought I was going to ugly cry like when we hit the button, Like just like tears streaming down my face. It was not that. We we ended up going out to lunch that day and after lunch, I think Ali wasn't even in the car yet and I was like, OK, so like next rental property.

It was so annoying, like we literally paid off our loans and then like 2 hours later was like OK, we need to talk about buying rentals and like I'm going to murder you because literally like can we just bask in this accomplishment for two seconds before we go to our next goal? But I think like that's an extreme example, but we tried really hard.

Like every time it was like we've made $1000 payment. Like we recently hit a goal in our brokerage account and it's like, let's go out to a nice dinner. Like we don't do anything crazy. And I think the reason for that is we've gotten to a place where, like, we don't really deprive ourselves. Like, if we want something, we buy it.

If we want to travel, we plan a trip. And that's a really privileged position to be in. But it's because we keep our expenses so low. We've worked so hard to increase our income. So I think we're constantly trying to give ourselves little, like carrots and rewards. But we definitely like take time to celebrate those little wins.

And The thing is too, to go back to what we were talking about earlier about those the six things that we felt like were most important to us. I think sometimes it's easy to be like, okay, we did this financial goal, now we're going to like buy this thing or go to this place. When in reality, when we go back to that list of six, it wasn't things.

It was, frankly, it was more time together, more time with family. And we celebrate now every single day in that sense, because when we started this journey, we were working fifty, 60-70 hours a week between 5 or 6 different jobs.

Now we work part time and most of the time we're together. And that was like the biggest reward we were after. We're visiting family all over the country and that was the biggest reward. And so in that way, we're celebrating our accomplishments every week. I love that.

And I think that is one way where you can kind of think through, hey, I'm going to go through these goals, I'm going to accomplish these goals and then have a way to celebrate it and enjoy it as well together. And Josh, you sound exactly like me. I'm thinking of the next plan every single time we accomplish something. But sometimes it's hard to get out of that mode as well. But like I've grown over time to kind of get closer to actually enjoying the wins and getting close to that as well.

So here's a couple of questions that I want to ask you guys before we finish this episode as well that we ask a lot of our guests. And a lot of times we get different answers for these. So these go a little bit deeper, but they are really cool. Some of the answers that we get out of these. So what part of your work or your life makes you come alive? I think my biggest thing right now, so I am like just a voracious learner.

So the thing that excites me the most actually, so I wake up really early, anywhere between like 4:30 and 5:00 AM every day. And I love like the world is still quiet and I can just sit there with a book or a podcast and just listen to stories. And then I try to take something that's like really abstracted I'm hearing.

And then how do I, how do I filter that down and kind of like change it to evolve and fit into our life? And it's like a puzzle for me. I love doing that and then seeing an idea become a real aspect of our life. I love that process.

I find that really enjoyable. And then honestly, something that we were talking about off air was through different ways and platforms and stuff like that, we get a ton of comments and questions every day. I love answering comments and answering questions because it's just like hearing questions and comments that I was going to the Internet three or four years ago each and every day, and now it's kind of full circle.

I get to help answer those questions and it's just really inspiring. For me, I love entrepreneurship, which is so funny to say because if you knew me in real life, I was the person that always hated going to work. If I was like if I could never work again I'd be fine.

Like I've never felt like deep love or passion for a job, like it was a means to to an end. And I feel like the Phi couple has been the most incredible experience because I'm doing it with my favorite Co worker in the entire world and I have control over my time.

I'm able to negotiate a pay that I think I'm worthy of. And there's just so much power and like having that control. And we wouldn't have been able to take that leap obviously if it wasn't for everything we've done financially. But I feel like really passionate about that because we love the work we do. We feel like we're making a difference and connecting with like minded people and it is just like, yeah, I'm shocked.

I mean, saying that work is my passion right now. It's like really funny full circle. But yeah, for sure. It's so incredible, like when you start to do the thing that you actually love to do, how it just kind of shifts your mindset into actually loving what you do every single day. And no, no day feels like work, which is absolutely amazing. So the second one is, what is the best advice about money you've ever received?

So. Honestly that it has little to do with money and more about behavior and mindset. I love the book Psychology of Money by Morgan Hassel because I think we're a blind spot so often in the financial advisory space for their personal finance space.

And this was a huge blind spot for me when I started talking to Ali about personal finances. Everyone wants to talk about the finance and they don't really want to talk about the mindset, the psychology, the value, the behavior behind the money. And that's really like the engine that drives all of the money habits and behaviors.

So for me, I would say like first of all, my grandpa is like one of the smartest people I know. I love my grandpa. Shout out Rudy and I remember, remember Josh and I were like just starting to get traction in our careers. We're starting to make money. This is like our debts paid off. We're doing good.

We're feeling good about ourselves. And I don't remember what he said, but it was pretty much like, don't think that you're shit right now. Like don't, don't inflate your lifestyle, don't celebrate, don't get cocky. Like don't do anything like live like you're broke and like don't get your head too big.

And I think that was the best financial advice because I think so often when people start to have success, we have this mentality of like, well, I earned this or now I'm worthy of this big financial purchase or debt. And it's like, you know what, like, why don't you just keep like not inflating the lifestyle and see how far you can take it?

And I think for us, it's been like the biggest lesson and opportunity, like, yes, our lifestyles inflated a little bit, but we're still living so far below our means. And what that gives us is the gift of time, freedom. And that to me is greater than any material object.

That's like almost perfect timing for a lot of folks. When you start to do some of these financial accomplishments and kind of go through that process is a lot of times you feel like, oh, I can afford so many other things now. That's when your lifestyle truly does inflate. So that was almost perfect timing for you to get that advice because I think a lot of people, that's the point where they just start to take off and that's when they get themselves in trouble.

So I think that's absolutely amazing. On the psychology side, I think I agree with you. I think personal finance is more so 80% behavior and 20% actually having the head knowledge. So I think a lot of times for people, once you master that psychology side, it'll change your entire life on how you do everything else and how you actually operate with your money.

So I love that one. Now the third question is my favorite question of all. And one day we want to make an episode. We just combine all these answers at the one Big long podcast episode. But what does wealth mean to you? I think. It's the power of choice. So the power of choice over what you do with your time, where you live.

Our whole goal has been work, optional, location, independence. I think sometimes people there's like a negative connotation with work when you're doing something. And work doesn't always have to be for money either, but like when you're doing something that you really enjoy, that you feel impactful, it genuinely really doesn't feel like work.

So I would say wealth is the power of choice and autonomy over your time. I think that's huge. I would echo everything he said and then just add on to it and like loving and meaningful relationships. Like to me beyond anything like it is like the love of my family, growing a family with Josh and having good friends that support us.

I feel like that is like true. True wealth, and then of course the power to spend the most time possible with those people is like cherry on the cake, Cherry on the sundae. Absolutely, those are amazing answers as well. I could not agree more. So tell us exactly where people can find more about you and your amazing content.

Absolutely. Yeah. Thank you so much. This has been a really fun show. So we are the FI couple that stands for financial independence. We have gotten the Florida couple and the fixed income couple, but that is not it. So the FI couple and you can find us on like all social media platforms, Instagram, Twitter, TikTok, Facebook.

And if you have specific questions for us about this episode or in general, you can connect with us via e-mail at info@theficouple.com. Absolutely, and it will link all those down the show notes as well so you guys can check out all their content. It's absolutely amazing.

So make sure that you go follow them on all those social platforms as well. Josh and Ally, thank you so much for coming on. This was amazing. Thank you, this has been so awesome and we're excited to connect again in the future. Thank you, Andrew.