From -$28k in Debt to $107k Net Worth by Cutting Out the Unnecessary

Mindy:
Welcome to the BiggerPockets Money Podcast show number 211, where we talk to Melissa, a listener who has completely changed how she handles money and is well on her way to financial independence simply by making a few key changes to her finances.

Melissa:
I think it just became something that because I had nothing, I was so focused on having things. Being homeless, not having a home, not knowing where your next meal is going to come from, I think I definitely got more focused on having nice things than creating a sustainable life, which is where I’m at now.

Mindy:
Hello. Hello. Hello. My name is Mindy Jensen, and with me as always is my standing on solid ground co-host, Scott Trench.

Scott:
Thank you for cementing my reputation with that lovely intro, Mindy.

Mindy:
You don’t even know about this in advance. You’re so good. Scott and I are here to make financial independence less scary, less just for somebody else.

Scott:
I read that one 10 seconds ago. We got that one.

Mindy:
But that was really fast.

Scott:
I was thinking about a shovel or…

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else to introduce you to every Money story, because we truly believe that financial freedom is attainable for everyone, no matter when or where you’re starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments and assets like real estate, or dig yourself out of a $50,000 hole in debt, we’ll help you reach your financial goals and get money out of the way so that you can launch yourself towards your dreams.

Mindy:
Scott, I am so excited to talk to Melissa today, because she is the embodiment of all that we preach on this show. She has taken the idea of getting your spending under control, and run with it, and completely turned her finances around. We first became aware of Melissa when she posted in our Facebook group, which can be found at facebook.com/groups/bpmoney, and she said, “I stumbled across the BP Money Podcast about two years ago. At the time, I was roughly negative $25,000 in net worth. I listened to the first five episodes, and realized I had to make some serious changes to my lifestyle.”

Mindy:
Then she included a screenshot, which is her net worth at positive $107,000. I am so excited for her to share her story today.

Scott:
This is one of the best episodes we’ve ever recorded on the BiggerPockets Money Podcast, in my opinion. Melissa is just phenomenal. If you have struggled with money in the past, you’re going to relate to Melissa. If you have had the aha moment, you’re going to relate to Melissa. If you’ve gone all out in the pursuit of financial independence and improving your financial position, you’re going to relate to Melissa. She’s gone through it all. She’s right in the middle of that grind. She’s going to be a millionaire in very short order here by the end of it.

Scott:
I think you’re going to love this episode. I love this, and I was so thrilled and reminded of why… I mean, I’m always reminded, but I was reminded in particular today about why I love doing this job so much here at BiggerPockets with you Mindy, and hosting this podcast, because this is what it’s all about is when we get a story like this.

Mindy:
It was so much fun to talk to her. She doesn’t think that she has started walking on water yet. I think she walks on water. I think she’s amazing. I think she has accomplished so much, and now that her mindset has changed, she’s going to accomplish so much more. Melissa Yi, welcome to the BiggerPockets Money Podcast. I cannot wait to hear your story.

Melissa:
Thank you. I’m so excited to be here. It’s very surreal.

Mindy:
Melissa is a listener who reached out on our Facebook group to tell us that she stumbled across us a couple of years ago, and we have since changed her life completely 100%. Is that a good gist of your story, Melissa?

Melissa:
Absolutely. All the credit to you both.

Mindy:
We did not do any of the work. We gave suggestions, and you did the work. Let’s start with your money story. Where does it start, and where are you right now?

Melissa:
I guess I’ll start just with growing up. Growing up, the money story was I didn’t know really anything about money except for the fact that we just didn’t have any. There really wasn’t a lot of conversations about money, about budgeting or, “This is a checkbook, and this is how you pay these bills.” It was really just surviving. I grew up with a single mom. She was usually working two jobs. At certain points in our lives, we were living in assisted housing, affordable housing subsidized. A certain couple of points in our lives, we ended up in homeless shelters because the housing can be expensive, and being a single parent is not an easy task, so kudos to any single parent.

Melissa:
It is very, very difficult, so just all growing up all throughout up into almost right at the start of high school, it was just very much that we just didn’t have any money. When I finally became old enough to work, my mom said, “Well, if you want anything other than just the basics, some shampoo, some conditioner, then you’re going to have to go out and work for it. You’re going to have to get a job.” I did. I was in high school, and I worked part time, and bought my first car, 500 bucks, little Pontiac Sunbird. I just really just started to just work part time, and buy things. Savings at that point and for even still a long time after that really wasn’t really a goal.

Melissa:
Retirement wasn’t a thing. It was just, “How do I buy the Nokia cell phone, and how do I afford my cell phone card? I got to free up my minutes and things like that.” But during high school, both my mother and my grandmother decided that they were going to go back to college. I think that was an interesting moment for me. My mom was in her 40s, and my grandma was in her 60s. It was really adorable to see them both go back to school together. They went to a little local college, and both got their associate’s degree. It was really cute to see them walk together and graduate together.

Melissa:
That was a seed that was planted at that point, because we never really talked about college really either growing up. It wasn’t really something that I thought was ever going to be in my cards. That was a really cute moment. [crosstalk 00:07:22].

Scott:
How old were you at this point?

Melissa:
I was probably 16. I was still in high school at that point when they were in college, and they had graduated.

Scott:
You’re literally homeless for a while, and then you’re working a job in high school, and that’s how you fund your car. What job are you doing?

Melissa:
I worked at a collection agency doing paperwork like filing all the paperwork for the collections, and there is the tellers that we’re calling out doing the automated dialing, but I was in charge of their paperwork and some data entry at 16.

Mindy:
That looks like a-

Scott:
Did that have any… Go ahead, Mindy.

Mindy:
That’s a lucrative job, isn’t it? I mean, especially for being 16.

Melissa:
I mean, you’re making minimum wage. I mean, really, anything at that point at 16 is a decent job. I wasn’t making 20 bucks mowing a lawn, but…

Scott:
Did that impact your thoughts on accumulating debt at all or anything like that?

Melissa:
Unfortunately, I don’t think it did, because I wasn’t scared of debt, as we’ll get into later, but it was more of I just didn’t know a lot about debt and how impactful credit card debt could be, because I definitely fell into that. It was just a… I think it just became something that because I had nothing, I was so focused on having things. Being homeless, not having a home, not knowing where your next meal is going to come from, I think I definitely got more focused on having nice things than creating a sustainable life, which is where I’m at now.

Scott:
What happens after? You’re 16. Your mom and your grandma both graduate. What happens next?

Melissa:
About that, so 16, working part-time job. Really, basically in 2004, I graduate high school, graduate with no debt, but really no savings. I had a car that was paid off. I’m living at home, and just trying to think about what adult life looks like. Beginning, I really didn’t have any plans of going to college. I mean, my parents definitely didn’t have the funds to pay for me to go to college. I didn’t have good enough grades for grants or scholarships. I mean, I didn’t have money saved to afford to put myself into college, so I thought I was going to be a massage therapist.

Melissa:
That’s not what ended up happening, but when I graduated, that’s what my plan was, so graduated, got my first full time job at a company, but again, still had no debt, no savings. My car was paid off, so I was in a nice little neutral space at graduation. Unfortunately, I didn’t stay there, but things happen.

Scott:
Let’s go through that. You’re in this nice, stable, neutral space after graduation. Sounds like you do racked up some debt from there.

Melissa:
I do.

Scott:
How does that come to pass?

Melissa:
It basically comes into a college. At 19, I moved out of my parents house. I moved out of state to what I thought was going to be to join a massage therapy academy. I quickly came to realize that massage therapy was actually not for me, so I got a full-time job at a local REMAX office. I started to become their data entry person there at 19, and got an apartment. I got a new car, or not a new car, but I had a car payment, and started my first time out of the home. But at this point, I still had no idea how to budget. I had no idea to think, “Okay, well if my rent’s $700, my utilities are going to be $100. If I’m making this much, how much do I have leftover?”

Melissa:
I just really had no concept of budgeting, and I started bouncing checks, and was scrambling to figure out how to live this adult life. I was working at the REMAX office, and someone told me, “What are you going to do with your life?” I said, “Well, I don’t really know what I’m going to do.” They told me that they had some friends that worked at Verizon Wireless, and that if you work there full time, they will pay for a business degree. I thought, “Well, that’s interesting. I never really had any plans of going to college, but, I mean, if they’re going to pay for it, it sounds like that would be a fantastic opportunity for me.” That was June 2011.

Melissa:
I got hired on Verizon Wireless, and sure enough, they will pay for a business degree if you work full time as long as you have passing grades, and that was… Their benefits were very generous to where… I believe it was $8,000 to $10,000 a year in tuition and books that they will pay.

Mindy:
That’s not bad.

Scott:
That’s great.

Melissa:
That was really great.

Scott:
It sounds like you took advantage of this.

Melissa:
I did, absolutely. I started in… I went… I got my associates degree and then moved on and got my bachelor’s degree as well. I worked there for about five years. Then during that time, too, I was contributing to a 401(k) during that point, which was great. I joined. I started… It wasn’t too much, but 2%, 3% or so, but that… I mean, thankfully, I’m very, very thankful that I got that job as difficult as it was at certain points, because it’s a call center job, so the hours are not great. You’re working weekends, so it’s not a-

Scott:
You’re attending school full time.

Melissa:
Right. I was working full time and going to school part time. It took me a few years to get the bachelor’s degree, but-

Scott:
What’s your position?

Melissa:
… it was just…

Scott:
What’s your position upon graduation? Have you accumulated some debt? Can we get an idea of maybe about your income level and that kind of stuff?

Melissa:
June 2011 is really where I started my downward slope and made several big mistakes that I took a long time to get out of. The first or where it started, so I had about a year and a half left to finish my bachelor’s degree, and getting this bachelor’s degree in finance. I am working still for Verizon Wireless, and I’m not really getting along with the management. They’re very micromanaging, and really tough on their employees making it known they don’t really trust their employees very well. I just didn’t really… I had a hard time with it. I had this day, this moment where I had just had enough.

Melissa:
I walked into my manager’s office, and I said, “You know what, I quit. This is my two-week notice. I can’t do this anymore. I can’t work for you anymore. I’m going to go to school full time. I’m going to figure this out, and I quit. I can’t do this,” and that’s not my finest moment and-

Mindy:
Let me guess, they didn’t continue to pay for school when you didn’t work there anymore.

Melissa:
Absolutely. Correct. Yes.

Mindy:
How far into the semester were you?

Melissa:
Luckily, at that point, I was on a break, so-

Mindy:
They had already paid for everything that you had taken, because that… I’ve been there. I have been in that, “I am so angry at my job. I am just going to quit.” Then you quit, and then you’re like, “Oh, wait a second. There were all these things.” You quit your job at Verizon.

Melissa:
Yes, I quit my job. Luckily, I’m in between. I was in the summer semester when this happened. This is June 2011. I just finished my spring semester and was trying to get everything lined up for my last year and a half of college. I’ve got to figure out, “Okay, so now I quit. How am I going to pay for school now? How am I going to pay for living? I don’t really have much savings or anything saved up, and so I signed up for student loans. I signed up for student loans, and so that covers tuition and things like that. I’m sitting there with my roommate, and I think, “What am I going to do? How do… I mean, how am I going to pay for rent? How am I going to pay for food? How am I going to pay for gas to get to and from school?”

Melissa:
She goes, “Well, why don’t you just get a credit card, and then you can just pay it off when you’re done with school. You’ll have more money then, right?” I thought, “That’s a perfect idea. Why didn’t I think of that?”

Mindy:
Worst friend ever.

Melissa:
I know. I love her, but dang it. I did that. I opened a credit card and got my Discover card, and started using that for living expenses. I think this is definitely the next big step for me for what I shouldn’t have done, but I looked at my 401(k) account that I had accumulated for the five years at Verizon Wireless. I can see your face, Mindy. I cashed it out. That was about $18,000 that I had in there in June 2011, so had I left it in there, I mean, I would have a lot of money in there at this point. That’s 10 years of taking on this really strong market that we’ve had.

Mindy:
June 2011 was… What was the low point? Was it 2010, Scott? I think it was September of 2010. Maybe I’m just making that up, but then it started going up again. We’re not here to chastise you for any past money mistakes. Don’t cash out your 401(k) if you’re listening.

Melissa:
Don’t do that. Don’t do that. Also, don’t take out a credit card just to pay for food at the cafeteria, college either. Not a good idea.

Scott:
At the end of this one and a half… You have one and a half years left to school. Did you finish in a year and a half?

Melissa:
I do.

Scott:
Are you in this position of like, “I have no 401(k) left. I have no cash. I have student loan debt and credit card debt?” Is that where we ended up?

Melissa:
Absolutely, so I graduated with a bachelor’s degree in finance in 2012. At that position, I have about $16,000 of student loans. I have about $14,000 in credit card debt, and then I have this car loan. During college, I decided it would be a brilliant idea to buy a brand new vehicle that I couldn’t afford, and I ended up rolling over some significant amount of negative equity into this loan. Not only do I have credit card debt, student loans, I have a $430 car payment. I have no job, really no savings, no 401(k) at this point, but I have my bachelor’s degree.

Scott:
This is 2012?

Melissa:
This is 2012, yeah.

Scott:
Oh geez.

Mindy:
That was the best year to start looking for a job, right?

Melissa:
Yes, that was my best year.

Scott:
What happens?

Melissa:
From that point, I get what I call my first big girl job. I get my first big girl job at a bank. I’m making… I think I signed on making… 40,000 was my salary. I signed up for the 401(k) trying to get that back up and going. I mean, that’s when I start to try and attempt to dig myself out of this hole. But at the same time, I’m not really making the changes that I need to. I’m still spending more than I have. I’m still buying things that I have no business buying. I’m just putting off this credit card debt to future. This future means problem. It’s not going to be dealt with right now. It was just several years of that of going all the way up until probably September of 2015, where I’m just working and really adding to this debt and going on vacations.

Melissa:
I’m buying expensive brand new clothes. I had an IPSY subscription. I had a Stitch Fix subscription, and really just adding… If anything on my vehicle broke down, it all ended up going on to these credit cards, and it really just steamrolled into that of this huge, huge debt that I just wasn’t… I was going the wrong direction. I think September 2015 is when I had an epiphany moment where I got a new apartment, and I didn’t even have the money to pay for the security deposit. I had to take a cash advance off of a credit card to pay for this security deposit. I thought that was my breaking point of this isn’t…

Melissa:
I’m going backwards. I have this business degree. I’ve been working in a bank. I have a finance degree, and I have nothing to show for it. At that point, I had about $25,000 in credit card debt. In September 2015, still really only making about $40,000 in salary, and it’s like, “I’ve got to figure this out. This is not working. Me forgetting about this for the last four years isn’t working. It’s still there.”

Mindy:
I can hear people listening to the show right now saying, “Oh my god, that’s me, or oh my god, that was me. I was in this space. I am in this space.” 2015 sounds like a turning point for you.

Melissa:
It was.

Mindy:
What happened in September 2015.

Melissa:
September 2015 was… I really had a bad summer. I lost a very close family member of mine. I think that was a very humbling experience for anyone to go through when you lose an immediate family member. It really, I think, just brought me back down to earth a bit of realizing that I was trying to live this lifestyle that I couldn’t afford with these expensive hair appointments, that every time you go get your hair done, it’s $120. I just thought like, I’m like, “Who am I fooling? Who am I joking? No one cares if I have my hair done. No one cares if I have a Stitch Fix or an IPSY subscription. No one cares these things.”

Melissa:
I mean, it’s definitely still took me a while but I thought, “Okay, so how do I… Where do I start?” At that point, I started to try and make extra money. “I have to do something, because what I’ve been doing hasn’t been working.” That’s when I tried it. I started Lyft. I tried Lyft for a little while. I tried Postmates. I tried Rover, but really just at this point in my life, I’m trying to bring more money to the table to stave and start making small dents in this massive amount of credit card debt that I have drowned in.

Scott:
How does that go? I mean, I attempted some similar stuff back in 2013, and found it unsuccessful for me that it’s really a very inefficient way to generate money with these things on the side after the full time job. At least I found that to be the case. Were you able to find success with some of those, that moonlighting and the second jobs there with Lyft?

Melissa:
I really wasn’t… At first, I just tried to just hang out downtown around to pick people up. I wasn’t comfortable with-

Scott:
Where is downtown?

Melissa:
This is in Portland, Oregon.

Scott:
Portland, Oregon.

Melissa:
I had moved to Oregon in 2014. That’s when I couldn’t afford a security deposit on an apartment, because it’s more expensive to live there. I just went downtown to try and pick up people in the Lyft. It seems like I really had to have a strategy. I tried the airport, where I would go get in the airport queue at Lyft, and take people home from there. I tried that. I tried that for a few months, and it just didn’t really seem like the amount I was making. I mean, I think the most I made in a day was 50 bucks, and driving people from the airport to their home, it’s barely breaking even with the gas to just… It’s an hour drive sometimes from the airport.

Melissa:
I tried Postmates, and Postmates was pretty similar, where I wasn’t really making a bunch. I mean, again, I probably made 50 or 75 bucks in a day. That’s not net of gas or expenses or anything like that. I tried Rover. I think Rover was probably the best one of them as far as making money and not having your expenses come out as well since you’re just going over to someone’s house, and babysitting their dog, or you’re walking their dog, or their dog’s coming over to your home. That was probably the best one. But even still, that’s maybe 80 bucks in a weekend.

Melissa:
I didn’t really feel like anything was really making that big step, making a big dent. It was 20, 30, 50 bucks here and there of me spending all the time I could trying to make additional money.

Scott:
How long does this continue, and what’s the next inflection point?

Melissa:
My now husband at that point, he said… He saw me just… I was doing all these part-time jobs, and trying to make all this extra money, and he thought… An Amazon package got delivered to our house. Then he goes, “Well, instead of trying to make more money, why don’t we focus on spending less money?” It was this light bulb. I was like, “You know what, the package that had just arrived from Amazon was a vegetable cutter. I did not need a $20 vegetable cutter, and that was what I had just made the night before.” Doing the Postmates was $20 or $30. I thought, “Oh, okay, that seems easier.”

Melissa:
It still took me a couple of years of trying to find… At that point, I was listening to the BiggerPockets original podcast, listening to all of these real estate success stories. Brandon Turner had said at one point, “You need to listen to the money podcast to, this is pre, get to real estate.” I thought, “Okay. Well, that’s where I need to be. I need to be listening and following these steps of advice before I can get into doing some real estate investing.” This is may 2018 that I am just really just trying to struggle through of trying to spend less, but I wasn’t really doing the work.

Scott:
Can we go back to one part in the story here? In 2015… When did you get married?

Melissa:
I got married in 2019.

Scott:
In 2019.

Melissa:
Yes.

Scott:
In 2015 is when you’re having this epiphany moment about, “Hey, I need to start earning more money.” It sounds like you grind a lot with these side hustles and maybe fits and starts for two, three years, and that chips away a little bit at the debt, but your approach changes in 2018 or 2019. Is that what I’m hearing?

Melissa:
That is absolutely… I was just grinding trying to make any extra dollar that I could, trying to get raises at work, really trying to bring more money to the table, but it wasn’t until…

Scott:
In that process leading up to 2018, because I want to spend a lot of time there, but in that process, were you able to chip away at the debt moderately in that three-year period?

Melissa:
Not really. No, to be honest. It really… I mean, it really stayed about the same during that time, because even though I was still trying to be more aware of it, my habits and my spending habits hadn’t changed. I was more aware of it, but I was still getting my hair done. I was still spending too much on clothing and makeup and car payments and things like that. It still hadn’t really sunk in. I was more aware of the spending, but it didn’t change my patterns and my habits yet. I hadn’t gotten to that point. 2018, still, this and this is still evidence that it still hadn’t really sunk in yet at this point as far as just the frugal lifestyle that we’re at now.

Melissa:
But 2018, we buy two brand new vehicles. I buy a 2018 Outback, and my now husband buys a 2018 Tacoma, and granted his work was paying for his, so that helped with that payment. But at that point, I still have $20,000 of credit card debt. We do have savings at this point that we have saved up because we were trying to buy a house. I’m making about $60,000 in my salary. I still have about $14,000 to $15,000 in student loans at this point. I’ve got about $15,000 in my 401(k) at this point that I had accumulated, and just let that go in there. 2018 is when I found the money podcasts, and started reading books.

Melissa:
The first book that I read was Your Money or Your Life. That was a really big shift in my mindset of [inaudible 00:33:45] consumerism. Spending all this money is a total shift of making things yourself and doing things yourself, and living this minimalistic, frugal lifestyle, grow your own vegetables and things. These were all concepts so far away from what I had ever really thought about or even tried to implement in my life. It definitely took a few months, and then also on the original podcast was where I had heard an episode that Mindy was on for live-in flips. That is where I got my live-in flip idea on the original BiggerPockets Money Podcast.

Melissa:
That’s when we really started. We got Mint account at that point in 2018. That was really eye opening to see where our money was going, to really sit down and look at the hard numbers and go, “Wow, we spent $1,000 one month on restaurants, $1,000,” that that money could have gone to credit cards or savings or something else or anything else other than $1,000 for the restaurant.

Mindy:
the tracking of your spending is the number one thing that I suggest. One of the most common what is your best advice for people who are just starting out comments is start knowing where your money’s going, because when you can see it in hard numbers, it is sometimes so shocking. I like to think I’m good with money, but the first time I started tracking my spending, I’ve said this before, I was shocked at where it was going, because when it’s part of your life to go to McDonald’s every day for breakfast, you don’t think about it. You just do it, and there goes $5 or $8 or however much it costs there.

Mindy:
That’s no big deal one day, but every single day, let’s say it’s $5. That’s $25 a week, unless you’re going seven days a week, and then that’s $35 a week. That’s $140 a month, and that adds up over time. If that’s not your only stop, that you go and get good coffee instead of McDonald’s coffee for breakfast, and then you go here and you go out to lunch. That’s $12 at your favorite place. I mean, you could conceivably spend $25 to $35 a day on food at restaurants just absentmindedly, which adds up to way more than $1,000 a month. But because it’s a habit, because you did it, “Oh, on Mondays I go out to lunch with the girls.” No big deal.

Mindy:
Then I went on Tuesdays, and then now it’s every single day. All of a sudden, you’re like, “Why am I broke all the time? I make good money, or I don’t even make good money, and why am I broke all the time?” I just… I love that you… I mean, that… I have a sneak preview with your story that seems to be really the thing that got you whipped into shape was just… That sounds mean and judgy, and I don’t mean it that way, but just I-

Melissa:
It’s honest.

Mindy:
I’m seeing how much money I’m spending, and this is not where I want my money to be going, so why am I allowing it to go there?

Scott:
How influential is… You got married. Is your husband interested in this as well at the same time as you, or are you leading the charge?

Melissa:
I’m leading the charge. It’s definitely… Thankfully, he was better with money than I was in the sense of when we met, he didn’t have credit card debt, but he also didn’t have a really [inaudible 00:37:48] savings. He was definitely more of the spender in the beginning of our relationship, but he was really… He was very on board with it. Well, he became more on board with it. But in the beginning, I just started cutting everything out. I just went full into this budgeting and cutting all these things, and we’re not doing this. We’re getting rid of Prime. We’re getting rid of cable. We’re getting rid of all these things.

Melissa:
We didn’t really sit down and have a conversation together about where should our money go. It was just more of, “We’re spending $1,000 a month on restaurants. We’re going to die broke. We need to figure this out.” It definitely took some time over the time of sitting down once a month and going, “This is where we ended up. We spent $600 in gas this month. How are we going to make changes?” Eventually got to that point where we figured it out together, and had monthly dinner budget nights.

Mindy:
I heard a couple of things that… Well, the monthly budget, I love, but I heard something that I’ve never heard before. Scott, did you hear her say we cut out everything? We got rid of Prime. How easy is it to order something from Amazon because you get free shipping? I don’t even look at anything that isn’t Prime, but I can guarantee you if I had to pay for shipping, it would make me think twice about ordering that product. Even though shipping is only three bucks or five bucks or whatever, if I have to pay for shipping, I think about the purchase. If I don’t have to pay for shipping, click buy, the end, and I’m done.

Mindy:
That is, “Oh, I like that a lot.” If you’re listening to this, and you want to make changes in your shopping, and you seem to be spending a lot on Amazon, get rid of Prime, and see what happens.

Melissa:
It really made me really think about things. It made me physically go out and search for things, and go to Walmart. Walmart has a similar service, and they don’t charge for it. It may take a few extra days to get there. It’s not going to be a next day delivery, but it really made me sit and plan out things instead of that impulse buying that I was so used to doing.

Mindy:
It’s so easy to do.

Scott:
It sounds like there’s a hard lifestyle reset that happens in 2018. Does this reset happen over the course of a month right away, right after you read that book, and start getting into this, or is it a process that takes a few months?

Melissa:
It’s definitely a process. I mean, I started with a book and then listening to the first 10 episodes of the Money Podcast. It started with trying to cut everything out, looking at our expenses, and the next thing that I focused on was our grocery bill. That’s when I’d heard Erin Chase’s $5 dinner episode. I thought, “That’s brilliant, because I’m spending so much money on groceries. Now that we’re not going out to restaurants, we have to start meal prepping, making things at home.” It was really exhausting sometimes sitting down every week trying to figure out what are we going to eat this week.

Melissa:
Sometimes, I would almost get lazy with it, and we would end up going to fast food or Taco Bell or something like that, because we hadn’t planned ahead for our meals and for our food or anything like that, and not just took so much of the headache out of it. I did that, and then that was a process, but it definitely was a process of then also… I heard an episode with Erin or The Broke Millennial. She introduced me to the Buy Nothing group, for local buy nothing groups. That was a next huge step was instead of buying things, you have to ask people if they have things that they don’t need anymore, and that was a huge change.

Melissa:
Then that led into more of this minimalistic lifestyle that we’re living in. Look at all this stuff I have that I don’t need. I haven’t touched any of these things. I have a garage full of stuff of things that I don’t need. It was definitely a process of one thing after the next of penny pinching and really taking a look at the budget every month, seeing where we’re spending, where can we cut out more? Where do we want our money to go? What do we value in life?

Scott:
With this, how much are you able to cut your spending, and begin accumulating on a monthly basis? It sounds like you were paying very little on average before this to your debt every month. How much are you able-

Melissa:
Yes.

Scott:
At the end of this process, maybe three, six months or however long it takes to really reset the spending in a lot of ways with that, how much are you able to save per month?

Melissa:
I mean, I think between the restaurants, I mean, I think we were able to cut out anywhere from $1,000 to $2,000 a month that we were spending on things that we didn’t need to. That’s probably on average.

Scott:
Where do you apply that money? What’s your debt paid down approach?

Melissa:
We applied that money initially towards getting our house, to put it into savings, because we had a goal to buy a house. Then the rest of it all just went into savings knowing that the house that we were going to buy was going to be a live-in flip.

Scott:
You actively chose to cut your spending, and then pursue a live-in flip strategy rather than pay down your debts with this.

Melissa:
Correct.

Scott:
I like it. That’s interesting. That’s a highly aggressive approach. It probably worked out really well for you, I bet, or it is on the track to.

Melissa:
I mean, it did. I mean, it definitely was… I thought that would be the fastest way for us to wipe out all the credit card debt.

Scott:
This is in Portland.

Melissa:
Yes. It was.

Scott:
Can you tell us about this project?

Melissa:
April 2019, we buy our first house, and we bought the live-in flip. At that point, my husband and I are both making about $70,000 a year. We still have about $20,000 in credit card debt, so it really hasn’t moved that much. I still have about $14,000 in student loans, but we get our first house, and we do the 3.5% down for an FHA loan on this house, and the rest of the money, we have set aside.

Scott:
How much money you have set aside?

Melissa:
We have set aside about $15,000, $17,000 total that we’ve been able to save throughout this time. $10,000 of that went into the down payment of the house that we got, and then the rest, we had set aside for starting to renovate the house and also for getting married. We got married in August of 2019. We had a budget of $10,000 for the whole wedding, for everything combined. I tried to talk my husband into just getting married in the woods, and he wasn’t having it, so we had to compromise somewhere. He wanted the actual wedding. He wanted to celebrate us, and so I’m like, “If we’re going to do this, we need to do this cheaply, as inexpensive as we can.”

Melissa:
We set the $10,000 budget, and I think our total was just a hair over $10,000 at the end of it. I was pretty proud that we didn’t completely blow through that.

Scott:
All right, and so you’re married, and you’re working on the live-in flip. How did things progress into 2020 and 2021?

Melissa:
2020 was finally when our net worth went to broke even. We could finally dug ourself out of a negative net worth. That was a huge goal of mine was just to get to a breakeven point. I was so proud of ourselves for doing that. We’re still doing, at that point, the very frugal minimalist lifestyle. We’re going to Goodwill for buying clothes, secondhand. We’re buying things off of Facebook marketplace, so we didn’t go buy a brand new furniture. We went to Facebook marketplace, and bought a dining table for $400 and a new couch for $500 off of the marketplace that was used.

Melissa:
All during that time, we’re trying to still spend as less as we absolutely could, and putting that money back into the house. Any money that we saved was going back into the house to get this live-in flip done.

Scott:
This is work that you’re doing or hiring out?

Melissa:
We actually did 90% of the work ourselves. We spent countless hours on YouTube watching how to do things. We did all the demo ourselves. We did the tiling ourselves. We did the drywall, mudding, paint, flooring. All of those things, we did ourselves.

Scott:
In the context of 2019, 2020, 2021, this is really high-dollar per hour activity that you’re describing here. You realized it. Mindy’s realized it with that, but that is stuff that you’re probably making a killing on doing it yourself rather than hiring it out given your household income and all that kind of stuff. I think that’s how much more effective is this as a wealth generator than driving Lyft for you guys over that same period, right?

Melissa:
Oh my gosh. He’s so huge.

Mindy:
That’s the secondary benefit, Scott. The primary benefit is not having to try and find a contractor, and deal with the headache and hassle of, “Oh yeah, I’ll come over,” and then they never do, or they don’t even answer their phone. I mean, that’s the number one reason why Carl and I started doing all the work ourselves is because we couldn’t get anybody to answer the flip flopping phone. Are you a contractor? You want to make a killing as a contractor. Answer your phone, number one thing that sets you apart. You don’t even have to be good.

Scott:
They don’t have to answer their phone, and they could kill it.

Melissa:
Absolutely.

Scott:
What are the numbers on this once the project is completed? How much do you buy it for? How much do you put it in, and how much do you sell it for?

Melissa:
We bought the house in April 2019 for 274. We ended up putting about… We’re about $45,000 into the project, and this is… We took a 3:2 house, and made it into a 4:2, and that was a huge difference in the price. But again, we did, I mean, everything ourselves. We completely gutted the bathrooms, redid the bathrooms. We gutted the kitchen, redid the kitchen, took a wall out. I actually painted the entire exterior of the house myself. It was actually fun. I enjoyed it. I mean, the only things that we ended up hiring out is when we bought the house, we knew we had to get a new furnace because it was cracked.

Melissa:
That was $8,000 right out of the gate was a new furnace. It didn’t have air conditioning, and we knew we needed to have that to sell the house and have a good price. That was $8,000 more than what we were originally planning to spend on the house to begin with. We definitely went over on our budget, but it ended up working out in the end. We were in the house for two years, so just in April of 2021, we sold the house for 433.

Scott:
All right, I like it. That’s $100,000 in profit after your expenses over the two years, right? That’s adding another full income and a half for your household.

Melissa:
Yes. Tax free.

Scott:
Tax free. I like it.

Mindy:
I was just going to say how much did you pay in taxes on that? Zero. We all paid the same amount of taxed on that, $100,000 in your pocket for the next big adventure. You mentioned you are now at zero net worth, and then you sold the house. What is your net worth right now?

Melissa:
Right now, I had the goal of reaching $100,000. We met that a couple… We met that. I think that was back in April or March for a net worth of $100,000. Right now, we are credit card debt free. We have zero in credit card debt, and-

Scott:
Now, over this period, are you paying off the credit card debt in addition to cash flow in the repairs? What’s your position the moment you sell the house? Do you still have debt remaining? Do you use the proceeds to pay off remaining debt? How does that work?

Melissa:
During the renovation, we were… I had taken all the credit card debt that we had had, and basically transferred at all to zero interest credit cards, and did a balance transfer there, but we were still paying some towards the credit cards while still using most of our excess cash flow to go into the house. We were doing both simultaneously. But once we sold the house, any dollar of credit card debt was completely wiped out. That’s the first thing I did. I was in tears. I was so happy when we sold the house, and I was sitting there with my husband paying off all the credit card debt that we had.

Melissa:
That was just such a huge, huge relief, this huge weight lifted off of my shoulders, and we finally paid off every dollar of the credit card debt and still had more money in the bank account than I’ve ever seen in my life. That was a really huge moment for us.

Scott:
All right, so we’re recording this now in June of 2021, so two months after you sold the house.

Melissa:
Yes.

Scott:
What’s your plan now? What are you doing? What’s the go forward look here? Congratulations, by the way, on that huge milestone.

Melissa:
Thank you. Thank you. I feel like the world has opened up for us at that point with not having that credit card debt. Now, we’re looking for our next live-in flip. Our realtor is really great, and she’s helping us with that. We’re hoping that we’ve narrowed down and found a property off market just to buy from someone directly. Hopefully that goes through, because we’ll go into it with about $40,000 of equity into that one. If they’re wanting to sell it to us under market values, they don’t have to worry about selling it out to the market and getting it ready to list.

Melissa:
I’m fingers crossed that that happens, but for now… That’s our next step, and then now, we’re going to be focusing on maxing out both of our 401(k)s and our Roths will be the second step as well.

Scott:
I love it. You guys are absolutely crushing it here with this. I have a couple of tactical questions about your current situation. First, how much do you have in cash after you put this down payment down? How are you thinking about your liquidity, your access to liquidity right now given that you’re about to do the next flip?

Melissa:
We still have about… After we paid off all the credit card debt, we still have about $90,000 of cash just sitting in the bank account. We are planning on putting 20% down onto the next house, and then we’ll still have enough money to use to renovate the house. I’m hoping that if we don’t have enough still left, I want to buy an out-of-state rental as well. That was my goal with some of the proceeds of the house is to buy an out-of-state rental, but I might just have to start saving for that to buy an out-of-state rental hopefully before the end of this year, but we’ll see if that happens.

Scott:
Love it. You put that $45,000 into the house, and now you’ve generated 150,000 or so on in cash. Part of that went to debt paid down. Part of that is going to go to the next house. Part of that’s going to go towards your emergency fund to fund the repairs for the next house. If there’s anything left over, you’re going to put that into out-of-state rentals. Over the next two years, you’re going to be continuing to sustain your high savings rate, so that’s going to enable you to cash flow. That’s another yet a huge conservative piece of your overall asset allocation that will allow you to either finance more repairs or fully fund your 401(k)s and Roths.

Scott:
I mean, this is just a super strong financial position that you’ve constructed for yourself remarkably over the last two years given for the… I would call that the starting point from your journey two years ago with debt and, and what sounds like some overextension on the spending habits side.

Melissa:
Absolutely.

Scott:
My second question for you is mechanically, what are you doing right now to live while you’re in between houses? Where do you live, and how do you structure that for the short term?

Melissa:
Right now, we actually live out of an RV trailer. When we sold the house, we bought an RV trailer that we’re living out of. We put almost everything into storage. We’ve got basically just our essentials, so we’re living a little bit of a gypsy summer right now, just traveling around in this trailer that we have. Right now, we’re staying for a couple weeks at a friend’s house to give ourselves a little break, but we’re going to be basically living at campgrounds until we get into this next house.

Scott:
All right, I’m glad I asked that, because that’s, I think, a big question. I think the fact that you’re willing to do that temporarily is why you’re going to be hundreds of thousands of dollars richer than you would be otherwise, because you’re willing to be flexible like that in the short term here in a way that a lot of people wouldn’t be willing to do, especially not two people with full-time jobs making $70,000 plus a year. Kudos to you on that. I think that that’s-

Melissa:
Thank you.

Scott:
… going to be a big contributor to your being a millionaire very shortly here.

Melissa:
Oh man, I can’t even fathom that right now.

Mindy:
I can see it in the cards in what?

Scott:
We’ll be interviewing you in three years, five years.

Mindy:
I was going to say six to eight years.

Scott:
Somewhere in that range.

Mindy:
I can see it in the cards, six to eight years, just continuing what you’re doing.

Scott:
I don’t know.

Mindy:
But if the real estate market continues to go insane like it has been, and if you can get again an off-market deal, that’s huge, not having to fight with somebody about getting to a bidding war, and then overpaying significantly. I do have a suggestion. You said that you wanted to put 20% down on the new house. Ask your lender what PMI would cost if you went with the lower down payment.

Scott:
Correct.

Mindy:
Sometimes, PMI can be really, really low. Jake Simon was on the show a few episodes ago. He is the one that had asked his lender, “Hey, how much is PMI?” It was $50 a month or something, $17 a month, I think. Maybe it was $67, and then it went down to 50 when he refinanced, but it would have cost him more to sell his stocks and pay taxes on that to get the 20% down. If you can get a really low PMI, maybe you put down 10%, you have more liquid cash for repairs, for the new purchase, for a rental property, et cetera. It might be too much. It might not be worth it, but just have that as an option, because I think a lot of people think really binary.

Mindy:
“I either have to put down 20%, or I have to pay a lot of PMI.” I was actually really surprised when Jake told me how low his PMI was. I’m like, “Oh, that actually makes sense to not do that.”

Melissa:
I’m hoping that since we’re buying this deal off-market that we’ll have the option to not put as much down, but initially, our realtor was saying that because the market is so competitive, if we do have to fight for a house, it looks stronger on paper when we put in an offer that we have a 20% down offer for a home. You’re right though if… We don’t have to compete for this house, and I think we might reexamine that situation.

Mindy:
Here is a little bit of not so widely known information about that. When you make an offer, and you say, “I will put… I will get an offer a loan for 80%, and I’ll put down 20%,” you don’t have to stick to that. You can’t cancel the contract, because you can’t get a loan for 90% when you said you’re only going to get an 80% loan, but you can cancel the contract if you can’t get the 80% loan, but the loan is between you and the lender, and doesn’t really have anything to do with the seller. The seller gets a lump sum of money when he sells no matter what.

Mindy:
If your lender will approve you for a lower down payment, as long as you can make the offer, as long as you can put 20% down, then you can work it out with your lender in a different way. Does that make sense? I’m hacking that description, but…

Melissa:
Right, because the seller doesn’t care, right? They’re still going to get their money. It’s just what the bank’s comfortable with?

Mindy:
Yep, so that’s an option. You can still write the offer like that, and then just work it out with your lender. Like I said earlier, I see millionaire status within 10 years, and probably significantly less than. This is from a girl who-

Scott:
I think if they keep going at this pace with the creativity they approach, it’ll be three to five.

Mindy:
Scott says three to five. I would love to be proven wrong. I would love Scott to be correct. We’ll make a calendar appointment. Three to five years from now, you’re going to call us up and say, “I’m a millionaire.”

Melissa:
Oh my gosh, that’s so wild.

Mindy:
It is doable.

Melissa:
I just can’t even imagine.

Mindy:
It’s doable.

Scott:
I think this has been an absolutely phenomenal episode. Thank you for sharing your story. You are just phenomenal.

Melissa:
Thank you so much.

Scott:
Your story is phenomenal. You knew all the questions you’re going to ask ahead of time with like, “What was your debts and assets at this inflection point, at that inflection point?” That made it really easy for us. We appreciate it. What a phenomenal story and journey.

Melissa:
Thank you. It’s-

Scott:
I like this. I think this is the end point, the hard part, that slog of getting over that hump. I think you’ve you’ve just completed it, and you now have a formula or a set of skills that you can apply to whatever you want to do in the future. You’re going to crush it.

Melissa:
Thank you. It definitely feels like the world has opened up, and it’s just this huge, huge thing just to not… I told my husband the other day, I said, “We don’t do anything else significant. If we just take this launching pad that we’ve just created for ourselves, and just sustain that, we’re going to be great, but the fact that we’re continuing to go into this, going to do another live-in flip, do these rentals, it’s just…” I have set a goal of I’m hoping that I can get us to a point where he can retire within five to six years.

Scott:
I think you have a very fair shot at achieving that. That’s awesome. Well, I think we’re at a really good place here. Do you think it’s time for the famous for here, Mindy and, Melissa?

Mindy:
I do. I think that we have shared a really great story.

Melissa:
Sure.

Mindy:
I think the next step is the famous four, the same four questions we ask of all of our guests. Melissa, are you ready?

Melissa:
I am.

Mindy:
What is your favorite finance book? I think I know the answer to this one.

Melissa:
I’d probably say Your Money or Your Life was really the biggest mind shift for me. Recently, I’ve been… I’ll give you two, but the one that I’ve recently read that was also helped me get forward from where we’re at now is I’ll Teach You to be Rich from Ramit Sethi. I really love his no BS approach, and especially now that we’re trying to figure out how to capitalize where high yield savings and maxing Roths and IRAs out and the 401(k)s, that was a really great pathway steps of how to go, that you know where to go from here.

Scott:
Love it. What was your biggest money mistake?

Melissa:
Oh man, you guys, I made so many.

Mindy:
Look at where you are now.

Melissa:
There’s so many. There’s so many. With brand new cars and… I mean, I think the biggest one though that hurts the worst would be cashing out my 401(k) in 2011. That was definitely my biggest money mistake because that could be… Had I left it in there and figured out other ways to survive, I mean, we would be in such a different financial position right now.

Scott:
What I think is so awesome about you and your story here is you had a rough 2011 with a number of problems there with the quitting the job, then having the student loans, the credit card debt, the advice from the friend, the cashing out the 401(k). That sets you up for a lot of problems over the next seven, eight years of your life with that, and you were able to just completely annihilate those problems, and get yourself into a launching pad over the last two or three years. That is remarkable.

Melissa:
Thank you.

Scott:
I think a lot of people are going to benefit from hearing that, because, I bet, you a lot of people have a similarly tough situation or similar circumstances to what you just described that they’re starting from.

Melissa:
I feel like I’ve made every financial mistake in the book, and buying brand new cars, cashing out 401(k)s, quitting jobs with no money. If I can get through this, I think anyone can do this.

Mindy:
I hear you say that, “Oh, I feel like I’ve made every financial mistake.” You made every financial mistake when you were young, and now, look at all the time you have to grow your finances and your net worth now, because you have fixed every financial mistakes that you have made.

Melissa:
That’s true.

Mindy:
There are people who are way older than you who are 10 years ago you and five years ago you, who are still continuing to make these same money mistakes. I know that we have a tendency to be really hard on ourselves, but you’re doing really, really well. You’re doing… What is the statement, Scott? 40% of Americans can’t cover $1,000 emergency, and you’re better than 40% of Americans, probably better than a lot more than 40%.

Scott:
You’re in great shape with this.

Melissa:
Well, it was a very humbling 10 years of realizing what I’ve done, and really looking at the spending uncomfortable time looking at the numbers, and making the sacrifices. The frugal lifestyle is not… It’s not easy, especially going from where I was to this hard, hard u turn boat that we had to turn around. It was difficult, but I’m very happy with what we’ve done.

Mindy:
Tagging off of that, what is your best piece of advice for people who are just starting out?

Melissa:
This is exactly what you said Mindy of just sitting down and looking at the numbers. That was the biggest mind, eye opening time was when I signed up for a Mint account, and put all of our information in there, all of our debt, all of our credit cards and our investments and everything, and just looking at our spending was such an eye opening experience to see there were some months we spent over $1,000 just on restaurants. That wasn’t including groceries and fast food and convenience stores and gas stations. If someone would have told me, “Oh yeah, you spent $1,000 on restaurant,” I’m like, “You’re joking. I spend maybe $400,” maybe if that…

Melissa:
To really look at the data is it’s a big pill to swallow, and it’s exactly what I needed.

Scott:
Well, we certainly agree with that advice. That’s probably 30% to 40% of the people if we were to do the data… Well, I have to actually go back and look now that she said to review the data, but I think that’s about 30% or 40% of people say just that. If you haven’t started tracking your spending, and you’re listening, go do that. Take a look back at the last three to six months, and see what the numbers say. All right, Melissa, what is your favorite joke to tell at parties?

Melissa:
Oh, Scott, I knew this one. I’m like, “He likes dad jokes,” so I came up with a dad joke because I don’t… When I thought of this, there’s just like, “I don’t really tell jokes at parties,” but I found one that I thought was fitting, and it’s, “I never buy anything that has Velcro with it because it’s a total rip-off.”

Scott:
I love it. I’ll think of something great to say to that later. We’ll put it in the outro. That’s awesome. Thank you. Where can people find out-

Mindy:
Melissa, where can people find out more about you?

Melissa:
You can find me on Facebook, just Melissa Yi. I’m with the Money Facebook group. That’s been a fantastic group. I’m on Instagram as well, but that’s more of just my hobby lifestyle. If anyone’s into hiking and backpacking and things, I’m @mellyrae23 on Instagram, but mainly on Facebook.

Scott:
All right, well, we will link to the BP Money Facebook group and your Instagram, all that kind of stuff in the show notes at biggerpockets.com/moneyshow211.

Mindy:
Melissa, this was so much fun. Thank you for sharing your story. I know there’s a lot of people listening who identify with many parts of your story. I think it’s really, really helpful to share every money story. I appreciate your time today.

Melissa:
Thank you so much for having me both. It was a privilege to be here.

Mindy:
We’ll talk to you soon.

Scott:
Thank you.

Melissa:
Thank you.

Mindy:
Holy cow, Scott, that was Melissa, and she is amazing. What did you think of her show?

Scott:
I thought she was amazing. I thought that this-

Mindy:
You’re right.

Scott:
Like I said in the intro, this is what it is all about here at BiggerPockets Money. I’m so proud to have been doing this show with you, and to have been some small part of the influence in Melissa’s journey. I’m so proud that the BP Money Facebook group was helpful to her. I’m just astonished at her journey from literally being growing up homeless to having these opportunities and challenges and setbacks, and then getting serious about the journey here about two years ago, and man, over $100,000. She has passed that snowball tipping point where she can just allow things to happen, and she will become rich over the next five to 10 years.

Scott:
She can really accelerate it in the next two to three years by just keeping up what she’s doing. She’s willing to be flexible. It sounds like she’s got a wonderful, wonderful husband with all this, and they’re just crushing it. It’s awesome to see.

Mindy:
It is awesome to see. I’m so excited for her future. She went from… I sound mean when I say this. She went from doing literally everything wrong to doing literally everything right, and that switch didn’t happen overnight. She knew she was supposed to do different things, and just didn’t, and then finally one day, she said, “I’m done. I am going to stop this, and I am going to start doing all the financially right things that I need to do to set myself up for the best future possible.”

Mindy:
Once you flip that switch, once you start doing the work, I know it’s not any easier, but it’s so much better.

Scott:
Well, should we get out of here, Mindy?

Mindy:
We should. From Episode 211 of the BiggerPockets Money Podcast, he is Scott Trench, and I am Mindy Jensen saying signing out sauerkraut.