If You’re Worried About Money, Hear This w/How to Money

0:00Financial stress doesn't just feel bad. Studies actually show that constantly worrying about money actually impairs your cognitive functions, making you worse at your job, worse at managing your money, and worse at building the future you want. It can be a vicious cycle. Today's guest, Joel Larsgaard, the co-host of the How to Money podcast, has made it his mission to help people break out of that cycle. He grew up watching his parents struggle with money and turned that experience into a career teaching financial literacy to millions of Americans. Real estate investing has been key for Joel's own financial journey and in the advice he preaches to others.

0:42He's built a manageable but very effective portfolio in Atlanta by house hacking, renting out properties when he moved in, and letting his equity compound over time. In this episode, Joel and I get into the financial foundations that every real estate investor needs, like budgeting and emergency funds. We also dig into the big questions I keep getting asked right now, like, is it still worth buying in this market? Joel has a strong take, and I think you'll find it convincing whether you're on your first deal or your 50.

1:19What's up, everyone? I'm Dave Meyer, Chief Investment Officer at BiggerPockets. Today's guest on the show is Joel Larsgaard, real estate investor and co-host of the How to Money podcast. Let's bring on Joel. Joel, welcome to the BiggerPockets podcast. Thanks for being here. Thanks for having me, Dave. Yeah, I'm excited to talk to you about this. You have such a wealth of experience and knowledge, not just in real estate, but across the financial and investing spectrum. So I'm excited to dig into this with you. Let's start at the beginning, though. How did you get into this world? Why personal finance?

1:54Why have you really dedicated your career to this? Man, it's complex. It's like personal and professional, right? It's this crossover of both for me. And just going back into my story, my parents weren't great with money. They were told some of the wrong things to do. I remember my dad told me he got advice to buy a house that was just a little bit more than they could afford because you're going to get promotions and stuff, man. And then at some point that payment will become really manageable. or his dad telling him, buy a nice car. You deserve it. And this led to when the promotion didn't come and actually when my dad got laid off, it led to meaningful financial issues.

2:38And I just remember that being like a cloud that hung over our home when I was a kid. And there were a lot of fights about how we handled money in our home. And I just remember going to sleep sometimes and thinking to myself, gosh, I don't want to argue about money with my spouse someday. And so part of it was this kind of innate desire to learn the ropes of money, not to become ridiculously wealthy, but just to say like, how can I handle this stuff so that it's not an ongoing issue for me in my adult life like it was for my parents for so many years. And so part of it was that. And then ultimately, when I worked in talk radio, I ended up working for this syndicated consumer advice guy named Clark Howard.

3:23And he's like just a brilliant mind, incredibly wise. And working and producing his radio show for 14 years was this intersection of like a personal pain point. And then it became this thing I became incredibly passionate about. It was a solution for me. But then I realized this is a problem that not just I'm facing, but that tens of millions of Americans have an issue with, right, is handling money in a way that's effective, that's helping them build wealth for their future and avoiding some of the pain that not handling money well creates. Well, first of all, sorry to hear that created issues in your family.

4:01And when you were talking about that, it just honestly reminds me a lot of my own childhood. I have my parents. I think you would describe as house poor is what people call, you know, like stretched on their on their budget of where to live. And it just sort of impacted the family a lot. My parents ultimately got divorced, a lot of fighting about money. And that just resonated with me, what you said, because it sort of created, I think, on the positive side, a drive to do better at budgeting and thinking ahead a little bit, but also sort of created this lifelong financial anxiety that I felt like I needed to address.

4:38Like I just was always worried about money as a kid. Like before you should be worried about money because my parents were constantly talking about it and trying to find like a positive way to channel that anxiety was a big mission and ultimately wound up in real estate for me. I felt like that was the right way to try and secure a good financial future for myself. But for you, after that experience growing up and working in radio with personal finance experts, what part of personal finance resonated with you and where did you find yourself gravitating? There are certainly a lot of people in this country who, for a lack of income, a lack of options, lack of education, have a real hard time making ends meet.

5:28But then there are a lot of people who have those solid incomes. Like I said, that's a growing number of Americans in middle and upper middle class. And yet still a lot of those people living paycheck to paycheck who have the ability to figure this out. I talk about it sometimes. It's like learning a different language. Learning personal finance can be like that. Same with learning real estate, right? That's why it typically takes 150, 200 hours of research and digging into your neighborhood before you start making offers, before you can make a smart offer and know what you're doing. The same can be true of personal finance, although I think the basics require a little bit less time than that.

6:08But ultimately, there's just such a need, no matter the income level, for people to learn these basics. Because I do think we can blame it on the system, or we can say that the macroeconomic wins are not in our favor right now. But I think there's just a lot of personal agency in that space of personal finance where people can take control of a lot of aspects. They can make changes that are going to improve their lives moving forward, that are going to reduce stress, like you talked about divorce, right? I mean, that divorce stress, there's a lot of studies about how being stressed out about money reduces your IQ level.

6:46It makes you worse at your job. Yeah. So if you're stressed about money constantly, you're like walking through life with like 14 points lopped off your IQ. You're going to make worse decisions. And employers have found this as they've started offering more like emergency fund help. They realize that their employees who are living financially strapped and on the margin, if they offer them a little bit of a lifeline, maybe they're a little bit less stressed at work. Maybe they're a little bit more productive. And so the reality is that if you have your personal finances buttoned up, if you're paying off some of the most nefarious kinds of debt and you're able to save up a little bit of emergency fund and you're able to start investing for your future, that frees up a lot of brain space so that you can enjoy your life more, but it's also just helping secure your financial future as well.

7:32So, Joel, you're saying that you think financial literacy can really help people sort of regardless of what's going on in that macroeconomic climate or the quote unquote system. And I'm curious if you could say more about that, because that is a debate, right? You hear that all the time, that things are harder now for people than they were a couple of years ago or a couple of decades ago. And I'm curious where you fall on that spectrum or how you would weigh in on that debate. I think it's a little bit of both, right? And I think in some ways, it's harder. I think about buying a house in 2010 versus 2026.

8:12It's a different endeavor. And rates are higher. Prices are higher. When you talk about the average income needed to buy the median house in the United States, it doesn't match up to where it was even five years ago. And so that's a problem. There are other ways, though, that it's become easier. I think there's more information about that, about personal finance. It's easier to learn than ever before. There are also, for instance, like requirements now for companies to auto enroll you into your 401k. So maybe before 10 years ago, you're like, it wouldn't have been on your radar. You wouldn't even thought about it.

8:48Now people are saving and investing for the future without realizing they're doing it. And in some ways, I think that's a wonderful thing. And so, yeah, I think it's a mixed bag. When you look at the stats about Gen Z, they're more prone to invest, more keen on investing than any other generation in history. And you can say some of that's negative with speculation and the prediction markets. Hope not. Yeah, I know. Some of it is. There's some of that taking place. But then I think a lot of that is also positive. And there's just a reality that they're living in. Hey, like questioning whether Social Security is going to be there for them, realizing that the onus is on them.

9:28And they're not just like passively hoping that they're going to be OK. They're actively investing for their future because they know they have to play a bigger role. That's where I come out on this. I wouldn't argue if someone were to say it is harder to be in the middle class today than it was 10, 20, 30 years ago. I think there's a lot of evidence to support that. But there are things that you can do to improve your financial future and why I personally believe as times get hard, personal finance becomes even more important. It's arguably less important when things are going well, right? Yeah.

10:02Like when we go through a recession or the Great Recession, right, back in 2008, what you find is that the savings rate goes up. When you look at what happened during COVID, the height of COVID in 2020, the savings rate skyrocketed. Part of that was like, we're staying at home, right? And so we're spending less. But this is just that's just a consistent reality of how people respond to unexpected negative events is they start saving more. And you would think like, man, if you make hay while the sun shines and you're saving ahead for those realities, then you don't have to like curb back instantaneously in the moment and pair back in a way that harms your lifestyle because you've prepared for that eventuality.

10:46but what you find is that most people don't and so what they end up doing they they find and they trim the fat but only when it's actually necessary and to your point too on whether or not it's easier or harder i think one of the things that makes it harder as a middle-class american now is just the abundance of stuff and the expectations that we have so yes some things are legitimately more difficult like buying a house right now then there are some things where we just have to change our expectations as individuals. And having lower expectations sounds like, all right, dude, come on, like you're telling me I should want less.

11:21And in some ways, yes, like we should. Yes. Oh, 100%. If we are okay wanting less or realizing that actually this 15-year-old car is going to get me where I want to go just as well as the brand new car, or you know what, the 1 ,200 square foot house is going to be just as fine for me to build the life I want as the 3 ,000 square foot house. It's just going to cost me a heck of a lot less than like, and I think this is not to just dunk on people's choices. But I was talking to a friend recently and he took out a loan from his 401k to to put in a pool. And then somebody came in and they were like, hey, man, you need new windows.

11:59He took out an 18 month zero percent interest loan, hoping he can pay it off in time to put the new windows in. These are the kind of decisions, Dave, that people are making to try and keep up with the Jones. He's got two new Teslas in the driveway. Right. There are all these choices that we make, and I'm not saying that there are no headwinds, but a lot of this we're also doing to ourselves. It's so important to just, not that you have to be cheap or frugal in every part of your life, but focusing on the things that actually matter to you instead of just buying things because other people are buying those things.

12:34Because otherwise, even if you get rich, you're still going to want more. That's, I think, the trap that you fall into is that you can earn more and more and more, but you'll never be happy until you can sort of control what you actually want and what you spend your time and effort on. You're going to be in the hamster wheel. So I love what you're saying there, Joel. Well, and that's on our show, we talk about the craft beer equivalent because I love craft beer and I'll spend a ridiculous amount like I just went to a brewery a couple of days ago and bought a couple of four packs and it's not cheap.

13:04Like it's how much they're like$21 for a four pack, a four pack of 12 ounce cans. You're like, that's five bucks a can. That's crazy. But it's, man, delicious stuff. And so I'm more than willing to buy that stuff. But if you can carve out, I think it's one of those things where you have to frame it in a positive way for people. Because oftentimes in personal finance, it's sort of this deprivation mentality. Well, how can you hate your life and spend as little as possible so that someday when you reach age 65, you're living high in your golden years? That's lame advice anyway, right? It is. It's a terrible idea to live for three decades from now.

13:37Yeah. But if you can find, well, how can I positively save for my future self, providing optionality for myself now while still spending on the couple of things, two, three things I've identified as highly important in the here and now? For me, craft beer is still up there, although less so now. But concerts, like that's really high on my list right now. And so I will, I'll spend big money to go to concerts. But then there's other things like my 20-year-old forerunner is, I'm just going to hold on to that for the next eight or 10 years. Are we the same person? You have a 20-year-old 4Runner? I drive a 2004 blue Toyota 4Runner.

14:12No way. I got no six, so I'm a little fancier than you. Okay, you're fancier than me. I love that car. I told my wife I'm going to get buried in it. I love it. See, cars don't matter to me, but man, put me in a fancy hotel, I'm a sucker for that. I absolutely love it. I like splurging on a vacation. For me, that's worth it, but car, I'll drive an old one. It's totally fine. So Joel, I want to hear about your involvement in real estate and how it has played a role in your own personal financial journey. But we do have to take one quick break. We'll be right back. You've upgraded how to buy properties, but did your insurance get the memo?

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18:31Welcome back to the BiggerPockets podcast. I'm here with Joel Larsgaard talking about personal finance. And Joel, I want to turn our conversation to what role real estate has played in your personal finance journey. So when did you first get into the real estate game? So bought my first property back in September 2009. It was a good time to buy. Let's be honest. Prices were low. It was also a tough time to buy because the economy was still in turmoil. We're talking about there were short sales happening everywhere, foreclosure sales happening everywhere. And so, yeah, it meant prices were cheap, but people were also worried about further price declines.

19:12And there were just a lot of things up in the air at that moment in time. Totally. People overlook that. They're like, oh, it's so easy. It's like, well, the bottom was kind of falling out and no one knew when we were going to find it. Exactly. But when I was doing the math, I was just thinking, think about what rent's going to cost me if I rented this apartment over here. and what's it going to what if i buy this single family home right around the corner in this like potentially up-and-coming neighborhood let's hope and man i could live in there alone by myself and pay just as much as i would in rent every single month but actually it's got another room i could rent that room out too and lower my cost substantially gosh it's starting to feel like a no-brainer like why would i not buy a property i was not it was not on my radar until i was looking at prices, sub 100K prices, which now people are like, don't rub it in, man.

20:01Don't say that out loud. True. I'm sorry I mentioned that. But when you start to see that, you're like, this feels like a once in a lifetime opportunity that I have to take advantage of. And even if the home pricing turnaround doesn't happen instantaneously, if I'm in it for the long term locking in just ridiculously low housing prices, that's a win in and of itself. So that was when I bought my first property. Where was that? Where in the country? So this is in Atlanta in like two miles east of downtown Atlanta. Wow. Sub-hundred grand in Atlanta is looking pretty good right now. Yes, for real.

20:34And so then I realized a couple of years later as real estate prices are going back up, but I'm like, there's still a lot of deals it seems like to be had. But I can't get rid of this house and upgrade. Like that's ridiculous. So what if I hold on to this house and I move just right around the corner into something just ever so slightly larger? And then I managed this one. And so just from a number standpoint, it started to make a whole lot of sense to save up that next down payment to buy a house around the corner. And this was kind of my methodology for the first seven or eight years was like, hey, every two years, can I buy a place and rent out the place that I bought previously?

21:13because, hey, if it's low price, I got incredible financing and I want to hold on to it for the long term. This seems like a no-brainer to help propel me on my path to like, you know, not fortune, but like towards at least building wealth for myself. Did you consider yourself a real estate investor or were you this a side hustle for you? I think it takes a while to consider yourself a real estate investor, right? At first, you're like, I'm doing this on a lark. I know this area, there's a lot of good things happening here, I saw a lot of potential in terms of pricing in, in terms of the neighborhood.

21:47And then the further along you get into it, you do it once and you're like, okay, all right. Like now I've learned a lot about finding a great tenant. I've learned a lot about planning for vacancy, right? You start, you just learn about every little thing along the way. So I was, I didn't feel like when I took the leap, I couldn't mess it up. Like I knew there were a lot of ways I couldn't mess it up. There were a lot of ways I didn't even think right in my mind, like, well, that's something I don't know. And you just kind of learn them through a series of hard knocks at times. I mean, that's the beauty of it, right?

22:15It's not easy, but it's simple. It's something that people can just understand. The inputs, even underwriting a deal, you need to get good at understanding what numbers to put in each slot in the calculator, but there aren't even that many slots in the calculator. You need to figure out your revenue, your debt service, a couple of expenses, but most people can wrap their head around those things. It's so tangible and easy to get a grasp on. And it is a more forgiving business than I think people give it credit for. If you buy well, you get a lot of leeway in getting your hands dirty and figuring it out on your own and learning by doing, at least in my experience.

22:55I think that buy well is such a key point. And I think especially right now, it's not that you can't. It's just harder. It's harder to buy well. And if you're trying to rush it or you're just like, man, real estate is the path to riches. That's the path I want to take. I think that's a reasonable choice for a lot of people who say that's where I want to focus my efforts. And that's where I think I have outsized abilities. If I can know my market incredibly well and buy intelligently, then I can perform better over time than I would investing passively in the stock market. More power to you. But I think there's also a lot of people who might knee-jerk say, I think real estate is the best path.

23:30And so I'm just going to start making offers and get in there and not maybe having run the numbers as thoroughly as they need to or thought through the trade-offs before they go hog wild or all in on the real estate path and find that they weren't really fully prepared. And the risk is higher now than it was, I think, when we were starting off. So Joel, at this time, you're buying a couple properties in Atlanta. Were you still working in radio or what were you doing? Still working in radio, contributing to my 401k, my Roth IRA still too. I like the kind of both edges of the sword. I wanted to partake in both.

24:06And my thought process was like, I didn't care about maxing out my 401k, but if I can't get the match and max out my Roth IRA, then I'm not ready to buy another property. To me, that was table stakes. I don't think that has to be the case for everyone, but that was the table stakes for me. If I can do both those things, whatever I can save on top, that's going towards my real estate investments. And so, like I said, I bought those first two houses. And then the third house I bought was a duplex. And it's still right in that same neighborhood. So I'm self-managing. I'm doing a lot of the repairs on my own.

24:39And I think that's a really, it's not for everyone, but especially when you're running the numbers in those early years, make sure those properties are profitable. The more you can do one, it helps you learn the lingo. It helps you understand your properties better. If you start like hire out for a property manager immediately, you're going to miss out on profitability and you're going to miss out on the learning process that's really necessary. I learned a lot about screening tenants, right? Like how important that is and how thorough you need to do that. That's like potentially the number one most important thing you have to learn how to do effectively after finding a good deal.