This story is part of CNBC Make It's Millennial Money series, which profiles people around the world and details how they earn, spend and save their money.
Sitting on his new West Elm bed in his two-bedroom condo in National Harbor, Maryland, 24-year-old Garrett Ramela flashes bill after colorful bill: bright red from Singapore, pale purple from England, teal and brown from Sudan.
He started the collection during his years in the Marine Corps, when he spent time stationed across three different continents and traveled to more than a dozen countries. In a nearby box, a collection of coins and medals shine in the mid-morning sun.
Ramela's collection of foreign currency symbolizes more than just his past. Money is part of what motivates him to work so hard, pursue multiple graduate degrees and invest in real estate. He's working toward a future where he can enjoy a comfortable lifestyle and the flexibility to travel or live anywhere in the world.
Today, he's employed full-time at a tech company as a defense contractor (where he earns a base salary of $120,000). He owns three properties (which bring in another $38,000 a year in rental income). And he's meticulous in his day-to-day financial decision making, which is reflected in his carefully curated budgeting spreadsheet.
Look in his wallet, though, and one thing is curiously missing: "No cash," he tells CNBC Make It. "I never have that in my wallet."
If you ask Ramela why he joined the Marine Corps, he'll tell you that his dad was a Marine, too.
But his choice wasn't simply about following in his father's footsteps.
"I joined the Marine Corps because I graduated high school and fell on my face," he admits.
Balancing online college courses with a string of odd jobs left Ramela both overwhelmed and directionless. The military not only provided structure but offered him tuition benefits and the ability to travel, so in 2013, he enlisted. He went to boot camp in 2014 and was stationed in Virginia Beach, Virginia.
From there, he volunteered for an assignment in Okinawa, Japan, and later another deployment in Djibouti, Africa, where he spent a year before returning to Japan.
"My military experience really opened my eyes," he says. "I'm from a suburban town in Pennsylvania where everyone is the same. Being in the military, you meet people from all different walks of life. You get to understand different cultures and share different values that you wouldn't normally share unless you live in a big city."
When Ramela returned to the U.S. in 2018 and "separated from the military," his first civilian job as a financial consultant paid around $80,000 a year pre-tax. Although it was nearly double what he earned as a Marine, it didn't feel like it because all his living expenses — including housing, health care and travel — had been covered by the military.
He's since increased his income significantly and hopes to continue to grow it.
Ramela earns a base salary of $120,000 pre-tax for his full-time role as an information systems and financial consultant at TITANONEZERO, a Virginia-based technology company.
But his total compensation adds up to far more: Ramela estimates his benefits package is worth another $28,000 per year. That includes health insurance, phone reimbursement, paid parking, a 4% 401(k) match, which kicks in after employees have worked for the company for six months, and a $10,000 education allowance he can use to attend conferences and take training courses.
He joined the company in August 2019, and while he's not currently contributing to his 401(k), he plans to once he's eligible for the match.
As a veteran, Ramela is able to take advantage of the Post-9/11 G.I. Bill, which covers his education expenses and provides a monthly housing allowance. It covered around $46,000 per year in tuition and fees at American University, where Ramela earned a master's in finance, completed in December 2019. He receives about $28,000, or just over $2,300 per month, to put toward housing as well.
All benefits Ramela receives from the bill are tax-free.
Ramela isn't done with school yet. He's working on his second master's degree in information technology at the University of Virginia, which he started pursuing in August 2019.
He hopes all the hard work will pay off as he has big career goals. "I want to be a CFO, and I think CFOs in the future will need to know how to use IT to create business value and be able to talk finance and accounting," he says. "My whole background is in finance and accounting, so I really need to learn IT to be able to have deep, intellectual conversations on the use of IT in businesses."
Ramela also brings in additional income as a landlord. He owns three properties: a house in Pittsburgh; a one-bedroom condo in Alexandria, Virginia; and a two-bedroom apartment in National Harbor, where he currently lives. He co-owns the Pittsburgh house with his cousin, so they split both the expenses and the profits evenly.
In total, he earns about $38,000 a year from the properties. The tenant in Alexandria pays $1,705 per month in rent, and the tenant in Pittsburgh pays $900, and Ramela receives half. His roommate gives him another $1,000 a month for his room in the National Harbor apartment.
Although Ramela's total real estate income comes to nearly $40,000 a year, he nets far less. His profit totals about $300 a month, or $3,600 per year.
That's OK, Ramela says. He cares more about keeping his cash flow positive than turning a huge profit right away. "The point of having passive income is to have it rented and not worry about it," he says. His tenants are paying off the mortgages on the homes, which builds equity for Ramela.
The ultimate goal is to continue to use the equity he builds in each property to invest in more and more units. Ramela aims to take the money he makes and "funnel it away into assets that are going to be there in the future and generate passive income."
To get started in real estate, Ramela used another military benefit: a V.A. home loan. The program allows eligible veterans to buy, build or refinance a home, often with better terms than a traditional loan would offer. Ramela was able to buy both the place in Alexandria, which he purchased for $217,000 in 2018, and the one in National Harbor, which cost $407,000 in 2019, with 0% down, no private mortgage insurance and "competitive" interest rates.
"Essentially, you can just move into the home and start making your mortgage payments," he says.
The loans do come with stipulations, however. Homes purchased through the program are meant to be primary residences, so Ramela lived in the Alexandria property for over a year before moving into the National Harbor apartment, where he currently resides.
Take a look at any of Ramela's financial documents and spreadsheets, and it's clear that he has a plan for his money. His bookkeeping is meticulous, every single expense is accounted for.
"Every purchase that I make, I try to think: What are the long-term ramifications of it? Is this a necessary expense for me to be able to make more money in the future?"
While he's willing to spend money to furnish his rental properties or celebrate finishing another semester of school with a vacation, such as a recent trip to New Orleans, there are a few things you won't see in Ramela's monthly budget: a gym membership (he uses the facilities at AU since the cost is covered by his tuition), a phone bill (work pays) and a Netflix subscription (T-Mobile includes it with his phone service).
Here's a breakdown of how Ramela spends his money in a typical month, as of September 2019.
Source: CNBC Make It
Outside of his mortgages, Ramela owes about $47,500 in debt between credit cards, a personal loan and student loans.
His credit card balance sits at about $28,000, mostly from renovation materials for the house in Pittsburgh and furnishings for his newer place in National Harbor, all racked up over the last year. He was able to finance some of the furniture with an interest-free credit card, but as the intro period comes to an end and his debt becomes subject to interest, paying those balances off as quickly as possible is Ramela's top priority. He puts $4,500 a month toward this.
"You have to pay a premium for using someone else's money," he says. "I had to make some necessary sacrifices in order to get to the next level."
He also puts $500 a month toward a personal loan, which has an outstanding balance of about $12,500.
Ramela still owes about $7,000 in student debt for his undergraduate degree. Because he's currently in school, those payments are suspended, he says. He'll start paying again when he's finished with both of his masters' degrees.
As a result of all his debt, Ramela only puts about $100 a month into savings and has about $6,500 stashed away. He doesn't think it makes sense to contribute to a retirement fund or brokerage account that earns a rate of return of 10% or less while he has credit card debt racking up 20% in interest, he says. And he tends to shy away from keeping too much in savings:
"I try to be anywhere between two and four weeks ahead of my necessary bills," he explains. "In the unfortunate event something happens to my primary job at TITANONEZERO, I'd have at least two-to-four weeks float before needing access to the extremely liquid capital which would cover approximately one to one-and-a-half months."
Despite the debt, Ramela doesn't regret the purchases. Investing in his rental properties allows him to boost his income going forward. Plus, the furniture looks great in his new place: "When I moved, I discovered West Elm and I love West Elm," he laughs.
The total monthly cost for Ramela's National Harbor apartment is just over $2,700, which includes both the principal and interest on the mortgage, homeowners association fees ($445) and two parking spots ($20 each). His roommate pays $1,000 a month for his share.
Ramela pays $1,595 per month on the mortgage for the property in Alexandria. That includes HOA fees and a storage unit. Right now, he has a tenant in the unit who pays him $1,705 per month in rent.
He also pays $250 per month toward the mortgage for the Pittsburgh house. His cousin covers the other half. They have a tenant who's currently paying $900 a month to rent the home, and Ramela and his cousin split the profit.
At both properties, the tenants cover their own utilities, so Ramela doesn't have to budget for those.
Ramela's "sustenance" budget, as he calls it, goes primarily toward dining out. In a given month, he only spends about $200 on groceries.
He knows he could save a significant amount of money by preparing his own meals, but he chooses not to. "It's really an opportunity cost," he says. "I will pay a premium to be able to eat out for convenience and not have to travel back home. If I spend a little bit more money, I can have dinner with friends and have a social life instead of coming home to make a grilled cheese sandwich."
There's another upside to barely using his kitchen: "I get to spend more time doing things that I love and not washing the dishes, which is the worst chore ever," he says, laughing.
A big part of being able to responsibly handle money comes down to understanding what's coming in and what's going out, or "mastering cash flow" as Boneparth calls it.
Ramela has a firm grasp of this concept: He knows exactly how much he brings in each month as well as how much he spends. "The fact that he even has these numbers organized in a spreadsheet and he can talk intelligently about that is one of the strongest things going for him," Boneparth says.
Additionally, Ramela lives within his means and has developed multiple sources of income, which stands out to Boneparth as positive signs that he's cognizant of his cash flow. It shows that Ramela has a good foundation for improving and maintaining his finances.
Ramela has fairly significant credit card debt, but Boneparth argues that not all debt is created equal. For Ramela, this debt was key to getting his real estate investments up and running. It allowed him to finish renovating the Pittsburgh property and begin to rent it out.
"He used credit cards as a tool — and one could argue he did it responsibly," Boneparth says. Now that Ramela has equity in real estate, the next time he wants to purchase a property he can use the equity he already has as leverage, instead of relying on credit cards.
Ramela also took on credit card debt with the knowledge that he earns enough income to be able to pay it off quickly. "He's able to put $5,000 a month toward paying down that debt," Boneparth says. "All of that non-mortgage debt can be paid off within 10 months at the rate he's going."
That doesn't mean taking on credit card debt is the best choice for everyone. Credit card interest rates typically run 16 to 24%, which can add up quickly if you aren't able to pay down the balance right away. You should carefully weigh the risks before deciding to take on a significant amount of high-interest debt.
Although Ramela appears to understand his choices, he's still taking on a high level of financial risk by choosing to utilize credit cards and expand his real estate portfolio.
That's not necessarily a bad thing, Boneparth says, but it wouldn't hurt to mitigate some of that risk to put himself in a slightly more stable position. As a starting point, Ramela should consider building up his liquid savings. Currently, he only has about $5,000 in cash in an emergency fund.
"Having a cash reserve is a very subjective thing — some people are OK with having none," Boneparth says. "There's a happy medium though. It doesn't need to be zero and it doesn't need to be six months."
When deciding how aggressive to be, it's helpful to consider the worst-case scenario, Boneparth says. If Ramela ended up in a tight position money-wise, he's prepared to draw from his retirement accounts, sell off assets or even start driving for a ride-share service like Uber. But the question he should ask himself is: Is that worth it?
Could he make some sacrifices now so he can build up cash savings that allow him to continue pursuing what's interesting and productive to him? Or is it worth it to him to continue to invest aggressively, knowing he might need to disrupt his life in a major way if disaster struck?
Boneparth's advice is to try and find a comfortable balance. Decreasing his risk doesn't mean to only focus on saving cash, he says. "It could be a combination of cash and leveraging real estate."
Although the real estate industry has performed well in recent years, there's no guarantee that it will continue down the same path in the future. That means Ramela needs to continue to make an effort to keep up with the industry and make informed decisions about which properties to buy and what he can afford.
Anyone interested in real estate, particularly rental properties, should remember that "real estate is cyclical," Boneparth says. "We have to be mindful of our own biases. You have to understand what your risks are and you have to question whether you have a really good handle on that."
Ramela should also remain conscious of the time commitment needed to keep up with a growing portfolio, especially while he has a full-time job and is going to school. Rental properties can provide a reliable source of passive income, but they still require a certain level of involvement.
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