How a 28-year-old managed to retire early and earn $16,000 a month in passive income

Rachel Richards.
Photo by Andrew Fazzone

To reach your major money goals, such as saving for retirement, starting early is key, experts agree. But even the most gung-ho financial advisors wouldn't expect many folks to be planning their financial futures between honors algebra and AP History. Then again, they probably haven't met Rachel Richards.

"Before entering college, I was already pretty freaked out by the idea of student loan debt," she says. "Because even by then I was a total finance nerd. I read everything I could about money management in middle school and high school."

Richards earned several scholarships to attend Centre College in Danville, Kentucky, including one for playing piano, and made up the rest of her tuition — about $10,000 a year — by selling Cutco knives. Thanks to that side hustle, and to some AP credit she earned in high school, she graduated debt-free in 2013 at age 20.

Richards credits this solid financial foundation for what happened next: Less than eight years later, she and her husband are financially independent, she's retired, and she brings in about $16,000 a month in passive income. Here's how she did it.

She started by saving 'over half' her paycheck

Richards graduated with a Bachelor of Science in financial economics and worked for two years as a financial advisor. "I figured, I love finance, I'm passionate about helping people, and I have this really strong sales background," she says. "So I figured it would be the perfect fit for me."

The job came with a salary of $36,000, which Richards says bumped to $42,000 in her second year. Even though she wasn't earning much, Richards says she was able to save the bulk of her salary. "My expenses were about $1,500 a month," she says. "And since I didn't have student loans and I was super, superfrugal, I was able to save over half my paycheck even then."

Richards soon realized that her financial advisory work required years of cold-calling to build her client base. "I realized I wanted out of this, but I still wanted to help people with finance, because that's what I love to do," she says. "It took me a few years to figure out how to eventually get there."

Richards took a few gigs in real estate before signing on as a financial analyst at a manufacturing firm in 2016, a job that paid $75,000. She stayed for three years before retiring from the 9-to-5 workforce at the age of 27 to focus on her income-generating projects.

Building a passive-income-generating machine

In 2017, Richards began focusing on ways for her and her then-fiancé to generate passive income. "Before that, we didn't have any other income streams," she says. "We didn't have side hustles. We didn't have passive income. We were both just working the hustle of the 9-to-5 jobs."

That year, the couple bought their first investment property: a duplex in Louisville that cost $100,000. "Each of us put $10,000 from our individual savings in to get us to that 20% down payment," Richards says. "That came from the money we had been saving over the years."

That her husband, a member of the military, had graduated debt-free as well helped matters a lot, says Richards.

The couple expanded their real estate holdings aggressively, purchasing six properties (a total of about 40 units) in two years.

Ryan Serhant: Why now is a great time to invest in real estate
Ryan Serhant: Why now is a great time to invest in real estate

Video by David Fang

The key to their rapid expansion: Rachel had her real estate license. That afforded them two big advantages, Richards says. One was speed. "If you have a license, you have a slight time advantage because you can literally get notified of properties that are being listed in real time," she says. "So there were times where I had a search set up that if something, that if a property met my criteria, it would immediately email me if something was listed. At times I could be out to that property within 30 minutes of it being listed and be the first one to make an offer."

She also acted as her own buyer's agent, meaning she earned a commission from the seller when she bought a property. "Any time we would close on one of our properties, basically we would fully deplete our savings to buy a property, but then I would immediately get a commission check back for thousands of dollars," Richards says. "Sometimes it would be like 10 grand. So that would jump-start the savings for the next down payment."

Aside from the first duplex, most of the properties that the couple acquired were move-in ready and were already being rented, Richards says. From there, Richards looked for properties in which she thought she could make $200 to $300 in monthly profits per unit.

The couple ceased buying new properties in 2018. They now spend about 5 to 10 hours a week managing the properties. All in all, the profits total around $8,000 per month, Richards says.

Turning a passion project into passive income

Right around the time she and her then-fiancé were considering buying their first property, Richards was working nights on her pet project: a book.

"I started thinking about writing a book in early 2017 because all my family and friends were coming to me for financial advice," she says. "I also began to wonder, well, why aren't they reading books or learning on their own? And then I had this epiphany that, oh yeah, personal finance is boring for most people. It's overwhelming, it's complex, it's dry. So I thought to myself, 'How can I make this topic fun and sassy and simple?' And that's where the idea for 'Money Honey' came from."

At first, Richards says, she was enamored with the idea of getting a traditional book deal. But she learned that many publishers expect authors to do the majority of their own promotion and marketing in exchange for a 10% to 15% royalty. Whereas "if you self-publish on Amazon, you can earn 35% to 70%," she says. "So I figured, why am I going to pay them, essentially, if they're not going to really do anything to help me market my books?"

The FIRE movement: What to consider before trying to retire early
Is retiring early actually a good idea?

Video by Stephen Parkhurst

After self-publishing her book on Amazon, Richards says she recouped her money within the first month. Since then, the book, along with her follow-up, "Passive Income, Aggressive Retirement," have flown off the virtual shelves, netting Richards about $4,000 a month in royalties.

Richards also offers an eight-week online course, which is another source of passive income for the couple. The course, which costs $497 and is called "Get Your Financial $hit Together," generates about $4,000 a month in profit for Richards.

'It's about working when, where, and if I want'

Richards describes her and her husband's financial situation as "Fat FIRE" – a financially independent lifestyle that doesn't include the sort of bare-bones living that characterizes the FIRE movement.

"We wanted to create $10,000 a month in passive income. Now it's $16,000 a month. Our expenses are probably $8,000 a month, on average," she says. "We love to do things like travel. We travel a lot. We live in a pretty big house. We just wanted to be comfortable and be able to go to REI and spend money without worrying about it."

Her husband still works: He earns a salary, plus benefits, such as the couple's health insurance plan. Richards focuses on expanding her brand of personal finance advice targeted toward millennial women.

"Now it's about working when, where, and if I want, and my passion just happens to be working on this business that I've created writing books and teaching women about financial literacy. So that's how I spend the majority of my time," Richards says. "My husband, on the other hand, has chosen to keep working for now, because he is a rare human in that he loves his career. He loves his job. He's very fulfilled by it. So for him too, it's about working because he wants to, not because he has to."

The article "How a 28-year-old Managed to Retire Early and Earn $16,000 a Month in Passive Income″ was originally published on Grow (CNBC + Acorns).

I quit my $35K job to grow my side hustle — now it brings in $141 million a year
I quit my $35K job to grow my side hustle — now it brings in $141 million a year