In the summer of 2019, Rachel Richards did something that many 27-year-olds might consider unthinkable: She quit a high-paying job that she absolutely loved. Richards—who worked as a financial analyst—didn’t leave for another job, in fact, but because she was already in a financial position to retire.
Richards lives in Louisville, KY, with her husband, Andrew. But her journey to a very early retirement began at a summer camp when she was 13-years-old. “I have been an avid reader since childhood,” she recalls. “I picked up a copy of ‘The Motley Fool Investment Guide for Teens,’ started reading it and learned about compound interest. It blew my mind. I felt like I had uncovered a secret nobody knew about.”
Rachel Richards
Starting Early
Richards took that initial lesson about the importance of saving and investing to heart when she got her first job in retail at age 16. By the time she turned 18, Richards was making small investments in the stock market and continuing to read everything she could get her hands on about personal finance. Over time, another important lesson emerged: The critical importance of remaining debt-free. As she headed to college, Richards earned scholarships to cover three-quarters of her tuition at Centre College in Danville, KY. To cover the remaining $10,000 per year, she got a commission-based job selling high-quality knives. “I paid my way through school and graduated without debt,” says Richards.
After graduating from college, Richards continued to learn more about saving and investing. She realized that she could retire very early if she were able to establish enough passive income streams to replace what she would otherwise earn as a salary. “What I like about passive income is that it’s all based on cash flow. You don’t have to build a massive nest egg,” she says. “I just had to make sure that the income from my full-time job was fully replaced.”
To do that, Richards and her husband purchased five rental properties with a total of 35 individual units. The income they earn from these rentals goes a long way toward covering their monthly expenses of around $6,000. “Once your passive income covers your expenses, you are retired,” she says. Though Richards is a proponent of real estate investing, she also knows that it comes with risks. She learned that the hard way when the property managers she hired to handle some of her properties collected the rent money from tenants, pocketed it and left town.
She brings in additional passive income from a T-shirt business she owns and through royalties from her own financial advice book, “Money Honey,” which is about helping millennials better save, invest and manage their money. She wrote the book because she felt like there wasn’t anything on the market that provided easily understandable and tangible money advice for young people. The book has consistently earned her several hundred dollars per month.
For Richards and her husband, the immediate future is devoted to exploring the country, visiting friends and likely moving to the western United States.
The Secret of Her Success
In the book, Richards shares what she has learned about budgeting, the downsides of excessive debt and the basics of investing—and advises readers to take a “savings buckets” approach. “I break it into four buckets, which makes it easy to follow,” she says. Bucket one is a $1,000 emergency fund; bucket two is for expenses over the next 12 months, like a trip or a new car; bucket three is for expenses that will take longer than 12 months to accumulate, though not including retirement, such as a down payment for a new house or a wedding; and bucket four is for retirement.
Richards advocates filling up bucket one first, then moving on to buckets two and three, the amounts of which will vary depending on each person’s goals. The exception is contributions to the retirement bucket. No matter how small the amount, she recommends people make those contributions each month.
It’s logical advice, given what Richards learned years ago at summer camp. “I encourage young people to get invested today, even if they don’t know what they’re doing,” she says. “Even if you don’t pick great investments, or you put money in a mutual fund that doesn’t do well, you’ll still do better than someone who starts 20 years from now.”
A former editor at Los Angeles magazine, Chris Warren's writing has appeared in publications ranging from Institutional Investor and Forbes to National Geographic Traveler, Oxford American and Greentech Media.
Inset photo courtesy of Rachel Richards.
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