Do you go throw spaghetti at your wall and see if it sticks?
You know, I have quite literally done that once or twice.
I think largely because I wanted to test whether or not the metaphor made sense.
Actually worked.
Yeah, exactly.
It works.
But I don't eat the strands of spaghetti that hit the wall.
I eat the rest of the pot.
Oh, thanks for clever.
Oh.
You can afford anything but not everything.
Every choice that you make is a trade-off against something else.
And that doesn't just apply to your money.
That applies to any limited resource you need to manage, like your time, your focus, your energy, your attention.
So what matters most and how do you make choices that reflect that?
That's what this show is all about.
My name is Paula Pan.
I'm the host of the Afford Anything podcast.
Every other episode we answer questions that come from you and my buddy, former financial planner, Joe Salsy.
Hi, joins me to answer these questions.
What's up, Joe?
Man, Paula.
I've been trying to tell airplane jokes lately, but none of them land.
Uh-huh.
No.
Come on.
Work with me, people.
Oh, look.
And then you blame other people for not laughing at your joke.
Joe, I think you're the problem.
No, no, no, no, no.
You have no idea how hard it was to even come up with that one.
No, it wasn't hard.
How are you, Paula?
I am running on, according to my Fitbit, two hours and 45 minutes of sleep.
But I'm drinking a latte with a double.
It's a literally violated the don't buy latte's principle, the famous personal finance.
Don't buy latte's.
And that's what's powering me through.
So here we are.
What most people don't know is that's an increase of two hours over the night before.
So congratulations.
Oh, that's great.
Onto people who also have questions that are keeping them up at night.
We're going to kick off with a question from Lee who is facing a tech layoff.
Hi, Paula.
Thank you for taking my question.
My name is Lee and I'm 30 years old.
I am about to be one of those tech lay offs you have been seeing in the news.
Technically, my company is doing a quote soft layoff by giving me two months to look
inside for a job.
But the sufferers package is a little too hard to pass up with three months of pay
and eight months of paid Cobra health coverage.
And since I've been on a FBI journey for a couple of years now, I have a year's worth
of expenses saved up.
Might take the rest of the year off.
I have two questions.
One, should I max my next couple paychecks towards my traditional 401k and as a result,
lower my tax bracket or put it towards Roth 401k or zero out my contributions and
put it in an after tax brokerage account.
Second, I'm in California.
And we'll qualify for unemployment.
Should I take it?
Will it affect me later in life?
Can I take it later?
What are your thoughts?
Lee, first of all, while I'm sorry to hear that you're facing a layoff, huge
congrats to you for being so prepared going into this.
You have a year's worth of expenses saved.
You have the option to just take the year off if you want to.
That is such a testament to proactive forward thinking, financial planning.
So huge congrats to you.
Steve, can we get a round of applause?
So now to answer your questions about how to manage this layoff, first of all, the more
money that you can put into any type of Roth account, the better.
One of your questions was, do you max out your traditional 401k and therefore lower
your tax bracket or do you invest in a Roth 401k?
Shovel as much as you can into the Roth 401k.
Shovel as much as you can up to the max in your Roth IRA, if you have to make it
a backdoor Roth IRA, but put as much as you can into Roth accounts because your income
this year, 2023, is likely to be lower than it will be in any foreseeable year in the future,
especially if you take the rest of the year off or even if you take three months off
or six months off.
And so because your income is going to be a lot lower than usual, you want to be paying
more in taxes, not less.
And what I mean by that is by virtue of putting as much money as you can into a Roth,
you then have money that is in an account that is tax exempt for life.
You don't have to pay taxes on capital gains.
You don't have to pay taxes on dividends.
And because you're young, you're 30, you're going to get the benefit of three,
four, five decades of growth, depending on how long today's contributions sit in
your Roth 401k or Roth IRA.
So to be able to exempt yourself from taxes on all of that growth and to do it when
you are in the lowest tax bracket that you foreseeably will be in, take that opportunity.
Absolutely.
Here's the thing that I worry about with the Roth.
If she's contributing to the Roth 401k, that money is going to be locked up for five
years or 59 and a half, whichever is longer.
And at age 30, if she thinks she might need that money ahead of time, then what I
might do instead, Paula, especially if she's making less money this year, she might
be okay, then this year to do Roth IRA instead.
With a Roth IRA, she can take the money out at any time that she put in the interest
on it, the money it makes still has that five year, 59 and a half rule.
But the contributions do not.
And in this year, where she's making a lot less money, what I might do would be see
if she's eligible for the Roth IRA, pop up to the max in the Roth IRA so that if her
leave ends up being longer than she anticipated, she struggles to find a job later.
She's got those contributions available that she can then pull out if she ends up needing
the money.
My only problem with this strategy at all is that when I'm getting ready to leave my
job and I don't have another one lined up and I'm not sure about where income's
going to come from, I worry about locking up money for the long term.
Hmm.
So you're worried about liquidity.
See, I'm not worried about her liquidity.
She's got a year's worth of expenses saved.
No, I love that.
But if she has a Roth IRA, Roth 401k, tax-wise, they do the same thing.
It's just going to make less money this year.
So she might be eligible for the IRA.
I would put the money in a Roth IRA versus the Roth 401k or if she could do both, then do both.
Yeah.
I mean, if she has to choose between one or the other, certainly the Roth IRA is
the first option and the Roth 401k is a second.
But if she doesn't have to choose, if she can do both max out both, just shovel
money into as many Roth accounts as possible.
The other question that Lee asked about taking unemployment, the answer is yes.
Take it.
Absolutely take it.
There is no downside.
There's no way it's going to hurt her later.
No employer is going to go, Oh, you took unemployment when you were unemployed.
It's there specifically for that reason.
It does.
I could speaking as a small business owner.
It hurts your company because your company's unemployment insurance premium will then
rise in the same way that anytime somebody makes a claim against say a homeowner's
insurance policy or a car insurance policy, you know, how your insurance premiums
rise after you make a claim.
Same thing happens with unemployment insurance, but that's not your problem.
That's a problem that your employer deals with.
And if she's part of a mass layoff anyway, Paula, yeah, they're going to get hit already.
It's not going to change it if Lee takes it.
Yeah.
Yeah.
This is not some family owned small business.
So there is no reason not to take unemployment.
Go for it.
Enjoy it.
I also love the chill that Lee has.
She might take the rest of the year off, like take the opportunity to make this a
little mini retirement or a sabbatical.
This is what planning does.
The fact that she's planned ahead.
It's not about the money.
It's about now she's in this situation and that chill where other people would
panic is because she has the ability to be flexible and to not panic, to be able to
go, I'm in the driver's seat here.
What I like is this opportunity now that a lot of people don't have to kind of
test drive some of her five dreams.
So when she's financially independent, what does she want to do?
Even if she's not there yet, she could test drive some of those things.
I've told you, Paula, that when Cheryl and I decided to become no
bads, it lasted a heck of a lot shorter than I thought it would because I didn't
like it.
I didn't, I'm a month at a time.
Yes, forever, not for me.
So the fact that we got to test drive that before, you know, we finally
decided was a real blessing and Lee can now do some of that herself.
Yeah, exactly.
You know, I have a friend who was recently laid off.
He was laid off in December and he's just started all these cool projects that
were always brewing in the back of his mind, but he never had time to pursue them.
Now he has a runway.
He's a good saver.
So he's got a solid runway of savings ahead of him.
He's got Cobra Health Insurance.
His was only covered for three months.
So Lee yours is much better at eight.
And he now has the freedom to pursue all of these different projects.
Statistically, recessions and other times of high unemployment tend to be the
times when the most small businesses start.
So in the last recession, for example, Airbnb, Uber, you know, those were little
startups at the time, but they got their kickoff when talent was available and
people who were in a good cash position had the bandwidth to be able to experiment
with creative ideas.
Heck, afford anything started in the last recession or just after it.
So times of unemployment are actually times of massive opportunity.
If if you have the ability to not have to think about the short term and where
you're going to get your next meal from him because Lee's done that.
Yeah.
Yeah.
Huge opportunities.
This is such a testament to good financial planning and good financial health.
It's a testament to taking the principles of financial independence and making that a
lifestyle.
And can we Paula just pause a second and why this is so awesome because at first,
she's like, this severance seems really tempting.
I'm like, ooh, she got a huge severance.
And then she said three months and I went, that's not a great severance.
That's like an average severance.
That's nothing.
But the fact that she could see the same opportunity, but for her and her situation,
it's a big, huge win.
That's where I flipped.
That's where I went.
Oh, yeah.
Yeah.
Right.
Exactly.
Cause she's got a year's worth of savings plus three months of severance plus
she qualifies for unemployment plus eight months of paid health insurance.
But it wasn't that she was lucky, quote, lucky to work at a company that had a huge
severance where they gave her, you know, six months a year, whatever it might be.
Well, that's what I was expecting.
It wasn't about luck.
She created her own luck.
Yeah.
So, congrats, Lee.
I think we've answered your questions, prioritize Roth accounts, definitely take
the unemployment.
You asked about how to organize your investments, make sure that you have enough
liquidity, enough cash that you have a runway.
You have a good emergency fund and safety net to keep you going for the short term.
Beyond that, everything else you're investing for the long term.
And because you're going to be in a low tax bracket this year, prioritize
Roth accounts, you don't need to do anything different with your asset
allocation because the time horizon for your investments is still the same.
This, the money that you're investing for retirement still has the same time
horizon.
So you don't need to change up any of that.
Well, thank you, Lee, for your question and congrats.
Our next question comes from Danielle.
Hi, Paula.
My husband and I've managed our own investments for years and are now approaching
retirement.
We'd like to talk to a financial advisor so we can bounce some questions
off them concerning our strategy and anything that we should be careful of as
we transition from working to retirement.
In financial podcasts like yours and websites, people in a situation like ours
are frequently advised to speak to a fee-only financial advisor who's a fiduciary.
However, we've been trying for three years to find such a person.
And it seems as if everyone really wants to manage our money for a fee and claims
there's no way for them to be able to offer comprehensive advice if they aren't
managing our money.
That's not what we want.
So how does someone actually find a fee-only advisor that simply offers advice
and perspective for a flat fee?
Thanks.
I appreciate it.
Danielle, fantastic question.
By the way, you have an amazing voice.
Seriously, I don't know if you've ever considered podcasting or doing voice
over work, but you have a fantastic voice.
All right, to your question.
There are two elements to the answer that I'm going to give you.
One is how you can find fee-only financial advisors.
And the other is how you approach the conversation.
I had a similar experience.
Mine didn't last for three years.
But when I was going through my divorce, I wanted a few sessions with a financial
advisor.
I didn't even want a long-term ongoing relationship.
I was open to that, but I specifically wanted guidance for this particular event
because it's a high stakes event that hopefully happens only once or never.
But for me, hopefully it happens only once.
And so given that I'd never gone through it before and there was a lot riding on it,
I looked for a financial advisor and I was absolutely not willing to put any assets
under management.
I just wanted somebody to review everything with me and give me sound advice and
feedback.
And so right out of the gate, I was very forceful.
As I was interviewing financial advisors, I was pretty forceful in stating that upfront,
making it known in the initial contact that, hey, I am not open to placing any of my
assets under your management.
And if you're going to try to convince me otherwise, then that's a non-starter to
such an extent that we should end this conversation right now.
It was a very forceful open.
I communicated that deal breaker right out of the gate.
You've been trying to find an advisor for three years.
So I imagine you probably have taken that tactic, but I'm sharing that also for the
sake of anyone else who's listening, who is also dealing with the same issue.
Now, as far as where to find one, the XY planning network is a great resource.
It's a directory of fee-only financial planners.
It is owned by Michael Kitzis, who was a former guest on this podcast in the show.
No, it's we'll link to his episode.
He's brilliant.
He's an absolutely brilliant financial advisor.
So it is co-owned by Michael Kitzis and Alan Moore.
Alan Moore is actually the ex of Sophia Barra, who was also a guest on this podcast,
willing to both of their episodes.
So it's co-owned by people inside of this community who are well known and well
respected, and it's a nationwide directory of fee-only financial planners where you
can sort based on a variety of criteria.
Yeah.
I think, Paula, that you can even make it less confrontational if during your initial
call, you just asked that question ahead of time before we meet.
Just even say before we meet, do you do fee for advice only, an hourly rate for advice?
And the reason why I need to parse this is because when people talk about fee-only
financial advisors, that's where Daniel will sometimes run into a problem because
fee-only does mean that there is a fee for assets under management.
A lot of fee-only advisors, frankly, the only fee they charge is that fee for assets
under management.
But you will still see fee-only, which makes it frustrating.
They don't parse by hourly fee unless it might say that on a website that they'll
charge an hourly fee or a consulting fee.
And some advisors don't want to work with people in a short-term basis.
They want to, you know, Roger Whitney, the retirement answer man, talks about
walking life with people, right?
And he wants clients that he's going to have for a long term, and he's not
interested in working people short-term.
And what I like is as this industry matures that you're seeing people that are
working with very specific groups of people that they really like.
So finding out, number one, do they charge just an hourly rate on that initial phone
call to the place before you go into a meeting, before you look even more deeply
into them?
I would do that first.
Second thing I would also ask is, do they have a specialty, people that they
work with?
And do you fit that group of people?
Are you a member of who they want to work with?
Then I think to your point, Paula, the XY planning network is nationwide.
And if you're just looking in Rochester, New York, it's going to be very difficult
to find some of these great planners.
And the cool thing that the pandemic taught us is that we can now get advice
and have meetings with people all over the world.
That geography is not a barrier, which is pretty awesome.
So I like the fact that using XY planning network as an example, you can
widen your search by a lot if you're okay with not meeting face to face.
Right.
And Joe, to go back to what you were saying about specialties, I'm looking at
the dropdown list of specialties right now.
And there's everything from people who specialize in certain career stages
to people who specialize in gender and identity focus and the way that that
impacts your financial planning.
There are people who specialize in marital status and family structure.
There are those who specialize in a faith focus, like Christian faith based.
There are those who specialize in some type of planning need, like elder care,
or if you have a special needs child or student loan debt, or if you're an expat.
So that's pretty cool that you can find planners who specialize in your unique
situation, because that's one of the benefits of meeting with a planner in the
first place.
The mass market information that you hear isn't necessarily tailored to your
particular situation.
You know, I was just having a conversation with somebody about this yesterday, in
fact, about how in South Asian culture, it's incredibly normal.
To have big multi generational households.
And so right now you might be like a desi nuclear family from the South Asian
continent, but you are sending foreign remittances back.
And you know that as soon as you can sponsor grandma or mom for a visa, you're
going to bring them over to the United States and they're going to move in with
you because obviously you're not going to put them in an apartment.
They're going to live with you.
That's, that's just how it works.
Traditional financial planning doesn't make those assumptions.
Like they don't assume that you're sending foreign remittances back.
They don't assume that you're planning on having your parents live with you, even
if they're perfectly healthy.
They don't assume that you might take in a cousin who might end up staying with
you for six months, because heck, sometimes that happens.
That's just one of many examples in which the specifics of a human life and the way that we
want to live it doesn't play to the one size fits all that you hear in mass media.
Yeah.
I thought of a place, Paula, while you were talking, that might be a good spot to start.
Investipedia posts a list of the top 100 advisors on social media.
Most big firms throttle their advisors with their compliance department.
So a lot of big firms are not going to be on that list, meaning you're not going to get a
lot of the asset gathering people on that list.
Not looking to be wrong.
There's some good people at those firms, but they'll also probably not work the way that
Danielle wants them to work.
So to get somebody who's a little more flexible, I'd start with that Investipedia top 100 list.
Now, I'm not just looking at that one, those 100 advisors.
What I do is see what association those advisors are in, because there's other planning
networks like the XY planning networks that some of these top advisors
are in as well, that you can also use to explore.
And this is a great way to open your national search.
Top advisors tend to hang out with other top advisors.
So when you find an association that has people who meet your criteria,
you'll find other advisors who also meet your criteria.
And that'll give you some room to take a look at picking and choosing between a wider
array without being stuck with who's in Rochester, New York.
Okay.
But last thing I'm going to say, and this is inspired by the list of top financial planners,
Investipedia is a fantastic, highly reputable site.
In fact, just yesterday, I met with two editors from Investipedia,
both incredibly impressive people.
One had come from Bloomberg after 30 years at Bloomberg.
A lot of their team actually comes from Bloomberg.
You know, Investipedia is absolutely top-notch.
But there are other, shall we say, less credible organizations that also put out lists.
Right.
If you think about it, anybody can put out a list.
My cat can put out a list.
Sure.
And so if you are going to look at a list of top advisors or top financial planners,
make sure that it comes from a reputable organization like Investipedia versus just
whatever you find in a Google search, because the entity that's putting together that list,
the non-credible ones sometimes assemble those lists as essentially a money-making ploy.
Yes.
So they will...
Like these who's who books that you can buy your way into.
Right.
One guy decided that he wanted to shine a light on this.
He is an investment advisor named Alan Roth.
He lives in Colorado Springs.
He paid $183 to the Consumer's Research Council of America, which promotes these lists that are
called the Guide to America's Top Blank, like Guide to America's Top and then XYZ Profession.
He paid $183 and had them name his dog as a top financial planner.
So he has an award in the name of Max Taelwager.
Oh, man.
And there's this adorable photo of his dog posing with the black.
Oh, no.
Yeah.
We'll link to that in the show notes as well.
That's fabulous.
You can subscribe to the show notes for free at affordanything.com slash show notes.
I look at this list, Paula.
And when you look at the Investipedia list, remember this is organized
by how the information people give on social media.
This is not what they do on a one-on-one basis.
This is just purely them spreading knowledge to other people.
So this is just frankly a starting point.
Investipedia is not doing your due diligence for you.
Michael Kitzes, I know rarely meets, I believe, with individual clients anymore.
He's number one, Taylor Sheltie in San Diego, listed as number two.
Lizetta Braxton's on this list, Margarita Chang, Maribeth Storjohan, Peter Lazaroff,
Ron Carson, Lauren Sprong, our own OG from the Stacking Benjamin Show on this list.
Stephanie McCullough, who's fantastic outside of Philadelphia.
Lots of great planners on this list and lots of people who have a national reputation that I
look down a list like this and I can easily tell Danielle, this is a great place to start,
not just with these people, but see what affiliations they have and then dig in.
Because you're much more likely to find those fee-only advisors with these people.
And if all else fails, Max Talebagger is available.
I heard the dog.
Then it turns out that Danielle's retirement went to the dogs.
Oh, can we get a hallelujah?
Oh, no, no, absolutely not.
All right, well, I would tell you to stick around for our next question, but clearly
everyone's going to be heading to the hills after that, Joe.
They'll get better, I promise.
Well, Joe's humor may not, but we have coming up a question from Stacy, who wants to get started
with real estate investing, but needs to sell her company stock in order to do it.
And we have a question from a listener who is 54 years old and has never had a traditional
or full-time job, has always been a self-employed artist.
And now at 54 has some questions heading into retirement.
So we'll tackle both of those right after this.
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Here's the thing about credit cards. If you're going on some champagne and caviar and
few shopping spree and you're going to run up a bunch of debt, obviously credit cards are not for
you. But if you are responsible with credit cards, if you pay them off and full every month,
they create an excellent opportunity to get airline miles, to get cash back,
to get the reward miles that will allow you to book round-trip tickets, sometimes in business
class, and to use miles to cover that ticket cost. I'm not going to recommend any particular
card because there are different cards that are better fits for different people depending on the
way that you spend. But we have a page if you go to affordanything.com slash travel, where we work
with a partner website card ratings to have an up-to-date list with the latest offers and bonuses
for top travel cards, top hotel rewards cards, top cashback cards, top cards if you run a small
business, top cards if you're trying to rebuild your credit, check it out affordanything.com slash
travel. That's affordanything.com slash travel. We keep this list up-to-date with sign-up offers,
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based on your personal parameters. So again, affordanything.com slash travel, check it out, and enjoy.
Our next question comes from an anonymous caller. You know what that means, Paula?
Every time we have an anonymous caller on the show, if you're new to the affordanything podcast,
we have been naming after a journalist this year because Paula is currently at Columbia in this
special journalism program and we're celebrating journalists. So, Paula, who you got?
A few weeks ago on this show, I mentioned a fantastic BBC documentary about the Indian Prime
Minister Narendra Modi and his role in the 2002 riots in Gujarat. That documentary has been
incredibly censored to such an extent that people trade around the link to it like you're watching
something pornographic practically. I mean, yeah, exactly. I got a BBC documentary. Yeah, exactly.
When the documentary came out, among other things, the Modi government decided to
raid the BBC offices in New Delhi. Wow, wow. Yeah. And so, the International Press Institute,
among other organizations, press organizations all around the world, of course,
condemned that crackdown on free speech. I am going to name this anonymous caller after
the director of advocacy at the International Press Institute. Her name is Amy. And she is
symbolic of the many, many people around the world who are trying to simply stop the censorship of
a documentary that was produced by, of all entities, the BBC. I mean, this is not a fringe
group. This is such a mainstream channel. So, this next caller will be Amy.
Dear Paula and Joe, I really enjoy your podcast, even though I'm not part of fire,
or really interested in investment or real estate. But it's really fun. I have a question that I've
not heard you discuss really, and that's budgeting as a self-employed artist. I'm an author, actress,
playwright, audiobook, narrator, professional writer, mentor, and recently I've added screenwriting
to my long list. I'm 54, and I've never had what you might call a traditional or even a full-time job.
My late husband was a musician, so there's never been a real regular paycheck in my household.
That said, I own my house, free and clear, in a desirable vacation spot, but it is rural,
so the taxes are reasonably low, which leaves me with just insurance, maintenance, and repairs,
but stuff are nothing too big, although it will need a roof in the next couple of years.
My entire rent fund is negligible, but I am putting stuff in it. Because I live in Canada,
I will have old age pension, guaranteed income supplement, plus a little bit of social security,
because I'm a dual citizen. I'm not really worried about retirement because I plan to just keep working
and writing and creating. My whole life has been paycheck to paycheck, and sometimes that can be
$250, and sometimes it can be $25,000, and I just don't really know. The problem is, is that when a
paycheck comes in, I've been living off my line of credit, which is technically against my own savings,
and when a paycheck comes in, I use it all on the payoff on the line of credit, and let's start
the cycle over. I'm always either at zero debt or in debt against my savings, but I never have
any cash being clear. I was thinking of taking retirement and taxes entirely off the top,
and then trying to live off the cash and make regular payments on the debt, but what do I do
when the years where I just don't have very much income? Some years I have plenty, and some years
I don't. I know that increasing my income is a good idea, and I'm working on that. I've cleared my
line of credit twice since 2018 through income, and then the cycle just starts over again, but right
now I'm in real debt. In addition to using most of my savings, I have some credit card debt. I have
some things I could cash out like gold and vintage instruments, and my accountant suggests I should.
My living expenses are pretty low. I could get by $1,500, it would be more comfortable on $2,000,
but I just don't know how to organize this, so what's the best thing to do with the money when I do
get it? I feel like I just need a plan. Thank you so much.
Amy, thank you so much for the call, and Paula, I really feel for Amy because you can hear the
tension. You can hear the frustration in Amy's voice, and it just reminds me why you and I do
the show, right? If we can help her a lay some of that. The big issue with a lot of people,
and I guess I'll start here because there's 40 places to start, but if we're looking for foundational
things that will help Amy alleviate stress, one of the best ones for people who have inconsistent
income streams is to try to change that. Now, she's not going to change it by the way she works.
We don't want to change Amy's vocation. Don't want to change the way that she makes money because
she clearly likes it. She said she likes it so much, Paula. She's going to do it forever, right?
So we definitely don't want to do that, but a lot of people who have inconsistent income,
they live paycheck to paycheck because they don't know when the next paycheck is going to come,
and so there's this boom bust lifestyle that I've found people over the years have lived. It's
ramen noodle, ramen noodle. I get a huge paycheck, steak dinner, and I buy a big screen TV,
ramen noodle, ramen noodle. So instead of that, if we can find a middle ground, that's where we
want to start. So here, Amy is a strategy that's worked for a lot of people. When you get paid,
you're first larger than normal amount of money for the very first time. Put that in an account
that is not going to be your main checking account, but a separate account. This account is going to
be your holding tank account as the business owner of Amy. And what we're going to do is we're
going to use, you know, Paula earlier, you were talking about your divorce and divorce can be
horrible, but this is a divorce that's great. We're going to divorce your paychecks coming in from
your clients with the amount of money you give to yourself. We want to take those two actions
and make them separate. That's the first thing. The way that we do that is we're going to take a
number that you know, you're going to be able to sustain until the next big paycheck, or there's a
high probability you're going to be able to sustain that then in whatever time frame works best for
you in your budget weekly, bi-weekly, monthly, semi-monthly, whatever, create a paycheck where
you're going to go to this other account and grab the same exact amount of money every week or every
two weeks or every month, whatever it might be. And you're going to create a paycheck now that is
the same. And that Amy, that single thing alone is going to change everything for you, because
where you couldn't budget before, now you will be able to budget. You'll also won't feel that that
hunger paying that makes you, when you get a big paycheck, go out and spend it. And I'm not even
saying that you're spending money on... Steak. Steaks and big screens are metaphors. Yes, right.
They're not meant to be taken literally. Yeah. Right. Now that you're doing anything dumb with
your money, I've worked with plenty of people and I have no idea how it works. It just works if you
turn into a consistent paycheck, because now we can do a similar budget every week. And now we can do
things like you can take your grocery bill. You know the same amount of groceries you can buy
every week. You can now set that budget to be the same. You can set the budget amount you send to
your credit cards to be the same. You can make it be the... So you can have a payoff strategy for
your credit cards. You can plan out vacations. You can plan out all this stuff that's so difficult
when it's this boom bust lifestyle. I think Paul of that one move is going to solve a lot of...
It won't solve them all, but I think that's a good place to start. Right. Because with that
move, Amy, what you're doing is you're essentially mimicking the experience of having a regular
stable, steady paycheck. You're creating a system in which your business... And you don't...
Don't worry about like it doesn't have to be formal or fancy, but conceptually, your business
earns sporadic volatile income, but you, Amy, the individual, Amy, the employee of that business,
so to speak, you earn a steady paycheck. Maybe it's $350 a week or $400 a week.
Start with that and then you know that I, Amy, regardless of what my business does,
I, Amy, make $400 every week. And that's what I'm budgeting from.
It's pretty exciting. And when money then accumulates in that account, give yourself maybe two
dates a year, four dates a year, whatever amount you want, whatever timeframe you want,
and pay yourself a bonus if there's extra money. And what's funny is a lot of people that I used
to work with when I was a planner Paula and they'd have inconsistent income, they would get so excited
about the boss giving them a bonus and the boss is them. Right. But it's so empowering.
It changes a lot. So that's an accidental emergency fund that we build up then.
But then take some of that money you're budgeting and build a real emergency fund. That's going to be
step number two. Emergency funds in some way stink because, you know, your money is in a savings
account that's earning less than inflation. What inflation is so it loses a little bit of earning
power. But you know that if things go wrong and you actually go over that budget that you just
created this amount of money, you're paying yourself, that you have this well of money that will get
you through those tough times. And then you can also take advantage of some opportunities if they
come around. I don't like it to just be for emergencies. I like it. Hey, if there's something I want to
do, I'm going to dip in there and I'm going to grab some of that money and I'm going to do it.
There's a great deal. And it's something that really fills me full of joy. I am going to spend
my money on that. And I know some people feel guilty about that. But that's what that money truly
is for, which is why I prefer the term cash reserve, but that's splitting hairs. But I would do that
second, Paula. That's the second thing. The third thing that I would do is I would begin
analyzing the business of the art that you make, the things that you do and see if there are
opportunities to increase your income. Most people look at ways to cut. It sounds like Amy,
you've found 50 million ways to cut. I believe just from your voice, you have cut so much. You're
asking your accountant about other ways you can make money. I would not go selling assets,
by the way. It sounds like you're at the point where you're going to start selling off stuff.
And don't get me wrong. I agree, Paula. I saw a Gary V video recently saying,
there's enough stuff in the average person's home where you can get by for a couple months,
right? You can just put that stuff on eBay and resell it and you can make some money. So, yes,
if it's vintage instruments that you don't want anymore, things that are just sitting in a closet
that nobody's ever looking at, you're not looking at, then go sell it. But as an example, you mentioned
the gold. Well, gold's an asset that goes up in value, not my favorite asset to accumulate.
But if you sell gold, you're mortgaging your future for today. And I don't love that.
I would highly analyze finding other income streams and study after study shows that
there often is money available out there. There are employers that will pay you more. There's
clients that will pay you more. There's opportunities to do your craft in the different way that will
pay you more. So, I think looking at income streams, Paula, is the third thing I do.
Yeah, that was what struck me because what I heard in Amy's question were a few different
problems that I think should be distinguished from one another. She started the voicemail by saying
that inconsistent income was an issue. And Joe, I think you've done a great job of solving that
with the structure of mimicking the experience of getting a regular paycheck.
But it also strikes me, she said that her expenses can be as low as $1,500 a month,
$2,000 a month would be more comfortable. Given that, it struck me that inconsistent income
would not be an issue if she was living on 2,000 and she was inconsistently earning somewhere between
4,000 to 6,000 a month after taxes. The gap between what she earns and what she spends,
that fundamentally is the issue. And the fact that the income is also inconsistent exacerbates
that issue. But the issue itself is not the inconsistency. I mean, to use a more extreme example,
Amy, if you were making somewhere between $10,000 to $20,000 every month and living on 2,000 a month,
again, the inconsistency of, I don't know if I'm going to make 10 this month or 20 this month,
not a problem. And so that goes to highlight that the gap between what she spends and what she earns
needs to widen. And there are only two ways to widen that gap, either earn more or spend less.
And Amy, given the fact that you're already living on as little as 1,500 a month,
you really can't frugal down any further. The fact that you can live on that little shows me that
you likely don't have a spending problem. You likely have an income problem.
So I think the 1,2 punch of leaning into your most profitable forms of art, you know, you
mentioned you do a lot of different things. I assume that within this basket of things that you do,
some are more profitable than others. So leaning into the ones that pay more, at least temporarily,
combined with Joe's strategy of mimicking the experience of having a regular paycheck. And I
think, Amy, I think it should start as a weekly paycheck. When you're first learning how to budget
off of a stable, steady paycheck, I think a weekly budget is a very good one to give yourself,
because it gives you rapid feedback. If you go over budget this week, you can very rapidly
see what's happened and adjust course. Can we talk about looking at her income streams,
the ones that pay more? And you said at least temporarily, do the ones that pay more?
Yeah.
So I think evaluating which work she does brings in the most money is a phenomenal exercise.
And a lot of business owners don't know that. In fact, I remember the first time, Paula,
when I was a fairly new business owner, somebody said, how much money do you need to make every
day to keep the light on? And I went, oh, I have no idea. That was a hot number one.
The not hot number two was of these different processes I do, which one brings in the most
in the least amount of time? Where's the low hanging fruit? You mean most of the least amount of money
for your time? No, which one in the least amount of time? So which one can I do quickest to bring
in money now? Right? Got it. So least amount of work brings in the most money, which are great.
But I would also say that just especially if Amy's creative, I think focusing a ton on that
single task is probably going to be incredibly monotonous and may take the joy out of something
that she wants to do forever, make it so that she doesn't want to do forever. So what I would do,
Paula, is only modify it slightly. I would make sure that there is enough of the high-paying gigs
to finance the time that you're going to spend doing the low-paying gigs that may give you an
equal amount of joy so that you're able to sustain the pace. Because I see this as a marathon, right?
And if it's a marathon and she creates a pace, she might be able to temporarily do this and have
some short-term pain for long-term gain, but she might be able to long-term have both,
where she knows the X pays so much money. So I'll give you an example, a Hollywood example,
since she talks about doing acting. Actors will do a studio movie and then they'll go
do Broadway and they'll do a little tiny movie that is poorly funded. And that Broadway experience
and the tiny movie give them joy and they get a fair amount of joy from doing the big Hollywood
blockbuster, but not quite as much. It's much more of a corporate gig, but that corporate gig buys
them the time the rest of the month, the rest of the year, the rest of whatever amount of time
to do those projects that give them that along the way. So it's almost like she's getting her
sabbaticals of doing the cool stuff. Every third gig, she's doing the cool thing,
but she's bringing in enough with the corporate gigs that it subsidizes that and she can continue
that pace for a good long time. Right. Amy, the other red flags that I hear, the things that worry me,
one is that we were pretty deep into your voicemail before you mentioned the credit card debt. In fact,
you mentioned the line of credit first before you mentioned the credit card and the credit card
necessarily is going to have a much higher interest rate and greater danger overall. So I'd like to
see you within the context of the budget that you're going to make for yourself when you mimic the
experience of having a regular weekly paycheck, I'd like to see you pay off that credit card and
then chop it up because I think that cutting yourself off from the temptation to reach for it
is a good move. And eventually, I'd like to see you cut yourself off from that line of credit as
well. That's what I had to do. When I had my money issues in the 90s, I'd deliver an all cash
lifestyle. Yeah. Yeah. Once you remove the option, your mind figures out a way to make it work.
I'd like to see you just remove those options from yourself. This will be interesting on this show,
especially because do you know where the inspiration that I had came from for that?
I am not a fan of a lot of things that this person says, but I absolutely love this from
their first book, Susie Orman, in her first book, talks about organizing the dollar bills inside of
your wallet because too many people, and this was me, I didn't have enough respect for a dollar
and what it took to earn a dollar, the work it took to earn a dollar and how I needed to respect
then how I spent that dollar, like this, you know, Vicki Robin thing of trading time for money,
fine. But when Susie talked about organizing your money and just spending time with it and
going, you know what, I'm kissing this money goodbye forever on what? On what? And when I did that
exercise, it led me to I need more respect for my cash. I could not out earn my bad spending
habits. I couldn't do it. And I'm not saying Amy has bad spending habits. I did. I had horrible
spending habits. So I couldn't out earn them. I needed more respect. So I cut myself off from
credit. I got a healthy respect for money. I lived without any credit or credit cards for
six years, maybe. And then I went back. And when I went back, now it was with a much, much different
approach and then pay off the credit card in full, get the maximum points that I can get,
get myself as much free stuff, use the hell out of these people that abused me back when I didn't
understand money, abuse them back so that I can claw back some of this money they took from me.
So I love the idea regardless though of going all cash. Right. In fact, if I can request a cameo
from our producer, Steve, Steve, you have lived debt free without a credit card,
without any loans at all for how long has it been now? Hey, everybody, it's Steve,
that guy who does stuff for Paula Paula. That's right. Cut up the credit cards in 2008.
I have no credit since then. Paid off the mortgage in 2015. My wife quit her toxic job in 2021.
And up until last month was basically retired. And now I was working a dream job,
three minutes from our house, the local library. She loves it. And I love what I do. So,
hey, no complaints. Living in cash free lifestyle, great for us. Highly recommended.
So there's a lot to be said for removing the option because once you don't have a credit card,
once you don't have a line of credit, once those choices are just not available, we figure it out.
Final thing that I'll say is I love that you want to work forever, but most retirements are
involuntary. Most people are forced to retire earlier than they would prefer to because of a
health condition. So I absolutely love the ethos of wanting to work into your 70s, your 80s,
your 90s. I share the same goal. My hope and prayer is that I remain healthy enough to work
when I am 105 and that I love the work that I do and want to do that and do it purely out of
the fact that my work brings me joy. But retirement funds are a form of self-insurance
against the possibility that you might not be able to work even if you want to.
And I know you have dual citizenship and can get social security from the US and pension from Canada.
But I would sit down and crunch through those numbers and add a little bit more of a defensive
buffer to be sure that you have enough because you're still young, 54, super young.
You have time on your side right now that you won't have when you're 84. So take care of your
84-year-old self. Well, thank you, Amy, for that question. Best of luck on the new budget,
the debt payoff and the joy of living your calling.
We'll return to the show in just a moment.
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Our final question today comes from Stacy.
Hi, Paula. Thanks for taking my call. Let me share a little bit about my situation and my
question. I'm a senior executive assistant in tech based in the Bay Area, California.
My previous company had an IPO back in September 2021 at the height of the market. And I had
exercised my shares far in advance because I knew the company had the potential to go public.
I only exercised the stock at about $1.50 a share back then. At one point, it had gone all the way
up to $70. And as of today, it's now at a measly $12 a share. I was lucky enough to have sold about
$70,000 worth of stock back in December 2021 to pay off all of our credit card debt. I have no idea
if or when the stock price will go back up to where it was a year ago. However, I only spent
about $15,000 total exercising all of my shares. So I figure I'm still winning even if I sell at
this point. I now have 11,000 shares, 9,000 of which I could sell anytime, 2,000 shares,
which I need to wait another six months until I could sell for tax purposes. I have wanted to buy
a short-term rental for the longest time. I know I'd be great at this because it's something I'm
super passionate about. I have a hospitality background and out of all the real estate routes,
this is the most intriguing to me. My question is, do you think it's a good idea to sell my shares
to put a down payment on a short-term rental? My idea is that I could sell the 9,000 shares
and hold on to the other 2,000 shares indefinitely until maybe someday the stock price does go back
up. I'm really eager to get started with real estate investing and I know this is a good time for
people to buy that are not scared to invest during this time. Some other facts about me,
I'm married, I make $164,000 a year at my current company and my husband makes $125,000
annually. We have zero debt, we max out our 401ks, we have about $16,000 in single stocks like Apple
and Google that we dollar cost average and we own our own home with a comfortable mortgage.
I do have stock options at my current company so the hope is that maybe I'll get another small wind
fall in a few years. I'm scared I'll have major regret selling most of my shares if the stock price
does go back up a huge amount but I also know that it's out of my control. So I just wanted to ask
my question to someone outside of our personal circle for a sanity check. Thanks for all that
you do Paula, I look forward to hearing from you. Stacy, thank you for that question. I love A,
your enthusiasm and B, that you have a background in hospitality that line jumped out at me because
many people when they enter the short-term rental market don't have the hospitality background so
they don't have a good sense of what they're getting into. Many am saying this for the sake of
everyone who's listening. I've seen many people get into the short-term rental market thinking
that it will be analogous to having a rental property when in fact as you know it's far more
analogous to the hospitality sector. So the fact that you know that, the fact that you have that
background, the fact that you're so enthusiastic about it, I love it. And I agree this is
such a good time to acquire houses. Remember in 2020 when listings were flying off the market,
a home would get listed and within 15 minutes it would be tied up, right? Back then, sure interest
rates were low but the moment a property hit the MLS it would instantly go into a bidding war,
realistically the bidding war started before the property hit the MLS as a pocket listing.
And so you'd have these homes that sell within a day of getting listed at 30, 40, 50 grand higher
than the asking price. You know when money was practically free, when the inflation adjusted
cost of capital was essentially zero, assets were getting leveraged up and people had
licensed to speculate. And now that money costs money, now that money is expensive to obtain,
there's less incentive for speculation, there's less incentive or fuel for an asset bubble.
One of my professors calls it asset inflation. She says we had asset inflation before we had
cost of living inflation. There's less fuel for that and there's more of a drive for true,
fundamental long-term investing. I love your enthusiasm for short-term rentals and I love
that you recognize that this is a very good time to buy real estate.
Let's pause for a second before we go into the next step, Paula, on decision-making.
Because I think Stacey brings up a really important point, which is whenever we make a decision or
we fear making a decision because history is going to prove that we made the wrong decision.
And then she's going to sell these shares of this company and the stock price is going to go up.
And I think all of us have had this happen to us and you wonder, so how do I make the optimal
decision? And after tons of reading and interviews and speaking with smart people in the financial
planning industry, the approach that I have adopted and that I think served my clients really well
was let's go into this as if we made the wrong decision.
To regret minimization. Absolutely. Whichever decision we make, we're going to make the wrong
one. And how does that make us feel that we made the wrong one? And I will go back and forth between
both of these and say, if this was the wrong one or if this was the wrong one, which gives us the
least regret and with the most upside. And my feeling is the stock market in a one-year period
of time is very close to 50-50. Now, over long periods of time, it's closer to 70-30 up, like
over a 10-year time frame. And even more so, 70-30, if we look at 20-30, 40 years that we get much
more consistency. But over the short run, it is a lot less consistent. So I think it is a safer bet
to take that money out now and do the things she's excited about, especially since she still
gets to leave some money there. I think the fact that she has to leave some money there for at least
another six months gives her this mitigation of this risk that she's going to lose out on upside
because she's still going to own a little bit of this position. She's still going to share in the
upside just not as much. And frankly, by doing this, Paula, she has more upside, which is that she
is going to be diversifying her positions, which I also like. Instead of having all this money in
one risk, now she's taking two different risks with that. So I think we have to factor in all the
other risks. I believe we get fixated so much on one risk. We don't back up and think about all
the other risks. Let's give her another one. Real estate, she was thinking about buying continues
to go up in price all the time. If she doesn't buy it today, there is also the risk that the real
estate she was going to buy goes up faster than the stock she was going to use to buy it with.
And now even if the stock goes up, it goes up less than the real estate and she loses out that way.
So she ends up having less money to put down on it. For me, that's what I think. But I would stay
as easy go through this, which one makes me feel less bad, assuming that I made the wrong decision?
You know, the other thing, Stacey, that what we don't know is how much that short-term rental
property is going to cost. And therefore, how much money you're going to need for a down payment
and closing costs, as well as any upfront repairs that you might need to make. We don't know what
those numbers are. And so it's possible that you might be able to take a split approach. You have
11,000 shares outstanding. You're eligible to sell 9,000 of those right now, but that doesn't
mean you have to sell all 9,000. If the property that you end up buying requires only selling
maybe 5,000 or 6,000 shares, then essentially you can sell half of your holdings, hold the other
half. And that way you get both. I was going to say you get to have your cake and eat it too,
but that expression never made any sense. Like if you have your cake, you might as well eat it.
Yeah, exactly. I mean, come on. I'm not going to sit here on the cake.
Right. Exactly. Yeah. What else would you do with cake? Obviously, you have cake, you're going to
eat it. Anyway, so if only there were a device where we could look up what that really means.
Wouldn't that be cool? Yes. It's called a fork. And I use it to transport cake into my mouth.
That's the device. So Stacey, you depending on the cost of real estate might not have to choose.
You might be able to split the difference, hedge your bets, keep some company stock,
and also get this property. I'm also wondering if there might be other
solutions if there's other, you know, she listed off her assets in her income stream,
with income streams as nice as she and her husband have. I wonder if there's a way to maybe cash flow
bankroll some of this build up a fund to help buy it over a short amount of time. Like, is there
another answer outside of this single asset that she's looking at that she's worried about maybe
giving up on? Right. I was thinking that as well because they have a combined income of 289,000.
They have no debt other than a very reasonable mortgage on their primary residence. Their credit
card debt is totally paid off. They max out their 401ks. So it seems as though, if not all,
then perhaps some of that down payment might be able to come from old-fashioned savings,
especially now that their credit card is paid off. And Stacey, you know yourself better than anyone.
So this is an introspective question, but noticing that your credit card debt was 70,000, which is
quite high, is there any risk that you might go back into credit card debt again? This is a
behavioral question. Maintenance is harder than achieving a specific goal. For example,
reaching a certain body weight or reaching a certain fat muscle composition is tough,
but maintaining that for the long term is much harder. And similarly, paying off all your credit
card debt, becoming debt free, that's tough, but maintaining that forever, much harder.
So this is a know thyself question because I don't know what the source of your previous
credit card debt was. Maybe you had a big medical emergency. That was a one-time thing.
But if you think that there is a risk of it, then you might want to heed the same advice that we
gave to Amy and live card free for a little while because the situation that I don't want to see
you in, like right now, we're talking about choosing between two really good options,
keeping your company stock, which has upside potential, or getting a short-term rental property,
which you're really excited about. So we're talking about choosing between two assets.
And anytime we're talking about which asset should I hold, it's a win either way. The question
fundamentally is which is more of a win. Magditude, yeah. Yeah, exactly. By contrast,
you mentioned that you sold a bunch of stock in December 2021 to pay off credit card debt.
The situation that I don't want to see you in is that you end up needing to do that again.
If you do sell this company stock, trade an asset for another asset. Don't trade an asset to offset
a future liability that you don't have yet. And the way to make sure that that happens is to
protect yourself from the risk of that liability forming, which is to say, get rid of the credit card.
Stacey, I was thinking about what great advice Apologist gave you, and that's much better advice
than you would have gotten from Max Tail Wagger right there. Well, maybe marginally better.
I don't know. I mean, Max Tail Wagger. I bet Max Tail Wagger is a pretty good financial planner.
Yes. He's got very much a demeanor about him. It's excited and happy to see you.
Fun to be around. It's got that bedside manner, Paula.
We're the good advisor needs. Thanks for throwing me a bone, Joe. Oh, but can we get a...
We've already done that sound in this episode. We need a new sound. 18 times. Well, I only have
a few, and this one doesn't... Oh, that was the sound that opened the episode.
So sad. We need different sounds throughout. We do. Yeah, yeah. I think repeating a sound in
an episode is just boring. We need a fresh sound effect every time. Yes. We got to pretend we're
a high budget podcast. Well, thanks for playing fetch with me, Paula. Anytime, I'll jump through hoops.
Oh, when I'm trying to have fun, I hang out here with Paula. And when I can't, I do my own circus
to your point at the Stachy Benjamin Show for Monday, Wednesday, and Friday. Really a one-on-one
guide to podcasts, to the headlines, ways to think about your money, and then we get the deeper
conversations over here and afford anything. Absolutely. Yes, stacking Benjamin's is fun and light,
and in approximately 52 days, I will be back on it. Which we're so looking forward to.
I detect a note of sarcasm, but I'll let it go. I did that mean that. I have ways to do that. I'm
like, this doesn't sound as enthusiastic as I totally mean for it to sound. That's not good.
Yes. Yes. We wholeheartedly welcome you with open arms. Well, thank you, Joe, for being part of
this show. And thanks to all of you for being part of the afford anything community.
We mentioned a bunch of resources during this episode. We talked about our episode of Michael
Kitzis, our episode with Sophia Berra. We talked about invest a peer list. Yes, and the Forbes article
about Max Tailwagger. And you can find links to all of those by subscribing to our show notes.
It's free. Sign up at affordanything.com slash show notes. Thanks again for tuning in. You can find
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from the old financial model of suffering on our way to fire. Ah, thank you. Thank you. I'm glad
you hear that. And Kevbot said, very entertaining and educational podcast, afford anything,
is amazing. Thank you. Oh, Joe, and you're in this one. What? Kerry22 says Paula along with Joe on
the Q&A episodes provides entertainment while giving accurate and useful financial and life info.
Highly recommend this is not a boring money show. Fantastic. Thank you. Ah, yes. Thank you. Thank
you for including me. The true star of the show, Joe. Absolutely. Yeah, right. Sure. You are. You
are. You hold it together for us. Stop. Keep going. Stop. Keep going. Thank you to everyone who's left
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you so much. This is the Afford Anything podcast. I'm Paula Pant. I'm Joe Salci. Hi. And we will catch
you in the next episode. Here is an important disclaimer. There's a distinction between financial
media and financial advice. Financial media includes everything that you read on the internet,
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That includes the Afford Anything podcast, this podcast, as well as everything Afford Anything
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substitute for actual professional advice. All right, there's your disclaimer. Have a great day.
Stacy, thank you for the question. And Paula, before you get too far,
I don't know about Stacy, but I heard Stacy's mom has got it going on. Oh, no.
Stacy, I'm sorry for this guy who's on the show with me. I just heard that it was a song.
No idea. Stacy, I'm so sorry. Wow. Why that her mom is cool. You're said that Stacy's mom is
cool. Stacy sounds cool. Why can't her mom be cool too? Hey, Joe. Yeah. Do you have cotton in your eye?
No comment. No comment. Would you come from Joe? Where'd you go?
Cotton eye Joe. Why do I feel like line dancing all the sudden? Do you feel like line dancing?
No. No. The one I always get is, hey, Joe, where are you going with a gun in your hand
from Jimmy Hendrix? I don't know that song. The song about Vietnam. Yeah.