Afford Anything - Ask Paula and Joe -- Should I BUY a Business, Instead of Starting One?

Episode Date: January 20, 2020

#237: Katie wants to know how to purchase a business that’s already cash-flow positive. What indicators can she look for? Rob will retire from the military with an inflation-adjusted pension. Does he need a bond allocation in his investment portfolio? Brian conquered a large sum of credit card debt, but still has student loan debt and a mortgage. Should he pay off his student loans, refinance them, or refinance his mortgage? Jeff is curious about the pros and cons of investment apps. When should you use them? Another Kati (without an e!) wants to live a healthy and wealthy life before she’s 70. Where should she allocate her savings so she can retire early? We answer these five questions in today’s episode. For more information, visit the show notes at https://affordanything.com/episode237 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything, just not everything. Every decision that you make is a trade-off against something else, and that doesn't just apply to your money. That applies to your time, your focus, your energy, your attention. It applies to anything in your life that's a scarce or limited resource. That leads to two questions. Number one, what matters most to you? And number two, how do you align your day-to-day decisions to reflect that?

Answering these two questions is a lifetime practice, and that is what this podcast is here to explore. My name is Paula Pan. I'm the host of the Afford Anything podcast. Every other week, I answer questions that come from you, the community. And today, former financial planner Joe Saul Seahy is with me to answer these questions. What's up, Joe? Paula, you're up.

I'm up. I'm awake and I am ready to answer some crazy questions. These are always so fun. It's a highlight of my week, as you know, and your listeners know. So let's go. Let's do it. Our first question comes from Katie. Hi, Paula.

On a recent Q&A episode, I heard you mentioned something about buying a business as a means of generating passive income. I'm a W-2 gal, and I really don't know anything about entrepreneurship. So it didn't really occur to me that it was possible to buy a business that would already be generating income. Can you give me an idea of what kind of business this might be or what kind of Google search terms I could use to find out more about this option? Thank you. Katie, that's a great question. Yes, you can buy any small business in any industry, but what I would recommend doing, if this is something that you're interested in pursuing, is searching for a business that

is in a field in which you've already worked so that you will be able to understand it, understand how it's making money, understand what its inefficiencies are, how you can solve those inefficiencies, how you can enable it to grow further, or what you need to do in order to maintain it, let's say you don't want to grow it, but you just want to maintain it, you'll need an in-depth understanding of that particular field or industry in order to be able to make that judgment. So here's an example. The other day, actually yesterday, I got a cold email out of the blue from somebody who is

selling a handful of personal finance websites. He sent me a list of about somewhere around. 10 or 15 different websites, none of which I'd ever heard of before. That's fine. I don't have to hear about them because all of the information that I would need to know to be able to make a preliminary assessment was reported on that spreadsheet. So column A were the URLs. Column B had the monthly visits. Column C had annual revenue. And column D was asking price. It was a super simple spreadsheet, just those four columns. Totally cold email out of the blue. I ended up forward iting on to a friend and then otherwise deleting it out of my life. But that's a perfect example of

the type of business that a person like me might purchase because I am already so intimately familiar with how to run a personal finance website, how those websites generate money, and what are both of the opportunities as well as the risks related to its current source of revenue. So for you, I don't know what field you work in, but think about small private businesses that relate to your field or industry, and from that starting point, begin your search. I love owning businesses to build wealth. I mean, that is really the primary driver of my wealth was owning a financial planning business and then selling it at 40. But I will say this. There's some things that you want to know ahead of time. So on top of what Paula talks about is make sure it's

something you already have an affinity for. There are also some basic things about business you want to know. First of all, if you're going to buy a business versus build a business, the chance of you losing that investment is much, much, much, much higher than you investing in the S&P 500 of the total stock market index and losing all your money. Because you're not investing just in one business. You're investing in probably a micro business. So, So you want to build the business with your thought process around not just maintaining it, but also treating it like you would an appreciating asset. And how do you do that? A bad business is built on you.

You do everything. You use your two hands. You figure out how things work. You understand that business model. The way you sell whatever it is that you're selling, the way that you do the books, the way that you get inventory, all those things. the problem is you become the business and everything is in your head the sellable part of a business is the system and the process so that anybody can do it so if you can buy a business that doesn't have those systems and then build systems in and prove that they work that becomes incredibly

sellable the safer way to build a business in my opinion is to build it from the ground up I look at somebody, Paula, that you and I know, a guy named Philip Taylor, who created the FinCon conference. He started up his website on the side while he was still an accountant. That way, he was able to build it to a point that it made good money. And then not only did it provide a nice income stream, it finally provided a big enough income stream that he could stop being an accountant. And of course, then he went on to found the FinCon conference. And that became its own business after that. that was bootstrapping a business and not spending a lot of money.

Right, but imagine. So Katie's question was about buying a business. So let's imagine that Katie has money to invest, but not a lot of time. The Philip Taylor example with the two businesses that he started, one of which is his website and the other of which is FinCon. I mean, both of those are businesses that if he chose to, he could sell. And an ideal buyer for either of those businesses, in my view, would be a person who, is already acquainted with that type of work. So, for example, for his website, you or I, I think, would be both, Joe, you and I would both be very well qualified to assess and evaluate his blog in order to see how it's making money, how it's generating traffic. And if we were to hold it, what we could do, if anything, to be able to improve those processes or, at a minimum, maintain those processes. with minimal input of our time.

But if I don't improve those processes, I have to make sure that the owner of that business doesn't know what he or she is sitting on. Because generally speaking, the business is going to be valued based on the fact that it churns out X percent per year, right? It churns out a return. So my ability to get a really sweet return is not that great. I preferred always to look at businesses, and frankly, I still do. I've bought a few businesses. I've preferred to look at businesses where the systems are not yet established or there's some value that the owner has overlooked.

And I think that's difficult. It isn't easy. I just don't want to position this as being easy for Katie. Oh, certainly owning a business in any capacity, regardless of whether you start it from scratch or buy it, is not easy. That's why the majority of people don't do it. But purchasing a business is a way to save two years of that bootstrapping. So let's take the website GenX Finance, for example. A friend of mine, Casey, purchased that from the guy who started it. The guy who started his name Jeremy. He started it from scratch, grew it. And then he decided that he wanted to just get out of the

website building business entirely. He wanted to start a restaurant. a barbecue restaurant. So he sold that website to my friend Casey and went off and started a restaurant. So now Jeremy's happy. He's living his dream, running his restaurant, working in this completely unrelated industry. Meanwhile, Casey is holding this website that generates a passive stream of income for him every year. And over the years, because websites are in our industry, websites are typically valued at, somewhere between 1.5x to 2x annual gross revenue. For him, the longer that he holds it, the more that that essentially ends up being a dividend play. It does as long as he's able to maintain the value of the website. Correct. There is a difference between trying to grow a business versus maintaining it where it's at. And so if, for example, you were to purchase a business that already had a T.

team in a place, it had a staff, it had some processes, and let's say you buy it at two X annual gross or three X annual gross. You would, if you held it long enough and maintained those systems, be able to turn a profit on that. I'll tell you what I like about buying a business is this. If you're trying to protect your money, diversification is a great answer. if you're trying to become wealthy diversification is not a great answer under diversification is being very focused so buying one business can give you the ability to improve your net worth so much quicker so so much quicker however there is a concept in financial planning called standard deviation which means that whenever people talk about volatility usually in the

the media when they talk about volatility, Paul, you and I know, they're talking about downturns, but volatility also is upside. So when I talk about you can get rich really quickly, that comes with an equal weighting of you can also lose your ass in a hurry. Right. So under diversifying is a fantastic way to get wealthy. I love it. I also find that it's like any muscle. There's a different muscle in business ownership than there is in in the thing. So as an example, I have two different functions every day. One is talking on the microphone and creating a podcast. The second is running a podcast company. And those are two different muscles. Once you learn the podcasting muscle, well, that means I can maybe be on other shows. But it doesn't mean I can run another business. The business ownership

muscle is awesome because once I've owned one business, even if a business is in a different field, I now know the language and I know some of the things, the metrics to look out for so that I can replicate that and do it again. Just fascinating seeing some people, like people by property or people buy individual stocks or people by whatever, I know people that go and, you know, they're serial entrepreneurs, right? They build a business. They sell it. They build another business. they sell it because they know the language. A little bit like riding a bike, but kind of like riding a bike along a cliff. Yeah, yeah. With a strong wind blowing. Yeah. I should add as a note for anybody who heard my valuation numbers, what I was referring to when I said that in our

industry, websites are commonly valued at between 1.5x to 2x. I was referring very specifically only to the common valuation that you see for personal finance websites. So I just want to be clear not to over extrapolate from that for other businesses because valuations range widely depending on the type of industry that you're in the type of business that you're running, the assets that business holds and many other factors. A great resource for people interested in buying businesses and selling businesses. A fantastic podcast is we, John Warrillo called Built to Sell Radio. Built to Sell is really interesting because of the fact that John not only wrote a book about building businesses to sell, but he interviews people that have

done it over and over and over and you start to see like anything the metrics that you need to know, the language you need to know about buying and selling businesses. Well, I mean, if you think about it, You see all of these websites in which, like, couponing websites, right? Where people write about how you can save $4.37 on your grocery bill. But some of those websites are big, big business that are grossing a million or more per month, right? Huge. Huge money. I mean, you look at some of these websites that teach people how to clip coupons or how

how to do a bunch of DIY projects where you can make your own soap or make your own candles or use baking soda for 27 different ways to clean your house. And by virtue of doing that cut down on the cost of your cleaning supplies, there are so many websites that cover fairly mundane topics that even if you were to follow their advice would not have a major financial benefit. But those sites themselves and the people who are running them are raking in huge money. Sure. Even affinity websites.

I mean, I think, you know, Paula, I like to play board games in my spare time. And there's a site called board game geek. Board games. Who would have known over, my understanding is over 2 million people a day. Go to boardgamegeek.com. board games. I mean, find something you like and make it now. I will say this. It still isn't easy. You and I know some of these people. Right. Yeah. Speaking with somebody like Rosemary Groner as an example, that woman worked her butt off. Oh, yeah. On creating a system to make it so that her readers got phenomenal value and she was able to set it up in a way that it ran like a well-oiled machine.

Right. But still, it's out there. She's making $100,000 a month. A month and working, what, 20 hours? These days she is, but it certainly took her a long time to set that up. So Katie, we expect you to be the next one. Yeah, but Katie, to answer your question, yes, buying a business presents great opportunities to save years of that initial bootstrapping and purchase something that already has a customer base, that already has product development, that already is bringing in revenue, just make sure that you understand what you are buying,

ideally because you have some professional experience in a relevant field or industry, so that that way you understand how you can add value to that business or at a minimum maintain the value that already exists inside of that business. So thank you, Katie, for asking that question. We'll come back to this episode after this word, from our sponsors. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient.

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Don't miss out on early Black Friday deals. Head to Wayfair.com now to shop Wayfair's Black Friday deals for up to 70% off. That's W-A-F-A-I-R.com. Sale ends December 7th. Our next question comes from Rob. Hello, Paula. My name is Rob, and my question is, do I need a bond allocation in my investment portfolio with an inflation-adjusted military pension? Or can I stay 100% equities since the pension provides regular income? Here are my stats. I'm 42 years old, married with two kids under four. I'm retiring to Henderson, Nevada, from the military in February, and my pension immediately begins paying monthly checks totaling $42,000 per year after taxes. As you probably know, the amount will adjust

for inflation every year and includes access to lifelong health care for my wife and I, plus the kids until age 21 for under 1,000 per year. I started investing in 2010, discovered the fire community in 2015, and followed the J.L. Collins investment strategy with 100% VTSAX. As of November 2019, our net worth is $850,000, not including our home, which was purchased with cash. The age $350,000 is roughly 90% VTSAX, almost evenly split between taxable and retirement accounts, with 10% in cash to take advantage of market downturns like December 2018. My charts show that we can live comfortably on the pension income alone, so I plan on withdrawing 1 to 2% from our equity portfolio just for special occasions,

like trips or charitable causes. I want to be careful to avoid income amounts over the 22% tax bracket to maintain my tax efficiency per lessons from the mad finances. So what do you think? Thanks so much, and I love the podcast. Rob, do you need a bond allocation if you are receiving a military pension? That is a fantastic question. In fact, my dad just asked me a similar question a couple of days ago. So my dad is a retired college professor, and he received a very important.

a pension through the state teacher's retirement pension program. Because he receives this pension, he actually called me and asked what he should do with his investments because he isn't sure if he really needs a bond allocation, given the fact that this pension is the fixed income portion of his retirement portfolio. And so if you think of your portfolio in the broadest sense of the word. If you think of retirement, the analogy that people often use is a three-legged stool in which one leg comes from investments, one comes from Social Security, and one comes from a pension, if applicable. If Social Security plus that pension combined, create a sufficient source of reliable fixed income, essentially the question is, does that give you the leeway

to be much more aggressive in the investment portion of your financial life. And my answer to that is yes, because your pension is operating as essentially that fixed income portion of your portfolio. I would say the same thing to somebody who had a serious volume of rental real estate, particularly if it was deleveraged. if the net rental income that's coming in from rental real estate is sufficiently high enough that it would be analogous to receiving a pension. I mean, it's not a perfect analogy, of course, because there's going to be more volatility when it comes to rental properties. But if a person were receiving some stable form of fixed income, such as rental income

or a pension, then, yes, I do think that you then have the leeway to be much more aggressive in your investments. I agree with a caveat, which is that the only dangerous thing about that, Rob, is setting up an automatic withdrawal from an equity account. That in a down market can wreak havoc on your portfolio. So the only thing that you have to be wary of, I wouldn't try to time the market to hit it on the right up day, but I would try to time the market to think first about not hitting it on the wrong day. Because study after study is shown that if you're doing reverse dollar cost averaging out of an equity portfolio, you can sink yourself much, much faster than if you just strategically pick spots along the way and pick apples off

the tree. So in other words, don't automate the withdrawals, manually select the days in which you are going to withdraw? Yes, absolutely. And do it slightly conservatively. so that you have the time and energy. I mean, the nice thing about this, and the part I like about this, not just for Rob, but everybody listening, but because he has that cash cushion, he can afford to wait a little longer to take money out.

The thing that I worry about is somebody who has very little cash trying to remove money from stocks, and they get to the point that they need the money on the wrong possible day. And at some point, we'll have another horrible market, and I don't want that day to be a time that's, you know, one of those absolutely horrible, horrible days. when everything about that day says I shouldn't take money out today, except that my cupboard's

empty and I have no groceries, no gas to get to work. Do you think that maintaining a strong cash cushion or maintaining a strong cash allocation, which could be tapped in the event of a down market and then replenished when equities are high, would be a good hedge against the risk that you just described? Clearly. And the bad news is what that's going to do is it's going to drive. down your returns. Now, keeping with equities over longer periods of time, it should keep your expected rate of return higher, but the cash allocation will offset that somewhat, which means

even though, you know, I kind of roll my eyes about people that look at 1.7% versus 1.8% on their cash cushion, just keeping a decent high interest money market, high interest savings account is going to be a great idea. And you know what's coming back, Paula? You and I both know that over different periods of time, we've said, you know what, CDs, not a great idea now. And then other days, yeah, CDs. Still not a great idea. For like the last decade, CDs have not been a great idea.

Well, here's the cool thing. CDs, if you've looked lately, are coming back. The idea of leaving money, this is the first time in a long time that I'm going, CD, yeah, okay, I can get behind that. If you look at one of the comparison sites, and I'm looking at Magnific, money, which, by the way, just before anybody complains, is a sponsor of the Stacky Benjamin's podcast. Full disclosure. Yes, but I do like them. I ask them to sponsor the show. A CD right now, if you look at the top CDs, they're paying two and a quarter and then 2.15, 2.11, 2.0.

I look instead, I toggle over to high interest savings accounts and a good interest rate on a savings account right now, 2.05, 2%. So you can tweak it a little bit. And maybe you do both, right? You take most money that you need and you leave it in a high interest savings account earning two or maybe for a lot of savings accounts just below two. And then get 2.15, 2 and a quarter on a one-year CD where you're fairly certain you're not going to need it. But the cool thing about most CDs and you want to look at the paperwork, you want to look at the fine print on this. But For most CDs, if you have to break it, all you're going to lose is the interest from the time that you started it, not any loss of principle, no penalty. But you want to make sure there's no penalty, no loss of principle before you get into the CD if you're going to use that.

So you can see there's not a huge difference, but there's enough now that I'm just starting to think, maybe Paula CDs are coming back. What's up with that? That would make me nervous about its implications for the type of inflation that we might expect in the future. because the last time CDs returned anything that was noteworthy happened during a time period in which inflation was also relatively high. And when I say relatively high, I mean as compared with this past decade in which inflation has been ridiculously low. It's a good thought. And I think you have every right to be a little nervous about that.

Right. Because people that set these rates, they've already done some serious homework. Yeah, yeah. I see the viability of CDs as something of an index for what we can expect our inflation rates to be. Yeah, where the ball's headed. Yeah. So interesting because then if we look at, so using your logic, too, if Rob left his money in a high interest savings account, CDs are just showing where high interest savings accounts are headed. That's true. Yeah. So he might lose a little bit over the next 12 months, but he gains complete liquidity of all his money.

My question would be, you know, is he really going to need all that money over the next 12 months? So I'm with you. No bond allocation. Does it? Yeah, exactly. You know, he's the pension is the fixed income component of the overall retirement portfolio. So, Rob, you can keep your investments in equities as long as you have what's known as a barbell allocation where you have lots of equities, but you also have cash to counterbalance it so that you're not forced to convert paper losses into real losses. at inopportune times. There was one other question that I wanted to ask about this, or one sort of devil's advocate. I don't want to say it's a devil's advocate position, Joe, because I'm going to phrase it as a question. But, Joe, something that you have often talked about is that a person should not take on more risk than they need to.

So if you're in a position in which you don't have to take on excess risk, then why would you have an all-equities portfolio, even if over the course of the next 30 years an all-equities portfolio will give you higher returns, if you don't need that level of risk exposure, then does it make sense to take it on? I think that's a great question, and I think that my answer is largely

in the way that Rob framed the question, which is, why wouldn't I do that? If Rob had framed the question as, do you think that this level of risk is acceptable or warranted, my answer would have gone back to what's the plan, right? Which is largely my answer to everything. We start with the plan and we work backwards. With Rob, Rob is so confident in the approach already. You can tell by the question, the way he phrased it, what he has. And you and I know historically over long periods of time and the way Rob's thinking, these are apples laying on the ground that all he has to do is pick up and put in his

basket and take him home and eat them. It is a low-hanging fruit thing. So yeah, if Rob had phrased the question differently or if we were talking about risk versus return, if I were his advisor back in the day, I would have said, here's the allocation that you need to get your goal. I would have gone back to what's called the efficient frontier, which would have given me bonds and stocks would have given me a nice diversified allocation. I would have talked about not just diversification, but about rebalancing and how that works. But then I would have said, I would have said to Rob, but you know what? Let me show you historically what happened if you did it this way, because you have the pension.

So we have X what you need to do and we have Y what you could do. I'm going to leave it up to you. Some people take the answer of, I will stick with X, what I need to do. And others take the answer of, I will choose why, what I could do. Yeah, yeah, exactly. You know what? If I don't have to take that risk, I don't want to take that. I don't want to lose sleep at night.

I know me, I would lose sleep at night. I like the fact that I have this opportunity if I decide to think differently. But no, let's do the safe method so that I can put my financial picture on autopilot and focus on instead my earning potential. And other people, you put the opportunity out there and they, oh, you kid me? I would take that in a heartbeat. So to summarize, to answer the question of should you take on more risk than is necessary, the answer is depends on whether or not your risk tolerance is geared towards doing so.

Right, right. So thank you, Rob, for asking that question. Our next question comes from Brian. Hi, Paula. My name is Brian, and I am 37 years old. After spending most of my 20s and early 30s making some bad financial decisions, I recently got finished paying off a large sum of credit card debt, and I also saved six months' worse of expenses in an emergency savings fund.

I feel really empowered not being weighed down by the credit card debt and having savings for the first time in my adult life. It has inspired me to dive into the personal finance community online, which is how I stumbled upon your wonderful website and podcast. I'm reaching out to you to figure out where to go from here. I currently have about 12 years left on my mortgage with a balance of 112,000 and an interest rate of 3.125%. I also have a student loan balance of about 65,000 at 6.375%. I wanted to run a few options by you to see where you think I should go from here because I'm having trouble figuring out where it would be best for me to put my money.

My first option is attempting to max out my 401k. Don't worry, I currently and have always contributed to get the full employer match. and I also contribute 2% on top of that. My current 401k balance is about 1.5 times my current salary. I also max out my HSA, as well as my Roth IRA. I also can invest in a Vanguard Mutual Fund with the after-tax money. Or I could focus on paying off my student loans. Part of me is hesitant to pay off the student loans for a number of reasons.

First, they are federal, so they come with a number of protections. And I'm thinking, since it is such a hot topic right now in politics, there could potentially be legislature that will benefit me in the near-ish future. Second, I feel that I can make more than a 6.4% return in the market, especially with compound interests and time on my side. I'm also considering refinancing with a private lender, where the interest rate will be much lower, but that, of course, will forego any potential benefits that come with a federal loan. I'm even considering refinancing my mortgage and taking out cash to lump in the student loans with it. Then I could at least get a lower rate,

and also deduct the mortgage interests and help lower my taxes. I should also note that my income is above the threshold where I can deduct any student loan interest on my taxes. Paul, I want to thank you in advance for your advice and thank you for all that you do. You are always so encouraging, and I'm so happy I found your platform. Brian, first of all, congratulations on being in such an excellent financial position. You have paid off your credit cards. You have a great emergency fund. you have a low balance remaining on your mortgage and a low interest rate on that. You know, the thing I like Best Paula, not to cut you off like I just did, but I'm going to anyway. All right. Yeah. I love the fact that he shows everybody else listening how you can change things.

You don't have to be the person you were yesterday. You can turn it around. I did crappy stuff with credit cards early in my career. So did Brian. And it's just, it's cool to see that he's turned it around and that you helped him so much. I flippin' love that. Yeah, absolutely. So huge congratulations, Brian. In fact, Steve, can we get some type of a sound effect? Thank you, Steve, and congrats Brian for all of the progress that you've made so far. Now, in response to your question, first I'm going to start with what not to do. You floated the idea of refinancing your mortgage, taking out some cash from that mortgage, and using a portion of that.

cash to pay off your student loans. Do not do that. In most cases, you should never use a secured loan to pay off an unsecured loan. The only exception would be an extreme example, like if you're on the brink of bankruptcy, in those very, very extreme fringe examples, maybe, maybe I'd consider it. But in your case, you're not on the brink of bankruptcy. You're doing very well. Certainly, in your position, you do not want to use a secured loan to pay off the debt on an unsecured loan. Simply stated, if something were to happen and you were to default on these bills, the bank can take your house away. They can't take your diploma away.

So let's scrap the idea of refinancing the mortgage. Also, you have a mortgage with a 3.125%. interest rate, which is amazing. And you've only got 12 years left on this mortgage. So in terms of your amortization table, your payments on that mortgage at this point, assuming that it was a 30-year mortgage, which it may or may not have been, maybe it's a 15-year, in which case, you know, you're still early in the amortization cycle. But if that was a 30-year mortgage and you have paid it down enough such that you've only got 12 years left on it, I mean, wow, your payments are going to be predominantly principal. So,

Your mortgage is in a great spot. If it ain't broke, don't fix it. Now, you also mentioned reluctance around refinancing your student loans based on what politicians may or may not do in the future. As policy, I recommend not speculating about broad political forces that are outside of your control. We have no idea what's going to happen next week or not. next month or next year. And to base a major financial decision on conjecture and speculation about topics that are completely outside of your locus of control is simply bad personal policy. There's a leader of a major, former leader of a major company, Jack Welch, who had a great

phrase that I am reminded of. My brain reminds me of this every time I start to think about. Well, what if things change or what if this happens? Jack Welch always said when he ran GE when GE was just rocking. He said face reality the way it is, not the way you wish it were or the way it might be. And I think that that's true here. Let's just look at reality the way it is today, which is you got to pay it. Right. Exactly. That quote from Jack Welsh reminds me of a similar saying that I often tell myself when I'm giving myself pep talks,

which is we live in the world of is, not the world of should. I love it. I also love the quote, 86% of the quotes on the Internet are made up. Abraham Lincoln. I don't know if you knew that Abe Lincoln said that. Very smart guy. Ahead of his time. Predicted the Internet, huh?

I heard he was on Snapchat. Very early Snapchat. So, Brian, you suggested maxing out. your 401k, HSA, Roth IRA, and also investing money in a Vanguard account that would be a taxable brokerage account. I love the idea of doing that, and I would encourage you to put money in those accounts. What you could do is put money in a taxable brokerage account and let that money accumulate until it reaches $65,000, which is your current student loan balance. And when that account has reached a balance of $65,000, you can then make the decision as to whether you

want to withdraw the money that's in that account and make a giant lump sum payment towards your student loans and wipe all of that out in one very satisfying check. Or if you want to maintain that money inside of the account and continue paying on your student loan balance, You can make that call once you have that huge lump sum to lob at it and then the opportunity costs become clear. Do I want to keep this money invested or do I want to wipe out this debt? That being said, given that your student loans have a balance of 6.375 percent, I'm also just going to add the commentary that the return that you are likely to get by investing that money might be higher. But given the volatility, given the risk, I don't know if a handful of basis points is worth it. Would you rather have a sure thing at paying off a 6.375% loan? Or would you rather try to arbitrage some difference, knowing that the opportunity to arbitrage that difference carries its own set of risks?

that's largely a question of risk tolerance, but I will also put that argument out there to say that if you choose not to put money in a taxable brokerage account and if you chose to instead prioritize paying off the student loan first before going the taxable brokerage account route, that would also be a very viable choice. And so I do not have a strong preference personally. I don't have a strong preference between whether you opt for paying off the student loan versus whether you opt for putting money in the Vanguard taxable brokerage account. I think there are great arguments on both sides for either of those options. But I do love the idea of you putting money into your IRA, your HSA, and your 401K, maxing all of those out. Those are great because you get some serious tax advantages with that.

So do that and don't mess with your mortgage and don't try to predict what politicians might do in the future. What I love about that plan, Paula, is that it maintains flexibility so that Brian is able to make moves later. I'm also with you, leaving your goals so at a lower interest rate assumption is always a great tact. Whenever I would meet people that wanted to assume that we were going to get 9, 10, 11%, I thought wouldn't be cool if we got 9, 10, 11%, but we didn't. needed six. Like that would be way more awesome because if we set our goals based on six, that meant we did the stuff that we can control. We can control our expenses. We control saving more. We can control getting a raise from work. We can control getting a side hustle. All these things are things that we can flex our muscles and do ourselves. But the market, sometimes the wind's

going to blow and sometimes it's not. And we can't control that. And so I always got worried when someone wanted to be that aggressive, not in their practice, but they wanted to be that aggressive with the planning. Exactly. When making assumptions about returns for the sake of making opportunity cost comparisons err on the side of assuming lower returns and also recognize that the only way to make a true apples to apples comparison between a risk-free, quote-unquote, return of 6.375%, which is what you would get by virtue of paying off that student loan, right? The risk-free 6.375% cannot be compared to a risky 7% in a direct numerical format. You can't simply say 7 is higher than 6.3, therefore we'll go with that because the risk needs to be contextualized into the comparison.

And especially now I realize that there's nothing that says that this bull market can't continue. It can continue forever and ever, never. So I don't want to say that, man, it's been a long time. So it's got to go down now. It doesn't have to do anything. Australia has been in a bull market for 28 years going on 29. Yeah. There's nothing that says it can't continue.

But still, reversion to the mean, Paul, is a real thing. And I don't want to count on it continuing for two, three. four, five, ten more years. Right. So, Brian, to summarize our answer, your mortgage is great. Don't mess with it. It's fantastic. Do max out your HSA, Roth IRA in 401K, and either pay off your student loans or invest in a Vanguard taxable brokerage account. And you can tell Joe and I are both leaning towards making those investments in a Vanguard taxable brokerage account for the reasons that we've just outlined. But either of those two. options are good ones. As one of my favorite comedian says, both favorites. Thank you, Brian,

for asking that question. We'll come back to this episode in just a minute. But first, our next question comes from Katie. Hi, Paula. You're so inspirational. I listen to you all the time. Thank you for bringing wonderful guest speakers and your advice specifically has helped me navigate life. With that being said, I have a question about order of operations. I'm interested in understanding the vehicles for both retirement as well as for living a healthy, wealthy life before I'm 70 years old. For context, I'm in my early 30s. I'm debt-free except for my mortgage and my car, which I believe I can aggressively pay down both within the next three years to become debt-free entirely besides obviously fixed bills. With that being said, my company offers 50 cents

on the dollar for the 401k pre-tax. So in 2020, I know I will be able to max that out. The company also offers an opportunity for an after-tax contribution where although I would not receive a match, I could put after-tax dollars around 27,750 towards, I believe it's an IRA that then converts to Roth at the end of the year. Personally, I'd love to feel like that's enough, judging there's been many years I was unable to do that at all. I was just asked, my first question is, is that enough vehicle for retirement as is? The second question is, I would love to understand, a ratio between retirement vehicles, the brokerage for life vehicles, and saving vehicles. What I know about myself would be I would love to pay for things in cash, Dave Ramsey-style,

as much as possible, just because loans give me anxiety. With that being said, I wanted to understand with a brokerage account, after you have, say, a full 12 months of an emergency fund, how much you should be allocating towards the brokerage account versus the retirement account. And what I mean here is I can put money towards both. I just don't want to have all of my wealth come at age 70 and then ultimately not be able to experience parts of life that are so beautiful. So with that being said, I wanted to know A is the pre-tax plus the Roth conversion through Vanguard and my company enough for retirement. B, with extra money and I have an excess, how much should I be putting towards a brokerage account and how much should I put towards savings so that I can, in real time, live my life. And then lastly, any advice that would be if there were any of vehicles or holes in

my plan that I could really utilize. For context, I work for a tech firm. I'm a W-2 employee in my early 30s and I'm breaking the six-figure mark. So I just wanted to make sure I'm allocating in a proper way since my budget does have opportunities here to make some changes in 2020. Thank you so much for your time. And I appreciate any insight you have to give. Katie, that's a great question. I actually hear two questions inside of what you've just asked. One is, am I on track for retirement? And the other is regarding your workplace retirement options. And you said a couple of things as you were describing your workplace retirement options that raised a bit of a red flag, including this notion of an after-tax account that converts to a Roth account. because aftertax and Roth are separate concepts. So, Joe, you're a former financial planner.

Can you talk us through the distinction between after tax and Roth as well as red flags to look out for in the workplace retirement plan that she has described? Yeah, I think definitely, Katie, you want to get a better understanding of your 401K because either it operates differently than any that I've seen, which, by the way, could be the case. I don't know everything about everything, but I'm fairly certain that it doesn't work the way that you described. So you generally have three different options, one of which stinks. The first one is you mentioned that you get pre-tax up to the match. And then you said you can contribute more, but it's after-tax. For most 401Ks, you can contribute more and still have it be pre-tax if you want. So money goes in.

It's not taxed. It doesn't get taxed until when you pull it out. and every 401k has provisions of how you can pull it out. I think that's probably beyond the scope of this discussion, but you want to know that when you get ready to pull it out. Most 401ks have a Roth option where money goes in after tax, and when you pull the money out, which once again depends on the plan document

and you want to be aware of the rules around pulling money out, but when you pull it out, you're not going to pay any tax, just like you would with a Roth IRA. The third type is a after-tax contribution, where it's not a Roth contribution, but it's after-tax, and then it's going to grow without taxes being withheld so that every year you leave it there, you're building up taxes that need to be paid that are still tax-deferred, but when you pull it out, you're going to have to pay those. that generally speaking is the worst way to save unless you have a strategy and I have seen this before where you can convert that somehow, Paula, to do a backdoor Roth IRA that works for some people that have the ability to pull money out of their 401k on a yearly basis. They can save after tax and then they can do a backdoor Roth IRA and essentially still get

their Roth contribution in. But the important note to make here at a conceptual level is that after tax, the phrase after tax is not synonymous with the phrase Roth. It is not. So even though contributions to a Roth account are after tax contributions, not all after tax contributions are Roth. So all Roth contributions are after tax, but not all after tax contributions are Roth.

the real battle needs to be fought 99% of the time between am I going to make a Roth contribution or am I going to make a pre-tax contribution? That's the bet. Yeah, for the majority of retirement plans. And by majority, we're talking about 98% of retirement plans. But we did have a caller at some point in one of our previous episodes who also had some type of plan that gave her the ability to make after-tack. tax non-roth contributions.

Most do. Most will allow you to do that, and it is a horrible option. I would 98% of the time say that's a horrible option. I have to say, though, so now that we got past that, Paula, this broader question, and I know that all questions are supposed to be like my children, where I love them all equally, and they're all fantastic. Joe, are you saying you have a favorite child? This is my favorite question.

Well, which one is your favorite child? Oh, I don't have a favorite child. Mm-hmm. But I do have a favorite question. And it is Katie's question. And the reason is I think we spend so much time talking about optimizing and we don't think enough about experiencing more life. And that's the piece of Katie's question that I like.

Like, how do I put my money in a spot? Not where I'm optimizing baloney tax provisions or I'm optimizing. all this stuff so that I leave a large amount of money to somebody else, but how do I get more life out of my money? That for me is what this is all about. Like remembering that money's a fuel and not the end game, for me personally, and everybody's goals aren't like mine, but man, that excites me. How do I have money available when I want it? That is a super exciting question. Right. Exactly. And Katie, to your question of, am I? on track for retirement. There are a few things that we need to know in order to be able to

answer that question. Number one is how much money do you currently have saved for retirement? What's the starting point? What's the current balance of your retirement portfolio? Number two, do you have any other anticipated sources of retirement income outside of your portfolio? There will most likely be some level of social security. Do you have any other forms of income that you're expecting, such as pension income? or rental property income, I'm going to just assume no unless stated otherwise. For the purposes of this answer, we'll assume no. Number three, how much do you make?

And more importantly, how much do you spend? And do you expect that to be consistent in retirement? And I know that in your early 30s, it's hard to answer that question because being in your early 30s, trying to anticipate how much you're going to spend when you're 67 years old is flippin' impossible. What state are you going to be living in?

What is your family situation going to be at that time? I mean, there's no way to reasonably predict the lifestyle that you will have 30 years into the future.

But that said, as an incredibly imperfect barometer, the level of spending that you are doing today for planning purposes is a crude blunt instrument

that a lot of people use in order to anticipate retirement spending decades into the future. So, you know, I know that you mentioned in your message that you're earning just north of the six-figure mark, but that doesn't tell me anything about how much you're spending because I'm not going to make the assumption, unlike a lot of other people who are in the retirement planning space, I am not going to make the assumption that you spend 90% of what you make or 80% of what you make, or even 70% of what you make. I want to completely divorce the implicit tie between income and expense, because I think that that is one of the most flawed paradigms in the world of retirement planning assumptions. It also gets rid of something else, Paula.

It gets rid of this desire people always have to rely on rules of thumb, which is funny because you think about how easy this actually ends up being to use. online calculators to use your exact number versus a rule of thumb. I'm constantly frustrated by people that always want to use the rule of thumb. Instead of just go plug in your numbers. Go plug in the real thing. Make it, make it 100% you. And then it's trackable. As things change for you, you can bump up and down your numbers.

It becomes so much easier and so much less of a pain. And so it doesn't blow in the wind the same way, like all of these crazy words. rules that people use, which I love Katie's phrase, order of operations. Because the way I look at it, the order of operation is this, is I think back to Stephen Cubby's seven habits of highly effective people. And what I love about that, Paula, is the rule that when you pick up one end of the stick, you also pick up the other end. And what does that mean here? It means that when you save a dollar, you're also later going to spend the dollar. That's the other end of the stick. So how do I best pick up the other end of the stick. The way I look at that is all around, when am I going to

spend the money? And if she wants money available pre 59.5, she probably wants it outside of conventional retirement plans. If she's going to spend it after 59 and a half, she definitely wants it inside conventional retirement plans. So it all is about what she got at when she talks about wanting to live life, which made me go hooray, think about that other end of the stick. When are you going to spend it and then save the money accordingly? Right. So, Katie, to your question of how much money do I need to save every year for retirement, in order to answer that question, we first need to know how much money you're going to need

every year in retirement. How much do you spend today? We can use that as the closest number that we can. reasonably use right now in order to try to estimate that. Assuming that you're spending in retirement is similar to today's spending adjusted for inflation, then that tells us how much you'll need every year in retirement to the best of our ability to make that prediction. And once we know that number, and we also know the number of how much money you already have in your portfolio, well, then you can go to an online retirement calculator, plug those numbers in and see how much

you need to save in order to be able to reach that goal. And to the order of operations, once you are saving enough to be able to reach that goal, that goal of the amount that you'll need to live on once you're in retirement, once you're saving that, then the rest can all be put into a taxable brokerage account because that's money that you can more easily access when you're in your late 30s or 40s or 50s. And at that point then, Paula, I think you're truly optimizing. Right. Versus just tax optimizing. Your life optimizing.

Exactly. Thank you, Katie, for asking that question. Our final question today comes from Jeff. Hi, Paul. My name's Jeff. I've been a little listener since the early days of your podcast, and I know you've spoken about these things before. Apps used for investing or investing for beginners, such as Robin Hood and other ones,

cash app has recently added the feature to invest in stocks. And I was wondering if you could do an episode on those apps and the benefits or something along those lines. Thanks. Jeff, that's a great question. Let's talk about some of our favorite apps. The Robin Hood app, as you mentioned, is one that I have had on my phone probably since 2013, 2014, something like that. I've had it for a very long time. For years, Robin Hood was unique because it allowed you to buy stocks fee-free, whereas a lot of other platforms such as e-trade would charge you a fee every time you wanted to buy a stock. But with Robin Hood, you could buy

stocks without any fees or commissions, which made it possible to buy one share or two shares. It made it cost-effective to do that. That was the reason that I initially got it. Now it's become a lot more common to be able to trade individual stocks without fees or commissions. In fact, some of the biggest brokerage houses offer that service. And that has taken away the unique value proposition that Robin Hood once had. That being said, they've got a great user interface. I still have them on my phone. I have somewhere between $20,000 to $25,000. Depending on the day. Yeah, depending on the day. Exactly. That I have put in Robin Hood as just sort of a fund, right? I'm not a big fan of individual stock picking as a core component of your portfolio,

but if you want to put a little bit of money there and use that for a very, very small portion of your overall portfolio, I think that's fine. I do that myself. And so Robin Hood is great for that. And there are other apps. You mentioned the cash app that are also investing apps. Back in the early days, Paula, of this particular app, I met this founder, Brian Barnes, who is an interesting guy from Stanford. And Brian was creating this Robin Hood, but for investors, if you were using individual stocks or exchange traded funds as part of your portfolio and his company is called M1 Finance. And M1, I've used extensively the same way. At that time, with Robin Hood, you would buy an individual stock. With M1 Finance, you could take eight

stocks and direct $100 to go proportionally percentage-wise into these pies, they called it. and you could keep a pie kind of managed. It was this bridge between individual stocks or ETFs and actually having a portfolio instead of an individual stock. So that was exciting too. But to your point, the thing that we've done stories over and over and over again has been, if you just look at 2019, it was incredibly exciting. You had Robin Hood before that, M1 Finance followed up with something similar,

then you had, I'm going to try to get this timeline right, companies like SoFi that said that we're going to offer these ETFs that aren't fee-free forever, but they're going to be fee-free for a little bit of time so we can attract some assets. I mean, they didn't position it that way, but that's really what it was. And then Fidelity, maybe what, June, July, came out with, hey, we're going to do, we're going to do these completely fee-free ETFs, but you have to buy them through the Fidelity platform. then the real battle started in October with Charles Schwab. Charles Schwab said, hey, that's what we're going to do. Individual stocks, no fee. And immediately within hours, TD Ameritrade said, we're going to do the same thing. And then within days, e-trade said we're going to do the same thing.

Within a week, Fidelity said we're going to do the same thing. And within three months, Vanguard, within three months, Vanguard said they were going to do the same thing. So you saw the entire industry just capitulate on individual stock fees, which by the way, it's funny. I thought initially, I'm like, wow, this is fantastic for investors. But you know what, Paula, on our program, a guy that you and I both know really well, OG, who's the certified financial plan on our show, he said, Wall Street always knows how to make money. And I'm wondering where we pay for this, which is funny. I mean, it's a little cynical, but free trades look good.

good, but you, I tend to agree with them. We're going to pay for this someplace. Like, there's going to be a place where maybe I'm on hold longer when I call in for service, or maybe there's going to be some chart or graph that I can't use anymore or something. There's going to be some way because these companies are all great at making a profit. Yeah, absolutely. I'm not worried about the financial health of the companies who are now giving up this revenue stream. It does, though, bring up my answer to Jeff, which is the benefit of using one of these apps versus what it used to be, which I think was your point earlier. Yeah. Not what it used to be. Yeah, exactly. Not what it used to be. I can do Sir Charles Schwab. Yeah, exactly. So, you know,

if you, if you want to use any investing app, Robin Hood, Cash, M1 Finance, I used to be on a platform called Loyal 3. Any of those, if you like it, if you like the user interface, if you generally, if it sparks joy, go for it. But there's really no compelling reason to go with any of them, either negative or positive. Paula Pant just Marie Condo to afford anything. Right. No, I'm saying I have had a Robin Hood account for the entire time that I've had afford anything. I started afford anything in 2011. I've had a Robin Hood account since I think 2012 or 13, something like that. I've had it for a freaking long time. And I've always enjoyed it. But I wouldn't go so far as to say that your life is devoid of some important digital tool.

Yeah. The perceived advantage a year ago of being able to invest from your phone fee free has gone bye-bye. Right. And that being said, if any of these platforms are ones that you enjoy, go for it. Can I ask you something about that too?

I mean, if we pull back for a second, look at the reason why a lot of people fail. We fail to save, number one. We fail to be strategic about our debt, but when it comes to our investments, we fail to leave them alone, right? More people fail because they touch their investment. more often than they should instead of just sitting on their hands and investing is at one place

where doing nothing largely is the right move. Being able to invest from our phone, thinking about that, increases our ability to do the wrong thing. So this perceived advantage is it truly an advantage? Exactly, yeah. Ease of access to an investing app is not the type of user behavior that we're trying to optimize for. In fact, it's rather the opposite. Yeah. Yeah.

No fee. And on my phone is one barrier that might have been a decent barrier. Like $8 to trade, which is not a significant speed bump. And not on my phone are two barriers that make me maybe think first before I go. You know what? This penny stock is a fantastic idea. Well, you know, but the $8 to trade, the thing that I love about the fact that trades are now fee-free is that it enables trading of small amounts. So it used to be that it was

simply just inefficient to try to invest $100 because if you're trying to invest $100 and there's an $8 fee, I mean, you do the math. Yeah, there were stocks in a sandbox portfolio when I was just starting out that I held on to just because eight bucks would have been significant to the return. Right, exactly. The $79 I had in that stock, which was up $8, which percentage buys was awesome, was completely swallowed by the $16 round trip to buy it and sell it. Exactly, exactly, exactly. I did that with a Visa stock when it IPOed.

I remember buying, I don't know, maybe $1,000 worth of the Visa IPO. This was back in, what, 2008? I only held it for like two or three days. And after paying the transaction costs of somewhere around $8, $10, somewhere in that neighborhood ballpark, after paying those transaction costs, I think I walked away with not much. I basically placed the trade for the sake of covering the transaction costs. Ta-da. Yeah. Yeah.

So, yeah, long story short, now that investing individual stocks is free on almost every platform, pick whichever. one you like the best. And there are great things about lots of them. There's great things about SoFi. There's great things about Robin Hood. There's great things about M1 Finance. Pick whichever one appeals to you. I should also say with regard to, like, as we talk about other money management apps generally, there are two that I downloaded on my phone last year, the two newest apps to have entered my life. One is Acorns and the other is Capital. Capital spelled with a Q. Of course. Of course. Right.

Because that makes it very audio and podcast friendly to talk about capital with a cue. But both of those are apps that allow you to save more money than you otherwise would. Acorns does this thing where you can round up your transactions. So if you spend $1.79 on a cup of coffee, it will round that up to $2 and invest that money for you automatically. And so I love acorns for that reason. And so I have an account with them. I've enabled the roundups. And it is fun to log in every now and again and be like, whoa, how did that grow to $800?

Really? Just from rounding up the spare change from every purchase? What kind of volume of transactions am I making here? But this is where I think fintech can win the day or some of these applications that allow us to save more or some. some places like trim as an example that will automatically go through and look at all my subscriptions and go, oh, I'm still subscribed to that. Right. Like getting rid of some of those things, I think those are, for me, are more powerful now than

the investing side. Yeah. One quirky app that I have on my phone that I used as a vacation fund is called tip yourself. You know how you tip the waiter, you tip people in your life? I tip myself whenever I go on a five mile run. I just get myself a couple bucks because I went out there. at 6 o'clock in the morning in Michigan in 28-degree weather and ran. So whenever I do something cool, I transfer a couple bucks from my bank account over to my

vacation fund as a tip. And then you list yourself, there's a little community. It's a small community. It's a small little app. But I dig it, Paula. It's just a pretty fun little quirky thing. Oh, that's funny. I use capital for that same purpose.

So I use the capital app to reward myself for good behavior. Yeah, yeah. And the money that accumulates in there is money that I have earmarked for something special that I wouldn't normally buy. Yeah, we use it when we go. We're headed to Japan, and I've been out there running enough that I'm going to have a couple nice dinners in Japan. Nice. Awesome. So in our show notes, which will be available at afford anything.com slash episode 237, we will link to a handful of apps.

again, afford anything.com slash episode 237 for links to a handful of cool fun apps, both for saving and for investing. That does it for today. Joe, where can people find you if they would like to know more about you? Wait, already, we're done?

We're done. We did it. Man, that was so fun. You can find me at the Stacky Benjamin show, which is a variety show, very, very light show. We are the greatest money show on Earth, which means it's a circus.

and we cover a couple of financial headlines. We'll have somebody that we talk to a thought leader or a great guest. We just had Romy Neustadt on who had a great book, which kind of is a little similar to the afford anything message. Romi's book is called You Can Have Everything Just Not at the Same Damn Time. My branding is better. Yeah. And while it's similar, her message is really follows a little bit of a different tech, but it's great stuff. So then we have some fun. So join us. And most Fridays, you'll find Paula Pant over there discussing a roundtable topic. Some blogger in the personal finance community, write something we find interesting and we kind of dive into it together as a team. So that's Monday, Wednesday, Friday on stacking Benjamins. Nice. Available where any podcasts are downloaded.

Finer podcasts. Finer podcasts. Fine. Only the best podcasts. I guess on the app conversation, don't forget, podcast playing apps, Spotify, Pandora, Overcast, Stitcher, most important apps you've got on your phone, the ones that help you listen to podcasts. Subscribe on all. Yes. And listen to like five times.

Yeah. Subscribe on all of them and then review us on all of them. Oh, that'd be great. listen to them over and over and over. Thanks again, Joe. That's our show for today. If you have not yet joined our one tweak a week challenge, I invite you to come join it.

We are kicking off the year 2020 with this 26 week challenge, in which every week you make one simple tweak to your finances, something that's easy and actionable and takes less than an hour. Some of them take less than five minutes. And if you make one small improvement a week for 26 weeks, which is the first half of the year, then six months from now, you'll be in a better spot than you're in today. So we've got a huge group of people who are all going through this challenge together, discussing the tweaks that they've made so far, talking about why they're taking the

challenge, sharing tips and pointers and modifications. So come join the group. You can take part in the one tweak a week a week challenge by going to afford anything.com slash 2020 kickoff. That's afford anything.com slash 2020 kickoff. On that site, you can download. a free ebook that has all 26 tweaks listed there. You'll also get emails once a week every Sunday with a reminder of that week's tweak. And again, we have a big community that's all doing this together. So it's all free. It's open to everyone. And you can get started at afford anything.com slash 2020 kickoff. Another really exciting announcement. And this is particularly great for anybody who's new to personal finance, new to the world of financial independence, and who wants to

learn the fundamentals of financial literacy, here is another free, really awesome opportunity. So here's the deal. If you're a longtime listener of this podcast, as you know, I sit on the board of the ChooseFI Foundation. Now, this is a nonprofit 501C3 Foundation that's dedicated to spreading financial literacy and the message of financial independence to underserved communities. This upcoming Saturday, January 25th, the ChooseFI Foundation is launching a free course called FI. 101. This course teaches the fundamentals, the building blocks of core personal finance management and financial independence. The course features 11 lessons, starting at lesson one with an introduction to the concept of financial independence, and then building from there. So lesson two

talks about the 4% rule and how to calculate your FI number. Lesson three talks about how to pay off your debt, lessons four, five, and six all cover ways to decrease your spending and increase your income, and lessons seven through eleven cover investing, tax optimization, insurance, higher education, lifelong learning, and how to synthesize all of this together to build a roadmap for yourself. You'll get a new lesson once a week for 11 weeks, and of course you have unlimited access to the course at any time. It's free. As I mentioned, it was created by the ChooseFi Foundation, which is a nonprofit organization, and it's going to become available as of Saturday, January 25th, 2020. So if you would like to enroll in this free course, or if you know

somebody who's a newbie to the personal finance space and you want to teach them the building blocks of financial literacy and guide them along that path from financial literacy to financial independence, you can get all the details and enroll at choosefi.com slash FI 101. Again, that's choosefI.com slash FI 101. While we're on the topic, I'd like to talk a little bit more about the ChooseFI International Foundation. The mission of the foundation is to educate underserved communities. And over the past year for 2019, as we discussed what that would look like and what form that would take, we chose a focus of three particular communities. One is K through 12 because there is a lack of financial literacy and a lack of financial education in K through 12.

And so we'd like school kids to learn the basics of how to manage your money wisely before they get into the adult world so that fewer of them can learn from the school of hard knocks and fewer of them can develop poor financial habits in their young adult years. So K through 12 is one area of focus. active duty service women and servicemen are another area of focus. So the Choose FI International Foundation is developing specific content that's geared to military families. And then the third area of focus are working adults who are drowning in debt. If you'd like to learn more about the plans that we have for developing out key programs that will serve these communities. And if you would like to see the 2019 financial report, because we make that, transparent and put that all online, you can look at all of that at choosefififoundation.org.

That's choosefififoundation.org and head to the page that's called mission. That's where a lot of the detailed information is around target communities, goals, and transparency of our financials. Afford Anything is a big supporter of the ChooseFI International Foundation. I am very excited to see all of the amazing work and change that this nonprofit will bring into the world. And again, if you'd like to learn more, choosefififoundation.org. With that said, I'd like to take a moment to thank the sponsors for this episode. And I'd like to thank you for taking the time to listen to these ads. The sponsors on the Afford Anything podcast are what make this podcast possible. We have a very strong team behind the scenes. We have some

great projects that are in the works. And so thanks to the sponsors who make this possible. So today's episode was sponsored by gusto, skill share, imperfect foods, and policy genius. And if you'd like to see a complete list of all of our sponsors and the deals and the discounts and promo codes that they offer, you can find all of them listed at afford anything.com slash sponsors. Finally, a huge thank you to everybody who has left us a rating or a review in whatever app you're using to listen to this show. As of the time of this recording, we have 2,093 ratings on Apple Podcasts, which is the platform formerly known as iTunes. I want to give a shout out to St. Mobile Diag, D-A-G, for their amazing review. They said, quote, love this podcast.

I've been listening for a year and a half, and in that time, have been inspired to start a business and save six months of salary for the first time in my life. Paula puts together such an informative and enjoyable show. I'm always excited to listen Monday morning. I also want to give a shout out to Captain Hastings, who left this awesome review. Quote, this podcast is my new favorite. Paula is a thoughtful presenter that asks interesting questions. Both her podcast and her blog are very well researched. Paula gave me the push to finally invest in real estate and to focus on increasing my income instead of obsessing over frugality.

Thanks, Paula. Well, thank you. And congratulations to you on your new real estate investments, on the new opportunities that you're pursuing as you increase your income, and on all of the improvements that you're making to your life. So thanks to both of them for those great reviews. Thanks to everybody who left us a review or a rating. If you haven't done so yet, please head to Afford Anything.com slash iTunes. That's going to redirect you to the page on the Apple Podcast website where you can leave us a review. That's Affordanithing.com slash iTunes. You can also leave a rating and a review directly from whatever app.

you're using to listen to this. While you're there, don't forget to hit the subscribe button or the follow button so that you don't miss any of our upcoming episodes. Thanks again for tuning in. This is the Afford Anything podcast. My name is Paula Pantt. I'll catch you next week. By the way, my lawyer says that I need a disclaimer, so here we go. This is purely for entertainment purposes. Basically, imagine that this is the least funny comedy show that you've ever listened to. We are not professionals. We barely can brush our teeth in the morning. And so we We don't hold ourselves out to be experts or really for that matter even adults. Give us the same amount of respect that you would give, say, a goldfish.

And always, always consult with a real grown-up before you make any decisions. That means consult with a tax advisor, consult with a lawyer, consult with a financial planner, consult with people who actually have credentials and who know what they're talking about, because that is definitely not us. All right, you've been warned.