Afford Anything - Ask Paula - Could This NYC Couple Contribute Only $10,000 Per Year Towards Retirement?

Episode Date: October 6, 2020

#280: Amy and her husband have $900,000 saved for retirement. They’re 40 years old and plan to retire at 65. Due to a job change + pay cut, they might only have $10,000 per year to save for the next 25 years. Will this be enough, given their yearly expenses of $144,000? Janie wants to get a solar power system for her house, but isn’t sure how to pay for it. Should she borrow funds from her seven-month emergency fund, or use funds from a taxable brokerage account that were earmarked for retirement? CJ and his wife netted $200,000 from the sale of their home. They aren’t sure when they’ll purchase their next home – their timeline could be as short as three years or as long as six years. Where should they keep the $200,000 to use towards a downpayment on their next home? Brandon wants to retire in the next five to ten years. He contributes 20 percent to his Roth 401k. Since he can’t withdraw those contributions early, does it make more sense to contribute up to the match of his 401k and invest the rest in an IRA with the goal of doing a Roth conversion? Anonymous “am I missing out?” wants to know the deal with tax-loss harvesting. When is it worthwhile? My friend and former financial planner Joe Saul-Sehy and I answer these questions on today’s episode. Enjoy! For more information, visit the show notes at https://affordanything.com/episode280 Learn more about your ad choices. Visit podcastchoices.com/adchoices

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 that you need to manage, like your time, your energy, your focus, your attention. Heck, even your motivation is a limited resource you need to manage. And that leads to two questions. Number one, what matters most to you? Where do you want to direct those scarce resources? And number two, how do you actually align the decisions in your life in order to reflect those values?

Answering those two questions is a lifetime practice. And that is what this podcast is here to explore. My name is Paula Pant. I am the host of the Afford Anything podcast. Every other episode, I answer questions that come from you, the community. Today, my buddy, former financial planner Joe Saul Seahy, is with me to answer these questions. What's up, Joe? I am so happy to be back.

I have to tell you the month that you were off, I cried nonstop. It's all I did. I missed you so much despite the fact that we also talk once a week anyway, regardless. Don't tell people that. Can let them know that. But I wasn't on afford anything. And that broke my heart. But you had some awesome episodes while you were gone. Oh, thank you. Thank you. Yeah. We aired some incredible interviews with brilliant thinkers. It's always fun. And I think sometimes people think, oh, Paula's on vacation. And so I'm going to go ahead and not listen during those times.

But for a creator like you or for on the Stacky Benjamin show, the same thing, that's when we get to pull out the stuff that really that we like, that we, and don't get me wrong, I think we like all of it, but you get to pull out these interviews that people haven't heard them. Like I think that if you don't listen to those, we call them rewind episodes, and you hadn't heard them before, man, you're missing out on some of the best stuff. And clearly this last month, it was like, a cannon going off. It was amazing. Oh, thank you. This is great because we didn't,

we didn't actually plan this, but Joe, what you just said leads perfectly into one thing that I wanted to mention in this intro, which is at the end of this episode, you are going to hear a conversation that I recorded earlier today with Aaron, who is the chief sanity officer of afford anything. She is employee number one, out of one. She is the one and only other full-time person. And so she's going to join me at the end of this episode. We're going to talk, where it's going to be a little inside baseball, but we're going to talk about what we worked on, what we did during the September sabbatical. So stay tuned for that if you want a peek behind the curtain. Well, I'm hanging out for that. I'm staying. Awesome. Well, you know it is pre-recorded,

so I can just send you the MP3 file. Spoiler. Come on. Don't pull back the curtain that far. Peek behind the curtain. We record these in different segments. No way. Well, do you think we should answer some questions? Let's do it. Awesome. Our first question today comes from CJ. Hi, Paula. I'm a huge fan of your show, both from an entertainment and advice standpoint.

And I appreciate the banter with Joe. It's great to hear different perspectives, even if he's wrong all the time. Here's my question. My wife and I live in the high cost of living in SF Bay Area and recently sold her primary residents, netting about $200,000 in cash with minimal taxable gains. We moved into a rental in another part of the bay. I could rent forever, but my wife is committed to homeownership, so it's definitely in our future. Our rental for now is great, though. It's spacious, walkable to schools for our kids, and has a ton of amenities that we appreciate. The problem is that we're not certain

of our purchase timeline. It could be as soon as three years from now, but no later than six, depending on what happens with our lives. We do have the financial means to purchase home in about the million-dollar range. We'll put $200,000 from the proceeds of our last home down, and we'll plan on putting another $5,200K into the down payment as well. Given all that, how would you recommend investing the $200,000 we netted from the last sale? Should we keep it in a secure savings account that's earning minimal interest? Would it be better off investing the majority in a California Muti bond fund like VCN,

A.I.X. Or is that too risky for a timeline that's potentially as short as three years? Or should we invest a portion more aggressively in a total market ETF like VTI, given that our timeline could be as long as six years out? Thanks, Paul and Joe. Keep up the great work. CJ, thank you so much. And I'm glad you're loving the show. And Joe, so sorry about the news that you're mostly wrong. Just a spoiler alert. Another way we pull back the curtain, C.J. is that Paul and I agree ahead of time. If I'm going to come on, I have to be the one who's wrong all the time. We so do not do that.

We have to build up the hosts by me, you know, take him on for the team. I don't put other people down to build myself up. That's fake news. I'm never wrong, CJ. What are you talking about? Paul is wrong all the time. It's so annoying. It's good to be back, Joe.

It is good to be back. I did miss this. I have to say to CJ, though, for a million dollars in the Bay Area, that buys what, C.J, a tent on the side of the hill, I think. It is tough. You know, we are hearing a lot about people moving out of that area, but prices still there are so expensive. It's just such an expensive place to buy real estate. So there's a lot of important decisions going on there.

Well, CJ, what I love about your question is that at its core, it's a financial planning question that's closely related to timeline. Like if you if you take out all of the details about how you got the money or what you're spending it on, if you strip away all of that and look at the core question, the core question is I have a bucket of money and I have a three to six year time horizon for when I want to deploy this money into the real world. How should I invest this bucket of money given this time horizon. At its core, that's what that question is. And that's why I like it. That's what's fascinating about it because this is, that core question is applicable to a lot of people who are listening to this. Even if their situation is different, even if their details are different,

the core question of how do you align your money with your timeline is relevant. Which means that based on that timeline, the last thing, CJ, that you said, VTI, putting it in stocks, even for a six-year time frame, pretty aggressive. And I definitely wouldn't go that way. So we can take that one off the table immediately. Yeah, absolutely. And the reason for that, for the sake of anybody who's wondering, is volatility in the stock market can sometimes extend out for a very long time, for longer than is comfortable. And when you have a 10-year time horizon, then even if there's a major fall, there is big. based on historical data, a reasonable likelihood that over a 10-year-time horizon, you have

enough time to recover from a major fall. A six-year-time horizon is based on historical data not enough for a recovery when you're certain and committed that you do want to tap that money and that you do want to spend that money. You know, if you have flexibility in that timeline, like, if the market were to go down and you were able to push that deadline from six years out to eight years or 10 years or whenever the market recovers, that would be different. But CJ, in your voicemail, you indicated no more than six years. From what it sounded like, that is a hard maximum. And so given that hard deadline,

given that hard maximum, you'll want to invest more conservatively. Paula, you want to get really nerdy on this topic for a moment for CJ? Let's do it. So I pulled up a great site called Morningstar.com, which is a fantastic third-party rating service, just to look at VTI to give CJ and everyone else an idea of what we're talking about, about this being potentially too volatile. The total return on average over the last five years has been just over 15%. I have it on a chart, so I don't have the actual number, but for what we're talking about,

that's going to be close enough. There's a measurement called standard deviation, and that is, just to put it very, simply, it's more complex than this. So please don't, please don't write. And tell us it's more, we know it's more complex than this. But that means that most of the time, you're going to have a return that's plus or minus 18% from that. So from, so in other words, from 15, it would be well within the normal volatility to have this thing equal 33%. That'd be fantastic. I'd love to have 33% of my money. On the same time, I can also get negative three on this. And that's also in the expected acceptable range. Now, you look at that and you can argue over a six year period.

Well, if I've got negative three on the downside and I got plus 30 something on the upside, I'll take that risk. Maybe. Maybe you do decide. But for Paul and I to tell you to take a return where a negative three is well within acceptable range is way too volatile. Think about 18% up or down from that number. That's a hell of a roller coaster ride versus he talked about going with bonds. The return on the California Muni bond fund that CJ mentioned, the expected return is around 4% with a standard deviation of 4, meaning it's well within the acceptable range between 0 and 8%.

Meaning he's not exposed to the loss of principle. And far less volatility. We can throw that dart with a lot more certainty that it's going to give him, not just to your point, a positive number, right? Versus I know that my ally cash reserve just went down to 0.6%. So not only can I beat that, but even in a bad year, I'm probably not going to lose money. Now, remember, that's one standard deviation. The Uber nerds will tell you, Joe, that's only one standard deviation. you can go two or three, you can go further out than that.

It can happen. But if we look at most of the time, we're going to expect between a 0 and 8% rate of return there. I like comparing those two. Even if you only know what I just told you, all I did was I went to morningstar.com. I put it in the ticker symbol VTI. I clicked the button that said risk.

And I looked at a chart that says risk return analysis. And on the bottom, it shows me standard deviation. That's the up and down from where the dot. is on the chart. And then the other axes gives me the expected total return during that time. So I can compare two investments just to see how much they wiggle. Wiggle being the technical term that all the cool people on Wall Street use. You know, actually one of the things that I did during the September sabbatical was that I went to the Morning Star Conference, except of course this year it was virtual. So September 16 and 17,

I was at the Morning Star Virtual Investors Conference. Me too, and I didn't even see you there. I know. I can't believe I didn't even run into you in the virtual hallways. It was so weird. Good stuff, though. Lots of discussions. I'm always fascinated at a conference like that, which is for industry professionals, the different conversations that advisors are having than the public-facing media is having. A lot more discussion about uses of technology.

I thought a lot more discussion about risk and not. just reward all the time. And also a lot of discussions during that conference about how a good financial planner isn't just a money woman or a money man. They are somebody who certainly knows money, but also more and more knows behavior and is also part therapist and part coach as well. That is really important to have that because frankly the investment part of it is getting, I think one quote from one of the speakers was that it's harder and harder for a financial advisor to come up with some investment strategy that beats indexing, right? Right, exactly.

You just can't do it. So where are you going to add value for your client? You add value by being able to help get in their head and help them control those things where they blow up their own plan. You don't want to do that. Right. And actually that links back to CJ's question because we're having this conversation about expected returns and volatility. But the fact of the matter is, most people underperform the funds that

they hold. That sounds nuts. How can you underperform at your own fund that you're holding? And it's because behaviorally, people dance in and out of them. Even this community, which I think if you've listened to this podcast enough, you've heard us talk time and time again about the importance of not market timing. But when there's volatility, people often don't think of themselves as market timing, but they'll ask questions or express sentiments that they don't even consciously realize is a market timing sentiment. So, you know, they'll say like, hey, should I be rethinking my strategy? I heard questions like that come up increasingly when the market was volatile and when it dawned on people that despite the 11-year bull run, the stock market is not a high-yield savings account.

Right. I just did some work looking at, also getting back to his question, at another option that I've talked about here on the show before, Paula. Ginny Mae. When it comes to risk, return, Ginny May. And Vanguard has a good one. I know he's only mentioned Vanguard funds, so I'm going to stick with Vanguard. VF-I-I-X is the ticker symbol, and now we're looking at an expected return around 5%

and a standard deviation of 2.17. So just over 2%. So the chance that we're going to get a 3% return or higher is much, much, much better during normal times. It doesn't mean we can't lose money, like I've said in the past, but if he gives a Ginny May four to six years, the chance of him having a positive, return that beats inflation probably much, much better. Now, here's the difference, though, between a Ginny May and the Muni fund he talked about. If he is a high-income earner,

even though that fund historically has a lower return and a higher standard deviation, he might have a little more risk, but his after-tax return might still be higher. And this is where he has to apply his own math. He's going to have to look at how he keeps a little bit. He's because the problem with that Ginny Mae is that as it pays money, it's going to pay a nice good dividend. So will the Muni. Muti will pay a smaller dividend, but he'll get to keep all of that muni dividend. The nice thing about a municipal bond, you're loaning money to a municipality, and that makes it federally tax-free. And if you live in the state, in most cases, it's also state tax-free. So he's going to have a return with no tax or with the Ginny May. He'll,

potentially it looks like over most time periods get a higher return, but he's going to have to give some of that back. But I still think just eyeballing that, I think my Ginny May still beats his Muni. Cs, though, may be a good option. If he can find a good CD is a third option. The cool thing about a CD is he may be able to lock in a rate, right? Where if interest rates on high yield savings accounts continue to deteriorate, at least he could lock in some on that CD. Problem with CDs is most of them are getting their butt kicked right now by these high yield. You know, I say high yield savings and couple that with 0.6%. Right. Right. Yes. Exactly. Yeah. CDs have been not very attractive for a long time. Like they're so unattractive that you may as well put your money

in a savings account because what's the point in tying it up if you're going to make so little that it's not worth the effort? Are we at the point yet where high yield savings is a misnomer? Well, it's all relative, relatively high yield. That's what they should call it as relatively high yield or doesn't suck as bad as your bank yield. Yeah. Okay, something. Yeah, there's got to be some better way to categorize this because high yield is laughable right now. Right, right, exactly.

But, you know, on the flip side, that does mean that we're in a low interest rate environment. So given that they're about to take out a very large loan, a low interest rate environment is a great time to take out a big housing loan. So the downside is while the yields from a savings account or from CDs are absolutely terrible, the flip side of that is that mortgage rates are at the lowest point in a generation and will continue to be that way for a while, for years. The Fed has pledged to keep rates low until 2023. So what Paul is really saying, CJ, is get into debt up to your eyeballs, big guy. Just get up to it into so much debt. Well, just not to get too discouraged by the fact that savings accounts suck so much, because

the flip side of that is that your mortgage rate is going to be very attractive right now as compared to historical rates. Yeah, the cost of debt, very, very low. Exactly, yeah. Cost of capital is quite cheap. If it were me, I would split at least between two categories, savings account and Ginny Mae or bond fund. I would too.

Absolutely. Yeah, and I don't know that there's an appreciable enough difference between the Ginny Mae, the Muni to make it worthwhile to spend a ton of time deciding which you like. Exactly, yeah. But if it were me, I would put roughly half of it in a savings account and roughly the other half of it in either a Ginny May or a bond fund. I mainly brought up the Ginny May because CJ said I'm wrong all the time and I wanted to make sure that I gave him something else to confuse the issue. All right. Thank you, CJ, for asking that question. And congratulations.

Our next question comes from an anonymous caller, which means we have to give her a name because calling every anonymous caller by the word anonymous is just really boring. So we got a review from somebody who does not like the fact that we give anonymous caller's names. It isn't really about them, though. It's you and I entertaining ourselves. We have to get through this, too, Paula. somebody needs to give us a break because we have to get through this. And to do it, to call everybody anonymous, the same name is not fun.

So now, we should be a little more worldly about our names. I've been giving them all names like Jane or Bill or whatever. And I was thinking maybe we need more names from all over the world just to make it even more fun. Maybe we can turn that person's frown upside down, Paula. Ooh, okay. Well, I will give her my grandmother's name. name, Maharani. So, our next caller is Maharani. Hi, Paula. I found your podcast last year and have been binging since then, and I'm now almost caught up. I hope this isn't a repeat question,

but I tried looking through your podcast to see if the answer has been covered before in depth, but I couldn't find it. My question is about tax loss harvesting. I've been investing in equities for about the last seven years and I've never practiced tax loss harvesting. Am I missing out? Thanks for your help. Maharani, thank you for asking that question. So confession, I don't tax loss harvest either, and I'm okay with it. I know. Joe's making a face at me right now. No, it's true.

It's true. I do not practice tax loss harvesting. And I have no objection to sites that will do it automatically for you, such as betterment, but I don't believe that it is for most people important enough to go into using a tool like that purely for the tax loss harvesting alone. I actually made that face because of the fact that all I hear about from some of the Robo-Advisor sites is all about tax-lost harvesting. And what's interesting is they're marketing this stuff to people that don't need to tax

loss harvest. The people who use a Robo-Advisor are usually early in the accumulation phase. They're just starting out. And I don't even know if that's who they should be marketing. that is who they market. That's who generally uses them. That asset pool is getting bigger and bigger. You can see when you get,

they're required to keep public records. And you can see their asset levels growing and people who are wealthier are using their services. But in the beginning, when I heard Betterman talk about tax loss harvesting, I literally rolled my eyes because this is somebody who's going to maybe make about 35 cents on, on tax loss harvesting by doing it versus, you know, just,

Here's the problem. So a tax loss harvesting is, let's say that you own a mutual fund that emulates the S&P 500. We'll say ticker symbol IVV. You have that. You've lost some money. You take that position and you sell it. Now, if you sell it, you can then claim that tax loss and rate it off on your taxes, which is why people do it. The problem is you can't put the money back in right away.

There is something called a wash sale rule that says that you have to leave this money out for a certain length of the time before you put it back in. So what people will do is find some other index that's not the exact same index, but something closely related, you know. Something that gives you the same asset allocation is roughly. Very much in the same area. So you're going from vanilla to French vanilla. It's very, very close. And you buy that instead. I'll tell you what has happened back when I was a financial planner, I would do the first loss of tax loss harvesting for a client.

And not all the time, but I'd say close to a quarter of the time, my client would say, you know, the market's kind of volatile now. Do you think we should just leave it out for a little while? Right. Do you think maybe we should do this thing that really is market timing, but I'm not going to call market timing? Yeah, exactly. People don't recognize them their market timing. Yes. We think differently about our money when it's on the sideline than we do when we're invested.

We're invested. You're like, yeah, okay, I'll let it ride. I'll go. But man, the second you get out, getting back in becomes this huge chore where you think if I read the paper more often or I look at a website more often or I ask the magic eight ball what I should do. There's some formula that somebody knows that I don't know about what I should put it back in. No. When you tax, lost harvest, you take it out. And you put it back in immediately.

Right. And so there are these automated platforms like Betterman that market the fact that they do it automatically. But they charge a fee for that service. Not a huge one, but they certainly charge a fee for it that is on top of the fees that the underlying assets that they hold also charge. And for the majority of people, particularly younger people, people in your 20s, 30s, even 40s, I would say, who don't necessarily have a massive amount of money saved, I don't think

the fee is worth it. I mean, the reason that I don't practice tax loss harvesting in my own portfolio is because I don't think it's worth my time to do it manually, and I don't think it's worth my money to pay a fee to do it. Yeah. So if I'm not willing to invest either time or money into it, then there it goes. The time in which I think it becomes appropriate is when your portfolio is sizable enough and your holdings are few enough that you would be selling a very large amount of money out of, you know, using the IVV example. If you're selling $200,000 worth of IVV, maybe, sure. But if you're selling $20,000 of it, I don't think I'd bother. Not that big a thing. Yeah. Even in my own practice, when someone had,

a seven-figure net worth, we would think about it. And most of those people, the money is in a IRA anyway. And people get confused here, too. The only money we're talking about is your money inside of taxable brokerage accounts. I've had people call me and have said, I heard about tax loss harvesting. You think we should go inside my 401k and do all that? No need to do that. That's all in a tax shelter. It's not going to help you at all to go sell stuff and buy other stuff. I don't think she should do it. I mean, I don't know how much money she's talking about, but my bias is toward you're probably not missing anything. Yeah, I would agree.

Unless she's got a sizable six-figure chunk in taxable brokerage accounts, and that sizable six-figure chunk is broken into relatively few holdings. Yep. Unless she's got that set of circumstances, then Maharani, I would say you don't have to bother. So thank you, Maharani, for asking that question and for having the same name as my grandma. We'll come back to this episode after this. word from our sponsors. The holidays are right around the corner and if you're hosting, you're going to need to get

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That's what being a fifth-third better is all about. It's about not being just one thing, but many things for our customers. Big Bank Muscle, FinTech Hustle. That's your commercial payments of Fifth Third Better. Our next question comes from Brandon. Hey, Paula. I have a question regarding Roth IRA conversion ladders, potential early retirement. planning in the next five to 10 years, 36 years old currently.

So my wife and I each contribute 20% to our Roth 401Ks. My understanding is that these contributions cannot be withdrawn early, the same way that our Roth IRA contributions can be. Would it not make more sense to instead contribute up to our match in the 401K and then fund two IRAs and ultimately Roth convert those each year? It seems that I'd pay the same taxes and have more flexibility with this strategy as we could begin withdrawing those conversion contributions in the next five years' time. We are very disciplined savers. We have Roth IRAs and taxable accounts as well. We are debt-free and we use a 40% savings rate

for the last six years since we became debt-free. Also, for those who invest only in a four 401k, wouldn't this strategy investing post-match dollars into IRAs make more flexibility with the same tax-deferred benefits, even if a person wouldn't plan on a Roth conversion, at least you'd have that option in the future. And what I typically see is at Vanguard where our IRAs and Roth IRAs are the investments are a little better as well, the options. So maybe I'm overthinking this, but the question's been bothering me for some time, as we do have large traditional 401K balances that I wish we could start Roth converting, but we're currently employed with those companies.

So I'd love to hear what you think. I love the show. If Joe is there, tell them I said hi. Thank you for everything that you guys do, and take care. Brandon, thank you for asking that question. And yes, I am a proponent of contributing to your 401K. up to the employer match, then switching over and maxing out your IRAs, and then once you've done that, switching back over and filling up your 401K. The reason for that is largely because of what you cited,

there is more flexibility with money that you contribute to an IRA. If some emergency were to befall you, you have the option, not that I would ever recommend this, but you have the option with erosite, IRA to tap the principal portion of your contribution, not the gains, but the principal portion, you can tap that at any time, penalty-free if you make that contribution into a Roth IRA. And so for that reason, because a Roth IRA gives you tax advantage combined with liquidity, hopefully liquidity that you never actually use, but the option that is there nonetheless, For that reason, I really strongly favor contributions into a Roth IRA. And it is for that reason that I often tell people,

contribute to your 401K, up to the employer match, then switch over, contribute to a Roth IRA, and then switch back over and contribute to the rest of your 401K. Now, in your case, it sounds as though what you would be doing, if I'm understanding this correctly, is that you would be contributing to a non-deductible traditional IRA, and then immediately moving that money into a backdoor Roth IRA. If my understanding is correct, and if that's what you are outlining, then great.

Because once that money is in that backdoor Roth IRA, you will have the ability to tap into that principle any time. So, again, you preserve that liquidity, you preserve that flexibility, you have the tax advantage that's associated with having your money in that backdoor Roth IRA. once that's all set and done, if you have the ability to then fill up the rest of your 401K, that's always an option. But given limited resources, if you can't fill up your 401k all the way, then at least you've topped off the IRAs first. Brandon seems like a great saver to me, but one word of caution for a lot of people, which is that if you can tap your money early, doesn't mean that you should. And a lot of the time people love flexibility, but some of the ways when I was a planner that I'd be able to help people save is that we would kind of lock it down.

Like as an example, people that couldn't save into an emergency fund, we would put it in a bank across town and cut up the ATM card and didn't give you online access. You would have to drive there to get it. And it wasn't that I thought that you should drive to go get your money. It was because if you did that, it's only a drive across town, Paula. up, but you know, or you could call and have it wired if you needed it right now. The wire had a $15 fee and driving across town was going to take an hour. And it was just putting that little, little thing between you and your money that made it so you could save. And people that could never save money all of a sudden, when they put up a little tiny roadblock, they were able to do it.

So I love what Brandon's talking about, about the early flexibility. If he and I were looking at a financial plan together, I would look at how much money is already flexible. Is there already enough money to get through that period. And if there is, then we start asking the question, how much money do we need in a flexible spot? Because if we don't, and it's just easier to put the money away at work into my Roth 401K, and the fees are nearly the same.

Let's say, why am I going to go through all this extra rigmarole to put the money in an IRA, flip the money in my IRA, choose the investments, knock out my ladder of all the times that I can get at all these monies because there's going to be a number. It's going to be an increasing. seeing amount of money I can get every year, right? Why am I going to go through all of this work

if it really doesn't matter? So what you're saying is maintain simplicity unless there is a compelling reason to add in more complexity? Yeah, the concept of efficacy comes to mind, right? I mean, is there any efficacy in doing all this? If not, then I wouldn't do it. So my first question is, how much money do you have flexible now? How much do you think you're going to need? And if we don't need to do that, then don't do it. Otherwise, his strategy is sound, isn't it? Seems sound to me. Absolutely. And that's a really interesting way to frame this as a trade-off between efficacy versus flexibility. Because what I often suggest, which is fill up your 401k up to the employer match, then switch over to fill up your IRA, and then switch back to top up the remainder

of your 401K, that three-step process, while not overly complex, it is certainly more complex then just fill up your 401k and be done. Yeah. So why turn one step into three steps unless there's a compelling reason to do so? Yeah, it is the tradeoff between simplicity and flexibility. With the other component that I think is really important, behavioral economics, the more we know, the more important we know that it is, know thyself, too. If you have more money available and you will touch more money because it's available,

then don't do it. Yeah. I get the impression Brandon will not. No, I get that impression too. I'm really cautioning other people listening to this, not Brandon, going, oh, I could have more money now? Fantastic. Don't wreck your own financial plan. For some people, we need to put the blinders on and make sure that we don't touch it.

You've seen the study around 401K plans that Fidelity did, that the top performing 401K plans that they work with, and they work with more 401K plans than anyone else belong to dead people. And the reason those 401K plans did best, those were the people that never touched it. Right. So I think that's a good lesson problem. But Brandon comes across to me, though, like a guy who's is not going to touch it. Speaking of touching money that you intended to set aside for retirement, that's actually a perfect lead-in to our next question. And this next question comes from Janie. Hi, Paula. I'm considering purchasing a solar power system for my house and wanted to get your thoughts on how to best pay for it. The cost of the system would be about $12,000. And between the solar renewable energy credits that we would qualify from our local government and the electricity savings that we would have, we would have about $3,600 a year in 6,000.

So the system would pay for itself within three and a half years. There's three options to buy the solar power system. There's to buy it outright in cash to take out a loan or to do a lease or leaning against the lease because then if we ever did sell our home, we'd have to convince someone to take over this lease. And I believe we wouldn't receive the solar renewable energy credits, which would significantly devalue the solar system. The loan we're also leaning against, but if we didn't do a loan, we would have to either tap two funds that we have available or to save up separately for it, which would take us into at least next year, at which point the tax credit, which is another

benefit of the system would be lower as that tax credit is being stepped down each year. So based on that, there's two ways we could pay for it. One is we have a seven-month emergency fund to pay for it would bring it down to a five-month emergency fund, which I think we would be comfortable with given that we could replenish it over the next six months. And we live such that if one of us lost our jobs, we could cover expenses, even not taking into account on employment benefits. The other option would be to sell some funds that I have in a taxable brokerage. I have about $50,000 in a taxable brokerage, but I've set my investments such that these investments were really intended to supplement our retirement safety.

savings. So they recovered, but they're definitely not at a high. So we'd love to get your thoughts on going from a seven to a five-month emergency fund versus tapping this taxable brokerage that was intended for retirement. Thanks for everything you do. Janie, that is a fantastic question. The first question that I would ask back to you is if you're goal is to get this system prior to when the tax credit is stepped down, what is the deadline next year by which that needs to happen? Are we talking January 1st or are we talking sometime later in the year? Because to the extent that you would be able to pay for this out of new funds, that's the option that I like the most. And even if you can't pay for it

entirely out of new funds, I want to see how much of it you can pay out of new funds, out of new savings that are earmarked specifically for this. And that's why I asked the question of what's the date that we're talking about? What's the deadline? Does this need to be done prior to January 1st or are we talking September 1st of next year? Because that's going to inform the amount of this that you can pay for out of brand new savings that you accumulate now that are meant specifically for this. And the reason that I favor new savings to the maximum extent possible is because psychologically, behaviorally, the practice of drawing down from an emergency fund

is a practice in which you tell yourself, you give yourself permission to tap into an emergency fund for non-emergency purposes. And so while I don't object to having a five-month fund, I think having a five-month fund is fine, I do object to the psychological implications. The psychological implications is probably not the best phrasing that makes it sound. Something like a Christopher Nolan movie. Like we're going to get all heavy here. Holy cow.

You know, the mental framework implications. Like, you know, mathematically a five-month emergency fund is totally fine. And I am not at all concerned about your future if you have a five-month emergency fund that you intend to pay back. Mathematically, I think that's fine. But if you get into the habit of drawing down on an emergency fund, or if you tell yourself that this is a tapable fund, then I think it becomes a slippery slope. I think that she hasn't misnamed. I think that what an emergency fund really is and what it should be is an emergency and big opportunities that come at us out of the blue that we didn't expect to do something that is really going to affect our life. But you can have two separate funds for that. That's the new

savings. That's the Paula who's Uber conservative that has an emergency fund for her emergency fund. Let's talk about the way that most people look at this, Janie. And that is that going from a seven to a five, I think it's appropriate. I don't think you're going to touch it for another $12,000. I mean, this is a big, big thing, right? I mean, don't be wrong. If you're going down to the corner store to buy baseball cards with your emergency fund, just this one time, you have a problem.

You have a problem, and you probably shouldn't do that. But how many solar panels, Paul, is she going to be able to buy? I mean, this is something where she's already calculated the ROI on the investment. She needs to make it sooner rather than later to make that ROI happen now. I also don't like going into debt as she doesn't have to. We didn't talk about the terms. You spoke earlier that the terms might be good. But when she's got this emergency fund that I think of big opportunity like this fun,

it says spend that this opportunity to me says spend it all over it. The thing that I would caution Janie on is this, when she was talking about taking money out of her investments, wouldn't do that in a million years. Absolutely. If this is already earmarked toward retirement, unless she's way ahead of the game on retirement, she's done her financial plan and she's got so much money left over and she's not going to retire early, doesn't want to retire more money, then spend it now. But assuming that that's not the case that this really was retirement money, don't upend that goal for this. The other thing she said that I'd also caution her on, she also said that, you know, because it's long-term money, it's in the markets and it hasn't recovered completely. And she doesn't want to touch it for that reason. You will never, ever, ever time your selling of your investments perfectly so you're at the top. I would never make that a criteria of selling my investments because time is finite. And if you do that, you're never going to do anything. You're going to sit and wait for a better day. and you're not going to do stuff. So when you sell something out of an investment that's in the stock market, sell it and don't

look back and use it for whatever that thing is. But don't worry about the fact that it's not as high as it was before. That's just part of that game. Yeah, it's water under the bridge. It's sunk costs. Yeah, let it go. Yeah, the investment does not care about the price that you bought it at. That's right.

Yes. So I'm going to go against Paul on this one. CJ knows I'm wrong. People are telling me I'm wrong. I already know, but you know what, this is really a big opportunity fund, Janie, and I would spend that cash and I would replenish that emergency opportunity fund quickly like you talk about doing. She's already clearly a good saver, Paula. I would at least see, it's, again, I have no problem with a five-month emergency fund. So mathematically, I think that's fine.

I think that totally works out. My problem is the implicit permission of tapping the emergency fund. So at a minimum, I would open a new account and just designate two separate buckets and say this one is the emergency fund and this one is the opportunities fund. You have a sickness. You have a sickness. You know, and if she has to move money between the two accounts, but at least you've got separate accounts with separate labels where now the thinking is around two different buckets. I love buckets when you know ahead of time that the goal is coming. Like, I would love it when a client would meet with me and would say they wouldn't call it the name of the investment, right?

Like the high yield savings account or the Ginny May or the whatever mutual fund. They would call it, how's my vacation home doing? And vacation home was what they knew. They didn't see it as a Ginny May. It was the vacation home fund. Because that was where we saved all that in. So I like that when you see the goal. coming. But this is something that is right now. And so I get that for goals in the future. I don't get that

for retroactively. For this. Yeah, I really think that emergency includes big opportunity if you're only going to take it down from seven to five. If she told me that she was going from four months to zero, forget about it. Right. I would still advise that to the maximum extent possible, even if this won't cover all of it. To the extent that she can pay for this out of brand new savings, do that. And then any amount that's left over, I guess, Joe, where you and I are in agreement is that neither of us like the option of taking out a loan, neither of us like the option of leasing this, and neither of us like the option of selling out of money that's intended for retirement. I love what you're saying about challenging yourself to cash flow it.

Yeah. Because the way that Janie has laid this out especially, I think shows both of us, too, that she, that kind of challenge is something that I think she'd like. See how much of it I can do with new money. I do like that. I hadn't even thought about that part about seeing what the deadline was and working that way. But get to that point. Forget Paulus thing about an extra fund. Just do it, Janey. Yeah. Yeah, yeah, yeah. Challenge yourself to cash flow as much as possible. Again, know that my hesitation around drawing down from the emergency fund is not a mathematical hesitation. It is not a logistical hesitation. It is purely that I don't want this to turn into a slippery slope. That's my one concern. Nice job, though, Janie, on saving and on laying this out. I really like how you laid out all the options. I feel like sometimes, Paula, people really get emotionally behind one option instead of laying all three out this way.

and it's clear I think that she likes the emergency fund going there the best, but to lay out all three of these options and really think through it as carefully as she did in this call, I think is really important. Absolutely. So, yeah, I think you're on the right track. So thank you, Janie, for asking that question. We'll return to the show in just a moment. Her final question today comes from Amy.

Hi, Paula. My name is Amy, and I live in Brooklyn, New York. I have a question about calculating retirement savings needs. My husband and I are 40, and we have $900,000 saved in 401 Tays and Vandard Mutual Fund accounts purely dedicated to retirement. We plan on continuing to add to those accounts, but I just left my job in corporate America for a job that I really like. It came with a big pay cut, and we also have two young kids.

So I'm just trying to think through a sort of worst-case scenario where we're only able to contribute, say, $10,000 per year additional money towards our retirement investments total, which is obviously way less than we have been contributing up to this point. I just want to see if we agree that that would still be sufficient. Both my husband and I are planning on continuing to work for the next 25 years. We both like our jobs and we both plan on retiring at 65. And we're not planning on touching any of this money that I'm talking about until retirement. So we already have an emergency account and college savings account. This is just a retirement question. So here is my question. We live in an expensive place, New York City, and we generally spend about $12,000 to $15,000 per month on living expenses. But our mortgage is about $2,500 of that, and it will be paid off before we retire. So I'm thinking that our monthly expenses in retirement will be more like $10,000 to $13,000. So assuming $900,000 save already, plus an additional $10,000 per year and assuming a 5% rate of return on investment.

By my calculation, that will get us to $4 million in 25 years, which is what I think we'll need based on $13,000 worth of monthly expenses for roughly 25 years of retirement from age 65 to 90. And I don't want to factor in anything like Social Security for this, you know, theoretical calculation. In other words, I just want to know, is that right? Is it okay for us to only save $10,000 per year at this point? I feel like I'm missing something and that you're probably going to school me on something here. But I'd rather know now than find out later. So have added.

Thank you so much. I love your show. Amy, thank you for asking that question. So I'm going to assume that the numbers that you stated are accurate. So I have not gone into a retirement calculator and plugged in all of your numbers and checked all of your assumptions or rerun those calculations. So I'm going to base this answer on assuming. that the calculations that you have presented are accurate. Under that set of assumptions, and under the assumption that you will retire at the age of 65 with a $4 million portfolio,

and you will have living expenses of $10,000 per month, $120,000 per year, a $4 million portfolio, assuming that we have roughly the same tax rates in the future that we have today should be approximately sufficient for covering $120,000 worth of expenses. Where I could see it blowing up is we don't know what tax rates in the future are going to be. I don't know the percentage of your money that's in Roth accounts versus traditional accounts, tax exemptor versus tax deferred. Those tax considerations could have an impact in how much after tax money you're able to collect in retirement. So I would pay particular attention to that and maybe overfund a little bit in order to offset some of the uncertainty around the inherent impossibility of predicting what tax rates are going to be at the time that you are 65 years old.

There's absolutely no way for anybody to know that. With the exception of tax planning, the rest of it sounds sound. As you said, this is purely a conversation about retirement. So savings for other goals is a separate conversation. But yeah, purely looking at just retirement alone, with the exception of tax planning, the rest of it sounds great to me. Yeah, I also have not run those numbers to make sure that they're correct. But, you know, if you're doing these on an envelope or with a calculator, investing in a good retirement calculator is invaluable. And even for this plan, going to a fee-only financial planner and having them look over your shoulder could be a great insurance.

policy. A good financial planner, Paula, might help somebody retire 10 times, maybe 15 times a year. What I mean by that is help 20 people retire a year. If you just want to retire once using that person as insurance policy to make sure your numbers are correct, I think is a great use of money. So I think that having them sort through all of the calculations to make sure you didn't miss one could be very valuable. I'll say this. There are three plays. where I would see people mess up their calculation. The first one is on the rate of return assumption they use and they make it really flipping high. Like a dude in Tennessee talks about 12%. Which guy is that? I don't know. Some random guy. Some guy on Tennessee who's on the radio.

Yeah, there's only one guy I know who says 12%, but there could be more. Using 12% on your money isn't something I would use. And most financial planners say not to use that number. Using a number that's super low like five, fantastic. Because the cool thing is, if you invest for seven or nine or 12, but you only get five, your plan isn't ruined, where if you count on 12 and you do 10, you're not going to make it. Yeah, Amy is using a 5% assumption, which is fantastic. Love it. Yeah, absolutely.

I love that the rate of return assumption is conservative based on historic returns. The second thing is, and there is a big. person who will remain nameless but who created an early version of their calculator and it's someone that most people listening to the show who are Uber money nerds knows forgot to put inflation into their calculator and it changed their calculator and I got to be the person to point it out so I was very pleased with that but make sure that inflation is something that you're actually looking at because even some very smart people forget that if you're trying to live on X amount of money today, 18 years from now, it's going to take double that

amount of money to live the same lifestyle. So inflation's number two. And then, of course, the one Paula already mentioned is taxes. It's what you keep. It's what you get to spend that's important, not just the ball of money. So how much money after tax are you going to have? That's two things. A good tax plan. And then kind of like Brandon talked about earlier, Paula, setting yourself up so that you have some tax flexibility later is also really cool. Exactly. Exactly. oftentimes inflation, you know, when people talk about returns, sometimes the discussion around return assumptions are real returns after inflation is factored out, and sometimes when people talk about return assumptions, they're talking about the total returns. So, for example,

if you assume a 3% inflation rate over the long term, some people will talk about that as, you know, I'm assuming 5% real return plus 3% inflation, so there will be an 8% total return. Yeah. That's how that conversation will go. Yeah. Basically, some people will refer to that as an 8% return with the assumption of 3% inflation. Others people will refer to that same set of assumptions as 5% real return.

And if she's doing that, I'm actually okay with that based on her time frame. If she's looking at 8%, a 3% inflation rate on top of that 5%? she's using, 8% is still to me is fine. Exactly. So, yeah. Yeah. So if we're assuming a 5% real return, I think that's really reasonable. Yeah.

Yeah. Agreed. That's it. I do think she has this laid out so much, though, Paula. And I can see that she's timeline her goals, which, you know, I talk about all the time as being, I think, a huge part of the financial plan. I think she, I can see her with the timeline out. I think this is truly where a good financial.

planner comes in and just gives her the peace of mind she's looking for. Yeah. Yeah. The only other major things that I can think of would be those Black Swan events, a major medical catastrophe, an unexpected divorce, an unexpected death in the family that causes them to have to, you know, I don't know where their family lives if they have to suddenly go to France because that's where part of their family lives. And then they have to support two households temporarily because somebody's sister has terminal cancer and they need to take care of her for a year and they have to shuttle back and forth between France and the U.S. You know, a situation like that, those types of events that can create some major unexpected expenses,

those are the other things that come to mind. And that's where all the other funds that Amy's talked about dovetail, right, and where insurance is dovetail. And actually, even more than insurance is just an overall risk management strategy. What is her risk management strategy? There's an engineer that I worked with who built highways, and it was great, Paula. She said that before they start building, they asked themselves all these questions about what could go wrong. They have all these meetings about, well, what if this happened?

What if this happened? And before they start building anything, they looked into all the contingencies. And I think that that dovetailing all of your other money and other strategies into this, I think, is an important part of the plan too. But this seems pretty sound to me. Great. Well, we've done it again, Joe. I can't believe we made it through it. Those are some great questions, except CJ's because he wasn't very nice to me.

No, C.J. You were great. C.J. was fantastic. C.J. was one of the five best questions on this show. Of the day. Yes. Absolutely. CJ's in my top five.

What more do you want? What does he want? Joe, where can people find you if they want to hear any more of your wacky ideas? Well, sadly, Pula is no longer. on Money with Friends. She was on, you can go back and still listen to those episodes

from the last four months, but we have our new season five cast. Well, although it doesn't involve the amazing Paula Pant, man, it does involve some people who your listeners have heard of.

David Bach is on our cast this season, Grant Sabadier, Bola Sukumbi from Clever Girl Finance, Farnush Tarabi, just some great thought leaders. None of them equal Paula. No.

But you can find us Monday through Saturday at Money with Friends, 50 minute episodes, sometimes 20, talking about current news headlines. Well, I will miss being on Money with Friends, but I definitely recommend that people check it out. It's fun. You know, you hear the day's headlines and have the conversation around money that pertains to what's happening in the current moment. Well, thank you, Joe, for spending this time with us. Thanks for having me as usual. It was, it was, it's always a blast. That is the end of today's episode. So you know how sometimes when you're watching a movie on Netflix or HBO, there will be the special director's bonus cut stuff that's at the end of the movie?

They do this with shows too. Like at the end of Game of Thrones, you can see the special behind the scenes filming. And people who are super Game of Thrones fans like I am watch every minute of it because I want to see how, like I want to see all of the behind the scenes. I want maximum exposure to everything that's going on there. Whereas if you're not as obsessed with Game of Thrones, then you don't really care because, you know, you enjoyed the episode, but you don't care enough to stick around

and watch the director's cut. So what we are about to air next, and for the next 20 minutes for the rest of this episode, is the special behind-the-scenes backstage pass, what we're doing? What are we working on? What happens other than just what you hear in front of the microphone? If you're curious about that and you want to hear more, stick around. That is what you're about to hear next. So up next I'm going to feature a conversation with Erin Millard.

She is the one and only other full-time employee of Afford Anything besides myself. The Afford- Anything team has a lot of great people who work with us part-time or who are independent contractors. But Aaron and I are the two full-time people behind the scenes. And Aaron is really the one who runs this place. She is the chief sanity officer of Afford Anything. that's her official title. She is absolutely incredible. She's the course administrator. She's the community manager. She's truly the chief operating officer. And the fact that we afford anything,

the fact that we exist is very largely because of her. So I'm really proud to be able to feature her. This is her first time on this podcast, even though she has been working behind the scenes with this podcast since back when it was still an idea. With all of that said, I want to introduce Erin Millard. Hey, Erin. Hey, Erin. Hey, Paula. How's it going? All right. How are you? I'm great. Ready to get this party started. Let's do it. Erin, how long have we worked together? I don't know, right? I think at least five years. Yeah. This is your first time on the podcast, but really, you're really the person who runs afford anything.

You're the operations, this whole thing would collapse without you. I'm the face. Like my talent is having a face. but you're the person who actually runs this. Well, and a voice. Oh, yes. I have a face into voice. You know, I want to chat about all of the stuff that we've been doing behind the scenes, that really you've been doing behind the scenes, because ultimately the stuff that's happening behind the scenes

is all for the ultimate mission of, I guess, twofold. One is spreading the message to more people, and the other is enhancing the way that people who are already in the community are able to learn about different topics and subtopics. You've done a lot to better organize our website. Can you share a little bit about sort of what you've been working on the last few months? Sure. Yeah, I think giving a tiny shout out to your recent Instagram posts, if I can, of like the North Star for us, I think is our audience. And I've noticed that a lot of people in our community ask questions and it's like, oh, we have a podcast that covers that, but how do I find it?

How do we make everything easier to find? Because we have such an amazing archive of content, but it's kind of difficult to sift through. So I don't blame people if they're like, well, I don't really feel like searching the website. So I'd rather just ask a question again. Or how do I even know it was covered? If someone is a new listener or a new reader, you know, how do we bring this message to them? That started with a content audit of the entire website. We were looking at the spreadsheet and it is what, at least 10 tabs possibly. It is the most detailed spread. I have bought houses with a less complex spreadsheet than that. There's a decade worth of content on that blog and almost 300 episodes

of the podcast. I mean, wow. And it's very, very thoroughly covered in that spreadsheet. Yeah. So it was a journey to go through all of those posts from way back in the day. And essentially, I just took it one by one, put them all in the spreadsheet and then looked at what we had and said, okay, what are we keeping? What are we repurposing and what are we archiving like permanently? What can we do with the content on the site? What purpose does it serve now? There are a lot of questions that went into figuring out, what are we keeping? How are we sorting all of this? And then with the podcast, we're not deleting any episodes of the podcast. It's here to stay. So how do we make it easier for people to find the content that they're looking for specifically?

When you and I had our meeting, we started discussing broadly, like what categories does afford anything cover and what do we want to cover in the future? Like, what do we stand for? What are we about? And we came up with the categories of personal finance, hire, real estate, investing, entrepreneurship, lifestyle, and behavioral finance and self-help. And we think this is just going to be so much easier to find content. So if you're on the website and you're like, hey, you know what? I'm really feeling like behavioral finance today. So you click that button and then you can see everything that's related to behavioral finance that we've ever published instead of trying to sit through a bunch of different episodes and a bunch of different blog posts.

So that was one of the major things. And then with the Ask Paula episodes, like we've had so many episodes and so many questions that have been answered, how do we make it easier for people who have questions to find similar questions? If you're a new listener and you're like, hey, I want to learn more about HSAs. how do I do that? It's going to be a lot easier because I've tagged all of the Aspaul episodes with like an HSA tag. So they're all going to be categorized by tags within themselves. Ultimately, the hope is that we can figure out a way to make this a lot easier, like present all the tags on one page so that you can just click on whatever you're most interested in. So all of the episodes that are under that tag will show up.

Right. And, you know, one of the issues that we've been discussing internally is the complexity between wanting to categorize and classify everything, while also not making it so complex that the complexity overshadows it. A couple of years ago, when we did a big redesign of the website, we started with the philosophy of begin with simplicity and only add complexity as needed. So we classified everything purely based on medium, like articles, podcast, YouTube. Now we're adding in this added layer of complexity, which is, okay, let's classify. these into topics, but at the same time, we don't want to create a paradox of choice where people are so overloaded with choices. But Aaron, you came up with a very, very good new

acronym for fire. So as you and I were having these meetings discussing this, a little behind the scenes here, I was talking about this misperception that I reached FI through real estate, which I did not. Real estate was one of three legs of a three-legged bar stool. And the other two legs of that bar stool are index funds, primarily in retirement accounts, but some in taxable brokerage accounts as well. And then operating a small business is another leg of that bar stool. And so it's a three-legged bar stool. And if any one of those was missing, it would be a wobbly barstool. You know, it would be a two-legged bar stool. So Aaron, you and I, a couple of weeks ago, we were discussing that. And if you want to share the new fire acronym you came up with.

It was inspired by your story. And then also we just had all the categories laid out. And I was like, wait a second, all of these piece together really well because you have fire, which is finance, investing, real estate and entrepreneurship. Yeah, exactly. And it just, it was, it was magical. Exactly. Exactly. Investing real estate entrepreneurship, the IRE of fire. The ire of fire. I think that really helped us define like where we're going. Just getting those, those categories down and having that higher level discussion of like what topics do we want to cover and what do we stand for. It just made perfect sense. It all came together. Right, right, because, you know, one of the things that I'm very proud of is what we decided that we were not going to include. Like, we intentionally decided to get rid of the savings category. And that's not because we dislike savings. It's because we want to focus on the ire of fire, the IRE. And in order to limit the structure to only about seven categories, you know, something's got to go.

And so savings as a category was thrown out, or not thrown out, but it's incorporated into personal finance basics. Yeah, as is paying off debt, homeownership, anything like that, that are basically the fundamentals. Like, if you were just starting out in your personal finance journey, where do you go, that category? Yeah. That is where you start. And then you graduate. Yeah, exactly. You start with the F, and that F is like finance fundamentals.

And once you've mastered that, then you go to the ire. So let's talk about community. There's been a lot that's happening there. every time I log into Zoom, there's like, oh, we're having a happy hour with people in Europe who are part of this community. Oh, we're having a happy hour with the North America part of this community. Wow. Okay, cool. Yeah, we have a global community, which is really awesome. Rewinding a little bit, we started a private community that's completely free for everybody last year, and it's blossomed a lot this year. When lockdown started, I basically went to the community and

said, hey, is anybody interested in getting together and talking? Because I knew how much of an isolating time it was for a lot of people. And I figured we could find strength in the community and each other. So we started off with just like instant messaging chats. And then it became clear that an hour wasn't enough because typing is much slower than talking. So I was like, well, is anyone interested in a Zoom chat? That just kind of evolved on to its own thing. We had weekly meetups where everyone just kind of came together and hung out and chatted about whatever was on their minds. And then it became clear after a while that people were experiencing Zoom burnout because it's a real thing. So I pull out to the community members and just said, what are you most interested in? And they came back with topical discussions because that adds way more value. And you can also determine ahead of time, like, is this something I'm interested in or not? Since June at least, we've been having topical discussions in the past month. We had a Zoom hangout hosted by one of our community members. It was awesome enough to volunteer and say, hey, I want to spread the message on how to create a will and trust because it's a really important thing, but no one likes to talk about it. And it's boring. So let's make it

fun and do it together. Then we did an online business like kind of mastermind workshop where we just brought ideas and helped each other figure things out. And then we had another call about finding your passion and what passion is and said okay to just have a quote unquote regular nine to five job if that's what you're happy with. We also have a book club. We have a Zoom book discussion that takes place once a month. We have one book each month that we decide to read. It's voted on by the community. We have a health and wealth accountability group where we all just kind of share our health goals, fitness goals, self-care goals. Yeah, we have community guides that I've been writing for the community specifically. One was on creating a will and trust. I just took the Zoom discussion that we had

and built it out to an entire guide. We have a savings guide on there as well. So a lot of it is the community coming forth and asking for opinions and suggestions on their situation. And the other part is just us coming together around specific topics, interests, just a place where you can connect with like-minded people, other afford-anything nerds. And those community guides, I mean, those are robust, like, dynamic documents. I've seen the way you take notes. It's no joke. It's been great to see.

Obviously, we're hoping, once it's safer, we can start hosting in-person meetups. I think that's the next step for our community, but we're happy with where we are right now, just meeting virtually and getting to know each other. Right. So it's a much more intimate atmosphere because we do have a Facebook group, but I find that the platform that we use Mighty Networks is just you're only a long. logging into that platform. So the purpose of it is just that you're not doing any mindless scrolling. It's very intentional. There's no ads. It's private. People just tend to feel safer there and just

more relaxed, I think. Everyone is just really friendly. Everybody's encouraging, supportive. They want to help each other. And everybody just kind of relates to each other because we're all on the same journey with different destinations in mind. So exactly. Exactly. I do like the intimacy of the group. The book club sounds cool. Like, yeah, it's been great. It was myself and I think five other people that we're on the call this past Sunday discussing decisive by Chip and Dan Heath. We love nerding out about decision-making everything that you cover on the podcast, basically. Nice. Let's talk about what's happening behind the scenes with the course. So the structure of the course is that, you know, we have one week in which we open our doors for enrollment. After that, we close the doors,

and then the course is 10 weeks long. All the students have lifetime access. But for those specific 10 weeks, we encourage people to go through it as a cohort together. so that there's that group support. And after every cohort, we take feedback from the previous cohort and create new lessons or amend lessons. If you think about any class, classes have syllabuses. And one of the things that Aaron that you and I have talked about is it's not just what we teach, but the order in which we teach it, in order to be able to create the best learning

experience. We've had conversations behind the scenes about how to restructure the syllabus based on the questions that we hear come up. What do we put where and how do we reorganize things? And are there ways that we can better synthesize ideas from one module into another? Yeah, I think one of the biggest things that we've heard from the students, our first module is analyzing. Everybody really enjoys getting down, digging into the weeds about it. But then we get to the finding module and they're like, wait, how do I tie all of us together? Because learning how to become a real estate investor and search for property and analyze the property. There's a lot involved and it can get overwhelming. So how can we make this less overwhelming for students? And we came up with the idea of just having you do a walkthrough of

doing the process yourself, like let the students see what your process is and how they can apply it. So that kind of ties together, the analyzing module, the finding module. And I think that helps give students a clear idea of where they should be going with all of this. Because it's one thing to be presented with a bunch of different information, but it's another to actually be able to apply it to the real world. Right, right, exactly. And one of the things that we had a long conversation about last week was we have these accountability groups. For those of you who are long-term listeners of this podcast, you've probably heard me just sort of like very casually throw out there. Like, yeah, you know, one of the many features that the course offers is that we

have these accountability groups that help keep you on track. I don't think I've said more than just that one phrase about it. When, in fact, behind the scenes, there's enough that goes into these groups that we're actually, we're hiring somebody to specifically be the accountability group coordinator for our next cohort. And Aaron, the conversation that you and I had last week, we talked for about two hours about this, revolved around our observation that rather than students needing accountability to go through the course itself, students typically progressed at different speeds depending on what was actually happening in the real world in their lives. So if someone was actively making offers on properties and then went under contract on a property, had an offer accepted and went under contract, they're galloping, they're moving really, really quickly and they need a lot of mastermind support. Whereas if another person is learning about it, but there may be a year away or two years away from being ready to start making offers, then they're taking it slow. And so we've spent a lot of time talking

about restructuring these groups so that they can be more effective masterminds based on where people are in the real world. It's an interesting thing to say, like, well, what if what we're doing isn't working? Why isn't it serving the students in its current form? What could we do better to serve the students? Again, that's the North Star of IFRP essentially. So we kind of tore the idea down. We were like, well, what is it about the accountability groups that isn't working? And it was exactly that. It's like, well, the way it was structured was we would ask people when they signed up for the accountability group, like, what is your expected timeline to buy a property? But of course, the trick to that is like, we could guess, but we don't actually know.

what's going to play out in real life, especially this year. Our vision was that the one to three-month group would move a lot quicker and thus be supporting each other more closely. But that wasn't what we always saw play out. And then we had some students make an excellent observation that our daily lesson emails held them accountable to going through the course and now. So we were able to kind detach the course progress from the actual like, how do we support them in the real estate journey, which led to the idea of like, well, what if we just turned it into a mastermind group on a rolling basis. Like, whoever needs it most signs up and then gets put into a group. And then when they no longer need the group, they leave. So it was a way for us to just make sure that everybody is constantly

having support. It's meeting the students where they are. And then around that came the idea of having Y-I-R-P happy hours, which take place on the first Friday of every month. So that's just where students get to hang out and talk with each other and nerd out over real estate. Exactly, exactly. In addition to these happy hours, I also host office hours with the students. And on these office hours calls, I get on Zoom and it's just like office hours at a college or university where the professor commits to being in the office and if a student wants to come by and ask questions, the professor is there. I commit to being on Zoom and if anybody wants to come by and ask questions, particularly at the beginning of cohorts, we'll have 100 people join a call. And then towards

the end, it'll dwindle down to like 10 to 15. But one of the pieces of feedback that we got was Some people said, like, hey, I'm an introvert. And asking a question on a Zoom call in front of a hundred people is basically my worst nightmare. And so from that, we got the idea that one of the things we'll be adding into the course is introvert hours, where there will be a 24-hour window in which if you're an introvert or if you just didn't get a chance to ask a question at office hours, you can submit a question during that 24-hour window. and myself and some of the TAs in the course, TAs are alumni from our course.

So they're inside of our community. Homegrown. You know, the TAs are all alumni and they're all, you know, very, very well versed in it. We will get together and we will answer those questions. So basically we keep adding more support mechanisms into the course in addition to refining both the lessons and the syllabus. Yeah.

Again, it's just doing whatever is, the student's best interest and to make this a really good, valuable learning experience for them. Yeah. Well, thank you for joining me in this little peek behind the scenes segment, Erin. I wanted to share with the community what we are working on, what happens behind the scenes here, and what are some of the projects underworks? Thanks for keeping this engine running. Thank you for having me. That's our show. Thank you so much for tuning in. My name is Paula Pant. This is the Afford Anything podcast. If you enjoyed today's today's

episode, please share it with a friend or a family member. That's the single most important thing that you can do to spread the message of personal finance, financial independence, to spread all of the teachings that you hear on this show. So share it with a friend or a family member. You can send them to the show notes, which are available at afford anything.com slash episode 280. Or if you want to subscribe to the show notes so that you can get a synopsies of these episodes delivered to your inbox, you can subscribe by going to afford anything.com slash show notes. It's free, affordanything.com slash show notes.

Thank you again for tuning in. My name is Paula Pant. This is the Afford Anything podcast. Don't forget to chat about today's episode with other members of the community. You can find them at afford anything.com slash community. And with all of that said, I will catch you in the next episode. 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 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.