Afford Anything - Ask Paula: Financial Disaster? How to Get Help Before It’s Too Late

Episode Date: August 2, 2023

#454: Amy says she hit “rock bottom” with her finances. She says she struggled to ask for help before her situation became an emergency. How can others ask for help sooner? Rebecca is a mother of four, which means she’s juggling four distinct college timelines and 529 plans. How does she make a withdrawal plan when there are so many unknowns?  Anne Marie switched jobs. What should she do with her old retirement accounts? And Dylan wonders if the IRS Rule of 55 applies to Roth 401k accounts. Former financial planner Joe Saul-Sehy and I tackle these four questions in today’s episode. Enjoy! Enjoy! P.S. Got a question? Leave it at https://affordanything.com/voicemail For more information, visit the show notes at https://affordanything.com/episode454 Learn more about your ad choices. Visit podcastchoices.com/adchoices

Joe, once upon a time when you were a lot younger, you were pretty heavy in credit card debt, right? And you just were in kind of a bad financial position. First of all, I'm incredibly young still today, Paula. Number two is when you stood when you were incredibly heavy, I'm like, whoa, wait a minute, easy. But yes, I was horrible with money. I was rotten with money. I had ruined my credit, tons of credit card debt, nowhere to turn. During that time, were you ever afraid to ask for help? Like, did you kind of want to just follow the ostrich, bear your head in the sand. Well, there's a big lie that I actually talk about a lot now, Paula, which is the lie that we are these islands. And I got myself into it. I should be able to get myself out of it, which truly, the brain that got you into it shouldn't be trusted to be the same brain that got you that gets you out of it. So then how did you hit that inflection point where you actually asked for help? I was driving home from a meeting across town. And I was in this rusted out minivan because my credit was so bad I couldn't get a new one literally a friend paula told me he's like oh i know you know going to buy a new car isn't a great deal but new car dealers have all these

creative financing things they totally give credit to anybody like i came clean with one friend of mine and go i'm screwed and i need a new car so i walk into this car dealer and i came clean with him i go hey my friend recommended you he said you all kinds of creative financing i have amazingly bad credit and he goes oh i got you i got you give me your give me your social security number walks into his office he's there forever he comes back out and all he says paula is dude oh you have horrible credit so i'm in this rusted out minivan because i can't get a new one i run out of gas on this road in the middle of nowhere and i have to search through the seats and i find 85 cents in the seats in the floor of this old minivan and i have to

walk, this sounds like a really old guy story, I have to walk a mile to this mobile station where the dude at the station doesn't want to loan me that plastic gas can because he thinks I'm going to steal it. The study I like to quote a lot says that over half of us say we've cried about our money, that's the day I cried because I realized I was screwed. I had no credit. I had no money. I'd nowhere to turn. I'm way away from home. I have this family that relies on me because I've got young kids, a spouse who's still in school and not earning any money. And man, I cried my brains out. But that was also the time.

And I'm like, you know what? You're in control. And you can begin to turn this around. And what I had to do was surround myself with better people. And then I had to quit living. So number one, I had to get rid of the lie that the same brain that got me into it could get me out of it. The second thing I had to do was dispel the second myth, which is that if I just earn a little more money, things will get better. That is such a lie.

if I earn $100,000 when I had bad money management skills, I would have spent $120. If I made $120, $150, $150, I would have spent $1.50, you know what I mean? It didn't matter how much money I made. I had crappy money skills. And because of that, I was never going to turn it around. What you just described sounds stressful enough even as a single person. You had young twins. Yeah.

How old were they at the time? A year and a half old. Jeez. Wow. And Cheryl was still in school. And by the way, and that was the thing, too. I didn't want to scare her because I was making all the money while I wasn't hiding things from my spouse. And I've never done that except on one pretty hilarious occasion that we can talk about some other day.

Because it was actually pretty damn funny. That'll be the next episode. But I also wasn't truthful. Meaning I was like, nope, I got this. We're good. She's like, are you sure we're good? Because it sure seems like we're sinking. I'm like, nope, I've got it.

Wow. Well, Joe, I'm glad you pulled out of it. I'm glad you're here now. and where all of that was leading is that the first caller. You weren't just exposing me to all of our listeners. Welcome to Paula's therapy session. My name is Paula. The first caller that we are going to introduce someone who also was in a financial jam for a long time and did not want to ask for help.

Welcome to the Afford Anything podcast, the show that understands you can afford anything but not everything. Every choice you make is a trade-off against something else, and that applies not just to your money, but your time, your focus, to any limited resource you need to manage. And that opens up two questions. What matters most? And how do you make decisions accordingly? Answering those takes a lifetime to figure out. And that's what we're here for. So I'm Paula Pant. You, Joe, are the financial planner, Joe, Sol C-high. I should let you introduce yourself. Who are you? I think you already did a nice job.

I think that was good. Right. We're on with that. 16 years. I was a financial planner. Now, what? Financial media for another 14 after that. And our first caller today, this is her second time calling into the show, is Amy.

This is Amy from a few months ago. I'm the freelance writer and actor who was in big trouble financially and didn't know how to get out of it. Between the time I wrote to you and you answered my question, I hit rock bottom. I had to borrow money from my mom to pay my money. credit card minimums. Anyway, I finally asked for help, and it came in the form of a friend's son who was a financial planner. He took me on pro bono, looked at everything, and formulated a plan for consolidating all my debt while keeping my savings and investments intact. This solved my immediate problem, but not how to stay out of trouble. That's exactly when you and Joe answered my

question on the air, and you saved me. I immediately switched to a cash-only plan with a weekly paycheck. I had to keep a credit card for some monthly subscriptions for my work, but now I pay them on the day they're charged. If I buy something online, I paid immediately out of my weekly money. One time I bought a gift online for someone and only after charging it realized I had to pay for it out of that week's money. It was a tight week, but totally worth it. The two key takeaways I got from your answers were to look at the fastest and easiest to most lucrative ways to raise my income and to lose the credit cards. When I was listening to you say that you won't use them if you don't have them, I thought that doesn't apply to me because before all this, I always paid off my

credit cards. But then I realized that you were 100% right. If I hadn't had a credit card, I would have gone out and gotten a job when I got to trouble, any job, maybe two jobs. But instead, I used the credit cards. Since going on the cash plan, there have been some weeks where I had to be creative, like have a yard sale, which got rid of a lot of crap I didn't want and paid for one and a half weeks. But the thing I really want to say, aside from thank you, is I would love it if you would address either you or with a special guest, the idea of asking for help before you get to where I was. I believe what you say and how you say is important. So I never say I got myself into a financial mess. I say I got myself into a financial SOS. And I know that many

of your listeners think that it's a great idea to ask pros to help them invest, but I bet you have more listeners than me who are frozen. I had wanted to call you for more than two years before I did. I think it could help your listeners a lot to hear that's okay to ask for helping how to get it. So thank you so much for everything. You guys rock. You saved me. Like it was a two-part deal. But I feel so much better and free. The other day, I had to buy something expensive and I had cash to pay for it. And I didn't, so I didn't have to debate whether I wanted it or not. It was like, I have this much cash from my weekly thing and I can afford this, this thing. And it was just, it felt so good. So thank you, thank you. And I love what you do. And I love what you do. And I, appreciate everything. Take care. And congratulations, Paula, on graduating. Yay. So awesome. Big, big, big, big congratulations to you for doing the work, for facing your finances for everything that you have accomplished. Steve, this deserves not just any round of applause. Do we have like some really epic? I mean, we're talking trombones, parades, a 10-piece marching band.

So let's talk some more about asking for help. But even before that, I'd like to, if you don't mind, Paula, go over some of the things that she glossed over for people that didn't hear that original episode. Because I think that the two things that really helped her that she didn't truly mention, because I think there's bedrock stuff behind her takeaways. And the one is the psychology of realizing that if you have a credit card balance available, your brain is very lazy. and it will not come up with a creative solution. This is what she was talking about. This is what she's referring to. When we said to get away from the credit card and to go to all cash,

she's like, well, before I got in trouble, I didn't use the credit card. Here's the deal, though. When you are in trouble, and this is what Amy so well pointed out, but I'd love to round out for everyone, is that if you have the credit card available and you do get into trouble, it's where your brain turns. But if the credit card is not there, your brain is so wonderful.

We're all way smarter than we think we are. We can do this like Amy has proven to herself. You can do this and you can do it without the credit card. And so by taking that option away from her brain, she had a garage sale. Fantastic. And then the second thing was living a weekly budget, which she kept talking about, but she didn't say it was one of the big takeaways. But I think for a lot of people, this is a huge takeaway. Amy has income that is up and down and up and

out and up and down. So what's the true problem? Amy has a boom bust budget. When she has the boom time, because those are not every week, she then goes out and spends extra money. I'm not talking about Amy, but this is the Amy's of the world. People on up down income, they will spend more because you have this scarcity mindset. So when money finally comes around, you're like, oh, I got to buy a bunch of stuff now because I might not have anything next week. And then the next week, when there is nothing, then you go into ramen noodle land and again, credit card debt develops if you don't, by making your budget even all the time. And you've got X number, which is the amount you can spend that week, which is what

Amy talked about. She's been practicing. This is what Amy did. She divorced her income stream from her budget. Don't be wrong. Her budget is going to be less money than what she's bringing in. But those two numbers in our head, right? I get a raise.

I spend more money. Why do we associate these two things? They don't need to be associated. Set your budget like Amy did every week. Money coming in can go up down, up, down, up down. And by the way, if you really need help doing this, make it two separate accounts. Have money going to account number one, which you never touch except for an automatic weekly or biweekly automatic move like a paycheck into that budget account.

And if you don't want to do heavy duty account, you just spend everything that's in that one account, forget the other account exists. And that's a good way, too. automate that system. But those are kind of the bedrock principles that Amy's working from, I think, to get her out of the problem. Yeah, you know, an additional thing that Amy is doing that I think is extremely helpful is if there is something that you have to purchase on a credit card, let's say it's an online purchase. Now, technically a debit card is also an option, although debit cards also have their own drawbacks, especially when it comes to fraud protection, et cetera. So let's just say

that there is something that you have to buy on a credit card. Pay it off daily, right? Like, There is no reason to carry a credit card balance for a month. Pay that thing off daily. You pay it off immediately. And by doing that, you are turning a credit card into de facto the same thing as cash, you know, just with an intermediary step because of the nature of digital processing. In fact, I'm seeing more and more now establishments, brick and mortar establishments that are cashless. You know, I've been into a handful of those.

I don't know if this is just a New York thing or if this is nationwide. but there are a handful of places that I've gone to where I have tried to pay cash, and they're like, I'm sorry, we don't take cash here. And I'm like, okay. So I think this will become a bigger and bigger piece of personal financial management as we become an increasingly cashless society. I'm seeing that at sporting events. I went to a baseball game on a recent trip to Minnesota and tried to give them cash like,

yeah, we can't take cash here at this place where I'm buying an 18. dollar hot dog. Right. Yeah. Exactly. Exactly. I've encountered this at multiple places. So yeah, I mean, in that case, you've got two options, either a debit card, which I mean, some people like that strategy. The problem with the debit card is that if there is any fraudulent activity, you have far less protection. So if you're going to be really on top of like constantly monitoring and making and calling out fraud immediately and staying, you know, but that's just it's like added workload for you. that is one option. The other option is to use a debit card where you do have that built-in fraud protection. That's what I prefer to use, but pay it off instantly. I had to graduate. So when I ran out of gas, the first thing I had to do was get rid of all my credit cards completely. Well, they were worthless anyway at that point.

But I still had to get to a cash-only lifestyle. And so I literally just filled my wallet with cash, you know, and did the envelope system. from there I went to the debit card because cash was even then in the 90s, early 90s, is already kind of a pain in the to just have a bunch of cash. And as I set up budgeting systems, the cash wasn't accountable. And I would spend cash in stupid ways. But with my debit card, because Cheryl and I had a system set up or we had a weekly money meeting like 20 minutes long, that was truly the key thing for us going to a debit

card made sure that I always had the money. so I wasn't going to get myself into credit card trouble because I couldn't trust my brain to not spend somebody else's money that I didn't have. So for me, the debit card was the second tier. But as soon as I got through and had respect for the value of a dollar and how hard it is to get a dollar and to value the purchases that I make with that money, then I went to the credit card. So I think you've got to see where you're at in that continuum to decide which one's best for you.

Right. Let's talk about what she asked us to speak about, which is asking for help before you hit rock bottom. You know, seeing that you're slipping and asking for help before things have gotten urgent. What'd you think? You know, I think the biggest challenge is that when things start to get bad, it is natural to go into a space of avoidance. And so I mentioned earlier the ostrich philosophy of just bury your head in the sand. but more broadly speaking, any form of avoidance, you know, avoidance, now I'm not even talking about money, just avoidance emotionally can come in the form of deflection. Anytime you talk

about something, you try to talk about something serious. They always tell jokes or they always change the subject or maybe they become angry, right? They don't want to talk about that thing that is painful. And so they'll use anger or humor or a change in topic as a deflection method. You encounter that a lot. Again, not just about money. about anything that is emotionally difficult or emotionally painful to discuss. And money is at its core, one of the most emotional things that we deal with, even though most of us don't think of it that way. Most people think that money is purely tactical.

It's actually highly emotional because it's a symbolic representation of our time, our energy, our life, and the time and lives of people around us. Anyway, all of that is to say, avoidance is common when dealing with any emotionally charged subject and money is highly emotionally charged. Other forms of avoidance, busyness, workaholism, burying yourself in your work. I've got some friends who are highly avoidant in that, and that is how they express it. Like, work for them is the equivalent of going to a bar or going to a casino, right? It's healthier than going to a bar, but they bury themselves in their work to the detriment of their heart and mind. And sometimes family and friends and other relationships.

Right. The core question really is, how do you, if you know that you have an avoidant tendency, how do you pull yourself out of that? And I mean, in some ways, that is the question that humanity has been grappling with since the dawn of time, right? The first step, of course, is just noticing in yourself that you are avoidant, you know, noticing those times when are you putting in an extra few hours at work because you want to, because you're excited about the project that you're working on, or are you doing it because you are deeply avoidant about something else? Sometimes it might be a combination of both. Sometimes both of those statements can be true. You might be extremely excited about a work-related project and also deeply avoiding something more painful. Same thing.

Why are you suddenly cracking a bunch of jokes? Is it because you love those jokes and you love making people laugh? Or is it because someone brought up something painful and you want to deflect the conversation? I mean, it's probably both. You know, it's probably true that you do enjoy being the jokester of your friend group. and you do enjoy making a room full of people laugh. Best comedians are dealing with some stuff. Yeah.

What doesn't kill you makes you funnier. You know, there are two things, Paula, along these lines that I was thinking about. I really like it. I'd encourage people to go back and listen to your interview of Peter Atwater. Because I think that if we shift the game on ourselves to think about, you know, he talked to you about the opposite of confidence is vulnerability, right? And often we will think too much about where are we vulnerable. But in these areas, especially financially, we don't think enough about where are we vulnerable.

And I think that having a thought of where am I vulnerable and pushing your psyche into a spot where you are, he goes through the quadrants. And again, people, we're going to want to go back to your interview with him. But pushing yourself into a spot where you know that you may be vulnerable so that you do take a look. I'll give you an example. Everybody knows you and Susie Orman are BFFs. Everybody already knows that. So Susie said, has said a few things that are really, really good. Susie said this, and I've stolen this from Susie for a long time, and I want to give credit

where credits do. Susie said, you know, you think you can't save any money now because you're struggling where your budget at age 35. Imagine yourself is 65, and you still haven't saved any money. how do you feel then so look at what she did using peter atwater's principles she took somebody who's like yeah i don't have to save now i got too many things going on i don't need to save project yourself into a spot where you're going to be vulnerable 30 years from now and all of a sudden you go oh hell if i don't start this now i am screwed and you will take somebody who's bubbling along feeling like

i'm okay i can do that later to all of a sudden i got to move today because if i don't save today i'm a mess So I think by asking ourselves, number one, what's important to me? Number two, then, is that where I'm truly spending my time and energy and tracking those things? And then forcing ourselves into an, am I vulnerable here situation where you're not on the dirt road walking the mile to get the gas cam people don't want to? You're projecting that ahead of time. And I'll give you an example from what Amy's talking about. Amy said, you know, I had this big expense, but I had the money available. And part of that, I think, is Amy said to herself, what if a big expense comes up again?

What am I going to do? She forces herself into that vulnerable quadrant. And she came up with a system to help her avoid that. I think that is how you get there. Right. You know, since we're talking about it, I want to outline what these quadrants are. Because actually, in my interview with Peter, we talked about confidence. We didn't actually talk about the quadrants.

Although I did introduce the quadrants in the intro to that episode. Anyway, for people who want to listen to that episode, it's episode 452, afford anything.com slash episode 452. But right now, since we're discussing it, let's go over what these quadrants are. Yeah, because you certainly talk around them the entire time. Yeah, exactly. So imagine a horizontal line. That's the X axis. And that line represents certainty. So as you're close to the point zero, as you're close to the start of the line, you have very low certainty. Let's say a lottery ticket, right? You have very, very low. certainty about what next week's winning lottery numbers are. And then as you move further down that line, you get towards high certainty, right? So it's just a horizontal line, low certainty to high certainty. High certainty is the sun will rise in the east and set in the west, right? That's the highest certainty thing that we've got. Well, we could even stick with your lottery analogy. The return on a dollar in the lottery, incredibly uncertain. The return on a savings

account where the bank says, Paula, you will get 0.06% on this 100% certain. You know. Right. Perfect. That's the x-axis. That's the horizontal line. Now, meanwhile, you've also got a y-axis, right? You've got that vertical line. And the y-axis represents control. So at that zero, at that low point, you have a low control. Again, the lottery ticket. You can't control. You have a zero control over how they're going to pull those numbers next week. at the top of the line, there are the things over which you have a very high degree of control, like how much money you choose to spend on nail polish or Xboxes, right? Do people still buy Xboxes?

Is that the thing? I don't know. I did. It's really fun. Okay. You have a huge degree of control over that. And so then, if you imagine breaking that into quadrants, there's the quadrant in which you have low certainty and low control. and that's where you are the most vulnerable.

And Joe, that's what you are talking about. You know, what are the scenarios in which you're going to be most vulnerable? Yeah. Low certainty, low control. Ask yourself that question. And to do it in that Susie way where you project yourself in the future where you're experiencing this and you ask yourself, is that a problem for me? Previously for Amy it was. Now for Amy it's not.

Right. Even though it hadn't happened yet. She set it up so that when the situation came, which it ultimately did, she didn't have to experience that lower left quadrant. Right. You know, on the topic of Susie Ormond, I recently heard, and I have not independently fact-checked this, so I don't know if it's true. But I recently heard that despite all of her wealth, I heard she only has one pair of earrings. She can easily buy an earring company if she wants to. Yeah.

But I've heard that she maintains that practice just as a reminder, no matter how much money she has, there's no reason to splurge on things that are not important to her, right? Spend where your priorities are. Don't spend on things that aren't priorities. And that, by the way, true story is why I don't have any earrings. Joe, now I know what to get you for Christmas. It's not important to me, Paula. I thought I've already proved.

I just said it's not important to me. I'll make you a deal. If you get your ears pierced, I'll get another piercing with you. Well, luckily, we're safe. We're both safe. We're both safe. Safe? Yeah. You don't get the other piercing. You don't need the other piercing. And I don't either. So there you go. Anyway, I get the point. And I didn't mean to demean the point by piling on. But yeah, these reminders that you set up for yourself, I think, are important and help you look at it. And also gets rid of some of the consternation. Because if you make it, worse for yourself to not look at it than it is to look at it, you're prepping yourself to win. You're like, oh, I got to look at this because if I don't look at it, then I'm really screwed. You know what I mean?

You got to build that leverage into your brain to make you address it ahead of time. Yeah. I think we've answered Amy's question, yes? I think so too, yeah. Okay, then before I move on, one more random completely tangential story. So you know my dad, of all people, my dad actually has two piercings in his ear. He didn't choose to have it. His mom, my grandma, pierced his ear when he was like a baby, baby. And it's because in certain parts of Nepali Hindu society, if you ask God for something and you like kind of make a deal with God, like God, if you do this, I promise to always do that, you know, then piercing your. child's ear is like how you sign on the dotted line. Wow.

Yeah. So she's like, I'm not going to sign on the dotted line with me. I'm going to take my baby and sign on the dotted line with him. Your dad's like, what did I do? Yeah. It's like a bystander in this whole deal. A bystander with pierced ears. Yeah.

Yeah. He always said that he believes that those piercings ended up bringing them a lot of blessings. That's fabulous. So thank you, Amy, for updating us for sharing your win with the community. And congratulations to you on everything that you have done on this financial turnaround. Very, very proud of you. Very happy for you. So good.

And I hope that other people find inspiration in what you've shared. We'll come back to this episode after this word from our show. sponsors. The holidays are right around the corner and if you're hosting, you're going to need to get prepared. Maybe you need bedding, sheets, linens. Maybe you need servware and cookware. And of course, holiday decor, all the stuff to make your home a great place to host during the holidays. You can get up to 70% off during Wayfair's Black Friday sale. Wayfair has Can't Miss Black Friday deals all month long. I use Wayfair to get lots of storage type of items for my home, so I got tons of shelving that's in the entryway, in the bathroom, very space saving. I have a daybed from them

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That's your commercial payments, a fifth-third better. Our next two questions actually go together super well. Oh, drama. They do, they do. Our next two questions are both about retirement, but it's specifically about this particular aspect of retirement. What bucket do you keep your money in or which buckets? They're two different questions.

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Our first caller then is Dylan. Hi, Paula. Hi, Joe. Dylan in Chicago. Longtime listener, second time caller. Question about the rule of 55 trying to avoid the 10% penalty for early withdrawal. 72T isn't necessarily an option. I know that can get kind of convoluted. I understand that the calendar year that you turn 55, you're able to withdraw funds from your 401k penalty-free, not having to pay that 10% penalty. One stipulation is that it must be your current 401K. However, I haven't seen anything through my research that DeCvers, does that have to be a traditional 401K, or can that also be a Roth 401K? Appreciate your assistance answering this question. Thanks. That's an exciting technical question. And by the way, I thought Paula initially, I thought, hey, you know what, Dylan, I'll do your Google for you. But to Dylan's credit, when you do the Google,

it doesn't answer this question. Right. Over the years, as I have gone through kind of deeper and deeper into finance nerdville, I have found everyone talks about the same handful of surface level talking points, but no one really digs into the edge cases. I mean, not even edge cases. Like, all right, you know how people talk about backdoor Roth IRAs all the freaking time? All the time. All the time. Everyone's like, backdoor this, everyone's like running home to like backdoor their Roth IRA. But no one ever talks about the fact that if you have, have other IRA accounts, you can only contribute a proportional share of what you've put into your TRA IRA relative to what's in your other IRA accounts.

Like, no one ever talks about the fact that there is a highly technical calculation that you have to make if you have money in other IRA accounts. So for example, if you have a SEP IRA or a simple IRA or just other traditional IRA, I mean, you know, no one talks about that. Everyone's like, just bag door it. Magic. Right. It's just magic.

Poof. Right. And so I think this question that Dylan asks is similar to that, where people will talk about, hey, what are some early retirement withdrawal strategies? Oh, rule of 55. Duh. But in the words of Alicia Silverstone from Clueless, as if. But, but no one ever digs into how to dot the eyes, how to cross the teeth. how to do the hard math.

Yeah. And I think even before we answer this for you, Dylan, and for everybody else, we need to remind you that we are not your tax expert. And you should, you should contact your own tax expert and not just think of this video as your tax expert. However, there is nothing that I've seen in the IRS code that distinguishes for the rule of 55 between a traditional 401K and a Roth 401K. And in fact, experts that I've talked to on the same thing, Paula, also.

don't. And for a couple reasons, number one is this just a general rule for people. So if you think about the spirit of the rule, often that will lead you to the actual usage of the rule. The reason why this rule exists is so that if you stay with your employer and you have this money available and you're not going back to work and you're over 55 years old, you don't have to wait till 59.5 and you don't have to use this onerous plan, this 72T rule that Dylan referenced. Now, why we didn't do that with everything? I don't know, because we generally do things halfway. However, the spirit of the rule also leads you to the same place that I'm telling you, Dylan,

is that the Roth 401K and the regular 401K interchangeable in this way. Now, remember, the money that you're going to take out after you retire from that Roth 401K, that money is going to, as it comes out, the money you put in, you've already paid tax on it. So that money is not going to be taxable anyway. So that's going to solve a piece of your problem. But I think, Paula, after I hear what you have to say on this, I think that there's another issue here that we want to contemplate, which is strategic. Okay.

So first, for the sake of everyone else who's listening, we should define what the rule of 55 is. Rule 55 says that if this is your current job and you're leaving your job after 55, but before 59 and a half, money from that particular 401K. Let's say you've got three 401Ks from old jobs. You can't take money out of those until 59.5. But your current one, the one you retire from, you can take out after you retire before 59.5 without any penalties.

Now you're still going to pay tax on it. If it's a traditional 401K where you did it the pre-tax way, which is where most people do it that way, you'll still pay tax normally. You just will avoid all the penalties that are out there. Right. And so, Joe, then, to what you were talking about when it comes to the spirit of the rule, think about it. Imagine that you work a particular job from the age of 48 until age 56, let's say. And then at age 56, let's imagine there's a huge downturn. We go into a recession. You get laid off from work. Do you at age 56 want to start applying for jobs again going into a new job at the age of 57 if you had planned on retiring at age 59 and a half anyway? A lot of people probably aren't going to want to do that, or maybe you'll want to, but you'll have

trouble finding work due to age discrimination, right? It's hard for people who are approaching their 60s to find work. And so the idea behind the rule is that if you're over the age of 55, they want to make it possible for you to be able to retire early if you want to and or if you have to, right? What we know is that the majority of retirements in the United States are involuntary. The majority of people who retire retire not because they want to, but rather because they have to. Either they were laid off and they can't find other work, or they have some type of a medical illness or they develop some type of, yeah, caregiving responsibility. Because when you are 56, 57, 58 years old, you're highly likely to have a parent

who is 90 and a kid who is 15. And so you then become that sandwich generation that has caregiving responsibilities in both directions, and a lot of people end up needing to retire. And maybe you have a spouse, maybe you're 57 or 58, you have a spouse who is in their early 60s, and they come down with some kind of major chronic illness. Now you're taking care of three generations. A lot of people end up needing to retire involuntarily due to that. So anyway, that's the spirit of the rule. Yeah.

Let's talk about... Not to bum everybody out. Wow. Well, but it happens, right? Yeah. Well, it is a bummer now, but listen, I'd rather have the philosophical bummer now that might happen than I've never thought about it and it happens because it does happen to your point. So we need to look ahead and think about all the things that could go wrong and protect against those.

Strategically, let's talk about this. So first, I don't want to answer Dylan's exact question. I want to answer the question of people that are listening or watching and are thinking, hey, what if I don't have enough money in that 401K? Like, I've only started the job and I've only got a little bit of money in there. I've only been here a couple of years. Here's what you do, Paula. If you do have an old 401K, this is one of the few times that I would ever recommend

you roll some of the old 401k into the new 401K. Now, I wouldn't put a lot of money into the new 401K because if the options change, if they decide to go cheap with the options at this workplace, you're really not in control. You've got much more control with an IRA. So I'd roll most of the money to an IRA. But as much as it's going to take you to get to 59.5. Move that money from your old 401k to the new 401k, if that's going to be your strategy. So you've got enough money that you can swim that moat.

I think that is a consideration for a lot of people. With regard to Dylan's discussion, you know, Dylan's asking this question. And hopefully this isn't part of his plan because I really, really like Roth 401k money to stay there for a long time. Here's the reason why. Can I guess? Can I guess? Can I guess? I guess. I have a guess. It's because all of the gains are tax exempt, all the dividends, all the capital gains, everything's tax exempt forever. It's fabulous. It's absolutely fabulous. So you don't have this required minimum distribution

that's going to happen later on where you've got to take the money out and it's all going to be tax. Money that's in pre-tax accounts create. a tax nightmare the longer you keep them there. So if you've got money that's tax free and you have money that is taxable, I would look at where the tax bracket lines are and take access money out in a year that you're going to spend very little money. Take access money out of the pre-tax spot so that you make this horror story that's going to happen later on if you don't do that, much less where not even because you want to,

but because you're required to, by law, take out money at higher tax brackets, you could actually do better off by taking out more money from the pre-tax sooner, saving the Roth money for later so that you don't create a tax quagmire later on. That's what I would do. So, Dylan, even if you can take money out, which we said that you can from your Roth 401K, like your pre-tax, if you've got both, buddy, I would go with the pre-tax first. Why is that mic still up? You should drop it.

You're just proud of yourself because you guessed where I was going. Well, I mean, it's everybody's, everyone loves the Roth for the same reasons. Right. Yes, right. Agreed. Everything. All capital gains, all dividends. It's all tax exempt.

It really, comparatively, it sucks today. And it's phenomenal every day after today. Yeah. It is such a beautiful, beautiful thing. I think we did it. I think so. Yeah, I think we did. But you know, Dylan's question leads perfectly to Anne Marie's question. So much so that they belong together, right? These two questions. They didn't even know it. Dylan and Marie had no idea that they belonged together. Yeah, they did not coordinate this at all. And they will now be forever together. Yes, exactly. In the archives of the podcast universe, the personal finance podcast universe.

Is this a romantic episode of Afford Anything? Are we matchmaking? Are we matchmaking? I assume one or both of them probably has a other spouse. We don't know, though, Paula. We don't know. This could be the start of something beautiful. Could be.

Don't ruin it. Don't ruin it. Also, we don't know if they're both straight. If they are. I don't want to assume. If they're not, they can still be, they're still together here. Yes. They're still together here.

This is your financial soulmate, not your romantic soulmate. It could be both, though. Maybe. Maybe. Should I play it? I think we should listen to Anne Marie's question. I think that's where we're at. Paula's like, come on.

Let's do it. Hi, Joan, Paula. My name's Anne Marie. I'm in my early 30s, and I have a question about what to do when you have several employee-sponsored retirement accounts, most of which are no longer being contributed to actively from previous employers. I have five accounts in total. Two, I know I don't want to touch, which are a pension I invested in and a Roth IRA.

But I also have three employer-sponsored accounts, including one simple IRA and two traditional 401ks. The simple IRA is with Schwab. It has no fees and it has roughly 5K invested in the index fund VTI. The second is a traditional 401k within power. It does have fees and has roughly 16K in it invested in a mix of the state's pension total return fund, international equity index fund, and small and mid-cap funds, all of which I selected with a financial advisor. The third is active with my current employer. It is a traditional 401k within power. I'm limited in what I can buy through the plan to a select number of funds the company selected, which is new to me and not something I fully understand. My question is, isn't it best for me to have all of these different

smaller pools of money in one account? If so, what is the best option for me? Do I roll it over to my current 401K? I'm hesitant to do that because my investing options are so limited, but is that my best option since it's active? Should I do that every time I start a new job with a new retirement plan? Thank you so much. Love the show. Complete alignment. I mean, we can pick up right where we left off, Paula. My first thought is that the second traditional 401K that you have, Anne-Marie, the one with Empower,

I'm not a huge fan of it because for exactly the reason that you mentioned, you have a very limited selection of funds and you, being in your early 30s, that fund selection is going to, I mean, it's going to matter, right? The money that you're going to be investing is going to stay in this fund,

in those investments for quite some time. So if you can be with a, different entity where you have greater selection. You can, not that everything's about expense ratios, but you can have better asset allocation, cheaper expense ratios, you can be more aligned with the efficient frontier. I mean, you know, having having the fund selection that gives you the capacity to invest in the way that you want, not in the way that you are forced to due to lack of better options is going to be, I think, meaningful in a way that compounds over the next several decades.

the IRA, Joe, I'm liking the IRA option. What do you think? Well, I think for me, the question comes down to her true question, Paul, is around dashboard. I don't think it's as much about fees, though, don't get me wrong. I'm with you there. I think it's much more around, would it be better to have fewer accounts is just the crux of her question? So the answer is you want them all to work harmoniously, and a lot of people don't do that. Let me tell you what I mean by that. they will have, you know, three different accounts and they're all completely perfectly diversified according to what they're trying to do. And yet account A is really better at,

has great options for large company stock. Option B is much better at international stock. Option C is better at something else. So you could actually put those together differently where they're harmonious by having each of them not actually be completely diversified. But when it comes to her financial plan, it works really well together for you. Wait, I'm sorry, can I interject though? Okay. So when you say option A is better for large cap, option B is better for international, are you talking about fund selection or are you talking about asset location based on

tax treatment of the account? I'm talking to things similar. I mean, so we're talking about a traditional IRA is simple and a traditional 401K, which are very similar tax treatment. Yeah. So I'm actually just talking about asset selection. Got it. Okay.

So my point was, was that you can have things in different places that all work together in harmony. But the easiest way for most of us, let's get real, is just to have one dashboard. If I'm on a road trip across the country or across, you know, I was just on a road trip across Spain, right? Which was awesome. But I don't need six dashboards to get there. I want one dashboard as much as possible to show me where things go. So I do like rolling it all to one place. And then to her second question, which was my current employer, we'll go back to Dylan for that one.

The answer is no. For all the reasons you talked about, Paula, you're going to have so many more options with an IRA. You're going to have so much more control. The fees usually in most cases are going to be lower there. So I really like what you said there. The only money I might roll to that 401K would be money to bridge that 55 to 59. If you think you're going to need more money there. Yeah.

Well, she's in her early 30s. So this is not going to be relevant. But knowing that, then that also answers the question. Then I wouldn't. It is your worst option, not your best option. That is your worst option is rolling it to the 401K. Yeah. Rolling it specifically to the new, the 401K with empower with limited fees, the current 401K.

Yeah. Yeah. As I was looking through her options, that was the one that I eliminated first. You know, I was like, look, I, you know, before I figure out which one is right, let me first figure out which one is wrong. Let me first figure out which one is worse. Yes. Worst. And worst is definitely with current employer for a variety of reasons.

I like the IRA. It's the most flexible. It has the greatest selection. That of the options seems to be the best place to consolidate. The length of tenure people have at a given job is so much lower and gets lower every year, like the average rate that I haven't even kept up with it. But in the last 20 years, the tenure that you be at a company has definitely decreased, meaning the chance that you're going to have more 401Ks over your life could mean that she's going to have a bigger and bigger problem.

Instead of five, she'll have 12. So creating that IRA today that becomes her dumping pot when she leaves a company. Right. Yeah, yeah, I get it. Yeah. The central repository of past for the graveyard of past 401Ks. That's right. Is this IRA, I think, becomes then even more.

crucial for people. The younger you are, the more I think you want this central repository, 401k, or excuse me, IRA, IRA, not 401K. Now, what you do then, the other thing that makes this really cool, Paula, with only two accounts, your current account at your current employer and this one central IRA, you now bend that IRA. She said she's at Schwab with her simple. Schwab has, is good at everything. I mean, there's so many choices there. You can get something in every asset class at Schwab and you're going to be fine. You're going to have low fees. You can do the same thing at Vanguard. You can do that at Fidelity. There's a bunch of choices. So that's not a Schwab commercial. But when you're with one of these big companies with your IRA, you're good at

everything. But 401K plans don't have as many choices. And sometimes they have a couple that are really, really good in one area, but they're not as good in other areas. And this gets back to my harmonious thing earlier. She can now in her in her current 401k, assuming it's all to fulfill the same goal go really big into one asset class that that 401k is good at and then carve that out of her IRA where she's not going to worry about as much in the IRA because she knows she's covering that in the 401k. She can then, instead of being suboptimal fee wise and performance wise in her IRA in her 401k, she can use the 401K for the thing it happens to be really good at, avoid all the crap that's in

there, and then bend this IRA that's much better at everything. around it. I like that. Yeah. I like that as well. I was thinking about the phrase bend this IRA, right? I've never heard it. I've never heard it expressed like that before, but it is a good phrase to illustrate the flexibility that an IRA affords. I was trying to think of there's a old movie, bend it like Beckham. We could bend it, bend it like pant. I don't know. Bend it like. Schwab. Bend it like Schwab. Bend it like your brokerage. I was thinking if we kept it at Schwab, we could sell that to him, Paula. We could totally, hey, Schwab, if you want to, if you want to sponsor the show. Bend it like your discount brokerage, right? And again, not a Schwab commercial. Vanguard Fidelity and Schwab are known as the big three discount brokerages. Fantastic service.

Huge, stable, rock bottom fees. It's bend it like your discount brokerage. Yes. Did you see that movie? You didn't see that movie, did you? I have not seen that movie. No. Of course.

No. I have not seen that movie. It's a movie about soccer. It isn't about soccer. It's not about soccer, but it's about David Beckham. Not truly. It's about young girls in England. Who presumably play soccer or as they call it football?

Yes. You'd like this film. Knowing how much you like Never Have I Ever, you'd really like this film. Oh, I do like Never Have I Ever. That is like one of my favorite shows. Although I haven't seen any season yet, so no spoilers, please. I'm halfway through. And it's very good.

I might have gone, I'm not crying, you're crying. a couple times. Aw, very nice. Pretty good. Very nice. Yeah, no, I do intend to see it. I can't believe I'm. I am behind on lots of watching.

Anne-Marie's thinking, what's this have to do with my question? It has nothing to do with your question, Amory. Poor Anne-Marie. We already, like, set her up with one of our other callers. Now we're talking about movies about English soccer slash football players. We're just keeping the possibility open. We don't have to. And you're right.

maybe they're not available. Anne Marie, the answer is the IRA with Schwab. That's the answer. That is. That is truly the answer. And beyond that, if you're looking for a television show recommendation, never have I ever. Fantastic show. Old movie recommendation, Bennett-like Beckham.

Excellent. All right. I think we have answered her question and more. Look at that. So thank you, Anne-Marie, and thank you, Dylan. Thank you both for those questions about, really, you know, thematically. These are questions on how to manage retirement account money. It's not retirement planning like in the how much do I need to retire sense.

It's how do I manage the buckets in which my retirement money is kept. That is thematically what links Dylan and Anne-Marie's question together. You know, how do I manage these retirement buckets? So thank you to both of you for asking those questions. We'll come back to this episode in just a minute. But first, hey, Joe, you have twins. Did you have 529 plans for your twins? We did. Yes. Did you like them? Yes, no. Thumbs up. Thumbs down. I did like them. You know, the best thing, obviously, the two best things about 529 plans are truly not the things that they sell,

which is the tax benefits of a 529 plan or the automatic age-based investing. Those are all right. And maybe that's me former pro talking that way. I'll tell you the two things I liked. Number one, setting up an automatic investment that was specifically for my kids college. Most people don't do that. They don't segregate out kids college and that's what that's for. And second, the fact that it was a completely separate pot of money for the kids college. So what we did specifically as an asset allocation gain, I used two different states, 529 plans, not because I cared.

And I didn't even care which name was on each one because you could change the beneficiaries. So autumn's could be for Nick. Nick could be for autumn. But just so I had two different asset managers. that were running it because if one had some issue, then I had another one that I could go to. So I used two different ones for diversification purposes. Oh, look at that. Bam. Strategory. Yes. Fidelity and Vanguard. Oh, nice. Two of the big three discount brokerages. Amen. Well, the next question that we are going to answer is a question that comes from Rebecca.

And it's about 529s. Spoiler alert. Hi, Paula and Joe. This is Rebecca, and I have a question about what to do with my son's 529 plan now that he is about to start college. We have four kids. He is starting college at a state university this fall. He has around $32,000 in his 529 plan. My second child is 15 and has around 22,000 in her plan, and my youngest two have about $14,000 each in their plans. But they have a way to go before college. The 529 plans are through fidelity and consist of various index funds. They are not target day funds. Because my son has decided to attend an in-state public university, he will be receiving a full tuition scholarship, and we only have to pay for room and board and books and other incidentals. All then, we will be paying around $10,000 a year, give or take. But he doesn't have that much saved in his 529 plan. So my husband and I had planned on cash rolling his college tuition for the first three years until a senior year, at which point we thought his 529 plan would hopefully have grown a bit. At that time,

our second child would be starting her freshman year at college, and we would have two college tuition to pay for at the same time. We thought that at that point, which would be exactly four years from now, we could use our son's hopefully larger 529 plan to pay for his senior year and do the same thing with my daughter of cash rolling her first three years and using her 529 plan for her senior year. Well, my son thinks he wants to do in life would require some graduate school, perhaps a year or two of a master's program. So if we used up some of the 529 plan for his senior year, we would have around $20,000 to help him pay for graduate school. Another option is for us to cash roll all four years of my son's undergraduate college

and save the 529 plan for grad school or use it for his sisters or save it for his children in the future if he ends up changing his mind as to career choice and not needing to go to grad school. Given the chance that we may need to use the funds in his plan for his senior year, which would be exactly four years from now, do we need to take the money out of the plan now and keep it in savings, even though there's a possibility that we won't need the money until grad school or for his younger sisters further down the line. If we take the money out now and hold it in savings, does that now constitute an asset that he has to report on the FAFSA, even if he is not receiving any financial aid? We have lost a little bit of money in all the

529 plans due to the market volatility. I mean, we're basically breaking even. I don't want to lock in losses, but I also know that there's a rule that if you need the money within three to four years, it shouldn't be invested in the stock market. Our problem is that we're not sure if we will need the money or not. I'm a very high-income earner, luckily, so we can certainly cash roll the $10,000 a year for his entire undergraduate college experience. I just don't know what to do with his money right now.

For now, we're still contributing a bit to each of the $529 plans every month because I don't know what to do with his plan yet. I'd appreciate any guidance you can offer on this subject. Thank you. Rebecca, thank you for the question. Right out of the gate, what strikes me, because you're right, there are a lot of moving parts. The approach that I would likely take is cash flow 10 grand a year for your son. Use the money, the $32,000 in your son's account plus the $22,000 in the 15-year-old's account.

So that's a total of $54,000. Right. use that for the 15-year-old. And then at that point, then the future contributions can go towards the funds for the youngest two. The 15-year-old is right on the brink of starting college. You know, it'll happen in fairly due time. So the 15-year-old is going to need basically a fully funded 529 plan in relatively short order.

And if you were to use the 32,000 invested for the college-bound son, If you were to use that for the 15-year-old and then plan that money from the point of view of this is for the 15-year-old, then you can invest that accordingly based on timeline. I would say, yeah, put that 54,000 towards the 15-year-old, make future contributions for the youngest to cash flow, the son that's currently starting college. You also, as an add-on, cannot take that money out now if it's. doesn't pay for expenses. Otherwise, the gains on that money, the part that's been growing tax deferred and gross tax free, if you take it out for college, you'll automatically pay a penalty on that money. So taking that money out today is not an option. And by the way, you're absolutely 100% right, Rebecca. That money then goes on the FAFSA form as an asset that if he does become

eligible for financial aid, let's say that he's independent when he goes to get his master's. if he still has that money sitting there, that will work directly dollar for dollar against any aid that he would get. So you do not want to take it out for that reason. Even if you were going to pay the penalty and do it, which you don't want to do, even if you did do that, the FAFSA makes it even worse. So it's a horrible idea to think about taking it out now. Yeah. I don't see any reason to take money out of 529 plans. I mean, the fact that you can cash flow money for the college bound sun. So it's not like you need the cash, right? You can easily cash flow that from your current income.

I don't know. I like that either, though. Really? We'll dig into that in a moment. Yeah, yeah, yeah. But yeah, but you can cash flow it from current income. Meanwhile, you've got three other kids who all need more $529 money. So there's no reason to take a withdrawal from a $529 when instead you can just reassign

money from your son's $529, your eldest son's $529. You can just reassign that towards the other three kids. And among those other three kids, the 15-year-old is the one who's going to need it soonest. Yeah, like Rebecca said, even if that doesn't work, I mean, you can pass it onto their children. So it becomes Rebecca's family education trust in a lot of ways. Right. So, yeah, I agree.

The only reason to take money out is if there's some huge catastrophe in the family where the income stream just dries up. Okay, then, then I think it's warranted. But outside of that, no, no, no, no, don't do it. Yeah. So here's my consternation about doing cash flow now. in most cases, in most use cases, if it were retirement, planning for a second home, whatever it might be, where you're taking the money out, I think that doing the cash flow option today to meet whatever that is, if you can do it, is a great idea.

Because of the fact that we look at inflation most of the time, and inflation makes the bet, Paula, really in your favor. So there's this thing called a risk premium, right, where is it worth the risk to have the money invested versus doing something else. The risk premium with college is not the same deal because college pricing continues to go up at these astronomical rates where I look at the money sitting there for college that they've invested today. And I think leaving that money alone, even though it will grow, will it grow a lot when it

comes to versus the cost of college? Now, contrary to what Rebecca said, because this might be a lot. surprised a lot of the afford anything audience is that as we're recording this video, the market's up big time. And because of the fact that in the popular press, all we're hearing about is, you know, the struggles around stuff in the government, the struggles around inflation. We all think the stock market's been crap. The stock market's hitting all time highs again now. Yeah. The stock market is pretty phenomenal. So Rebecca, if you're 529 is struggling right now and you said you've lost some, you might want to look at that asset allocation because

Yeah, well, it should be up. I mean, I don't know when she left the voicemail. I mean, we're recording this Thursday, July 27, 2023. But year to date, the stock market is just phenomenal. Big numbers. Yeah. Even if you put money in the market at the end of 2020, beginning of 2021, right? Like one of the worst recent times you could put money in the market.

Even if you put some big lump sums in the market right around that time, you would still be about on par today. I'm looking at ticker symbol SPY, which is the spider, the S&P 500 ETF, one of the S&P 500 ETFs. And the market truly bottomed out last year, I believe it's October 11th, if I've got this right. The spider was trading at $357.757. Today is trading at $457. Today is trading at $453, almost $100 a share more than it was trading a year ago in October. So market has done pretty well. So here's what we got, Paula. We have an upmarket. I'm not certain that colleges are going to anytime soon rain back expenses and this huge

wall of expenses. So we can probably count on five to seven percent inflation for college expenses. I would take the excess cash flow and secure the longer term stuff while I empty out that 529 plan while we have an up market. That's what I would do. I would take the bird in the hand today and go, you know what? We save this money. It's for this purpose.

Let's go ahead and spend it today and save the cash flow maybe for later. That is contrary to any other goal I know of. Every other goal I know of, I totally agree with you. Use the cash flow option today. Let your money ride because if inflation's at three and you're getting eight, it's a win to leave it invested. For college, it doesn't make as much sense. So you would not then redirect the son's money towards the 15th. year old. You would spend the son's money on the sun. And I would look at in the future cash

flowing the 15 year old instead. Now, the question then becomes, and this is great, and this is why all goals are tied together, right? Stephen Covey, pick up one end of the stick. The other stick comes with it. The question I would ask Rebecca is, what are you going to be doing when the 15 year old goes to college? Because the only uncertainty in my plan of using the 529 money is what if that great cash flow she has when 15 year old goes to college? is no longer there. That's the only if. Yeah.

So I would keep saving into, I would use that excess cash flow to keep saving into the 15 year olds plan while I'm at the same time taking it out of the, really, in a lot of ways, we're getting to the same place. Yeah. Because we can change the thing.

I just like the fact we have an up market and I don't know. Right. Cash flow later when you need to. With the 529 plans are empty, don't do it today. Interesting. So part of my thinking was if she were to roll

over the eldest son's money into the 15-year-olds, that money, given that the timeline on the 15-year-old, right, there's going to be three more years until the 15-year-old enters college and then another four years for college. So we're talking seven years before that account needs to be drained, which means that with that kind of timeline, that money can be invested more aggressively today. But is it going to beat the inflation of college? If it were retirement, if we're talking about she's saving toward these goods retirement, I'm like, Paula, you're 100% right. Right. I don't know that it's going to beat the cost going up at college by the risk premium. Is the risk premium high enough that that actually makes sense? I don't know. Use the money, I think. We've an outmarket right now. It's a beautiful time to use it to take those gains and use them. The bigger concern then might be the fact that she's not reporting gains or she's not, you know, she's talking as though she's got losses in here.

You know, she said that she did not want to lock in losses. Yeah. That to me is a concern because if she's got losses, then I agree. Don't lock in losses. Yeah. Well, and it certainly is something for her to examine. A lot of times we have this colloquially where we think in our head that this is what's going on and I haven't actually gone into the account and looked. There were many times during my career where listening to the popular press, my client would come

in going, oh, I heard things are awful. Or worse yet, this is the worst. The worst was, oh, man, things are great. I'm like, no, have you not been paying attention the last two months? It's not good when you're the hired help to be the voice of doom and gloom, telling them that things are not as great as you think that they are. It could be that. It could be because I think it surprises right now a lot of people to think that the market's

actually up. Yeah, well, I guess because we have experienced. experience such high inflation people feel cash strapped on a day-to-day level and perhaps emotionally translate that into assuming that the portfolio is also underperforming. I don't know about for you, but when I look at any financial news, what I'm hearing about is inflation starting to moderate, but everybody thinking about when's the next wave going to come because of what's going on there. I'm hearing about companies still laying people off. We're seeing, of course, this debate from Airbnb about real estate and office real estate,

going back to work. So people are wondering about, you know, what's the state of different pieces of the real estate environment? Like, it's all negative. And with all that negativity to go, no, no, no, no, no, no, no. The stock market's rocking just doesn't seem to be the same thing. Right. It feels incongruent. I guess because there's so many conversations about are we due for a recession? Will it be a hard landing or a soft landing? We're still talking about that. Which is very interesting and somewhat congruent, but a little bit of a tangent. This is why you don't mess around with your money and bet because of the fact that often you're betting based on all of these criteria, which are not really the stock market. I mean, October of last year,

when the stock market decided to take off, most of us were still in, oh, man, it's looking, I remember all the tech jobs going away last fall, right? That's all we were talking about. Microsoft laying off people, Google laying off people, all these layoffs happening. And that was the beginning. And if at that point, Paula, you had gone, you know what, I can't take this anymore. I got to move my money to a, quote, safer spot. You just locked in all the losses and you missed out on this huge upswing that we had. Well, I guess the piece that we don't know is how the money inside of the 529 is being managed. So if Rebecca is stating that that she has losses in the 529, does she actually have losses or does she only feel as though she does?

Right. If she does have losses, is it due to touching the account too often trying to. trying to time the market through buys and sells. Is there asset allocation off? Is there right now one weirdness thing that's happening, small companies not performing as well as large companies. Yeah. Over a huge amount, over big, you know, long swaths of time small companies outperform.

But over this, in this pretty good environment, small companies are not a great place to be. Maybe she's got a lot of money in small companies. Right. You know, the bulk of the market gains have been driven by just a small handful of companies. Nvidia, Microsoft. Yeah.

A small handful of predominantly very, very large tech companies are driving the bulk of the market gains. So I think those are things, Rebecca, for you to look at before you decide. But I think that'll help her decision about whether to cash flow now or cash flow later. Yeah. I don't think it's as cut and dry as this with, if you're listening to this or watching us on YouTube, and you are looking at any other goal, cash flow now and let the money sit. if it's in the right spot is generally the better option. Yeah.

Well, I think the deciding factor then is going to be, is the portfolio up or down? Yeah. Does she have gains in there or does she have losses in there? I think that's going to be the deciding factor. So we're both right. And that's just to make us feel better, Rebecca. That's nothing to do with you. We just want to come out at a spot where we both feel right.

Well, no, I think it's illuminating because it speaks to the premise behind each of our answers. Yeah. I gave my answer premised on the idea that there are losses in her portfolio because she said there were. And you gave the answer premised on the idea that there are gains in her portfolio because the market's up. Yes. But we both agree, do not take the money out. Right. For non-college expenses. Exactly. All right. Rebecca, thank you for the question. Congrats to your eldest son for the full tuition scholarship. That's incredible. And congratulations. to you for everything that you're building and that you're doing, you know, for setting up such a good financial foundation for your four kids. That's fabulous. It's fantastic. Absolutely. All right, Joe, we've done it. Again, I can't believe it. And it's wild, you know, it's funny that we have different themes and different episodes. I mean, we truly had three out of four colors with unique things. We really had three themes this time. This was more of a variety show than we

usually get, even though we take them in order. I think if there's a certain theme, it would be long-term life planning, right? Whether it's college, whether it's retirement, whether it's how do I set up a budget that allows me to never go back into credit card debt and maintain financial stability, even in the face of volatile income? The overarching theme is long-term planning. And I think specifically long-term planning income streams. Right.

We look at Amy talking about once she figured out her income streams on a week-to-week basis, things got much better and managed it that way. And then with Dylan and Anne-Marie, it was about planning based on how are you going to take money out of these retirement accounts. So we're planning our incomes based on those, right? And how do we set up those accounts for better cash flow? And then, whether speaking of cash flow with Rebecca, whether we cash flow college today, or do we defer that and spend the assets that are already in the account? Right. Cash flow management. Cash flow management.

That is a highly unclickable headline. Cash flow management 101. You will not see chat GPT recommending that as a title for this episode. Exactly. Joe, where can people find you if they want to? want to hear more A's to Cues. I've got a great twofer here. How about get more me, but also you can get more Paula, and it's over on our channel.

It's stacking Benjamin. So subscribe to that too when you're done with Afford Anything. And if you go specifically to our Friday episodes, you will see Paula mixing it up on our roundtable, which is always fun. Yes. Yeah, that's a great time. I always have a great time. We've got a trivia contest that I am not in.

last place on? Am I second? Am I in second? You are in second. That's a silver medalist right there. I should add there only three contestants. I'm second out of three. But it's better than the normal, which is amazing.

Paula, the smartest person I know. Always last place and our trivia cut. Of course, it shows how ridiculous our trivia is, though. It is ridiculous. Remember we had somebody one time that said they didn't go over to stacking Benjamins because they thought it would be too cerebral. And then they finally went after like two years and they're like, wow, was I wrong?

Right. Yeah, our shows are complete polar opposites, right? Afford anything is cerebral. It's thoughtful. It goes deep. Stacking Benjamin's is, I mean, how would you describe it? I think it's very smart conversations handled in a very light manner, but they're going to make you think.

They're going to introduce you to the issues. You're going to come away with some great ahas. But at the same time, if we ever get as deep as we do here, I don't afford anything, we did something seriously wrong. Right. Seriously, seriously, seriously wrong. We will often, which is interesting, we'll often have the same guests on both of our shows. And everybody who listens to both shows has told me as I went around the country last year for the book tour that it really is a great one two punch to listen to our interviews because we rarely ask the same questions.

Exactly. Yeah. Just take both interviews and put them together. So good times. Yeah, it rounds out the dimensionality of the guest. Yeah. Right. We spoke about Peter Atwater, who's been on your show.

before coming on stacking Benjamin soon, and that will be a whole different discussion than you had. I can tell by the discussion we had here today. Exactly. And, you know, when I'm on the show, I'm just, I'm different on the show. Yes. The audience sees a different side of me. Which is likewise, you will not see me giving much financial advice. I'm usually just the master ceremonies over on stacking benjuments. Exactly. And I'm usually like slapstick and quick with a quip. What's up with that? Well, Joe, thank you. Thank you for being part of this.

Well, thanks to all of you. Ford Anything, peeps. If you enjoyed this episode, please leave us a review in your favorite podcast playing app, except for Stitcher because that's going away. Bye, bye. So if you're on Stitcher, please go to a different podcast playing app. Otherwise, open up your favorite app. Leave us a review.

Talk about how much you love, Joe. No, we do, too, do. Please, please, because my ego needs it. Please. And while you're there, hit the subscribe or the follow button. That's what it's called these days. I know what buttons are called, see? Follow us.

Yeah, follow us in your favorite app. All right, well, thank you so much for tuning in. My name is Paula. I'm Joe. And we will catch you in the next episode. Here is an important disclaimer. There's a distinction between financial media and financial advice. Financial media includes everything

that you read on the internet, hear on a podcast, see on social media that relates to finance, all of this is financial media. That includes the Afford Anything podcast, this podcast, as well as everything Afford Anything produces. And financial media is not a regulated industry. There are no licensure requirements. There are no mandatory credentials. There's no oversight board or review board. The financial media, including this show, is fundamentally part of the media. And the media is never a substitute for professional advice. That means any time you make a financial decision or a tax decision or a business decision, anytime you make any type of decision,

you should be consulting with licensed credential experts, including but not limited to attorneys, tax professionals, certified financial planners or certified financial advisors, always, always, always consult with them before you make any decision. never use anything in the financial media, and that includes this show, and that includes everything that I say and do, never use the financial media as a substitute for actual professional advice. All right, there's your disclaimer. Have a great day. I was going to, by the way, as a tangential on your tangential, there's a great Emil Phillips

YouTube, where he's like, his car dies in the middle of like Death Valley or the Desert. and he goes to get help and the sun's bearing down on him. And before you know it, he's on hands and knees and he's starving and he's clearly going to die. And he looks up at the sun and he goes, dear Lord, if you help me out of this, I will give up everything. I will go around the world singing your praises. Oh, yeah. And then a car pulls up and he's like, never mind. Thanks anyway.

That's what your story about your dad remind me. Sorry, it couldn't help. I'm good. So as I was telling it, I was like, I'm not going to, I'm not going to, the full story is too depressing. So I was like, I'm just not going to tell it. Because the full story is her first two children died. Oh. Yeah.

And so then she started piercing every child that was born. She was like, God, please, like, survive them. Yes. Oh, just psychologically. Yeah. The meaning of that. piercing becomes huge. And when she started piercing her children's ears, they all survived. So she was like, all right, I have figured out the solution to childhood mortality.

Yes. That is so wild, the accidental association. Yeah. The whole thing. Yeah. I used to work in a Pepsi bottling plant, but it was so depressing.