Afford Anything - Ask Paula: FIRE vs. FOMO -- How Do You Balance Between These?

Episode Date: December 29, 2021

#356: How do you find balance between smart money management vs. missing out on opportunities? Should you pile money into investments or take that dream trip to Tanzania? What should you do when your heart leads you to a decision that doesn't make sense on paper? In today's episode, former financial planner Joe Saul-Sehy and I discuss the purpose and practice of mindful money. Subscribe to the show notes at https://affordanything.com/shownotes 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 your time, your focus, your energy, your attention. Any limited resource that you need to manage. Saying yes to something implicitly means that you're saying no to all other opportunities, and that opens up two questions. First, what matters most?

Second, how do you align your decision-making around that which matters most? answering those two questions is a lifetime practice. And that's what this podcast is here to explore and ideally to facilitate, like, meaning put it in action. So my name's Paula Pant. I'm the host of the Afford Anything podcast. And across the card table from me virtually digitally is my buddy, former financial planner, Joe Saul Seahy. What's up, Joe? I'm doing great.

You and I had a fantastic discussion the last time that we talked. I was going to see Ghostbusters. Oh, yes. And you told me something very shocking. That I've never seen Ghostbusters. Yeah. And I said shocking, not shocking. If you start any question with the words, have you seen?

Correct. I have only one answer. The movies that you assume everyone has seen, I have not seen. Yes. And I might get picked on today in one of our questions, maybe our first question. I'll get picked on a little bit. In today's episode, we are going to be answering four questions that come from two callers. Nick wants to know about opportunity costs.

And Coral has three questions, one about insurance, one about environmentalism, and one about the 25X rule. We're going to be answering all four of those questions right now, starting with Nick. Hey, Paula. my name is Nick. That's Nick and not Boris or Sven or whatever the hell else Joe was watching on Netflix this week. My name is Nick. I want to get that out of the way. Anyways, my question is a little bit more existential, I should say.

It's how do I counterbalance being systematic and formulaic and making sure that I'm being mathematical about my future with ensuring they don't miss out on an opportunity? or ensuring that I really open myself up to opportunities. I'm really firmly in belief that when you say yes or when you're willing to actually think about things in a positive manner, you're more likely to be successful. However, that can sometimes interrupt or kind of throw a monkey wrench or complicate your systems that you already have in place. And I just wonder if there's any sort of ways to think or things that you use.

use to really kind of counterbalance those things because I'm in a really good place right now where I feel like there's a lot of systems to my life that have really made a huge difference in making things better, but I also don't want to miss out on things that really could be life-changing opportunities. Anyways, I really appreciate your show and I look forward to hearing your answer. Thanks so much. Nick, fantastic question. To pull back and speak philosophically, So the concept of missing opportunities is it's an unusual concept because as the open of this show always talks about, there's always a tradeoff. There's always something in its place. So if you say no to a given opportunity, like for example, if you pass up a trip to Tanzania, there's something else that you do in that time that replaces it.

And that something might be as seemingly mundane, as reading books or playing video games, whatever it is that you do. But unless you're in a coma, there is no missing. You're living one way or the other. And I say that to establish that, you know, so many people talk FOMO, the fear of missing out, but you're not really missing anything. You're replacing. So it's Jomo, like joy of missing out. or really it's Joe, Joe Roe, joy of replacing, joy of replacing is what it is. But that doesn't answer your question, because I get the sense that your question comes from a place of perhaps wanting to do certain things or having been provided the opportunity to do certain things, but having some type of internal scripts that lead you to tell yourself that you can't or that you shouldn't.

And I don't know specifically what they are, but maybe you did pass up on a trip to Tanzania or a chance to attend your dream university for grad school or a chance to take a lower paying but much more fun job. Whatever it is, maybe you did pass up on it because it, quote unquote, didn't make sense. Maybe you're living in the city that you don't actually want to be living in because it has a lower cost of living. when necessity dictates that you must do that, that you have no other choice because your back is against the wall, the chips are down, insert cliche here, then heck, you do what you got to do, right? You do what you need to do to survive. You have no other good options. But when you have enough discretionary income, when you have enough saved, that you can make those choices and it's nothing other than your internal scripts that are holding you back, that often becomes counterproductive. Because sure, you might. spend a few years living in a city that you don't want to be in because it has a lower cost of living. But ultimately, you're going to be unhappy. And then you're going to pay a bunch of money in order to move. And those costs are going to eat away at the amount that you saved in the first place.

So the way that I've learned to deal with this, and I'm certainly a work in progress, the teaching that I keep reminding myself of is the phrase, let the heart lead and the mind. execute, meaning don't do the thing that makes sense. Do the thing that you want to do and then let your mind figure out how to do that thing in the most sensible way. It's the ultimate not letting the tail wag the dog. I love where you're headed there because my thought when I heard, what was his name again? Was it Nick? I think it was Forrest or maybe Sven? I'm fairly certain wasn't Sven or Forrest. I think it was Nick. So let's get that straight, Paula. But I think what Nick, where Nick was going, and I got really excited by his question because I've always had this same question. And I know that from people far smarter than me, what I've learned is that beginning with your values.

So you talk about where your heart leads, begin with your values and what you value. is a way to not experience this FOMO that you talk about or Jomo or whatever it is. Because if you don't value it, it wasn't an opportunity anyway. And it didn't matter. And by the way, it doesn't matter if it's a great thing if it doesn't fit your value. So the more concretely you're able to define the path that you're on, which, by the way, some people think is limiting. actually the more freeing it is because you're you are looking for one specific opportunity.

So people think that no is bad. And you and I know that saying no a lot is really a good thing. There's that expression if it's not a hell yet. It's a no. Yeah. And there's a phrase that David Allen uses that really excites me. He is a wonderful visual example from Eastern philosophy about this. And David Allen, by the way, if people aren't familiar with him,

He's the gentleman who created a big organizational group called Getting Things Done and his philosophy is getting things done. If you haven't read Getting Things Done, I highly recommend it because it. You recommend they get that done? I recommend they get that done. Yes. And it's all about organization. But at its heart, it's about, and this is the phrase from Eastern philosophy, it's about being like water. And this really gets me fired up where you go where the river's headed, right? Wait, wait.

Being like water gets you. fired up? Gets me watered up. I don't know. Yes. Yeah, I don't know. It gets me really excited because I love that analogy. I want to go where the river's running.

I want to, I want to be quiet and be listening. And I can't be quiet and I can't be listening if my life is a mess, if things are a mess. So the heart of getting things done is not about organization. As much as it about, as much as it's about removing all. the things from your life that keep you away from being like water. And I think at its heart, if I'm hearing him right, that's next question. How do I make sure I don't miss out? I think, number one, it's values and knowing what you're trying to say yes to. And then number two,

quieting everything else. If you can do those two things, I think you're much more likely to find those right opportunities. And that, as you know, Paula, is a lifelong question. because you will never be perfect at blocking those things out that don't fit. Nick, several years ago, I got an email from someone who was like, hey, I really want to go travel. I really want to take some time off. But I can't stop calculating the amount that I would miss in compounding gains. Like he was driving himself nuts, just plugging $10,000 or $15,000, whatever the amount was,

into a compound interest calculator, just totally spinning out over the fact that if he spends this 10 or 15K now, that comes at the opportunity cost of whatever that amount would grow to at an 8% interest rate over the span of the next 40 years. And that's the downside of being so financially attuned. If you take the lessons of compound interest to their logical conclusion, you would never do anything. You would have one pair of used socks, live in a tent, and eat just enough to keep yourself alive.

And save the rest. Right. But then what's it all for? What's the point of that money? Money is not, or at least should not be the goal. Money is a tool. and it's a tool that facilitates a life that you enjoy. So to your question about opportunity cost,

I think the first question is, what would you enjoy? And whatever that is, whether it's taking a mini retirement so that you can focus on playing music or playing sports or any other hobby that catches your attention, or whether it's travel or whatever it is, money is a tool that facilitates that. it's the thing that makes it possible. It's basically a key, right?

So once you have the keys in hand, then it doesn't make sense to be holding a set of keys and not using them. So I hope that helps. Helps you say yes to the right opportunities. But if I can summarize it into one phrase, it's let the heart lead and the mind execute.

So many people, myself included, go wrong because we do the opposite. We let our mind lead. We let logic lead. And whenever, the biggest mistakes that I've made in my life have come from making the logical decision. Every time that I have done the logical thing, it has come back to bite me. And every time that I've done the illogical thing, it's been, in hindsight, the best decision

I've ever made. Afford anything. This podcast, the website, the whole brand, the whole company was completely illogical at the time that I started it. Who in their right mind at the age of 24 would quit a job in a dying industry in the middle of a recession with nothing more than a liberal arts undergrad degree from a state school? Like I was no one special in a dying industry in a recession. Everyone was like, that doesn't make sense. You're committing career suicide.

you're never going to get a job again. Everyone thought I was nuts. It was an absolutely nuts decision. My parents were like sweating bullets trying to get me to enroll in grad school. Like begging me to go to grad school. Because they were convinced that if I didn't, I would be living under a bridge eating cat food out of a can. If I could afford the cat food.

Can't cat food is expensive. I'd probably be eating the dry stuff. Well, if cats ask for it by name. It's got to be good. Right? And meanwhile, now, now that my business is successful, and I have all of this proof of concept, like I said to my dad last year, I was like, you know, I kind of think I want to take like a sabbatical for a year and like maybe go to grad school so I can learn how to tell better stories.

Like now that I don't need it, now that I would be going just for the learning and not for the sake of getting a job, you know, I'm like, yeah, that could be like a fun sabbatical, like a fun one year sabbatical after 11 years of running this company. And now my dad is sweating bullets in the opposite direction. Now he's like, no, no, no, no, no, don't do that. Stay. Stay at your company. It's going so well. Why would you walk out on something that is going so well? It's hilarious. Dad, you're the same person who, like, 11 years ago, was saying the exact opposite. 11 years ago, you were like,

master's as minimum. Your education is not complete without it. And now you're like, I take it back, I take it back. Yeah, so, you know, the rest of the world, I tell that story to illustrate, the rest of the world always wants you to make the logical choice. And your brain, especially if you are an analytical, rational person, your brain also wants to make the rational choice.

So when you have both these external and internal forces, telling you to be rational, then yeah, you're going to be rational and you're going to be miserable, and then you're going to spend a whole lot of time and money undoing that rational decision when it reaches the point at which you just can't stand it anymore. How many people who are listening to this podcast right now are in the process of making a midlife career change because they went into the wrong career when they were 21, because they were the same. because they were listening to what made sense rather than to what they wanted. And now at the age of 40 or 50 or 60, now they're undoing it and they're starting their second chapter.

We hear that story again and again and again. And so that's why I say, let the heart lead and the mind execute. That might sound illogical. But when you look at the evidence, when you look at the long-term aggregate costs, Letting the Heart Lead is actually the most fiscally responsible, most logical, most rational thing that you can do. Joe, you sold your financial planning business when it was absolutely kicking butt making a bunch of money. Didn't everyone tell you that you were nuts for doing it? Actually, it was...

And then you went into podcasting. Really? Well, that wasn't even it. I mean, actually, this was much more of a fire move, Paula. I just told people that it was close to right, but it was. not completely what I wanted to do. And I was lucky that I had a friend named Chris, who was my mentor. Actually, what was really neat is that Chris was even a couple of years younger than me. But Chris was a guy that a lot of us knew who one day wrote a letter to all of us saying

that he was getting out of the business. And by the way, that's not something that happens. And usually when people leave a firm, they leave at midnight with all the client It's like Jerry McGuire. Well, you won't know Jerry McGuire. But in the movie Jerry McGuire, which was a movie with Tom Cruise, they, uh, I love the background. You're like, a movie is. Yes.

And they're and everybody's calling to get the client, right? I mean, that's, that's the type of industry that that was. And he didn't do that. And his letter was great. It said, you know, I really like this, but I don't love it. I've been very lucky that I've done a good job of saving. And now he said, I have other mountains I want to climb. And he wasn't.

Joking, actually, I thought it was a euphemism. He went on to climb nearly all of the tall peaks around the world. He's climbed Everest twice. He hasn't finished K2, but he's climbed Denali here a couple times. And he runs now an adventure travel company. And I realized that I was turning 40 and that, you know what? It doesn't matter how great this business is. I liked it.

I didn't love it. I took my work home every night. I felt very sick whenever my clients lost money. You know, 2007, 2007, 2008 just killed us. Just killed everybody. And sitting across from people where you did the right thing and you helped them diversify their portfolio and telling them, hey, we only lost about half what the market lost. So there, how great is that? Fist bump.

Yeah, you can't retire when you wanted to. But it was very frustrating because I would take it home. And it wasn't good for my health. And so I thought, you know what? the other thing I want to do because I had also done went from being horrible with money to being a good saver. I took the bag of money from selling my business and decided to become a high school teacher and a track coach. And so I started taking classes to become high school teacher because I thought if I can that was that would be so fun. Cheryl and I met each other

coaching middle school track. I get to work with kids. I don't really need the money anymore. So this will be this will be great. And then I did some research and found out that that wasn't really what I wanted to do. I wanted to keep teaching people about money, but in a way that I wanted to do it. For me, when I told that story to people, I think they got it. I didn't have somebody tell me I was crazy besides my parents. Actually, my parents were like, what? You're doing what? But most people, most people got it. They were like, yeah, okay, yep, because I had other mountains to climb or other high schoolers to teach. Doesn't have the same room. Other mountains to climb. As a Nepalese person, I very much relate to any analogy that deals with mountains.

With mountains, yes. By the way, I'm watching a documentary called 14 peaks right now, which is a guy from Nepal who's climbing the 14 highest peak, starting with Annapurna in a I think it's a seven-month period. Wow. Hardcore. A different high peak every two weeks. You know, I've been to Annapurna Base Camp and it's, People who are listening who are from Colorado or any other, you know, people who are familiar with high altitude will probably appreciate this. The experience of being at 14,000 feet and then looking up another 14,000 feet to the summit, that is, wow.

Yeah. Like Colorado, you're used to 14,000 being the summit. Yeah. Not being halfway there. Right. Yeah. But yes, Nick, back to your question. So you have other mountains to climb or different mountains to climb.

And assuming that you're not in a really bad situation, the only thing that's stopping you is yourself. I know that's easier said than overcome. But I think acknowledging that, like, it's internal scripts and social conditioning that's holding you back. That might help you say yes to the things that are right. So thank you, Nick, for asking that question. question. We're going to take a short break to hear a word from our sponsors, the people who make this podcast possible. And when we come back, we are going to answer three questions from a member of our community named Coral. She wants us to ask these questions to Pete, our good friend Pete, Mr. Money Mustache, but he is truly retired. He does not like to work in the way that Joe and I do. Like, you know, I did a guest spot on another podcast this morning. And I do that fairly frequently in order to promote this show and in order to grow this community.

And it's work. I'm at work right now. So are you, Joe. But Pete is not going to be making repeat guests. He's not going to be like going on the podcast tour the way that those of us who are like, quote unquote, in the biz do. Yeah. So Joe and I will do our best to answer these three questions. That's coming up right after this break.

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innovative companies by Fortune Magazine. 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 Coral. Hi, Paula. If you're ever able to interview Mr. Money Mustach again,

I would love for you to explore these three questions, which I think are different than the typical interviews that he's had over and over. First, it sounds like you don't always agree that early retirement is as simple as 25 times your annual expenses at any given point. I'd love for you both to discuss back and forth what that number is useful for and what it can be potentially dangerous to use as an oversimplification. Second, I know that Kanye Hester and Mr. Money Mustache have pretty different views on insurance, and Mr. Money Mustash often advocates being self-insured. I would love for you to discuss that with him and see how your different viewpoints on this might differ. And then third, I know that Mr. Money Mustaches, I was often,

pointed out that financial independence is often aligned with environmentalism. And you in particular have a different viewpoint on when it might make sense to live in the suburbs and commute it in by car versus his biker for life of philosophy. I'd love for you to discuss when are there tradeoffs between financial independence and environmentalism? Has he encountered those and how does he approach them. Thanks, Paula. I love everything you do. The part of Pete Adney, Mr. Money Mustache,

today will be played by his understudies, Paula Pant and Joe Sal C-Hie-Hi. Thank you and enjoy the show. Remember, no flash photography. If you have candy in rappers, please unwrap it prior to the start of the show. Enjoy today's episode of Afford Anything. Joe talking to you is a job, but it's a pretty great job.

Why, thank you, Paula. All right, but if I did want to retire from this job, which I don't, the standard, as Coral asks, question number one out of three, the standard rudimentary metric that beginners to fire beginners use is 25x your annual expenses. And by the way, for people who are new to the show, just brief background, the thinking behind that is that if you take your expenses, let's say that you spend $40,000 per year, multiply that by $25, that's $1 million. And that means that you can just flip-flop that, like $1 million at a 4% withdrawal rate is $40,000 a year. So if you save 25 times your annual expenses, then you will have a portfolio that is sized such that you can draw down 4% of that point. portfolio per year, specifically 4% in year one, and then 4% adjusted for inflation every subsequent year. And you would, in theory, have a reasonable chance of not outliving your portfolio. So that's where the 25x rule comes from. However, as Coral alludes to in her question,

I think that's a crock of baloney because your expenses are dynamic. If you were to plot your expenses over the span of your life on a graph, the point that you discover fire is one randomized data point on the graph of your life. And so to give one random data point undo importance for no reason other than

that represents the expenses that you had at the time that you learned about this or the time that you set your fire goal or your fire number, that doesn't make any sense. at all. That's barely a step better than just picking a number out of thin air. What if you did this then? What if you instead took the lifestyle that you wanted to have, added that or subtract that from your current lifestyle, think about your future lifestyle,

and then use the 25X. So it represents a dream lifestyle. There are two unstated premises within what your suggestion. One is that the lifestyle that you want to have, well, actually, there's three. One is that the lifestyle that you want to have is static, when in fact that itself is also dynamic and constantly in flux, what you will want 10 years in the future is going to be different than what you will want 12 years into the future, which will be different than what you want 14 years into the future. You get the picture. So that's flaw number one. Flaw number two is the idea that you can accurately predict what those costs are. Heck, in 2019, we could not predict what housing costs were going to be in 2020.

Gas right now is like in some places topping, what, five, six bucks a gallon? Who saw that coming. In 2013, Microsoft was a crappy stock to own that hadn't gone up in 13 years. You were still down from 13 years before. Today, Microsoft, everybody says, is a long-term hold that you should all have in your portfolio. Right. So the idea that we can predict anything about the future, such as what prices are, and also such as what we ourselves will want, because we ourselves are going to be different people in the future. All right, flaw number one is that what you you want is dynamic. Flaw number two is predicting the cost of what you want is a glorified guessing game. And then flaw number three is that that premise also is that this is this conversation

is all centered around wants when in fact needs, like actual needs like medicine. Yeah. Drive a lot of spending. And there's no way to predict that either. So I think you're absolutely right, but none of this really bothers me. I think you're incredibly right. I think you're incredibly right. and I really don't care. Well, and the reason I don't care is because if you use a 25x rule, you'll be in the ballpark, you know, you'll be directionally on the way there. And that's better than what 90, 95% of people are doing. So, okay, yeah, 25x works.

I've got a different objection to it, Paula. I think you suck all the flipping joy out of this entire person. process by using a rule of thumb. And you lose the important and fantastic values-based discussions that you have when you actually do the homework. Because I think what you're really getting to when you're like, this is a point in time. And there's going to be things that are going to be important at one point that aren't important later. A point in time is a much more colloquial way of saying graph, a data point on the graph of your life. Wow. The fact that I phrased it, That way just gives me insight about how my brain works.

It's not good. Okay, yes, it's a point in time. But it really is. And you think about if you visually timeline out your goals. You don't just say, okay, what do I want to do? You visually put, I want this by this date. I want this by this date. And you see those goals interact with each other.

And you realize you might not be able to get them all, right? You can afford anything, but not everything. Somebody says that that I know. Once you have that, then you start. having discussions about what is most important in your life and which things do you really want to go after. And so when you do a little bit more homework that is more based on you and not just a 25x rule of thumb, you all the sudden get invested in these things that with a 25x rule or the 4% rule or the rule of 72 are so damn boring. They're boring. They're mathematical. You don't have the same level of wanting it.

And it's going to be for a lot of people now for you and I have met the wonderful people as an example to go to Camp Phi, right? Fantastic people that are into this and they visualize it and they live and breathe this idea of, you know, valuing my life. But for the average person just starting out, you're going to miss out on all that fun. If you go for the, no, no, no, I want to make this easier. Let's just use a rule of thumb. The rule of thumb gets rid of all the joy about what we're trying to do, I believe.

That's what bothers me about 25X. So, Coral, to answer your question, so your question was, essentially, what are the pros and cons? I think Joe and I have just enumerated the cons. And Joe also highlighted the pro, the advantage, which is, and Joe not to put words in your mouth, but, hey, it gets you started. and it's directionally the 80-20 of it. Accurate. In the ballpark. Exactly, right?

It's directionally correct, but it shouldn't be taken too literally. Yeah. By the way, that applies to a lot of financial formulas. In real estate, the 1% rule, it's directionally pretty good, but I've met people who take it like gospel. And that's not how it should be. You know, if a given home is at like 0.9 percent, who cares? It's simply a directional guidepost. More in my wheelhouse.

Same thing, Paula, with stocks, right? When you do fundamental analysis, when you're looking at free cash flow, the PE ratio, you know, the increasing sales, what are the expenses, the debt level of the company? like all these are just data points. And yet you're right, people have hard and fast rules. And often there's, they're fantastic companies that don't meet your hard and fast rule. But when you understand the data points and how to use them against each other, it's, it's very similar to what I think you're talking about with the 1% rule.

Right. You know, and I think what we're, if we zoom out, what you and I are conceptually discussing is flexibility, right? Being mentally flexible, being mentally nimble, not being too rigid in the way that you think about money. But also, and I just want to reemphasize this, also don't rob yourself of the fantastic textual conversations you'll have when you do the actual legwork toward your goal instead of using the rule of thumb.

I don't think it's about the additional math. I think it's about the fun of how valuable is this. And what is valuable about, quote, retirement for me or whatever the goal might be, about financial independence? What's the value equation for me? And as you know, that's going to be different for everybody, which is so exciting. Don't rob yourself of that by just using the rule of thumb. We'll come back to this episode after this word from our sponsors.

Hey, we should get to Coral's second question. You know what? Let's play that snippet of her second question. I know that Kanya Hester and Mr. Money Mustache have pretty different views on insurance and Mr. Money Mustash often advocates being self-insured. I would love to discuss that with him and see how your different viewpoints on this might differ. All right. So to answer this question, let me outline both of their positions and then Joe and I will both opine on ours. That's a great word. Love that word. On the topic of health insurance specifically,

Tanya Hester, and she has said this on this podcast, so if you go to Afford Anything.com, search for the PSA Thursday that we did with Tanya Hester. We aired it in 2020. You'll be able to hear her talk about this. But Tanya cites research that shows that if people are in a high deductible health insurance plan, they are less likely to use their health insurance, even if, they have plenty of money and would have no problem meeting the deductible. So even high income, high net worth people, millionaires are less likely to use their health insurance, meaning they're less likely to go to a doctor, they're less likely to get small stuff checked out. They're more likely to stay at home and see if it gets worse because of the friction that's created, the mental friction that's created by the fact that they have. a high deductible. And so she is a fan of getting a lot of insurance, including getting

a low deductible policy, because behaviorally it can push you towards getting stuff checked out when it needs to be checked out. It's not a financial recommendation, at least not directly. It's a behavioral recommendation. And it's based on research that's been done. It's based on data that's been collected about the habits of people in different types of insurance policies as measured against their means to be able to pay those deductibles. It's not a means issue. It's not a income or net worth issue. It's a behavioral issue. So that's Tanya's position. Now, Pete's position is that insurance is overhead and the less of it that you have to pay for, the better. So if you can have a strong enough portfolio that you'll be able to deal with most big

ticket things, then his position is why would you spend a lot of money paying for protection that you don't really need? And he takes that to what many people would consider to be an extreme, such as, you know, if your home is paid off, why would you have homeowners insurance? And certainly there are many people who would be like, because your home could catch fire, and then you would be out of pocket, $500,000. But Pete's position is an extreme level of, quote, unquote, self-insurance, meaning that you amass enough money that you don't need to pay another entity for Black Swan Protection.

So those are each of their respective positions. Joe, I know you have some thoughts on insurance. What's your take now that I've outlined the two ends of the extreme? Yeah, and I think for the average person listening to this, you don't need to be on either extreme. But I think there are some ways to frame this. I think the first thing to think about is this. The conversation around insurance, I think, is actually flawed. I don't think we should be talking about insurance.

I think we should be talking about risk management. I think when we talk about insurance, what we end up having a discussion on is limited. Should I or shouldn't I buy insurance policies? Where the true question is, if my house were to burn down, what would I do? To use that example that you just brought up, if your house is paid off, I would have homeowners insurance. My question is, your question is, if your house burns down, how would you handle it? What would happen? And once you expand that discussion, you still have Tanya's and Pete's points to consider,

but I think you have many other points that you can consider as well. I mean, you can completely design a risk management plan that partially involves insurance and partly involves self-coverage. And for both the reasons that they talk about, why overpay for insurances that you don't need on one hand, and on the other, are you actually going to go to the doctor if you just don't, are you going to have regular health maintenance checkups before you're hurt, right, or before you're sick so that you're sick less often? Will you, will you have that annual physical? And data, to Tanya's point, says that you won't. So then I think, what is my strategy to make

sure I remain healthy and make sure that I'm talking to people that know a lot more about being healthy than I do so that I can catch things early. I can prevent things from happening to me. Like what is what is my risk management strategy? So overall, Paula, that's that's my thought process. And generally what I've seen from people is that their actual exposure to insurance is like a horseshoe. People should begin with a fairly. large amount of insurance. They should then deplete the insurance as they increase assets and have a plan that involves other avenues of paying for things.

And then when you are Uber wealthy and you realize that the cost of the insurance is less than the pit in your stomach that you've left so many things unattended and your wealth would go toward this, you realize that the insurance is a small price to pay for the for the value that you get. And that's what I saw as a financial planner. And by the way, you mentioned annual physical, so I'm just going to say this because I know that if I don't say it, I'm going to get like 12 emails about it. The annual physical is covered by ACA compliant plans, so there isn't an out-of-pocket expense for that. However, if you're like me and you've been buying individual insurance since before the ACA, before the Affordable Care Act,

there was a time in your life, there's a time in my life, when I got billed $600, $700 for an annual physical. And that was at a time in my life when that was a lot of money for me. Sure. And I'm so scarred by that that I've missed, even though I know it's quote unquote free or no cost to me, even though I know that it's covered. Cognitively, I know that. I still skip them all the time. Yeah. And I shouldn't.

I know I shouldn't, but... And that is why the wider discussion is more important, I think. Yeah. I think the wider, what is my risk? And my risk is less if I have that physical. If I actually go and do it with insurance, it being covered, I think is a much smaller conversation. Is it covered or not?

The bigger discussion is, no matter who's paying for it, if I'm looking at risk management, I need to go get that done. Yeah. Yeah, there's two conversations. there's a risk management conversation and then there's the behavioral compliance conversation because like what you're, you know, I like the way that you framed it. The question is, what would I do, right? That's very much a risk management. What forms of capital do I have? Not just economic capital, but social capital. Relationship capital in general. You know,

like what are the tools at my disposal? And then the behavioral question is what mostly, essentially it's what motivates me, you know, what, when there is a disconnect between cognition and behavior, meaning when I know better, but I still don't act in accordance with what I know, i.e., it's not an education or informational issue, it's a compliance issue. What will bridge that behavior gap? So yeah, I think those are the two operative questions. All right, let's get to Coral's third question. I know that Mr. Money Mustaches, I was often pointed out that financial independence is often aligned with environmentalism. And you in particular have a different viewpoint on when it might make sense to live in the suburbs and commute it in by car versus his biker for life philosophy.

I'd love for you to discuss when are there tradeoffs between financial independence and environmentalism, has he encountered those and how does he approach them? I'll tackle that one straight away. No, I don't think there are trade-offs. I think that there are many ways to achieve the same objective. And if your objective is to make a positive contribution towards the threat of climate change, then you have to decide, do you want to minimize your impact or do you want to maximize your impact? So there are some people whose strategy is to minimize their footprint and they try to live as small as possible. And there are others who decide that they want to maximize their impact.

And so they live a productive life in which they contribute a lot of value to society, receive value in the form of financial capital, and in the form of talents, resources, connections. And then they deploy their capital, their resources, their influence, their knowledge, that will broadly classify all of that as influence, right? They deploy that influence towards solving this problem. Elon Musk has done more for the environment than some barefoot guy living in the woods ever has or ever will. But that's not to poo-poo the barefoot guy living in the woods.

Like, you have to, each individual has a calling. And if you feel strongly that your calling is that remote, wooded life if you were meant to be Henry David Thoreau rather than Elon Musk, well, the world needs Henry David Thoreau's as well. Not to get too Nepalese on you, but we all have our Dharma. I'm going to echo what we told Nick, because I'm fairly certain his name was Nick, wasn't it? I don't think it was Sven. I think it was Nick. Oh, but he did mention Forest and we just talked about Barefoot guy in Forest. Barefoot guy in Forest. Named Nick. Yes. But I think Paula, this begins with values, right? Again, what do you value? And once again, you're not going to have a discussion

about your environmental impact with the 25X rule. Yeah. Boom. Way to bring it back. Awesome. Well, Coral, thank you so much for all of those questions. Between Nick's questions and Coral's questions, we've had some very philosophical and illuminating questions in today's show. Four questions. Normally, it's four people we talk to, but today, two people. Well, we, we, speak with all of you. But we answer four questions, as usual. Four questions from two people. Joe, tell us what you're working on. I'm only going to say this because there are big moments in people's lives. And I'm having one today, not just Paula, because I get to hang out with you, which is fantastic, pinch myself. But when, you know, my kids were born, when I ran a marathon,

I didn't even think that was going to be important to me. But I couldn't stop crying when I ran my marathon. And today's a big day because I got my author copies of my new book. I've heard from other authors just what a wow day that is. Like seeing the actual thing and holding it in your hand is a wow thing. So I've been working on this book called Stack, Your Super Serious Guide to Modern Money Management written with our friend Emily Guy Berkin. You can pre-order it at stackingbejumns.com slash stacked. And Paula is on page 13. Lucky page 13. I am so proud of you and happy for you that you're finally getting to hold that book in your

hands. So weird. Such a weird day. Well, thank you so much for tuning in. This is the Afford Anything podcast. If you enjoyed today's episode, please do three things. Number one, share it with a friend or family member. Number two, open up whatever app you're using to listen to this.

and hit the follow button so that you don't miss any of our amazing upcoming shows. And number three, while you're there, please leave us a review. Thanks again for spending this time with us. I'm on Instagram at Paula P-A-U-L-A-P-A-N-T. Thank you again for tuning in. This is the Afford Anything podcast, and I will catch you in the next episode. P-S, one member of our community recorded this song, a member of our community named Matt. He recorded this song and left it for us as a voice.

voicemail. And I wanted to share it with all of you. So, for your musical pleasure, here you are. It's Christmas in Texarkana and it's hard to ignore that. It feels like summer all the time, but I'll take a southern winter to pay down my bad debt. You can have anything, just not everything. 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. 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 anytime 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. And that, as you know, Paula, is a lifelong quest because you will never be perfect at blocking those things out that don't fit. you know, even people as successful as Bono have struggled with this.

I mean, he said publicly, I've climbed the highest mountain and I've run through the fields only to be with you. And I still haven't found what I'm looking for. Do you know that song? I do know that song. I do know that song. I don't know why. Even in the musical avenue queue, the moral of the story is everyone's a little bit unsatisfied.

Everyone goes around a little empty inside. He's climbing all these mountains, running through all these fields, and he still hasn't found what he's looking for. So Nick. Steve cut all of this. Cut the whole show. Well, the world needs Henry David Thoreau's as well. Not to get two Nepalese on you, but we all have our Dharma. I immediately think of a TV show you've been seen.

Oh, Darmah and Greg. I saw like a couple episodes of that. I saw the episode where Darmah calls Greg's mom, Kitty, Kitty Montgomery, and says that she's having a shower. And Kitty thinks that it's a baby shower, but in fact, she's just trying to install a showerhead. And then Kitty feels really bad about it. And so Darmah tries to cheer her up by saying, oh, you know, there's a lot of hominemes out there. Like, if I said, hey, come over and fast, do I mean come over quickly? Or do I mean come over and don't eat for a very long time?

Yeah. Yeah, that was a good show. Yeah. Look, so I have seen a thing. Dharma. Dharma. Yeah. We all have our Dharma.

You can have that Dharma too.