Afford Anything - Ask Paula: How Can I Get the Most from My Mini-Retirement?

Episode Date: November 25, 2019

#227: Lien is taking a year off of work to live the van life with her husband. She wants to know how she can make the most of this sabbatical to figure out how to turn her less-than-inspiring career into a lifestyle that she loves. Lien called in again to say that she wants to start a new business and a family when she returns from her gap year. Her former job offered excellent health benefits and maternity leave, but she doesn’t really want to go back. What should she do? Eddie wants to build his real estate portfolio. How should he approach downpayments - put down more to net more profit, or put down less to acquire more properties? Wilson is wondering if it’s a good idea to partner with a friend on real estate ventures. What are the downsides? Wilson also wants to know about real estate business expenses, and the pros and cons of short-term rentals vs. long-term rentals. Sean has an inconsistent employment history and is struggling to find a lender that will give him a mortgage. He wants to know if there are any other ways he can get a mortgage for a 4-plex? An anonymous listener is thinking about taking the leap into real estate investing and wants to know how to overcome the fear they have about it. Also, should they put all of their savings towards real estate? Anonymous is also wondering: how do you calculate net worth when you’re married? For more information, visit the show notes at https://affordanything.com/episode227 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, anything in your life that's a limited resource. And that leads to two questions. What do you value most? And how do you live a life in accordance?

Answering these two questions is a lifetime practice, and that's what this podcast is here to explore. My name is Paula Pant. I am the host of the Afford Anything podcast. I am recording this episode from Ecuador. I'm spending three weeks here with a group of people largely from the afford anything community, people who listen to this podcast and the financial independence or FI or FI community in general. I'm spending this time here in Ecuador, three weeks here, with them to talk about how to create a more meaningful life. In today's episode, I'm answering questions that come in from the community.

And this first question, which comes from Lien, is perfectly fitting. Hi Paula, I need your help. Inspired by the FI community and principles, my husband and I made the big leap to sell our home in San Diego, build out a youth student into our new home on wheels, and then travel for a year. Other than having fun and drying my hand to the travel blog, I want to take this time to reflect on my purpose and how to transition my less than inspiring career as an accountant slash auditor into a lifestyle that I want. Everyone says taking a sabbatical is a great time to take a break and reflect, but I don't. really know what that means. What could you recommend as a start as I start this process? How should I

break this down into right-size questions for myself? So I'm not just questioning my entire existence. Thank you, Paula, for what you do. You're my favorite source of motivating out-of-the-box thinking. First of all, congratulations on getting inspired by the FI community and taking action. There are a lot of people who listen to this, but don't take that radical action, and you've done it. You've sold your home, you're traveling, you're not deferring life. You're living this great adventure and that's fantastic. And you're asking, I love that you're asking questions about how to ask better questions. How do you make the most of this sabbatical?

Here are a few exercises that you can do by yourself to figure out what matters most in your own life. So here we go. One, set a timer for two minutes. In those two minutes, write down. Every word that you would use in order to describe the roles that you occupy, like accountant, wife, friend, daughter, sister, write down all of those role-related or relational-related words. Do that for two minutes. Okay.

End timer. Set a timer for two minutes again. And in those two minutes, write down adjectives that you would use to describe yourself. generous, funny, patient, kind, end timer. All right, now set a timer for two more minutes and describe yourself without using any of the words that you've previously written down. And so this is an exercise that gets your brain thinking about who am I when the identity words and the identifier words that I typically use are stripped away.

How else would I define myself if I could not define myself in the way in which I currently do? So that's one exercise that you can do. Another exercise, set a timer for 10 minutes and write down whatever comes to your mind related to the following writing prompt. The best day ever. Now, this would be the ideal best day, a theoretical best day. What would you be doing? And for the sake of this exercise, don't write about a day that would be a total anomaly. Don't write about, on the best day ever, I would complete an entire marathon run.

Because, I mean, that's great, but you can't do that every day. So write about the theoretical best day ever that would be under the umbrella of a normal day. So a normal day you might train for a marathon run. You might go on a three mile or four mile run, but it wouldn't be your gold medal day. Right about that theoretical best day, from start to finish, what would you be doing? where would you wake up? What would be the first thing you do after you wake up? When do you eat lunch? Where do you eat lunch? Who are you with? What are you discussing? Craft what that would look like. That's a writing prompt. That's an exercise that you can do. Another one is to set a timer for 10 minutes

and write for 10 minutes about whatever first comes to mind when you hear the phrase meaningful change. And I'm intentionally keeping that change broad because you might interpret that to mean social change, environmental change. You might interpret that to mean internal or personal or emotional change. You might interpret that to mean changes in your relationships or your careers. Whatever comes to mind when you hear that phrase meaningful change, write for 10 minutes about what that brings up for you. That's another exercise that you can do. And then another one is to write for another 10 minutes about whatever comes to. to mind when you hear the phrase fulfilling work? And again, I'm keeping that intentionally broad.

This could be paid work. It could be unpaid work. It could be domestic work. It could be internal work. It could be spiritual work. It could be what we traditionally think of as work. What comes to mind when you hear that? So those are three different writing prompts that you can give yourself. For set a timer, 10 minutes on each of those. And now, once you're done with that, Here's how to take this one step further. Under each of those prompts, there are many things that you've just written that you'd find appealing or interesting in some way. Why?

Why does that resonate with you? So for each one of those prompts, take five minutes to write the why of what aspect of that appeals to you. Why would this be the best day ever? Why would that particular type of change be meaningful? Why would you find that type of work fulfilling? So take five minutes, write the why. And then when you're done, take another five minutes to look at those whys and write down why. Like, why the why?

That why that you just wrote down, why does that matter? Now, repeat this at least five times. So write down five whys with each one explaining why the previous why mattered. As I describe it on a podcast, I realize this exercise. might sound or feel repetitive, but what I found, particularly as I've been going through it here with a group, is the five Y's exercise can often get to the heart of a matter. It can help you figure out what is it the root of what you're actually going for. There were some people, when we went through this exercise last week, there were some people who found that their Ys became

circular. By the time they reached the fifth Y, that Y was reflective of the first, and there were others who found that their wise just went off in a completely unexpected direction. So try some of those exercises, the five wise exercise for each of those three writing prompts, best day ever, meaningful change and fulfilling work. Those can be good exercises for figuring out what's next. The other thing that I would encourage you to do, particularly because you're on a mini retirement right now, so you've got time on your side, is to write down a list of everything that you're kind of curious about. People often talk about following your passion, but passion is such a loaded word.

What sparks your curiosity? Brainstorm a list of everything that sparks your curiosity, then circle eight or ten, and then while you're on this mini-retirement, again, because you have the time to do this, spend one week diving into depth on each of those things that spark your curiosity. binge on YouTube videos, read books, listen to podcasts, dedicate one week to one topic. And at the end of that week, move to the next topic. And at the end of that, move to the next topic. This is a great way, particularly, again, because you've got the time to do this,

to completely immerse yourself in those things that you've always been kind of curious about, but have never had the time to really dig into. And as you do that, particularly if you do this with eight or ten or even 12 different areas, of interest, you'll find that two or three of them probably stand out. At the end of that week, there will probably be two or three that you enjoyed more than the others, or that you were really disappointed when that week ended because you wanted to still keep going. You wanted to find more forums about it. You wanted to keep binging on that topic. Oftentimes, again, to that cliche of follow your passion, oftentimes passion is the result rather than the cause.

So oftentimes, assuming that you have a minimum level of interest in a thing, as you go deeper and deeper into that thing, you become more passionate about it. And so then that passion is a consequence of spending time in a particular subject. It's a consequence of deep diving into something. For a great book about this, read the book, So Good They Can't Ignore You by Cal Newport. That book elaborates on the ideas that I'm talking about right now, that, passion is the result rather than the precursor. But for that to be true, the initial curiosity needs to be there. And so follow your curiosity. Do that for eight or ten or twelve weeks. And at the end of that, pick the two or three things that stood out as the winners and keep deep

diving into those. Spend the rest of your mini retirement focusing on those. And I think that's a great way to see where passion will develop over time. So thank you for asking that question. And I noticed that you've also called in with a closely related follow-up question. So we're going to answer that right now. Hi, Paula. I recently left a demanding job to do a gap year, and now I'm considering what to do after I return. When I get back, I'd like to invest my time and energy in starting up a new business, but I also hope to start a family. My previous job had excellent health insurance and maternity benefits, but the thought of going back is kind of soul-crushing. I live in California. Can you help me understand how to do you? to break down this decision financially and otherwise. What are my insurance options when

self-employed, specifically as it relates to maternity health care costs? Thank you so much again. Lean, this is a great question and a perfect continuation of the previous question and answer that we just talked about, because what I'm hearing inside of what you've just asked are two questions. One is, let's talk through the ramifications of being self-employed or starting your own business as compared with going back into a W-2 employment situation. That's broadly speaking in terms of the financial ramifications of it. That's one aspect of the question. And then more specifically, what are the health insurance and maternity health care consequences of this decision is a subset of the bigger umbrella of what are the financial ramifications. So let's talk about both,

but let's start at that high level, financial implications for starting your own business. Now, first of all, I don't know what type of business you want to start or how much idea validation you've done. A successful business lives at the intersection between what you can uniquely provide, your skill set, your training, the gifts that you have to offer. And the intersection of that is what are people or companies willing to pay for? And the way to validate this idea is to do it on a small scale. So right now, as you're taking your mini retirement, is there a way that you can somehow test or validate this business idea? So for example, if, and again, I don't know what type of business you want to start, but could you approximate the type of product or service that you would be offering in some type of a freelance or consulting sort of a way, even if it's not a perfect replication of that business, even if it's a rough approximation, can you validate that there is a market for, what you want to sell? Can you find one or two paying clients or paying customers who would

buy the product or service that you're offering? And again, I know this is very vague. What I'm telling you is very vague because I don't know what type of business you want to start. But the first thing that I would say is that before you get started, you want to validate the idea. And let me also add that if you test or try to validate the idea and it doesn't work out, that doesn't mean don't start a business. It might mean just tweak the idea. Particularly if your aim is to be self-employed or a small business, you're not trying to grow something to incredible scalability. You have this opportunity to corner a niche. And so if your first few iterations of the idea don't work out, keep testing different niches, niche down or niche laterally

until you can find that space where your unique skill set intersects with what people or companies are willing to pay for. So that's the first thing that I would say. Second thing, and of course if you're part of the financial independence community, this goes without saying. But make sure that you have enough of a runway that you can cover your own personal expenses as well as the business's operating expenses for, I'd say at least six months to a year. a lot of early businesses fold before they really get a chance to get going because the owners just run out of cash. So you don't want to be in a situation in which you have a viable business, but you're temporarily going through a cash flow contraction. And that cash flow contraction is what knocks you out of the game. Now, again, I don't know how overhead intensive your business is.

one way to manage this is by at least initially starting with the lowest overhead iteration of that business that you can form just so that you can get that initial revenue coming in and then of course you can you can then reinvest all of the revenue that's coming in your doors into growing your operations but the way to be able to reinvest the revenue that comes through your doors is to have enough of a personal runway that you can keep your lights on and food in the fridge. So if you build enough of a personal runway that you don't have to take money out of the company, then you'll set your business up for the best chances of long-term success because then you don't have to eat your profits. If you have to remove profits from your company in order to buy groceries, you're literally eating your profits.

And that's what many people have to do. But particularly in the first couple of years, that can make things really tight. So if you can set up enough of a runway that your personal expenses are covered and then reinvest every dime that your business brings in, that's a sustainable blueprint for growing your operations. You also might make the conscious decision that during the first year that you're in business, you might decide that you're not going to max out a 401k that year. Maybe you'll just max out a Roth IRA and that's it. So up front, before you go into it, set realistic parameters of how much you intend to contribute into retirement accounts, especially during those first one or two years in business,

because those are often the leanest years in which cash flow management is paramount. And with all this being said, if you need money in order to be able to make possible all of the things that I'm talking about, it's perfectly fine to take on some type of part-time work or freelance work or consulting work that brings money in the door while you're getting your business off the ground. Just make sure you don't get stuck there. Because if you get into the habit of relying on freelancer consulting or other part-time work and you get into this gig economy mindset of accepting whatever gigs come your way, I mean, to the extent that it helps you survive so that you can build your business, that's great. But if you go too deep into that, into the

short-term gigs, then that will come at the expense of being able to grow a more scalable business. So as you're growing this company, gigging is great. Just don't get so distracted by the gigs that you forget to grow a business. Now, to the specific aspect of your question, which is, what are your health insurance options? Assuming that you don't qualify for health insurance through a spouse's plan, then you'll have to buy health insurance through the individual exchange. Here are some things that you should know about this. Now, first of all, insurance plans that are sold to individuals are either ACA compliant, or not ACA compliant.

ACA is the Affordable Care Act. If you go to health care.gov, all insurance plans that are sold on that website, health care.gov, are ACA compliant. If you go to a different website like PolicyGenius, you'll see a mix of different plans, some of which are ACA compliant, some of which may or may not be.

I would advocate at least at the preliminary cursory information gathering level, go to multiple websites to see what plans are available in your area because plans are going to be different based on your location. But check out the landscape, but know that one very, very fortunate thing for your circumstance is that all ACA compliant plans have to, by law, have to include coverage for pregnancy and maternity care. So as long as your plan is ACA compliant, that will be covered. Now, what that means at the financial planning level is that then the next thing you want

look at are your deductible, your co-insurance and co-pays, and the amount of prescription coverage that you have, as well as your annual out-of-pocket maximum. So to review those again, deductible, co-insurance or co-pays, prescription coverage, annual out-of-pocket maximum. Those four pieces of information will give you a good sense of how much you might spend, and certainly the total amount that you might spend in a given year, if you have a lot of health care costs. Now remember, the deductible for your doctor's visits is different from your prescription deductible. So basically what I would do is I would create a spreadsheet in which you add the deductible plus the prescription deductible, assuming that in a year in which you

have a child, you'll probably hit both of those numbers. So how much does that total? Then look at what you're on the hook for paying when it comes to co-insurance or co-pays and check out whether that's a flat dollar rate or whether that's a percentage of what you're billed, that information will give you a sense of what some of those ongoing doctor's visits might cost. And then finally, look at the annual out-of-pocket maximum so that you can see what the highest amount that you would pay for for covered care is. Now, remember that your out-of-pocket maximum does not include your premium payments, your monthly premiums on health insurance.

Typically what I tell people is if you're young and healthy, get a plan that has a low premium and high deductible. But if you plan on getting pregnant, I'd say the opposite. I would say get a plan that has a high premium and a low deductible and a low out-of-pocket max because you're probably going to have a lot of healthcare costs. And so in a year in which you anticipate having high health care costs, it makes sense to get a high premium low-debted. deductible plan. Now, the other thing that I'll say is we're assuming that you will easily be able to get pregnant. If that does not happen, and if you then need to seek out IVF treatment or IUI treatment, there's the very low likelihood that you're going to find a plan that covers that. I hope that doesn't end up being the case, but if it is, and if you have to go the IVF route,

that's going to be a whole huge basket of expenses that are just going to come out of your own pocket. Hopefully you won't need fertility treatments, and if you do, be prepared to radically shake up the rest of your budget in order to be able to make the space for that. I hate to end this on that note. That's such a downer note. So I'll end this on a positive note. The good news is that pregnancy and maternity are covered under all ACA compliant plans, and that was not the case 10 years ago. I've been buying individual health insurance for myself since 2008, and for years and years, I could never buy a policy that covered maternity care.

And so I remember at that time thinking to myself, well, if I ever want to have a baby, I guess I'll have to go to Thailand so that I can pay cash at a more affordable rate. Fortunately, that's not the case anymore. Fortunately, these expenses are covered. That's the good news, and we'll end this on that good news. Thank you for asking that question, and best of luck with all of your plans going to. ahead because that's all very exciting. We'll come back to this episode after this word from our sponsors. Are you looking for a deodorant that's made without a bunch of scary ingredients?

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taxes, HR, everything to start the new year off right. So let Gusto make it easier on you. And as a bonus, you can get three months free when you run your first payroll. Try a demo free for three months and see for yourself at gusto.com slash Paula. That's g-U-S-T-O.com slash Paula. Gusto.com slash Paula for three months free. Our next question comes from Wilson. Hi, Paula.

My name is Wilson. and I live outside of LA. I want to thank you so much for what you do. You're able to take a lot of high-level, heady information and really make it accessible for the rest of us. So great podcasts, great articles, as they say in the business, I guess, long-time listener, first-time caller. I just had a few real estate questions.

I've been scouring different books and podcasts such as yours or bigger pockets for the past six or seven months, still on the sidelines for now. I'm considering going in with a friend of mine and partnering in, maybe forming an LLC or corporation to start this. One reason is because he has some experience and already own some properties in different areas, and it might just be an easier way for me to get in and mitigate some risk. I'm not sure if you've done that with some of your properties before and just use a friend or partner. What are some of the downsides? Maybe you could talk a little bit about how to structure this, contracts, et cetera.

don't want this business to affect my personal friendship with him. So I'd like some advice on that. My second question is just around tax deductions. I understand, of course, real estate does offer a lot of tax benefits due to depreciating assets. But what about when you haven't really started yet and you're just on the journey, having purchased a property, when you go visit properties out of town, traveling, what can be considered a business expense?

And then my third question just was around short-term rentals. I don't know if you do any of that with your properties or have researched or looked into that. And maybe if you have some pros and cons of each Airbnb style versus renting it out for the long term. Thank you again for answer my question. And I look forward to hearing your answers. Wilson, it's great that you're thinking so much about this. So to recap your three questions, number one, you are interested in possibly partnering with a friend on a real estate investment. You're wondering whether or not you should and what you should consider. number two, you are wondering about what would be considered a tax deduction or business expense in real estate. And number three, you want to know about short-term rentals versus long-term rentals.

There's a lot to cover in there. So in order to address this, I'm going to give a 30,000-foot big-picture overview explanation of all three of those questions. And then I will refer you to a handful of resources where you can read more thoroughly about each of these. So to your first question that you're thinking about partnering with a friend who has some experience, you want to know what the downsides of this are, there are a lot. Essentially, any time that you're thinking about getting into a business partnership, what you're actually saying is that you plan on getting into a marriage. At least within a very specific regard, you will have joint assets and joint liabilities together, and you will have to discuss and agree upon every fine point related to the management. and disposition of these properties. So, what properties do you buy? What type of financing do you use? Whether or not you refinance? How do you manage it? What level of renovation do you

choose for these properties? What criteria do you set for the tenants in terms of tenant qualifications? How much financing are you using? What's the risk profile of the overall neighborhood? Are you looking for class A, B, C, D? In what ways do you plan to add value or force appreciation on a property. Under what circumstances would you sell or refi a property? Those are just a few of the many decisions that you make when you are a real estate investor. And it's difficult enough to arrive at a conclusion on your own. To have to compromise and deliberate and debate with somebody else who's coming from a different perspective and to have to be in agreement and in alignment on each of those decisions is a very difficult thing, particularly if the two

of you are in different life stages or have different life goals. Perhaps one person might have some type of a life event in which he needs more liquidity, while the other person doesn't and wants to invest in a way that's more optimized towards long-term returns or optimized towards tax advantages, right? The strategy that you undertake for managing your real estate and your portfolio of real estate investments, it's incredibly hard to see eye to eye on all of those decisions with another person, particularly if you and this other person are not actually married, so you don't have a life that you're sharing together, which means that you have life situations that are very different from one another and that will cause your goals, your priorities, your decision-making framework

to shift over time. You know, when you talk to couples about how they manage their money, oftentimes you hear couples talk about how difficult it is when one person has a dramatically different risk tolerance than the other. With a business partnership, imagine that times a thousand, because now you're not just talking about different risk tolerances, you're talking about potentially whole different stages of life. So I would not recommend going into a partnership with anybody else. I would try to avoid it as much as you can, and if you absolutely insist on doing it,

then I would structure it as a joint venture rather than as an LLC that you both co-own. When you have a joint venture, then each of you, each separately have your own businesses, and you come together for a limited time and a specific circumstance to do a particular thing together, which is that joint venture. So if you absolutely must work with somebody else on a project, I would structure it that way so that you don't get into the muck of co-owning a business together and one day getting into a big battle. about the disposition of the LLC. Now, in addition to that, there are what are called the four Ds, which are divorce, departure, disability, and death. For example, what happens if the two of you form an LLC together and then one of you gets divorced and the spouse of the partner who is getting divorced

has a claim on a portion of that LLC? What happens to the portion of the ownership stake that ends up going to the ex-spouse, of the divorcing partner? Can you make an equalization payment that would allow the divorcing partner to keep their ownership interest in the company without giving a share of the actual operations of the company to the divorcing spouse? And if there is an equalization payment, how much should it be and do both of you pay it or does only the divorcing spouse pay it? That's like one of many questions on just that one of the four Ds, right? Another D departure. So let's say one of the two of you no longer wants to owner operate the business, but the other one still does. Well, guess what? You own

this thing together. So does the remaining owner get the right of first refusal on the share of the departing owner? Or does the departing owner have the right to sell his or her share on the open market so that they can try to get the highest and best compensation for it that they can? And if the remaining owner does get the right of first refusal, how should it? that ownership interest be valued? How is that value determined? And what type of payment schedule is expected? Does it need to be a cash lump sum right up front? What type of buy-sell agreements will you have in place? That's something that you need to discuss right at the beginning because you certainly don't want to be doing it in the heat of the moment when one person is leaving or when one person, worse yet,

is in a desperate situation and you don't want to do it at the 11th hour because that's when things really fall apart. Okay, so we've talked about divorce, we've talked about departure. disability. What happens if one person becomes disabled or addicted to drugs or develops an alcohol issue that is bad enough that they can no longer function in the operations of the business? Does one person step in and take care of things until the other person is okay? And if so, for how long? And can that one person eventually get the right to kick out the other partner? If so, what are the circumstances of that? And what would be the compensation structure and how would it even be determined that one of the two partners is no longer capable of

running a business if there is acrimony over that, if there's a disagreement in which one partner says, look, I think that your drug problem has gotten so bad that I don't think that you can run this anymore. And the other partner says, oh, no, I think I'm fine. How do you resolve that? And then, of course, the final D is death. What is the succession plan? If one person passes away, does the full ownership interest go to their area?

or beneficiaries? And if so, do those heirs and beneficiaries now become your business partners? Or does the full ownership interest pass to the remaining partner, the living partner, and the heirs and beneficiaries, are they entitled to some type of a payout or a dividend as a result? And if so, how much and for how long? Right. So talking about the four Ds and the four, these are the four Ds of exit strategy planning. And as you can tell, every single one of these is an incredibly complex and multi-layered issue. And that alone, I hope, provides some insight into the complexity around forming a business partnership with someone and why I caution against it. So that is a response to your first question, which is about whether or not you should go into a

business partnership. Now, your second question was about tax deductions. And you specifically asked if you flew out to a different state. to look at a rental property. Could you deduct this as a travel expense? Yes, if you travel overnight for your rental activity, you can deduct airfare, hotel bills, 50% of your meals. If you drive there, you can deduct your mileage. But there are a few things that you should know. Now, first of all, for these expenses to be deductible, your travel expenses must be what are considered ordinary and necessary. Let's say, for example, that you purchase a rental property in a small town in Tennessee

that's right next to a beautiful lake. And you absolutely love to vacation there and you love to travel there. You cannot use the existence of that rental property in that location to justify taking an excessive number of trips there. In other words, it cannot be a thinly veiled excuse for recreational sightseeing or vacationing. So if you're specifically flying out there, let's say that you haven't bought the property yet, and you fly out there for one day to meet with, a real estate agent. Let's say you fly out there on Friday evening. You stay in a hotel Friday night. Saturday morning, you meet with a real estate agent. You look at 12 different properties. By the end of the day, your agent is writing offers on your behalf for four out of those 12 properties.

You spend the night, Saturday night, you fly back home on Sunday. And then maybe you fly out there, let's say, one other time. So one of those four properties goes under contract. You hire an inspector to do a move-in walk-through, and you fly out there specifically to meet with the inspector to accompany her on that walk-through while you are in the due diligence period. On that same trip, you also schedule meetings with property managers so that you can interview three different property managers, and by the end of that weekend, you've selected the manager that you want to work with. Again, that's a one-weekend trip.

You fly out there on Friday night. You fly back on Sunday. You go back home. You close the deal. And from that point forward, your property manager handles the showing. and coordinates dealing with tenants and maintenance and repairs, right? So in that example that I just outlined, sure, you make two trips, both of which were ordinary and necessary for your rental activity.

And during those trips, you spent the majority of your time, you spent more than half of your time working, doing specifically rental business-related activities. For a situation like that, yes, you can deduct it. But by contrast, if you fly out there for a vacation and you spend one day there on rental activities and then the next five days at the lake, then you did not spend more than half of your time on business, which means that the entire cost of that trip is a personal expense. It's not a business expense. Now, what I would recommend you do is set up a business bank account with a business credit or debit card so that your business expenses and your personal expenses are not commingled. You can seed that account with an owner contribution so that you have some initial seed money to get started. But you want to separate out your business banking from your personal banking because these are two separate entities. You are a person and your business is a business.

Don't commingle the two. Then when you do take a trip, document everything really well, keep all of your receipts, have a clear written logs. And email is perfectly fine that shows exactly what you've done, you know, that shows that you flew out there on Friday night. And that Saturday morning, from 8 a.m. to noon, you were viewing properties with your agent. And from noon to one, you had lunch. And from one to three, you interviewed potential property managers. And then from three to five, you went to a local real estate investors networking group or meetup. You know, have all of that documented so that you can show that you worked from 8 a.m. to 5 p.m. that day. And then you had dinner that night and you went to sleep and you flew back first thing the next morning.

Right. And as long as you have that kind of documentation, then if your bookkeeper or your accountant or heaven forbid the IRS asks any questions about it, you can show that documentation to demonstrate that this was a trip taken for the purposes of necessary rental-related activities. So further reading, NOLO has a fantastic book called Every Landlord's Tax Deduction Guide. We will link to it in the show notes. It's very comprehensive. So I would definitely recommend reading that.

Now, your final question was about short-term versus long-term rentals. At the very, very high level, my answer will be short-term rentals are more comparable to running a hotel. You are in the hospitality industry because you are responsible for consumables, such as shampoo, conditioner, toilet paper, towels, cleaning in-between tenants, and those tenant turnovers might be every three to four days. So your vacancies slash occupancy rates, your operating costs because of all the consumables that you're buying, and because of the fact that you have to send in a house cleaner so frequently, all of those operating costs and vacancy rates slash occupancy rates, you're running a completely different set of numbers. And the closest analogy to it really is

running a bed and breakfast or running a small hotel. You're also dealing with a completely different set of taxes, sales and occupancy tax. And you're dealing with different licensing requirements depending on the city that you live in. So it's just, I, I, I always wonder what, like, I understand the temptation to try to compare between the two because on the surface, it seems as though they are similar businesses in that they're dealing with the same physical underlying asset, the same physical underlying asset being the property. And so there's a temptation to try to compare the two when, in fact, they're completely different business models that operate by completely different sets of rules.

and I use the word rules in the broadest possible sense of the word, legal requirements, tax reporting requirements, analysis rules when you're trying to determine whether or not a property could be profitable. You're comparing different industries. One is the hospitality industry and the other is residential real estate as a commodity. So just because the underlying physical asset is the same, don't imagine for a second that these two fields are comparable at all. And for further reading about this, I have a very, very long series on my blog, Afford Anything.com. We will link to this in the show notes as well. It is a long four-part series on my experience as a short-term rental investor.

So we're going to link to everything that I've mentioned here, the NOLO guide to every landlord's tax deduction, the very long thorough series that I wrote about short-term rentals on Afford Anything.com. We're going to link to all of that in the show notes. And the show notes will be available at Afford-anything.com slash episode. 227. Again, that's afford anything.com slash episode 227. So thank you for asking those questions, Wilson, and best of luck with whatever approach you take. Now, we kicked off this episode with a question from somebody who wanted to become self-employed, and after that, we played a question from someone who wants to invest in real estate. So it seems fitting that the next question that we

play is from a self-employed person who wants to invest in real estate. And that next question comes from Sean. Hi, Paula. This is Sean. I've got a question for you. I have a little bit of a choppy employment past. I've been in the freelance market for a while. And so my job history is not the best for getting a mortgage. I want to eventually buy a fourplex and be able to house hack, live in one of the units with my family, and then move on from there. I think that's a good place for me to start. But I'm finding it hard to find anyone to lend me money with my job history, even though I have a decent savings account and a good chunk of change set aside for down payment on a house where I'll be able to definitely afford probably about 30% down payment.

Do you have any suggestions for how I can fund buying my first real estate property? I'm pretty new at this, so I'm still looking for ideas. I've looked into private investors and such, but I would love to hear any other ideas that you might have. Thanks so much. Bye. Sean, congratulations on being self-employed, being in the freelance market, and for deciding to buy a 4plex and house hack, because I think that's a fantastic way to get started. In your voicemail, you mentioned that you've been in the freelance market for, quote, a while. Now, I don't know how long a while is, but you need to have been in the freelance market for at least two years.

So as long as you have two years, then you should not be at any significant disadvantage as compared with somebody who has a W-2 standard employment, because you have two years of tax returns that show the income that you're making from your business. Now, when I say that you won't be at any significant disadvantage, note that I use the word significant because there are a couple of things that self-employed people need to be aware of. First of all, self-employed people, just like W-2 people, will be able to qualify for a loan based on their debt to income ratios. And so how that income is calculated is very important. Now, if you're a W-2 employee, your income is whatever you're making at the time that you apply for the mortgage. If you're a self-employed person, if you're a freelancer, your income is calculated by dividing the last two years of your adjusted gross income by $25. That's your average monthly income. So for example, if last year you had an AGI of $70,000 and the year prior to that, you had an AGI

of $50,000, well, then over that two-year period, you had a total net income of $120,000, and so that divided by $24 equals an average monthly income of $5,000. And so that amount, $5,000 per month, will be what the lender views as your income for the purposes of issuing you alone. Now, notice in this example, you earned more last year than you did the year before, right? In this example, two years ago, you earned $50,000. Last year you earned $70,000. So the business is growing. But that growth in average income isn't taken into account other than it skews the average up.

The other place for self-employed people often get tripped up is that self-employed people, in an effort to reduce their taxes, often make a lot of deductions. And if you make a lot of deductions, then your tax returns might show that you have a low net income. The advantage to this is that you've got the tax reduction for it. The disadvantage is that a lender is going to base your loan qualification on your net income. Now that said, as long as you are filing your taxes fairly and honestly, as long as you're not over-inflating your write-offs, then this shouldn't really be an issue. But that's also just something to throw out there for anybody who's listening who needs a little extra motivation to only write-off actual legitimate write-offs and don't try to over-inflate your write-offs. When you go in to apply for a loan, oftentimes lenders will ask for a letter from your CPA or from your tax preparer. So if you're self-employed, you should be working with one anyway.

Just be prepared. The lender is most likely going to need a letter from your tax preparer on that CPA's company letterhead that just is a verification of employment. And that's basically the equivalent of, you know, W-2 employees oftentimes have to produce that as well from their employer. So since you don't have an employer, they just ask for something from your CPA. And then beyond that, they're going to want to see the standard paperwork. They'll want to see if you have a business license in your state, show them a copy of that. They'll want to see your year-to-date profit and loss statements. They'll want to take a look at your bank statements.

So there's a lot of document management that goes on. The way that I typically deal with it is I have a big Dropbox folder. Inside of it, I have a lot of subfolders with everything that they're asking for. And so that way all of it gets organized in one central place that I can then share with my mortgage banker. And you might have to submit literally hundreds of documents. So it's fine. It's just kind of a time suck. You'll be spending a couple of Saturday nights, logging into bank accounts, downloading forms, uploading them to Dropbox.

So those are my primary tips for making yourself an attractive lending candidate when you're self-employed. And I do want to make one note, within your voicemail, you used the phrase inconsistent job history. I want to distinguish between truly being self-employed, like having a career as a freelancer, in which that is your full-time profession. Under that set of circumstances where you do have profit and loss statements and you are tracking the growth of your income, and you do have a business bank account, and you are working with a CPA. Under that set of circumstances, you'll be fine. You'll have to submit a bunch of paperwork, do the Saturday night Dropbox thing, but you'll be fine as long as you've been in the game for two years. But if you have, as you described, an inconsistent job history, meaning that you're using, and I don't know your situation specifically, but if you're using freelance as a euphemism for been out of work for a while, that's an entirely different scenario. And so, again, I don't know your situation.

On one hand, you said that you've been in the freelance market for a while, which leads me to believe that this is how you've been supporting yourself. You've been running this business for a while. On the other hand, you use the phrase inconsistent job history, which is not typically the way that business owners talk about their work. If you run a business, even if it's a business of one person, which is yourself, then that's your business. And you treat it as such.

and when you do that for at least two years, you'll be an attractive loan candidate. So best of luck and enjoy the fourplex. I love house hacking. I think that's a great strategy. So thank you so much for asking that question, Sean. We'll come back to the show in just a second, but first,

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my question is, do you think it's better to save 20% down so that way I net a little bit more from the profit? Or do you think it's better to put 5% down in a way to acquire more properties quickly? Thank you. Eddie, first of all, congratulations on already owning two properties and continuing to build your portfolio. Now, fundamentally, the question that you're asking deals with two topics. One is leverage and the other is cash flow management. If you were to put 20% down on your next rental property, you would have a lower monthly payment because you're borrowing less money. You have a good likelihood of qualifying for a loan with a lower interest rate, which is yet another factor that would contribute towards that lower monthly payment as well.

So the size of your loan would be smaller and the interest rate that you'd be paying on that loan would presumably could also be smaller. You would pay less interest over the life of the loan. and because those monthly payments are smaller, then with all else being equal, your cash flow from that property would be greater. And you could use that greater cash flow to either save up for the next down payment on the next property or make repairs on that property

or aggressively pay off that mortgage. When you have cash flow, you have options. And by making a higher down payment, you put yourself in a position where you're more likely to have greater cash flow and therefore greater options. Now, that being said, that all needs to be contextualized with what's your overall financial position? How much do you have in cash reserves for your rental properties, your portfolio of rental properties right now?

How fortified are you with regard to being able to withstand prolonged vacancies or repairs or damage that are in excess of what you predicted? Or major capital expenditures or big cash outlays that you didn't anticipate beforehand? And from your day job and from that gap in between what you're currently earning and what you're currently spending in your 9 to 5 primary source of work, how rapidly are you saving money and how quickly can you build additional cash reserves? Because everything that I just said about having a lower mortgage payment that would allow you to have greater cash flow from that one particular property, that difference in cash flow could be a dream. drop in the bucket compared to the reserves that you currently have and the amount that you're currently able to save from your primary occupation. So, for example, we take scenario A and scenario B. In scenario A, you make a 20% down payment, and that improves your cash flow by an extra $200

a month, which is $2,400 a year. Scenario B, you make a 5% down payment. Your cash flow on those properties is fairly tight, but you're not worried about that because you've got huge cash reserves. you're ready to withstand black swan events like prolonged vacancies or major cap-ex on multiple properties all at once and you're saving so much from your day job that you know let's say you're saving $4,000 or $5,000 or $6,000 a month from your day job and you're ready and willing to put all of that towards fortifying and building out that rental business well if that's the

situation then getting that extra $2,400 a year in cash flow in scenario A is kind of a rounding error, if that's the case. So depending on your overall financial situation, the first thing that I would ask yourself is, how cashed up are you? Because when it comes to leverage, one of the biggest risks that you can face is not having enough cash on hand to get you through an emergency, particularly when multiple emergencies happen all at the same time. And so if your personal savings rate from your day job is strong enough that you could use that money to fill the gaps. You could make big owner contributions if you needed to in order to fill the gaps. Well, then you're in a better position to take out that leverage if that's what you choose to do.

That's basically another way of saying, don't leverage hard unless you're really strong in other areas. If you're going to make 5% down payments on multiple properties, I mean, Yes, as you know, the downstream consequences of that are that you'll have a PMI payment or an MIP payment, depending on if it's a conventional loan versus an FHA loan. On top of that, you are likely to have a higher interest rate. And then on top of that, you're borrowing more money. So for an equally priced property, your payment is going to be higher. Your payment will be higher for all three of those reasons. The PMI or MIP, the higher interest rate, the fact that the loan is larger. You'll also pay more lifetime interest over the life of that loan. But if you can handle that higher monthly payment because you've got large cash reserves in place and you've got a fire hose of savings from your day job so that you're not reliant on the property cash flowing, especially at the beginning, in order to cover all of its initial outlays, well, I mean, then you're in a better position to take out that loan.

So the more leverage that you choose to take on, the more important it is to make sure that you have, a plan B, a plan C, a plan D. And if you're worried about that, or if you're unsure, then the safest option is to err on the side of making a higher down payment and taking out less leverage. The final thing that I would ask you to think about is how much leverage relative to equity you want your entire portfolio of properties to have. So forget about what any one given property inside of that portfolio has. When it comes to your entire basket of properties, how much debt do you want to hold relative to the amount of equity that you want to hold? Pick a ratio that feels comfortable to you.

And as you buy more properties in the future, make sure that that ratio that you've chosen is intact. For example, you might decide that you don't want that ratio to ever go beyond 50-50. So for every dollar of debt that you carry on those properties, you want to have that counterbalance for at least a dollar of equity. If you have a total of $300,000 in mortgage loans, then you should also have at least $300,000 in equity. I'm just stating that as a hypothetical example. That might not be the ratio that you choose, but that would be an illustration of what that 50-50 debt-to-equity ratio would look like. And that's not something that the lenders are going to enforce.

Not like that. That's something that you need to decide for yourself as an investor when you're deciding your own strategy for your portfolio as a whole. how much risk, how much leverage do you want to expose your entire portfolio to? That's what I encourage you to think about. Total amount of leverage risk and cash flow management and whether or not you have contingency plans in place in the event that the more highly leveraged properties need to be fed for a while and need outlays that are in excess of what they're bringing in, particularly doing those first few years. So thank you for asking that question, Eddie. Our final question today comes from Anonymous. Thank you for an awesome podcast.

I just got into it last year and I've been so inspired and learned so much from you. I'm in my early 30s, married with one child and own a townhome. We have a high enough income that we cannot contribute to a Roth IRA, but we both max out our 403Bs through work. I recently got the option to contribute to a Roth 403B instead and have decided to shift all my contributions there since I'm relatively young. I don't have an exact calculation, but I think we're saving about 40% of our income, although this has only been the case starting in 2019. We have about six-month savings and just started contributing to a taxable brokerage.

I'm thinking the next step is real estate. I've been discussing with my husband and learning as much as I can, but I'm still nervous to take the leap. My questions. Anywhere else I should be sending my savings? If I'm thinking of eventually investing in real estate, should I put all my savings towards that or still contribute to my taxable brokerage? Any advice on overcoming the real estate newbie fears so I can take the plunge? Also, I recently listened to some of your older episodes about net worth. When you are married, do you consider net worth for both you and your spouse as one number?

We have mostly combined finances, so I was just wondering how that would work. Thank you for taking the time to answer my questions and for all that you do. Anonymous, first of all, congratulations on everything that you're doing. You're saving 40% of your income. You are maxing out a Roth 403B. you have a six-month emergency fund. You have some absolutely fantastic stuff going on. So big congratulations for managing your financial life so well.

Now, as far as your questions, you asked two questions related to real estate. One is how to overcome real estate newbie fears. And the other is how to manage your savings, if all of it should be put towards real estate, or if it should be split between real estate and contributions to your taxable brokerage account. And in the context of that question, of course, I'm assuming that we're referring to savings outside of your retirement accounts, which will still continue. I can actually answer both of those questions together. Both of those, even though they seem like different questions, they actually contain the same answer. And that is to begin this process by forming an incredibly concrete strategy and goal.

And so what I mean by that is the following. When we talk about real estate, real estate is an incredibly broad umbrella that encompasses everything from residential properties to offices to warehouses to mobile home parks to bare land. Those are all of the different niches of real estate that you can get involved in. And in addition to that, strategies for making money in real estate include buy and hold long-term rental investing, flipping houses, purchasing tax liens, wholesaling properties. There are many ways to make money in real estate. So when we use this catch-all term real estate, we're talking about a massive universe of both strategies for making money and niches of the physical underlying asset that you could acquire as part of this strategy. And so the first thing that I want you to do is to choose specifically what your strategy and your niche is. And the fact that you're calling this podcast, the fact that you listen to me, I'm going to assume that you're interested in buy and hold long-term rental property investment.

specifically, and most likely you're interested in residential properties, meaning between one to four units, a single-family home, duplex, triplex, fourplex. And if that assumption is correct, then that's great because it means that you already have a strategy and a niche, which puts you way ahead of a lot of people who are just getting started, who aren't sure where they stand on those issues. So now that you have that, and I'm just going to assume that you do, the next order of business is to decide, at least right now, as far as where you currently stand at this time, how big of a role do you want this to play in your life? Do you want to have a strategy of acquiring one property every two or three years? So that within 10 years from now, say by the year 2030,

you'll have a total of somewhere between three to five properties? Is that what you're aiming for? or is it too early to say? And from where you stand now, you just want to buy one and give that one a try and see how it goes. And maybe that might be your only one. Choose some type of vision for how you want real estate to be part of the landscape, the context and the landscape of your greater financial life. And you don't have to stick with it. You can change this vision.

But articulate what this vision is as of right now so that you have some type of a direction that you're going in. Now let's assume that right now you just want to buy one and see how it goes. In that type of a framework, it can be helpful to buy a property that has multiple doors that has multiple units, so a duplex or a triplex or a fourplex, because that way, particularly if you're only going to own one property, the performance of one unit doesn't have an outsize impact on your total rental portfolio. In other words, you're not putting all of your eggs in one basket or in this case in one unit, right? So if you have a fourplex, you've got four units to rent out,

which means if one of those units is vacant, you still have income coming in from the other three units. And particularly when you're just getting started, if you think that this might be the only property that you own, if you aren't specifically setting out with a strategy of acquiring single-family homes, which maybe you are, I don't know. And if you are, that's a super valid strategy,

and I totally support it. But unless your strategy is specifically acquiring single-family, homes, then maybe I'm just speaking in hypotheticals, it might make sense to start with a multi-unit property. And so let's assume that that's the case for you. Then the next questions become, all right, where do I want to buy this property? What city, what state? And approximately how much do I think it's going to cost? Could I buy it in cash or do I need to get financing for it? And if I need to get financing for it, what type of financing would I get and what level of a down payment would I want to put down? So for example, if you're house hacking into this property, you could

qualify for an FHA loan that you could get for as little as 3.5% down. By contrast, if you are going to an institution like a bank or a credit union and you're applying for an investor loan, those loans often require 30% down between 25 to 30%. So the amount of down payment that you would need for this property depends on its location, its price, and the type of financing that you're getting. And once you've worked out those details, or at least once you've formed a vision around those details, then you know how much money you need to save in order to get into this property. If you want to buy a $300,000 triplex with a 30% down payment, then you know, you need $90,000 to put down plus additional closing costs, plus you want to have some cash

reserves up front in case there are any repairs or there's maintenance that you need to do right at the beginning or in case at the time that you buy it, there are some units that are vacant. You want to have some cash reserves up front for it. So in this example, that $300,000 triplex with a $30,000 down payment means a $90,000 down payment plus, let's say that you want to set aside another $10,000 for closing costs and another $300,000 for a $30,000. initial cash reserves, that means you need $110,000 in this example to get into that investment. And that guides your decision on how much money you should save towards a rental property versus put into a taxable brokerage account. Now, if those numbers sound incredibly steep,

and I'm not just saying this to you, I'm saying this to everybody who's listening, if you just heard that example and you thought, whoa, that's a ridiculous amount of money, please keep in mind, that's only a hypothetical. You can buy a single family home for $70,000, and even if you have to get an investor loan for it, which requires that 30% down payment, what 30% of $70,000 is a down payment of $21,000. So at a savings rate of $1,000 a month,

you'll have that within two years. And yes, in that example, you would still want additional money for closing costs and other miscellaneous expenses, you'd want some money for cash reserves, but just bear in mind, as I speak these numbers allowed, not to get hung up on the number itself, because the type of property that you will end up deciding to buy, frankly, is going to be what's realistic for you at this point in your financial life.

If you can pull off a higher priced multi-unit, that's great. But if you'd rather take a low-cost single-family home strategy and essentially diversify your units over time with a goal of buying $170,000 single-family home every two years. That works well too, and in that strategy you're acquiring a unit at a time. We had a guest on a previous episode named Rich Carey. He was a guest on episode 136. You can access that at afford anything.com slash episode 136.

If you want to hear a great story of somebody who bought 20 single family homes and did an amazing job of that strategy that I just outlined, the acquiring cheap single family homes slowly over the course of many years, tune into that interview, hear his story, that's a great one. But anyway, I digress. Anonymous, to answer your question, to pull back a little bit and put this at the big picture view, to the question of how much money should you save for a rental versus put in a taxable brokerage account, the answer to that depends on how much money do you need for this rental?

And the answer to that depends on what type of rental are you trying to buy, with what type of financing, if any, and where, and how soon? And in that regard, it's no different than budgeting for any other big ticket item. And to the other facet of your question, which is how do you get over that initial nervousness of taking the leap? I think going through that process of figuring out exactly what you want to buy when and how, that process can remove a lot of fear. Because when you're thinking ambiguously and amorphously about real estate as a landscape, it's so broad and so overly generalized that it's very easy to be afraid of the unknown. By contrast, it's much more difficult to be afraid of a single family home under $70,000 in the 452-331 zip code.

that needs less than $5,000 of upfront repairs at the time of purchase and that is likely to rent for at least $900 a month. When your search becomes that specific, then knowledge and its close cousin specificity becomes the antidote to that fear, because you're no longer fearing the unknown. That's how I would address those two components of your question. Now as to the final thing that you asked about, you asked, when you're married, do you consider net worth for both you and your spouse as one number? How does that work? So Will and I, when we were married, and if you heard my recent podcast episode, we recently went to trial to finalize the most of the major aspects of our divorce. But Will and I were together for 10 years.

I was 23 when I started dating him. And I was 34 when we broke up. and the divorce trial took place the day before my 36th birthday. So that relationship has up to this point constituted my entire post-collegiate adult life. That was one of the strange things to wrap my head around really two years ago when we first broke up. Because there I was, I was 34 years old. I had never been single as an adult.

never really been single after college. So that's been a new skill set that, quite frankly, that I think I'm pretty good at now. I'd say I was a pretty quick learner at that. But anyway, I realize you asked your question prior to when I made the divorce announcement. And so that brings this answer, like a whole degree of depth that you weren't intending. I know that you were only intending to ask about purely about a net worth calculation. but given the timing of this question, I'm choosing to use this as an opportunity to answer your question in a slightly more nuanced way, because what Will and I did during our relationship

was we both came in with nothing. Everything that we built, we built together. And so while we were together, we very much considered our net worth, our finances, our achievements to be shared, to belong to both of us, because of the fact that we both were blank slates when we came into the relationship. And I think that's probably fairly unusual. Like, we both came in with really no significant assets or debts. Will had a little bit of money. He was a few years older than me, so he had a little bit more, but not significantly so.

It felt significant at the time. It felt significant when I was 23, but no, not significantly so. And so for that reason, we very much considered our net worth. We calculated it together. And one of the defining moments that happened after we split up was I remember very clearly the first time that I calculate my net worth on a spreadsheet twice a year, once in approximately January, once in approximately July, like winter and summer. And I remember so clearly the first time that I opened up a spreadsheet and created a net worth tracking spreadsheet that was purely my own. And that was less than two years ago. That was about a year and a half ago.

And I gave it this great title. I called it net worth tracking in my fabulous single mid-30s life. And I carved out those numbers for me, for me and only me. And now I update this spreadsheet every few months. I updated it in May of 2019, and then I updated it again in October of 2019. So extremely recently, I've been wanting to update it more frequently because, you know, as we've separated out assets and determined who gets what, you know, not just in terms of the rental properties, but in terms of the brokerage accounts, the retirement accounts, the checking accounts, the cars, the primary residence that we shared, the proceeds from my launch of the real estate course, because I formed to afford anything when we were together. Nevada is a community property state. So there was a lot to unravel, which is why it took so long. I'm sorry, this is way more than you were asking, by the way, but this is something that I've been wanting to share with my audience for a while.

So yeah, I've been tracking my net worth very, very closely as all of that has been going on to basically take the health of my finances and know where I stand and know where I am at the moment that I hit this reset button and what things look like going forward. So I'll just share with you right now, as of October of 2019, as of my 36th birthday, I have a net worth of $1.59 million. And that is now all of the assets and the liabilities that are solely my own. And if I were to get married again, and I hope that I do, it would be a very different situation because this, unlike when I was 23, this time I would be coming into, you know, in my next marriage, I'll be coming into it. with a history. I'll be coming into it with assets. And I will make damn sure that everybody understands that that is separate property. This is mine and my own. This is the share of what I built during my first marriage. This is what I had remaining and what I had to relaunch my life with at 36 when I became officially single again.

And yeah, my next marriage, I would never ever, for me personally, I will never go all in with a partner in the way that I was with Will, not doing it, not happening. What I bring into the marriage is mine and mine alone. Whatever he brings in, if anything, is his and his alone. And those two buckets have nothing to do with one another. So that's how I would approach net worth in the future. And I realized the conversation that I'm kind of dancing around right now are all of the myriad ways that couples can combine finances,

which is still a bit of a sore subject for me because I'm so recently coming off of seeing the myriad of ways that couples can uncombine finances. But to answer your question, in my next relationship, I will be much more territorial over the bucket of money that is mine, as well as the properties and the businesses that I formed, particularly everything that I've created prior to entering the relationship. And I think that that just might be reflective of my age of being 23 the last time that I was

single versus being 36 the next time I'm single, which is now. It has, in many big ways, changed the way that. I view money, particularly the way that couples combine their money. So I know that wasn't your question, but those are many of the thoughts that I've had swirling around in my head regarding couples and net worth. So this is actually a perfect lead-in to, I want to share two really nice, very sweet voicemails that I got from listeners after I made a recent announcement on episode 221 when I announced my divorce. We got some really nice voicemails at this time and I want to share them with you. So this first comment comes from Adam. Hi, Paula. It's Adam from the UK. I haven't got a

question. I'm a long-time listener and I just heard you make an announcement about your divorce. I just wanted to say that I'm very sorry to hear that I went through the same thing about five years ago. and I just wanted to say that your comment about grieving really resonated with me. So, yeah, I just wanted to let you know that it does get better. I've now met somebody else and we're expecting our first child at the end of November. So life does get better even though you probably can't see that at the moment. So just felt like I wanted to reach out. Thanks very much.

Adam, thank you so much. And congratulations on having a baby that's due at the end of November, which as of the time that we air this episode, this episode's going to air towards the end of November. So thank you so much for being a long-time listener. Thank you for the encouragement. And congratulations on recovering and moving on and finding that brightness and that joy on the other side and on having a baby that's due around now. Thank you so much, Adam, and congratulations to you. I want to share one more comment. And this comes from. on Matt. Hey, Paula. This is Matt from Las Vegas. I'm calling first just to say thank you because of podcasters like you, Joe, OG, and others that are also often mentioned on the show. My husband and I have been heading towards FI. And about six months ago, we actually got to the point where he was able to leave his

nine to five job. And we started a massage studio in downtown Las Vegas. I'm also calling because I heard your most recent podcast. and I'd like to say that I'm sorry for everything that you're going through and I know that it's a difficult situation, but you seem to be in good spirits, especially with your birthday and the new year coming up. Thank you for everything that you do. I really, really appreciate you, the community, and all the wisdom that you provide. Thank you so much, Matt. Congratulations on all of your success on your business. And thank you for taking the time to leave a message like that.

It's sweet. I love this community. You know, we're here for each other. We support each other. I'm honored that I get to be part of this community, that I can nurture this and make space for this. And, you know, as I said in episode 221, this podcast is a really bright light. It's a huge high point of my week. I mean, this podcast is a space where I can be in this playground of ideas, thinking and talking and learning and strategizing at a very high conceptual level around everything from career to money, to business and entrepreneurship, to meaning and purpose, to improving the skill of improving skills. Like, all of that is what we explore here. And it's so much fun. So I get to show up to the microphone every week. I get to have an enormous amount of fun,

and there's this awesome community that forms around it. So thank you and thank you to everybody who's listening for being part of something that's so special and so great. So thanks for being here. If you want to connect with other people in the Afford Anything community, we have a free platform where people can connect with each other. It's at affordanything.com slash community. That's a great place where you can ask questions, exchange ideas, offer encouragement, and connect with all the great people inside of the Afford Anything community. Again, it's totally free. It's afford anything.com slash community. Affordanything.com slash community. Thank you to everybody who has left us a rating or a review. As of the time of this recording, we have more than 1,900 reviews on iTunes, which is now known as Apple Podcasts.

So please jump in with a rating or a review. My goal is to get to 2,000 reviews by the end of 2019. 2000 to kick off 2020. So I want to give a shout out to C. McElvey for their amazing review. They said, quote, Afford Anything is my all-time favorite FI podcast. After listening to the show for a long time, I finally decided to phone in and ask a question of my own.

Paula's advice blew me away. No other host pays this much attention to questions and breaks them down the way that Paula does. If you want to learn something every week, subscribe to this podcast right now and tune in. You won't regret it. Thank you so much, and I'm really glad that... I'm glad that my advice resonated,

so I'm honored to hear that. And I echo your recommendation. For everyone who's listening, please make sure that you hit the subscribe button or the follow button in whatever app you're using to listen to this show. I'll take a moment to thank the sponsors who make this show possible.

Sponsors for today's episode are policy genius, gusto, native, and grove. If you'd like to see a complete list of all of our sponsors and plus all of the discounts and the special deals that they offer, go to afford anything.com slash sponsors. Thanks again for tuning in. This is Paula Pant recording from a hotel room in Quito, Ecuador. It is just past midnight, so I think I'm going to go to sleep. But thanks for tuning in, and make sure you're subscribed, because I will catch you next week.

By the way, my lawyer says that I need a disclaimer, so here we go. This is purely for entertainment purposes. Basically, imagine that this is the least funny comedy show that you've ever listened to. We are not professionals. We barely can brush our teeth in the morning. And so we don't hold ourselves out to be experts or really for that matter even adults. Give us the same amount of respect that you would give, say, a goldfish. And always, always consult with a real.

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