Afford Anything - Ask Paula: How Do I Talk to Friends who Ridicule the Idea of FIRE?

Episode Date: April 1, 2019

#185: Hello from Austin, Texas! I’m living in an Airbnb here for the next 5 weeks. Listen to the end of today’s episode to find out why … and discover how these next 5 weeks, for me, exemplify the “why” of financial independence. In the meantime, though, the show must go on! Here are the questions that we’re answering in today’s episode. An anonymous listener named Seeking FIRE wants to know how she can talk about financial independence with people who ridicule the topic. What do you say to those who laugh at the very idea? Russell owns a landscaping company and is also a part-time student. He’d like to earn more money on the side, but his schedule is overbooked. What can he do? Nick and his family are moving to the Washington D.C. area for approximately two to six years. They own two rental properties free-and-clear, and would like to buy a personal residence when they move. How should he save for the downpayment? Gerardo lives in Mexico and wants to retire on his investment portfolio, using the 4 percent withdrawal rule. How should he invest, given currency fluctuations and other international factors? Anonymous left her job and wants to know if she should roll over her 401k from her old employer. We tackle these five questions in today’s episode. We also answer a comment from a listener who says that individual stock-picking and active management doesn’t get the credit it deserves. For more information, visit the show notes at https://affordanything.com/episode185  Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else, and that doesn't just apply to your money. It applies to your time, your focus, your energy, your attention. It applies to anything in your life that's a scarce or limited resource. And so the questions are twofold. Number one, what's most important to you? And number two, how do you align your daily decisions in accordance? Answering these two questions is a lifetime practice, and this podcast is here to explore that.

My name's Paula Pan. I'm the host of the Afford Anything podcast. And today, my buddy, former financial planner, Joe Saul Seahy, is with me on this show to answer questions that come from you, the audience. What's up, Joe? It's that time. I'm so happy to be back. Thank you for having me. We are answering some questions.

I love it. And we got some good ones today, too. Yeah, excellent. I mean, not like we don't always have good ones. I'm just, if you've asked us questions before, don't get upset that I called these ones good ones as well. But we're going to have some fun today. The first question comes from Russell. Hi, Paula. This is Russell from Sonoma County. I'm 31, and I have about a year plus worth of savings in my savings account.

I have a mutual fund that has roughly $12,000 that I continuously add to very, very frequently every day. I am going to school part-time, as well as I'm a single owner and operator of a landscaping business. While I'm going to school, I can really only work about three days. And I feel like I'm just kind of missing some extra income. And I'm wondering, what is the most passive way of getting some extra income you've found? I've thought about opening an online store or growing some extra vegetables and making some spring mixes and selling that around my neighborhood. But those all seem to take some amount of time and management. And my question to you is, is for someone who's overbooked in life, is there still a way we can make a little bit of extra income when we feel up to it?

Thanks, Paula. Love the show. Thanks for the question, Russell. You know what's interesting, Paula? What's that? I look at Russell's question a little differently than he does. Let's just break down the three parts of Russell's life. Russell has his landscaping business, which is his number one source of income.

My assumption is, is that when he thinks about making money, that he probably has enough expertise that he could make more money there. Right. But he doesn't have the time to do that. So he's thinking about passive income, which initially seems smart, except for there's this third thing going on, which is school. And my question is, is Russell, and I don't know the answer, but is Russell actually asking the right question?

Because my number one question isn't, how can I fill in this? income, which will help me through the next year, two years, however long Russell's schooling's going to take. My question is, is there a productivity, kind of don't like the word hack, but let's go with it? Is there a productivity hack? Is there a way to manage time better? Is there a way to do things so that he can get out of school more quickly?

Because let's be realistic. If he's going to grow a few vegetables on the side for a season or two, why would I do that versus push up my graduation date by six months or a year, get that certificate, whatever he's going for more quickly, which ostensibly is what's going to give him more income. I think the key to him having more income should first revolve around how do I speed up getting that degree. That makes a ton of sense because there's an opportunity cost with every year that that degree is delayed. Yeah. And it's a compounding one. You know?

I mean, that opportunity costs is at one time. But if he can earn X amount of money six months earlier, the lessons he may learn or the new contacts he may get or the new position that he's able to achieve, these often happens sequentially. And the quicker he can start that sequence, the faster he gets the last doubling like you do, you know, as your money doubles. Yeah, I agree. Russell, it sounds as though you don't have an urgent need for money.

I mean, you've mentioned that you have an emergency fund that represent. represents one year's worth of expenses, which is fantastic. You have additional savings and investments as well, and you're adding to that daily while you're a student and you're running your own business. So you're already doing really well. So I echo Joe. I don't see an urgency for you to burn yourself out or spread yourself too thin, given the fact that everything seems to be really good. Yeah. I really like the fact that he has. money in the bank, he has reserves. This might even be a time when he uses the fact that he has reserves to his advantage to help him go more quickly. Possibly, yes. And Russell, I don't know

how you're paying for school if you're cash flowing it, if you're taking out student loans. Regardless, the fact that you've got that one-year emergency fund plus additional savings on top of that, you're in a very good spot for where you are. When you ask specifically about how to make more money, you know, when I listen to your voicemail, the first thing that popped into my mind was your landscaping business. Oftentimes, concentrating in your core business is more efficient than trying to start a secondary thing on the side. Now, I'm assuming, as Joe is, that there's some reason that you can't double down on the landscaping business, whether it's a time crunch or it's seasonal. There's, I'm assuming, some factor that limits your ability to double down on that

at this time. If you could, I think that's where you're going to see the greatest income boost. But I agree with Joe. Finishing the degree as fast as you possibly can is in the long term the thing that's going to get you the most money. We can also, though, tackle his direct question. I mean, I don't mean to just frustrate Russell. But there is an older book by a really smart guy guy named Jay Abraham. And the book is called Getting Everything You Can Out of All you've got. And it's a way to take his landscaping business. And what I would do rather than creating something that is completely different, because Paul, I agree with you, that switching, you know, and there have been plenty of studies done on this, switching from task A to task B

requires a lot of energy and there's a lot of noise and it's difficult to refocus on the new thing. But what Jay Abraham writes about, if you can take what you're already doing and create new income streams from what you're already doing possibly. And he talked about this a little bit with, you know, maybe growing some plants or things like that. I would think about how can I create new income streams with the business that I'm already running. Joe, you and I are agreeing too much on this question. What is up with that? Right? We're supposed to disagree. But so Russell, the reason that I agree, because I don't want to just give the answer. I want to talk through why I think the way in which I do. If you imagine a car, accelerating from zero miles per hour to 10 miles per hour requires more energy than accelerating from 10 miles per hour up to 20 miles per hour.

If you take that metaphor and apply it to the business that you're running, the fact that you already have a landscaping company, the fact that you've already done the upfront work of getting that business up and running, you've built the initial momentum, that's the reason why. why that's your best, most efficient source of additional income at this time. If you were to start something new, you would be starting something new. And starting from scratch requires a much greater input of time, energy, attention than growing something that's already established. There's other questions I'd ask too, Paula, that have nothing to do with more time. And that is, if you look at the pricing structure for his current client, is he pricing his current business as effectively as he can back to j abraham as an example he

talks about how AT&T verizon google whoever's running the internet to your house they have the ability to give you all the internet and as small business owners we usually give people the whole service but instead what does AT&T do well if you pay us 30 we'll give you this little bit if you pay us $50 will give you more. They already have all of it. It costs them negligible money to send the thing to me, but they price it into three different ways so that they're able to show perceived value. There is really no extra effort they're doing sending you 75 versus 100 or 25 versus 100. There isn't more effort that goes into that and yet they're able to price it differently. Is there an opportunity there, Russell, with your business? Possibly. The other idea,

But take this one with a grain of salt is hiring out and bringing more people into the landscaping business. But that being said, the process of setting that up is going to be a time suck. The process of finding people, hiring them, training them, that's a huge upfront time suck. So in the long term, that can be a time saver. But in the short run, it's going to be an even greater demand on your time. That's something that perhaps during a break from school, you've. could look into. Yeah, long-term, that's absolutely fantastic. I remember a mentor telling me once that if I don't delegate to other people, the speed at which I can move is only the speed of

my two hands. And the key to making things go faster is to apply more hands to the situation. Final thing that I have to say about this, and this is really for the sake of everybody, zooming out and looking at passive income in a conceptual way, because Russell, you're question was, how do I create passive income? Passive income comes from frontloading the workload. So when you want to create passive income, and not just you, Russell, but anyone listening, you're going to work ridiculously hard in the short term so that you can relax in the long term. And so Russell, for you in the situation that you're in right now, which is that you temporarily, because you are a part-time student, have this time.

crunch, this is the worst time for you to take on an additional project of creating passive income because this is the phase in which your time is already super crunched due to the fact that you're a student. Once you graduate, once you're no longer a student, then you will have some extra time and that would be a much better time to create passive income because again, passive income requires front-loading that workload and having a few really, really rough years in the beginning so that you can chill out in the coming decades. In that regard, building passive income is not unlike going to school. You go to school and balance that with work and have a few really rough years so that you can enjoy the fruits of that in the decades to come. The process

is very similar. You upfront the suckiness. So thank you for asking that question, Russell. Our next question comes from an anonymous caller who goes by the term seeking fire. Hi, Paula. Thanks for the podcast. I really enjoy it and I learn a lot from it. I really enjoyed your episode about getting friends interested in the fire movement. But one piece I thought was missing was how to get people interested that almost laugh at you when you bring up fire. The episode seemed to be focused around people that were interested and where to get them started. but I have friends that I have brought this up with and they laugh at me because they have children and they need to put their children through college. So they say, yeah, we'll start to think about retiring once.

We're good on our kids' college plan. Now, they think that because I do not have children, that I do not have to worry about this, which I don't, and it is a large sum of money, but I still think that they can retire early or think differently about it, like not driving so far to work and not driving gas-guzzling cars, not getting caught up in the consumerism of the market, and because we make these big salaries, we should spend it and show off what we have for it with expensive cars and big houses and lots of upgrades and luxurious things, vacations, things like that. So that would be my question is how to get folks interested in when they laugh at you about fire.

And maybe the answer is they're not ready to hear it. They need to hear it on their own or when they're ready. Thanks. Seeking fire, I hear two questions within that. There's the question of how do I achieve fire if I have children to put through college? and then there's the question of, how do I explain fire to somebody who laughs at me? I'll take the second question first. If somebody isn't open to the idea of fire, then they're not open to it.

So there's no use trying to convince them to come on board. There was a famous dog trainer once who was just excellent at training dogs to jump through hoops. Somebody once asked him, what's your secret? and he said, well, I pick the dogs that want to jump. His secret to being a good dog trainer to, like, being excellent at training dogs to jump through hoops, was that he didn't work with the ones that didn't want to learn it. Same thing when it comes to talking to people about fire. So that's the answer to that portion of the question.

Now to the other portion, which is, how do you achieve fire if you have children to send to college? Let's look at that in purely mathematical terms. Because what I love about math is that everything is solvable. You solve for X. Now, as you and I both know, there are many ways to decrease the cost of college and make it far less expensive than people assume. So, for example, when the child is in high school, if they have the aptitude, they can take the advanced placement exams or the Klep exams and test out of an entire semester's worth of college. material, which would enable them to graduate in three and a half years instead of four.

They could spend the first two years at a community college and then transfer into a four-year public institution at the end of those two years. That would also save money. There are scholarships. There are many, many ways that you can decrease the cost of college. But without even going into that, let's just play ball and let's assume, for the sake of example, that you want to save $100,000 per child. right, and you've got two kids.

So you want to save $200,000. Let's just, I'm just going to run with those numbers so that we can have some big numbers to deal with. If your cost of living is $40,000 per year and you invest in a portfolio of 50, 50, 50 stocks and bonds that you draw down at a 4% withdrawal rate, that means you need a portfolio of $1 million in order to get to that $40,000 per year. You also want to save $200,000 so that your kids can go to college. Okay, your fire number is $1.2 million instead of $1 million. That's your X. Now, solve for X. How much do you have to save at what assumed rate of return for how many years before you have a portfolio of $1.2 million?

$1, mathematically speaking, the X that you're trying to solve for in this example is $1.2 million instead of $1 million. I don't think that's so laughable, given that people in the fire community have very different fire numbers. And everything comes down to a mathematical equation. I used to speak at companies, and specifically to your point, Paula, I would ask people how they pick their investments inside their 401K. And they'd say, well, it's based on what I can afford to do now. And I would ask what to me was the obvious question, which is, where is that going to get you? And you and I both know what the answer was, I have no idea. But if you start with the end in mind and work backward, you say, I want this pot of money at X time.

And I work backward to today, how much do I need to save and what rate of return do I need to get it? All of a sudden, the picture becomes much clear. And that clearly isn't laughable. but I'm with you. You know, all you can do is create the hayride and put it out in front of people at the campground, invite people to come in and join you on this fantastic trip you're taking. And whether they get on or not is completely up to them. Yeah. The thing that I will say, though, I will say this because I'm a little spicy today.

Mm-hmm. You know, I'll use an analogy. I really like board games. and I know people who like board games as much as I do. And when I hear them talking to their friends who have never played a board game before, and they go, hey, there's this community of people. And they all love to sit around and geek out at a table and do whatever. I can see the person they're talking to pull away like, I can't go to meetings.

I really can't drink all the Kool-Lade, right? And it seems like this closed community. When I talk about board games, only because I'm 51 years old and I've learned to watch when people start pulling away, talk about board games. You know, people will see my games or it'll come up and they'll go, oh, you really like that stuff. I'm like, you know what? It's more about just hanging out, having friends, chatting. And the board game's fun too.

Like, we have a good time and some of them are pretty fun. And I kind of downplay. And the more I downplay, guess what happens? And the more I talk about friends and being together. and being able to do what I want, the more they lean forward, and then they're not afraid to play. I have a very well-crafted persona

that my friends will tell you that know me really well that I've developed, and that's that I'm crappy at board games. And I'm crappy, and by the way, I'm not. But the reason I crafted that is because it's much more approachable and more people will play games with me if they think they don't have to be fantastic at it right away. And so think about this from the other person's point of view,

If you come up to me and you tell me there's this tight-knit community of people who get together and talk about how I pick the perfect investment so that I can retire at age 28. I'm sorry, nothing sounds like more fun to me, but I don't think I can make it that day. But instead, if you, and by the way, and I don't know, and I'm not picking on you, and I don't know how you're presenting it, but I have heard that before. People really into more of the close community thing. Instead, it's, instead if you just kind of shrug and go, you know, this, it's cool because it's about being able to do what I want when I want, which is fun. I love the fact that I can take a vacation when I want.

I could probably put my kids through school quicker, you know, if I had kids, I could, I could probably, but if you kind of relax on it and talk about the freedom it gives you and probably less about the community, some people I've heard describing the fire movement, if they were a little less movementy, it may go. go further. Don't make it so obvious that this is a cult. Right. The first objective in getting people into the cult is to pretend it's not a cult. Don't let them know it's a cult.

That's right. But, you know, I heard somebody, I think on a YouTube video, I forget which one, someone made the comment, what is a nerd other than somebody who's extremely enthusiastic about a given topic? Sure. I was like, wow, that's a perfect definition of nerd. So there are board game nerds. There are personal finance nerds. There are science nerds. Like, there are nerds of every genre. And that's what's frustrating for us is because we want our friends to share our nerdery and we get excited about it. And it's hard to recognize that the way we talk about it matters. Right. Nerdie talk appeals to nerds. Right. And only to nerds. Well, maybe. Maybe because I have to tell you when I get a friend of mine to come to board game night, and I've been pretty successful in Texas, I had a group of 20 guys who were on our list to come to board game night. And none of these guys are guys that would have called themselves board game players before that, or maybe a couple were, but hardly any of them. In Detroit now, we're up to, I think, 10 guys. And I've only been here for two months. And I'm trying to proselytize to everybody I know. But once I get people, here and they see that it is about having fun, the games take care of themselves. And all of a sudden, when people start going, oh, the game seeks, so I think people find the

nerdery later. You know what I mean? I mean, because you and I is nerds, Paula, we know we're after flexibility and we're after being able to do what we want. But you and I then learn to have fun talking about the fact that this particular fund is at a 0.06% expense ratio. And another one is it But that's fun once we share the goal. Right. It isn't fun for somebody that hasn't yet been introduced to the goal. It's so fun. I love the enthusiasm, though.

Yeah. So I guess the lesson is to go back to the metaphor from the beginning, if the dogs are around the hoop long enough, more of them might want, eventually might want to learn to jump. That should be the title of this episode. Or not. Thank you for asking that question, Anonymous. We'll come back to this episode after this word from our sponsors. If you've been reading my blog for a while, you see that I pretty much always wear yoga pants because they're comfortable. But the problem is that when you go to a conference or you make a speech or for those of you with jobs when you go to work, you have to wear workplace appropriate pants.

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I'm single, 34 years old, and I'm getting married December next year. I inherited three properties with no mortgages. Two of those I rent them to local businesses. One of them has been renting the place for more than 20 years, and the other one is with a very popular motorcycle company, so they are relatively stable. The other property is the house where I'm going to live once I get married. Both rental properties generate $58,000 annually,

which here in Mexico is a very good monthly income. I want to retire with the 4% rule, as you had mentioned on the podcast. To accomplish this, I want to do it with Jim Collins' systems, the simple path to wealth. I want to replicate that from my country. In Mexico, the only tax benefit we have is that we pay the 10% on stock capital gains and nothing more. With all of this in context, here are my questions. One, currency risk.

Does the currency fluctuations could affect negatively the amount invested in index funds over time? Two, invest only in US or worldwide. Here in Mexico, we have access to Vanguard only by ETSs like VTI and BT. Given my particular position with rental properties, will you think I have the possibility to invest with more risk and aggressively? I mean, should I choose VTI or VT? 3, from ETFs to funds.

Vanguard has plans to bring investment funds to Mexico. When that happens, is it a good idea to sell all my ETFs and send them to the investment fund? Or should I leave it as it is and keep going with this strategy? I would love to hear your opinion on what would you do if you were me in a particular situation. Thanks. Hey, Harardo. Congratulations on the wedding.

Awesome. Yeah. That's awesome. And by the way, I'm sure that Paula and I have invitations in the mail, and thank you. Very nice. We'd love to attend your wedding,

especially because I live in Michigan, if you plan it for December or January. I'd appreciate it. It'd be great. July, maybe not so much. but let's dig into these, Paula. I think when it comes to currency risk, currency risk, you know, can be a big risk. You look at some economies where the currency is all over the place and it can be difficult.

But really, if you're looking at as an example, the euro versus the dollar, the yen versus the dollar, there's some currencies that are very stable. So currency risk is always something that you think about if you're investing in other currencies. I live right now in Michigan, right on the Canadian border, and right now there's a huge difference between a Canadian dollar and a U.S. dollar. And there have been times in my life when they've been at par. So currency risk always plays a... The problem with currency risk is we don't know where it's going to head next, right? So what I would encourage you to do is to, A, look at the volatility of the currencies that

you're involved in. And if there's not a ton of volatility, I kind of like having different currencies. because then I can pull from different buckets. I can pull from the bucket that's up at that time. But if I'm not already an expert in that area, if I already don't have lots of different buckets of currencies, I would stick with the currency where you're spending the money because of the fact that it simplifies your goal so, so much more.

Right. And then you don't have to worry about conversion as well. Currency conversion fees, transaction costs, all of the upfront fees that come with playing the currency game. Yeah, you don't have to run to the airport and get ripped off by the currency exchange person. If you're getting your currency and you're doing it at the airport, I'll tell you you're doing it wrong. Yeah. But anyway, next, next was US versus worldwide.

It doesn't matter where you are. People suffer from the risk of investing too much in their local economy, what they know the most. And studies have shown that it is much, much, much better to take a worldwide approach. For risk purposes, that hasn't always played out for return purposes. So please don't write Paul and I saying, well, returns have been better. Okay, that's fine. Risk-wise, it's always better to bet on a collection of places rather than just the United States. With regard to the last question, exchange traded funds versus Vanguard bringing some new investment funds to Mexico.

I don't know what they're bringing. I don't have the details about what they're bringing, but Paula, you and I can go over what we should probably think about. Number one is fees. Expense ratio. Yeah. Yeah. Because if I'm getting the same thing,

if I'm getting the same type thing and it's going to be more expensive, why would I do that? Right. Fortunately, it's Vanguard, so hopefully it'll be reasonable. Yeah. Oh, I would definitely think so. The second thing is the currency risk. If the exchange trade of funds you have now are invested in dollars and in Mexico you get rid of that risk, you know, maybe it makes sense to have both.

Leave your ETFs, your exchange traded funds invested as they are and use the new funds to build money in Mexico as well. Right. So VTI and VT that will give you exposure to total U.S. stock market and total international. And that can be the U.S. dollar portion of your portfolio. Yeah. And then when this new opportunity emerges, now you have another bucket to pull from. And then last is, are the new funds, because you use the words that you talked about investment funds, are those going to be actively managed versus passively managed? The way things are currently, the way things are laid out right now, I think that going

with a passive approach is a better way to go. as actively managed investments continue to develop, and we will talk about the future later, I think that there might be some exciting opportunities, but I certainly wouldn't base the hull of my investment ship on actively managed funds. I would base them on passive funds. Right. Absolutely. And again, given the fact that it is Vanguard, I would imagine that, yeah, I don't know what they're rolling out, but I would imagine that they would have something passively managed with a low expense ratio. which means there might be a very good argument for keeping a portion of your portfolio in it. And Paul and I certainly aren't experts in Mexican investment choices. So I wouldn't rely on this. But if you wanted to write us back once that becomes a reality, I'd be happy to take a look at it. And Paul, I'm sure you would too.

Absolutely. So I hope that helped. Thank you so much for calling in. And congratulations on your upcoming wedding and on your three. properties. It sounds like you're very well set up. You've got a good thing going. So congratulations on managing what you have so well. He said it's a popular motorcycle company. And that just makes me think of like some cool motorcycle brands. Wouldn't it be cool if it was like Dukati? Paula knows a ton about motorcycle. I'm just sitting here with a completely blank stare

shrugging right now. Uh-huh. Yeah, Dukadi, whatever that is. But that would be neat. Our next question comes from Nick. Hi, Paula. This is Nick. I've been listening for about six months and I'm a first-time caller. I have a question about saving up for a down payment on a house by reducing my contributions to the TSP.

We're transferring to the D.C. area in August 2019, where our family will be living for about two to six years. We're considering buying a single family home for our family in the Virginia or Maryland. area, and they're looking pretty expensive. I'm considering reducing my TSP contributions for a few months to save up enough for a 20% down payment. We currently have about 80,000 saved. A little background. I've been maxing out my TSP contributions since 2001. We have two paid off rental properties in the south, and currently paying about 1,400 amounts on a rental property in the Pacific Northwest, with a positive cash flow. Our household gross income is about 160,000 per year, and I'm just

wondering if I should reduce my TSP contributions for a few months, then make up for it later in 2019. Thank you so much. Nick, thank you for asking that question. So the first thing that comes to mind, you mentioned that you're going to live in this area for between two to six years. I'm going to throw this question back at you. Do you think that it is prudent to buy a home in a high cost of living area if you're only going to live there for between two to six years, given the fact that that once you pay the closing costs, the transaction fees, all of the expenses that are incurred when you buy and sell a home, plus given the fact that while you're living there, a very negligible portion of your PITI mortgage payment, principal interest taxes insurance, mortgage payment is going to go to principal, the bulk of it's going to go to interest taxes and insurance. Renting might be better for you. Now, I say that with the assumption that when you leave you. the area, you would sell the home. So if you were to leave the area and then hang on to this home as a

rental property, then that changes things. And then we would, of course, have a conversation about what property are you going to choose in the context of this has to serve double duty as a personal residence and as a rental. But assuming that this is purely just a personal residence, and you're going to sell it when you leave, and you're going to leave in between two to six years, why would you buy? Yeah, I'm, I'm on that train completely. The way an amortization table works for people who don't know is that the bank makes sure they get most of their money up front. It isn't like a car loan or a credit card where it's a straight line of interest as you go. It's the bank gets 99% of the payment. I'm making these numbers up, by the way, 99% of the payment,

then 95, the 90. And toward the end of your loan, the lifetime. of your loan, you are paying very little interest. And so when a bank quotes you a 4% interest rate on a loan, that's if you follow the exact term of the loan for the 30 year period or the 15 year period or whatever it is. So with a two to six year time frame, that was my first thought, is that you're really going to spin your wheels and to take away long-term money that will add to your nest egg so much, especially, you know, going back to what we talked about earlier with compounding interest. I don't think I'd do that in a million years.

But, Paula, that conversation changes for me if you tell me that when you leave the DC area, that you're going to add this property to your rental portfolio. Then, okay, now we've got a strategy that maybe we can work with. Right. And so, Nick, if you are going to do that, if when you leave the DC area, you are going to hold on to this property as a rental property and assuming that you buy a property that worth holding onto as a rental property. In that case, then to answer your question directly, which is, do I reduce contributions to a TSP in order to save the money for a down payment?

I would actually take an alternate approach. You mentioned that you have two fully paid off rental properties. Cash out refi one of those rental properties and use that money for a down payment on this third property. Ah, yeah, yeah. Yeah, much, much better idea. Yeah, exactly. That way you can continue making contributions to your TSP and also get the money that you need in order to make a down payment on the property in the D.C. area, which will become your next rental property when you leave D.C. in two to six years. The only downside that you need to be aware of ahead of time of doing a refinance on a house that you don't live in versus your main residence, the place where you live, is that the bank is going to charge you a little higher interest rate

on that money than your primary residence. But as a lot of the bank, long as you know that going in with a big quote to your rate, I just don't want you to flip out and go, wait a minute, hold on. They're not trying to repue off. They get more worried about houses that you don't personally occupy than they do about your primary residence, which is why they bump up the interest. Right. And don't forget that higher interest rate that you would pay on a cash out refi, that applies only to the money that you're borrowing in order to get the down payment so that you can then take out a primary residence mortgage on a the house that you're going to occupy in D.C. So essentially, the house that you occupy in D.C. will be cobbled together between two mortgages, one that's a primary residence mortgage and the other that is the cash out refi from the rental properties that you own free and clear. And really looking at the aggregate interest rate between the two of those, if you're coming up with the money, a small amount of money to fulfill that requirement and the much larger amount of money, the lower interest rate, your interest rate overall on your money, Paul, is going to be just

marginally higher than it would be. And easily, by the way, less than you would expect to make long term on your thrift savings plan, which is the key is to preserve your ability to put that money away. Right. Exactly. You know the other possibility that I would look into and I would run a spreadsheet like deep diving into these numbers to see which one is going to make more financial sense? But you mentioned that you want a 20% down payment. I would look into what the additional interest plus P.S. or MIP would cost you if you were to buy a home, a personal residence in the D.C. area, with less than 20% down because it might be the case that buying a home with 10% down or even taking out an FHA loan and getting a home with 3.5% down or 5% down, it might be the case that that would be a better deal for you, even after paying for either PMI if it's a conventional

loan or MIP if it's a government-backed loan. So what I would do is I would run a spreadsheet looking at that option, the less than 20% down option, as one of two choices, and then the cash out refi option as the other of two choices, and then just see how the numbers play out. Great idea. I love the interesting correlation, though, here between Nick's question and Russell's question earlier. This is something that. that a good financial planner or a friend who knows a lot about money and your goals will look at. And that's this very basic premise that usually, because we're so excited about whatever it is we're doing, that we skip over, which is, are we asking the right question in the first place?

Notice how both of these cases, I think we question the premise. And I think that always has to be job number one. Is the premise something we should really be considering? or is there a third alternative or a second alternative? Is there some other answer outside of our scope that might be a better way to handle this? Exactly. Well, thank you, Nick, for asking that question. And enjoy your move to the D.C. area.

Our final question comes from Mo. Hey, Paula, thanks for everything you do. Love listening to your podcast. I have a question about a 401k rollover. I left my job and started a new one at the end of September. in 2018. It's currently just before the new year in 2019, and I'm wondering whether I should roll over my 401k to my new employer's plan now, or if it's better to wait a little bit since the market is in a little bit of a downturn. I don't really know a ton about markets.

I just know that I want to roll everything over so that it's in one account and so that I can track it easily. The accounts are already well balanced based on what you recommend, so I didn't know if it was better to roll it over now and consolidate or if it's better to just leave it where it is for a year and then roll over next year. Thanks so much. Appreciate it. Mo, thank you for calling in and asking that question. Now, first of all, there is, we get a lot of questions here. So we have about a three-month lag time right now between when we receive questions and when we are able to play them. And so that actually makes answering this question really interesting because you asked this question in December of 2018, and now we're answering

it in March of 2019. And so we have the benefit of hindsight to see how the past few months have gone. And as you've seen, it happens to be the case that the markets did well at the beginning of 2019. However, as you have heard on this show many times, beware of resulting. Resulting is judging a decision based on the outcome rather than the decision-making process. In this particular case, yeah, the markets were jittery in December of 2018, but it still did well in the beginning of 2019, so the result of the stock market in the last couple of months is positive. Sure. But that outcome is not indicative of anything when it comes to the decision-making process. The decision-making process requires asking the question, statistically speaking over a long-term aggregate average, what can I most reasonably expect would be the decision that would give me the highest likelihood of a positive outcome?

And that's basically a long and fancy way of saying, of taking this concept called expected value or EV. This is a concept that comes from the world of poker. Essentially, you're asking what is a plus EV decision? And what we know is that on average, over the long term, on any one given day, any random given day that the markets are open, the markets tend to go up more than they go down. So putting money in the market on any given day is a plus EV decision. Over the long term, it is more likely to do better than worse. And in this case, Paula, and this is a key consideration because people used to ask me this all the time when I was a financial planner, the money's actually already invested. It's already in the market. So whether you

wait or you do it now, your money's still on the bumpy roller coaster ride that you're worried about. So my feeling is if there's a place that you don't want it, which you don't want it there because it's suboptimal versus the optimal place you want it, why would I wait to move my money to a more optimal position, especially if it's a roller coaster ride that I'm worried about. Right. If I'm worried about it, I want it in the more optimal spot where I'm more confident that it's going to endure that roller coaster. So I definitely want to do it sooner rather than later in that case. Right, right.

I'm assuming she mentioned that her asset allocation is looking good, but I'm assuming that when she rolls it over, she would probably be choosing some different investments. Sure, right. But probably, you know, similar cash stock to bond to whatever. I'm going to tackle the other part of that. I'm actually going to give Mo another point of view when it comes to rolling that over to her new 401k plan. Here's what I worry about. Depending on your 401k plan, they might have five options. They might have 15 options.

They might be great at international funds, but horrible at large company U.S. stocks. They might have horrible choices when it comes to small companies and you need some of that, whatever. To find a 401k plan that has everything is not always the case. And it might be. And by the way, let's say that it is. Let's say that the 401 plan right now that she's moving to is fantastic. If the committee that decides about that 401k plan, they decide to do something different that is attractive to Mo later.

If all your money's in that 401K, your ability to make a different option outside of what their choice is, is zero. You have to do what's in that plan. So for that reason, and listen, I get the one, I totally get the one dashboard thing. I mean, if I'm on a road trip to wherever party central that I'm going to, I don't want to have five dashboards. I want to have one thing that tells me what my speed is, one thing that tells me how much gas I have in the tank. But I'm going to still make the case for two instead of one. one place where you're working it currently and then an IRA that you can bend around that current workplace retirement plan that maybe overemphasizes a little bit the things that you don't have

in your 401K. So let's say that you don't have good international choices in your 401k at work. Don't invest in any international there. And instead choose a fantastic exchange traded fund in your IRA that makes up for it. And now you've got a great asset allocation between the two places. And with a good part of your money from your old job or jobs, you never have to worry about somebody else being in control. With an IRA, you are always ultimately in control of your destiny. Boom.

Got it. And who doesn't want to be in control of their destiny? I am always excited about being in control of my destiny. Really? You're always excited about being in control of your destiny, Joe? You wake up in the morning and you think that? Yes. I am in control of my destiny.

And Cheryl looks at me like, what's that? What's all you talking about? You know what that means in my life? It means that I'm going for a five-mile run versus a seven-mile run because I'm in control. Exactly. And then you're in control of what you eat after that run? Yes, whether I have three donuts or five donuts. So thank you, Mo, for asking that question. We have a comment that we are also going to share. I wonder what this could be about. We will find out after this final word from our sponsors. Are you tired of getting nickel and dimes by your bank? Are you looking for a bank that's going to pay you a high interest rate on a checking

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Go to grove.com slash afford anything to get this exclusive spring cleaning offer. Grove.com slash afford anything. Hey, Paula, long-time listener. Hey, your partner, I think his name is Jonathan? made me cringe when he basically made the statement that active stock picking and management is dead. And I hear this a lot in the fire movement. And it always, again, makes me kind of cringe. I don't know why people say this. And I'm not advocating stock timing. But I have used the same process that I invest in real estate where I try to find a house that I believe is undervalued, that value can be added to.

And then I buy it and I hold it for life. I've done the same thing very successfully with stocks. And I'll give you two quick examples. One, I live in Texas. And so I'm 48 years old. I've seen many booms and bust in the oil market. Well, this recent one in 2015, oil went from 100 to 30. It's not going to stay at 30.

When will it go back up? I have no idea. But here's what I know. All of the stocks were super, super low. And so I just made a value assessment. And I bought what would be the easiest pick, the XLE, which is an index fund of the top oil manufacturers. I bought a little Conoco. I bought a little Exxon. I bought a little Chevron. My time frame. My life. And so I wait. And I don't just recently here in 2018, I sold off a portion of those stocks. I'll hold the rest for life. And I've taken that money. And now I'm looking for where's my next undervalued large cap blue cap stock? A while back, I'm in Walmart. And I see people in red shirts. And they're doing some sort of inventory thing. And I noticed they don't want. work for Walmart. And I said, ma'am, excuse me, what are you doing? And she told me they were an

inventory company. I got out my little smartphone, did a little research. And this was a company that you would call in when you had inventory problems. And so I did a little research. And I went and looked, and I could find nowhere where it said Walmart was having inventory problems. And so I wrote it down and I waited. I went and looked and see, well, when does Walmart report their earnings? Sure enough, when they reported earnings, the stock got crushed, felt like 8% because they had an inventory problem. Investors tend to panic. So I waited a couple days. Stock had come down about 10, 15%, and I began accumulating shares, not a lot, like 150, 200 shares, which I went on to sell for like a 30 or 40% gain because I knew Walmart was already on top of it. They were already working to fix the problem,

and they're a huge, huge company. And so this idea that people can't pick stocks or you have to be some sort of financial genius, I just don't buy it because I'm living proof. It's, help me become financially independent by just looking for value and then buying some. You know, that's it. Have a great day. Let's talk about a few things. Markets can stay down longer than you have time frame. And even though he was right about oil in this case, whenever you buy anything, it's the

price that it is for a reason. And certainly those may be short-term reasons. And there also may be ways to think that there are values available. But markets can stay down. I'll give you an example. Gold. Look at the number of years in a row. Gold will do absolutely nothing before it skyrockets for, you know, a year, 18 months,

six months. Depends on the time. But if you look at the heartbeat on gold, gold looks like a patient that could die any second and then just barely comes back to life or comes back to life. They're coming back to life really strong and then goes back into the coma and then goes back up strong and goes back. So I never, ever, ever think that when I place a bet, whether it's on oil or it's on gold or it's on any of those commodities, that it's certainly going to come back in X time frame. I don't know that. And I also don't know, even if there is value there, I don't know that it's going to come back faster than the S&P will at the same time.

because when oil was getting crushed, there were other sectors of the S&P that were doing fantastically well. So to load up on a sector of the market where I think there's value because it's down, I don't know what opportunity costs I'm losing in one area. So do I want to play that game at all? And then number two is, if I did invest in the, if I do invest in oil, how long is it really going to take for that to come back? Right. And I mean, I'll make the point because I'm sure that plenty of people are listening, thinking, well, but I'm going to hold it for life. Life is a limited time frame. Yeah.

We don't know if something's going to come back in 40 years, 50 years, 60 years. That's one thing. The other is, to what this caller said, he made the comment that oil had been at 100, now it's at 30, it's going to come back. This is a cognitive bias referred to as anchoring. Anchoring is the common practice of believing that because something was once valued at X, it will later again be valued at X. So $100 is set in your mind as the price anchor, the value drops to 30, and it's tempting to think that it will return to 100 because it was worth that once. the reality is what it was worth in the past does not guarantee that it will be worth that in the future. Your stock does not care what it used to be worth.

And so anchoring for everybody listening is a cognitive bias that you need to look out for because it is very tempting to think, well, used to be worth that. It's going to come back. Nobody knows if anything is going to come back. There's also this tendency to think that the thing that you are looking at is, the thing that everyone's looking at, that this is clearly good because you think that it's good. And it's hard to get rid of that. It's really hard. One of my favorite books, and by the way, don't go read this book because you think it's going to be fun and interesting. This is a dry, dry, dry book. It's called Trading Rules. And it's written by one of the top commodities traders

on the commodities exchange, which is something, Paula, which is far riskier than you or I or 99% of the people listening to this would ever do. But his list of how he trades is phenomenal. And one of his basic tenants about trading is give up that you know anything about the future, about the market. The market is way bigger than it seems in your head. And people will trade for reasons that you don't know that are beyond your control and that the media will never know.

Right. And because of that, you could completely get smoked. And that's, that's his first thing. And it's always scary then when I hear people that, it's always scary to me when an investor says Apple always goes up. Right. Facebook's a phenomenal bet. Now, have I played that game? Sure, I have.

I made a bunch of money on Eli Lilly because one drug, one time 12 years ago, didn't get the FDA acceptance that everybody thought that it was going to get. And the stock taint. and I thought similar to this gentleman, this is Eli Lilly. It's one drug. Eli Lilly has oodles a drug. There's a market overreaction. I went in big and bought. I'll tell you another time that I did exactly what this person's talking about.

I went in with Ford. Ford was just about to announce earnings. And three days before they announced earnings, they announced that they were opening up a new plant. You don't go open up a new plant unless, that earnings thing that's coming in three days is going to be really good. In fact, at that time, automotive wasn't doing very well at all. And so you knew not only was it going to be good, it was going to be really good. So if Ford announces that they're opening a brand new plant,

three days before they're going to tell people, hey, earnings stink and we can't afford anything. By the way, we opened this plant. We're a bunch of idiots. Like that wouldn't have happened. So I made a big position in Ford. It's one of the few times. I owned a stock for a week. Well, I got a nice big bump. I got about 8% in a week. I sold it off. It was gone. So I've played these games too, and there are times. But as an example, he talked about the inventory people. Walmart is a huge chain. Is it inventory problems with the entire company, or is it inventory problems in that store?

Because if there's inventory problems in that store, Walmart being a huge company, who cares? It's not going to affect the bottom line. Well, not just that, but there are so many factors. There are so many variables that impact a company's stock prices. The thing that worried me about what he said is that. that it showed, to be perfectly frank, a complete lack of knowledge. I mean, I didn't hear him once talk about reviewing any of Walmart's financials. I didn't hear him once talk about

reading the quarterly earnings reports. Yeah, which is, by the way, the heartbeat of the company. Exactly. He didn't mention that at all. All he said was he did a little bit of what's referred to in the industry as Scuttlebutt. You know, he did a little bit of chatting with some people who are boots on the ground and getting a little bit of information through that, that is a tiny tip of the iceberg of knowledge. And if you're going to base a major financial decision on that, that's the definition of a little knowledge is a dangerous thing. And to the final thing that he said, which is I know it works because it's worked for me. Again, resulting, you are a sample size of one, and it has worked for a limited time frame. So number one,

do not conflate the strength of the decision-making process with the outcome. The decision-making process is absent of the outcome. If you run a red light and you don't get into a car accident and you reach your destination faster, does that mean that running a red light was a good idea? Of course not. So if you buy a stock based on a limited amount of information and it happens to do really well, was buying that stock a good idea? No, even though it did well, it is not a good idea. It happened to have a good outcome, but that is different than the decision-making process being sound. So the fact that it's worked for him is indicative of nothing. The last thing that I wanted to tackle was my view about active investing, which varies from Paula's, I think, probably significantly.

Yeah. So disclaimer for everybody listening, I am 100% a fan of passively managed investments. And then there's Joe. And his wacky ideas about active investing. I think two things. I think number one, there are active managers who you and I can't afford, who do pick winners a ton. And we could even point to them. In fact, there are books called, stock market wizards. It's a series of books, which are phenomenal. You and I can't afford those people. And frankly, I don't know that we want to because they're mostly hedge fund managers who will take half of the proceeds for themselves. And when you get by all the fees that they charge, the question is, is it worth it?

But number two is this. I think the active management in general, though, the piece that we can afford is a really exciting place. I don't know how exciting it is now. There are some funds that are. out there. But we're at the beginning of this shift in active management from Jim Bob Fund Manager who has a team of people that go in and analyze companies and then might have an allergic reaction to the cheesecake at lunch and decides to go big on something that was a mistake to machine

learning driven active management. And when you look at some of the machines out there that are driving active management decisions and active management processes, I think there's a ton of excitement there. And I think that this will be a game changer for active investing in general. I think that active investing is alive and maybe not healthy, but I think that the health of it is not in managers who more accurately predict stuff. It's in our ability to lean on machines to see where the opportunity lies. I think that's already exists. in the professional realm of professional money management. I think it's coming to Main Street, though, when you look at what's happening on the edge of

the FinTech revolution. I think we're going to see it, Paula. I think it's coming. You think robo-active investing and AI-driven active investing is going to outperform passively managed funds in the future? I do. I think there's two things going on. And what's funny is that Jack Bogle recently, and by recently,

I mean, within a year of his death, said that he agreed that there's going to be a problem in the, and by the way, this is still probably in the distant future. The more people passively index, the more there's opportunity on the other side of that. We create a bunch of opportunity, the more that we get index heavy. And so as more and more people pile money into indexes, I think that we're going to see machine-driven stuff. Do I think, by the way, that that's going to be robos the way we see it now? Oh, hell no. I don't think that Betterment or Wealthfront are on the bleeding edge of that.

I think Betterment and Wealthfront are taking modern portfolio theory and ETFs and adding them to your portfolio for a fee. That's what they're doing. But having a machine that's picking an actively managed portfolio of maybe 20 or 30 positions that are going to beat the S&P 500 with a similar amount of risk, that's here now, but that's coming to Main Street. I'd say in the next three or four years. Well, and as everybody knows, my position is, at least from what we know now in the year 2019, stick with passively managed funds. She's like, I love Joe's science fiction report. It's fantastic.

From what we know now, those who try to beat the market over the long term revert to the mean. But it will be interesting to see how AI impacts every aspect of finance and jobs. You know, it is going to be, we did an episode last fall on AI and the future of jobs. And I think the next 20 years are going to be fascinating in terms of how artificial intelligence affects everything from housing to medicine to the world of finance. I actually question the goal of using machine to beat the S&P 500. I think a better goal is, is there a way to equal the results of the S&P 500 and lower the risk while doing it? I think that's also an area of active investing that we'll see.

I think too many people get excited about do I beat the index. What if I can equal the index and take significantly less risk? Would I want to do that? Absolutely, I want to do that. So you would improve risk-adjusted returns, not by improving the return, but by improving the risk. Absolutely. And whenever anybody says, you know, well, ex-advisor didn't beat the S&P 500, my first question every time is, like we talked about earlier in the show, who cares? Like, who, what does the S-B-500 have to do with anything? I didn't know that the S-N-P-500 was going to buy your house. I didn't know the S-Nap-500 was going to retire you. I didn't know any of those things. I do know that there's a certain rate of return that you're looking for. What if I can get that? that return, what if I can get that lifestyle and take less risk getting it? I would certainly want to do that.

And that's where I think the excitement is more around AI and active investing than beating the random walk down Wall Street. Because I also think that the random walk down Wall Street, and here's what's going to happen, by the way, people purchasing 100% stocks, which is something that I like, I know a lot of people listening to this like that, I think it's going to wash a lot of us out the first time we have a significant downturn. Really? So as somebody who has an all-equities portfolio, I embrace that challenge. I think you're going to be fine. And I also think you may agree with me that there are people

that do not understand the risk that you're taking when you have that. 2000 to 2002, you lost, I don't have the number in front of me, 60% of her portfolio, 65% of your portfolio, which is fine, by the way, if you're talking about $10,000 and you're down to $4,000, let's say that your portfolio has grown to a million and you're right around the corner from your goal. And now your million dollar portfolios worth $450,000. Are you going to be able to stick with it then? It depends on your income potential at the time.

So I'm thinking back to 2008. And in 2008, my earnings were jack. And so the little bit of money that I had invested, watching that get wiped out during the Great Recession was painful because my income potential was so crappy at that time. Working with a larger group of people, though, I will tell you that those are two separate things. I agree with you. That's what it should be. They're two separate things. I would have people in my office that said that they had an extremely high risk tolerance go, holy crap.

I've lost $550,000. It's gone. And by the way, I don't know when it's going to come back. And if my client asks me, when is that money coming back? You know what my answer is? Because I was good at my job? I don't know either. Right.

And this goes back to what we were saying before. Just because something was valued at X does not mean it will be valued at X in the future. Just because oil was 100 and now it's 30 does not mean that it will be 100. So a stock does not care what price you paid for it. Right. And a stock does not care what price it used to be. So just because a portfolio was valued at a given amount and then it falls, it might never recover. And I say that as somebody with an all-equities portfolio, which, by the way, I do not recommend for most people.

That's just me. Yeah, because you understand the risk. You understand the standard deviation around that portfolio to use the super nerdy term. You get that. the fact that it might not come back. And also I have a huge cash allocation. So really, I have a barbell allocation. Yes. But your ability to process and think about the fact that you have that cash allocation and reason through it without getting emotional about it, I think is also higher than most people. I think we get interested in robots getting back to this active management thing

when that hits. When that hits and people go, oh, how can I lower the risk in this portfolio? So this never happens again is going to be a big thing for a lot of people. So you think that the next recession is going to trigger the interest in tech development around AI that reduces risk in investing? I do. Wow. Okay. That's Joe's prediction. Shower thoughts by Joe. Yeah, too bad. We never talk about anything, Paula.

Joe, thank you for coming on the show. Where can people find you if they want to hear more of your crazy ideas? You won't, you'll find a lot of craziness, but maybe not my crazy ideas. At stacking Benjamins, the show that is the greatest money show on earth. And if that sounds like a circus, that's because it is every Monday, Wednesday, Friday. And Paula, you'll find Paula there on Fridays hanging out with us and our roundtable gang. So, yeah, Monday, Wednesday, Friday, stackingbenjamins.com or wherever you're listening to Paula now. Nice.

Well, thank you so much for tuning in. If you enjoy today's show, please do three things. Number one, share it with a friend or family member. Number two, hit the subscribe button in whatever app you're using to listen to podcasts. And number three, leave us a review. If you go to Afford Anything.com slash iTunes, that'll redirect you to the page on Apple Podcasts where you can leave us a review. Thank you again for tuning in.

My name is Paula Pan. I am the host of the Afford Anything Podcast. If you have a question, you can submit it at Afford Anything.com slash voicemail. and I'll catch you next week. P.S. So while I have you here a few things I wanted to say, number one, we've added an extra week to the Chautauqua in Ecuador. So I will be spending one week with Vicki Robin and Tanya Hester. That week, unfortunately, is sold out, but good news. I will be spending a second week with Leaf from Physician on Fire and Steve from Think Save Retire. We will be hosting a Chautauqua event in Ecuador in which we talk about financials,

Independence. So you can find out more about that at above the clouds retreats.com. Number two, we've picked a date for the course launch. As most of you know, I have been working on a course about rental property investing. The name of the course is your first rental property. It's been under development for three years. We've gone through two rounds of beta testers. The course includes quizzes and worksheets and handouts and flow charts and everything that you need to carry you through from I want to buy a rental property as a starting point to the ending point of, hey, I just collected my first rent check. So the course is the flow that gets you from point A to point B. The course is 10 weeks long. Everybody goes through it together as a student

body, as a group, and I'm very interactive and with you throughout that time. Enrollment opens on April 8th and enrollment closes on April 12th. So if you want to sign up to be a student in the course, that is the enrollment period during which you can enroll. So Monday, April 8th through Friday, April 12th. And then the first day of class is Monday, April 15th. And the course runs through Friday, June 21st. You can get more details by going to afford anything.com slash VIP list. Again, that's afford anything.com slash VIP list. Sign up there. You'll get a bunch more details about it. Finally, and most importantly, I also want to talk about what I'm doing right now in the last half of March and the entire month of April. I am in Austin, Texas. I will be here for five

weeks. The reason that I'm here is because 17 years ago, when I was 18 years old and a freshman in college, I met a fellow college freshman named Maureen who would become my best friend, and she and I have been best friends for 17 years now. We went to college together. We spent hundreds of hours on campus together. We went camping and hiking together on the weekends. On the morning of graduation, we drank champagne at seven in the morning, and then we walked barefoot to our graduation ceremony for no other reason than we could. And for those of you who listened to the episode in which I interviewed Kim, the firefighter for the city of Austin, Maureen and Kim and I, the three of us, we all met at that time, and the three of us are all best friends. So

Maureen and Kim are like my two best friends in the world, and both of them live in Austin, Texas. And as you know, I live in Las Vegas, Nevada, which means I see them maybe once a year. So a few months ago, Maureen called to tell me that she was pregnant. And so I booked a ticket to Austin and I Airbnb a place that's half a mile from where she lives. It's a 10-minute walk. And I'll be here until May. And I'm here for five weeks to help out with the first five weeks of the new baby's life. As luck would have it, I happened to.

to book my ticket and show up here within 36 hours of this baby being born. So his name is Tommy. He's seven pounds and three ounces. He was born just before midnight on March 22nd. And I showed up early Sunday morning, March 24th. I got to see Mo in the hospital. I got to be there when she came home with him for the first time. Not at the moment that she came home, but I got to be there like a couple hours later. And I'm just here in Austin to be helpful in any way that I can, even if that means getting groceries for her or running errands, whatever that means. Yesterday, I was there for the first time that Mo and Tommy took a walk. And so this is, this is what managing your money is all about. If I were in a pile of debt, there's no way I would

be able to just, on a total spur of the moment, buy an airline ticket and Airbnb a home for five weeks with very limited advance notice. If I were not in a really super financially stable and healthy position, I wouldn't be able to have the finances to do this. So when we talk about managing money, when we talk about managing finances, what we're really talking about is life. And there's a part of me right now that's tempted to say this is what financial independence is all about, but to be honest, you don't need to be FI in order to do this. You certainly need to be in a financially healthy and stable place. And you also need to have a form of employment that is super flexible, whether that means early retirement or whether that means self-employment

or whether that means just having a job that's super duper flexible, in whatever form that takes, you certainly need income-related flexibility coupled with being in a super financially healthy place. And once you have those two elements in place, you can get a phone call and find out that your best friend is having a baby and immediately, without even thinking about it, without even logging into your bank accounts, without any thought about the money whatsoever, you can immediately get on Airbnb, find the home that is closest to where she lives that's

available for five weeks and book it without even thinking about it. That is the power of figuring out this money stuff. And so when we talk about finances, we are really talking about life. We're talking about this. This is the reason that we do this. this is what it's all for. So whenever your friends or your family or your colleagues ask you why you spend your spare time listening to personal finance podcasts or why you're so interested in retirement plan

contribution limits or asset allocation or strategies around paying off debt versus investing, whenever people wonder why you're nerding out on this stuff so much, you can just tell them that it's because of this. It's so that you have the ability to do this. So I just wanted to share that. Thank you.