Afford Anything - Ask Paula: I Make $168,000 Per Year and Spend $5,000 Per Year. What’s Next?

Episode Date: May 27, 2019

#195: Alex makes $168,000 per year, combined between her full-time job and her side hustle. Her company pays for breakfast, lunch and dinner during the work week, plus a cell phone subsidy, health, dental and vision insurance, a gym membership, and commuting costs. She also househacks, so her living expenses are only $400 per month. What should she do with her ample savings? Christine is 38 and earns $70,000 per year running her own business. She holds $70,000 in investment accounts, has another $16,000 in savings, bought a condo with 20 percent down, and has no debt. What can she do to fast-track her path to financial independence? Amy is unsure whether she should pay off her mortgage, downsize to a smaller home, or invest. Katherine is 23 and househacking into a duplex. How much should she set aside for cash reserves? Miriam started a podcast and wants to know how to morph a passion into a lucrative income stream. Nick wonders if the FIRE movement should plan an annual gathering … you know, like a FIRE Festival. (But not like the Fyre Festival.) I tackle these six questions in today’s episode. For more information, visit the show notes at https://affordanything.com/episode195  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 is a scarce or limited resource. And so that leads to two questions. Number one, what is most important to you? Not what do other people say should be important to you, but what do you actually value in your own life, regardless of how unconventional it may be?

And number two, how do you align your daily decisions in accordance? Answering these two questions is a lifetime practice. There are no simple answers and no shortcuts. That's what this podcast is here to explore. My name is Paula Pan. I'm the host of the Afford Anything podcast. Every other week, I answer questions that come from you, the community. This week, here is what we're going to cover.

Alex has a massive gap between what she earns and what she spends. How should she direct this money? Christine is 38, just bought her first home, and feels as though she's behind because she started saving later in life. What should she do to be able to accelerate her path to FI, financial independence? Amy is not sure whether she should pay off her mortgage or sell her home and downsize. Miriam had a life-changing illness last year, and now she's inspired to start a business that is meaningful and purposeful to her. What should she know?

Catherine just had an offer accepted on a duplex in which she'll be house hacking. What kind of emergency fund does she need? And Nick saw the Netflix documentary on the Fire Festival and is wondering, is the Fire Financial Independence Retire Early Community going to have its own fire festival? We're going to answer all of these questions right now. Let's start with Alex. Hey, Paula, Alex here. I absolutely adore your podcast. That said, I have a couple questions. I want to give you as much detail as possible for a detailed answer in return. So please bear with me. I'm 27 and just recently purchased my second home. My first home was purchased in 2016. in Chicago, which I'm renting out now for a profit of $600 per month. After transitioning out to the Bay Area from Chicago back in July 2018, and after tripling my paycheck, I might add, I plan to house hack to keep the cost of living low.

I currently make $120,000 a year at my full-time job and have no debt other than these two properties. I'm investing 10% of my income to my 401k, which my company matches $6,000 a year. I max out my Roth IRA every year as well. I also invest $1,000 a month to an individual account through fidelity just because. My company pays for health, dental, vision insurance, breakfast, lunch, and dinner during the weekdays, a gym, monthly cell phone subsidy, commuter benefits, etc. Essentially, my only living costs are food on the weekends and any leisurely trips that I want to take. Because I have house-acked, I brought my personal monthly living expenses down to $400 per month.

Definitely want to mention that I also have a business that pulls in a minimum of $4,000 a month. That all said, my question here is simple. What would you do? How would you allocate the additional income that I'm seeing for the first time? I still spend frugally like I'm living on nothing and don't have any intent changing that habit. The mic is yours. Thanks so much for the help. Alex, wow, congratulations.

So first of all, the gap between what you're earning and what you're spending is probably without exaggeration, the most significant gap I have ever heard of. So between your day job and your side business, you're making a total of $168,000 per year, $120,000 from your day job, and then $4,000 a month, which is $48,000. a year from your side business. So you're making $168,000 a year, but your company pays for breakfast, lunch, and dinner, plus your cell phone, plus commuting costs, plus a gym membership, plus health dental and vision insurance, and your house hacking. And so you're living on $400 a month. You're living on $4,800 a year. That's very, very impressive. That's even lower living costs than Jacob Lundfisker, the author of Early Retirement Extreme. He lives on $7,000 a year. And until I heard your voicemail, that's the lowest amount that I've ever heard somebody in the United

States living on. Wow, you've beat Jacob. So congratulations. That is very impressive. Steve, can we get a round of applause here? Okay, so what should you do with this money? So after taxes, you're probably bringing home somewhere in the neighborhood of about $120,000 a year from your day job and side business combined. And you're living on five, so you're saving about $115,000 a year. The beauty of a savings rate like that is that you can do some pretty big things. So here are a few ideas in no particular order. Number one, you could buy a house in cash every year. If you're saving $100,000, $1,000, $15,000 per year and you wanted to grow a portfolio of rental properties, you could easily buy a house in many parts of the country, let's say Cincinnati,

for example, or Indianapolis or Huntsville, you could buy a house there in cash every single year, in a good neighborhood. And then, of course, because you own them in cash, they'd start cash flowing like bonkers immediately, which further increases your income, which lets you save and invest even more. And after a few years of this, you can pretty quickly hit a cycle in which you are just cash flowing houses. The cash flow from your houses will start to buy their own houses, compounding houses. Right?

So that is option number one. Option number two, you could use this money to make a down payment on some bigger rental units. So if you save up $120,000, now you've got a 30% down payment on a $400,000 property. Well, for $400,000, you could buy a duplex or a triplex, so in one year you could get two or three doors financed rather than just one door in cash. So that's option number two. Option number three. You mentioned that you have a business that is bringing in $4,000 a month, $48,000 a year, which if you think about it is almost half of what you're making at your day job. So I'm assuming if you look at time relative to compensation, I'm assuming that you spend more than twice as much time, maybe four times as much time or five times as much time at your day job than you do at your side hustle.

And yet the income from your side hustle is almost half that of your day job. Well, then in terms of compensation relative to hours, it sounds as though your side hustle brings in more money on an hourly basis. Now, of course, I'm not counting the value of the perks that your day job also gives you, which are significant. But I'm stating this for the sake of illustration. Oftentimes when we think about what opportunities should we pursue, it can be sometimes easy to look purely. at the raw dollar amounts that our various projects are pulling in and not contextualize those dollar amounts with regard to the amount of time or effort that we are investing in order to receive that payment. And so where I'm going with this is that since it sounds as though

your side hustle is quite lucrative and has some pretty significant upward potential, you might want to double down on it. I mean, you could use your savings to further capitalize that business, expand, hire people, double down on the marketing, do whatever it is that you need to do in order to grow the revenue from that side hustle. Could you double that next year? I mean, I don't know. I don't know the details of that side business, but you do. I think you've probably got a pretty good sense of the potential for growth that that side hustle has. And so if it can grow and if further capitalizing that business is a way in which you can accelerate that growth, then that would be an excellent use of that gap between what you're making and what you're spending.

Option number four, amp up the contributions to your retirement accounts. You mentioned that you invest 10% of your income into your 401k. Are you able to contribute more than that? If you're making 120 at your day job, 10% is 12,000. And in the year 2019, for people who are age 49 and under, the maximum employee salary deferral is 19,000. So that means that there's another $7,000 that you could be putting into your employee salary deferral in your 401k.

And then in addition to that, your employer is chipping in another $6,000. So once you contribute 19 as an employee salary deferral and your employer contributes that same six, assuming that you've already reached your employer max, then that means that you would then be contributing a total of $25,000 every year to your workplace 401K. And then in addition to that, because you have a side business, you can set up retirement accounts through your side business. so you can open up a 401k through that side hustle and contribute to a solo 401k through your side business. So you can contribute to both your employer-sponsored 401K as well as your solo 401k set up through your side business.

And then finally, you could just old-fashioned pay off all your debt. You mentioned that you have two homes, two mortgages. No one ever went wrong paying off their mortgage. So when in doubt, when you're not sure what else to do, that's always an option that you can. can fall back on. And I know that there are people who are going to argue, like, yeah, but does that really make sense? You could do so much more with the money or get better returns if you invested it. But here's the thing. Paying off your mortgage does not mean that you are signing a blood oath to never take out a mortgage again. If you pay off your mortgage and then the following

week you decide that you want to access money for another investment, well, guess what? You can take out a cash out refire or a he lock on that paid off home. So if you do pay off a mortgage, or in your case a couple of mortgages, you are not saying goodbye to your cash and liquidity forever. It's still net worth on your balance sheet and you still have the ability to tap that money whenever you want to. So this is a fun question. There are so many cool things that you can do with the saving rate that's that high. So congratulations again on that huge savings rate and keep it up. Our next question comes from Christine. Hi, Paula. I just are listening to your podcast. It was recommended to me by a friend and I am addicted. I have been listening nonstop for the last week. Thank you for the content that you put out in a way that's really human and totally understandable. I very much appreciate it. My question is, I'm 38. I just bought my first home to condo at the price of 141K. Pay 20% down and I currently have no PMI or outstanding debt outside of my mortgage. I have 70K in retirement savings.

35 in a Roth and 35 in a brokerage account managed by two gentlemen. I have 13k in savings and 3K in emergency fund and liquid cash. I'm self-employed and I make approximately 70K a year. My question is, I feel like my assets might be a little bit all over. And since I started saving very late in life, I feel like I have a lot of catching up to do. What advice would you give as far as putting me in the best financial position to become FI? Because I feel like at this point, retirement's a dream and being financially independent is not far behind that. Sure, there's plenty of other listeners out there that might be in a similar situation. Thank you, and I love your show.

Christine, first of all, congratulations on buying this condo with 20% down and for all the savings that you've accumulated. You mentioned in your voicemail that you feel as though you're behind because you describe yourself as having started late, but what I hear when I hear your question is that you have more than one year's worth of income saved. You said you make $70,000 a year, and you have $35,000 in a Roth IRA and another $35,000 in a brokerage account, which means that between those two accounts between the Roth IRA and the brokerage account, you have one year's worth of income invested in investment accounts by the age of 38. And you also own a condo with a 20% down payment. And that doesn't even count the other $16,000 that you've also saved, plus the fact that you have no debt.

think you're doing really well. So the first thing that I would say is give yourself some credit. You may feel as though you started late, but the numbers, one year's worth of your income in investments by the age of 38, that's pretty solid. And yes, I know. Okay, so for a little bit of context or a little bit of background, Fidelity investments put out this chart of how much should I have saved by X age? Because a lot of people Google that term, a lot of people want know that. And so what they said was that by the age of 30, you should have 1x your annual salary. Essentially, you should have your annual salary saved. By the age of 35, they said that you should have 2x your annual salary. By the age of 45, it should be 4x. By the age of 55, it should be 7x. And then by the age of 67 years old, it should be 10x. So those were the guidelines. That was a roadmap that Fidelity put. out. And that's ridiculous for a couple of reasons. First, your accumulated savings should be measured against what you spend, not what you earn. Measuring your accumulated savings against what you earn

carries the implicit assumption that you spend most of what you make. But why would you assume that? So let's break that correlation and let's compare accumulated savings as a multiple of your spending, not as a multiple of your earnings. That's the first issue with Fidelity's guidelines. But even if we set that aside, there's another problem. It presents this one-size-fits-all formula that doesn't apply to the nuances of each person's specific situation. And so, sure, if you graduated at the age of 22 and immediately started working with a starting salary of 60,000 at the age of 22, and you had no major interruptions in your job history, you never had an extended layoff, or you never took time off to have children or take care of an elderly parent,

or grandparent, and also if you only had moderate student loans and you never had a major medical illness and nobody ever sued you and you never tried to start a business that failed or you never got a divorce or maybe made the decision at the age of 26 to go back to school, those are the things that happen that interrupt that roadmap. And so when you go online and you see these one-size-fits-all roadmaps that say that by the age of X, you should have saved Y. throw it out the window because those generalized one-size-fits-all guidelines

only apply to an incredibly narrow set of textbook example circumstances. In fact, this hypothetical 22-year-old who starts work right after graduating from college and has a clean, uninterrupted life, I don't know if that person even exists or if they do. They might be so normative as to be in the minority. Right? This idealized example of that 22-year-old who starts working and then goes through an extremely predictable life, that seems almost more like a caricature than an actual person. There are plenty of people who are listening to this podcast right now who got a master's degree and then went to law school or they went to med school. And they didn't finish school until they were 30. So these one-size-fits-all roadmaps that say by the age of 30, you should have a full year's worth of salary, save.

that doesn't apply if you finish school at 30. And likewise, Christine, you started your own business, and I know from personal experience, that when you start your own business, those first few years are often very, very lean. But you go through those painful initial lean years so that you can have really good earning potential down the road. And so when you say that you started late,

I might disagree with that, I might challenge you on that because those years in which I assume you probably had a few pretty lean years while you were starting your business, I would consider those years to be an investment that you made. And they're not an investment in the sense of pixels on a screen or digits in a bank account, but it was an investment that came in the form of opportunity cost. You made less money than you otherwise could have so that you could start this business. And now you're reaping the rewards of it because this business is successful. It's making $70,000 a year. Now this business is doing so well that you have the ability to say, hey, how else should I be handling my savings? How should I be investing?

How do I accelerate my path to financial independence? Those are the questions that a person asks after their business. business is doing well. And so the fact that you invested all of that time up front to get your business to the point at which you could ask the question that you asked today, as I see it, you did not start late at all. In fact, if anything, you started early. You're ahead of the game. You know how many people are in their 40s or their 50s and they've always wanted to start a business, but they haven't done it yet? There are people in their 50s and their 60s who want to do exactly what you've already accomplished in your 20s and 30s.

So I think you're doing great. Now, to answer your question directly, how do you put yourself in the best position to become FI? Just keep doing what you're doing. You're self-employed, so keep growing your business because that gives you unlimited income potential. You don't have to rely on a boss for a 3% raise every year. So grow your business,

and by virtue of doing so, you will increase the gap between what you're earning and what you're spending. and then invest that gap in tax-advantaged accounts, invest that gap into retirement accounts. Being self-employed, you can open a solo 401K. So you can actually open, at Vanguard, they have an option for a Roth solo 401K. So then you can contribute an employee salary deferral because you are your own employee. So you can contribute an employee salary deferral of 19,000 a year.

And then because you are also your own employer, you can also contribute an employer portion. So go to Vanguard open a Roth Sola 401K. The employer side of the contribution is going to be pre-tax. The Roth is going to be after-tax. That way you harness both sets of tax advantages. And keep building that because that combination of growing your business and then diverting all of that extra cash into tax-advantaged retirement accounts, that's what's going to get you to retirement.

So you're on the right track. Keep it up. Oh, and one other question, Christy, This is a question I'm going to ask back at you. You mentioned that you have $13,000 in savings and $3,000 in an emergency fund. The implication of the way that you phrase that is that the money that you have in a savings account is not money that you consider to be part of your emergency fund. I'm wondering why. What is the money in that savings account earmarked for if it is not part of your emergency fund?

Do you have it earmarked for some alternate specific purpose? If the answer is no, then I would mentally bucket that entire lump sum, the $13,000 in savings plus the $3,000 emergency fund. I would mentally bucket that as a $16,000 emergency fund, particularly given that you are self-employed, which means naturally your income is going to fluctuate, having that emergency fund will be helpful for those times when naturally, you know, your income is going to be, is going to have some dips. That's just what happens when they're self-employment. So otherwise, I think you're doing great. So keep up keeping up. And thank you, Christine, for asking that question. We'll come back to this episode after this word from our sponsors.

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bank that gives you freedom from fees. Check out Radiusbank.com slash Paula in order to learn more about them. That's R-A-D-I-U-S bank.com slash Paula. Radiusbank.com slash Paula. Our next question comes from Amy. Hi, Paula. My husband and I have just started our journey to financial independence here very recently, and we would love your opinion on something that's been kind of bothering us. So we've been in our house a little bit over a year.

We owe about $350,000 on it, and we bring home about $12,000 a month after taxes. We don't have any other debt except our vehicles, which we're hoping to crush. within the next couple of years, and our mortgage payment is about $2,300 a month. So in terms of ratio to our income, it's pretty good. But my question is, I'm not sure if it would be better to pay down extra on our mortgage aggressively, or if we should plan to just sell it in a few years and downsize. We live in Austin, and so the real estate market is pretty healthy, and I think it's reasonable to assume that our home will continue to appreciate. However, I think we could have gotten a cheaper home. And I'm also not sure if we'll live in Austin forever, so to

speak. So we thought about doing a combination of both, maybe pay down the mortgage, but also continue to put extra money into the stock market. And given our incomes, I think we could probably do that. But ultimately, I'm just really interested in what your perspective would be. Thanks so much. Amy, this is a really interesting question. So at its core, your question is, should I pay off debt versus invest. But there's a third option that you've thrown in there, a little bit of an added flare to this question, which is pay off debt or sell the home and downsize or invest or some combination thereof.

So let's chat through all of these. Now let's start with the option of selling your home in a few years and downsizing. This set off a couple of red flags for me, and here's why. You mentioned that you might not live in Austin, forever. Now, I don't know what your definition of forever is, but let's say that there's a reasonable likelihood that you might move out of Austin within the next, we'll say, five to ten years. If you sold your home and downsized and then moved out of Austin, thus requiring you to sell your home again, here's what would end up happening. When you sell your home,

you would pay around 7% in closing costs. That's about 6% for a real estate agent fee, plus another 1%, maybe even 1.5% in seller-paid closing costs. Now you mentioned that you owe $350,000 on your home, which means that the value of the home I'm going to assume is maybe around $450,000. You wait a couple of years. By the time you sell it, the home is worth $475. You sell it.

You pay 7% in closing costs, which means that you take a $33,000 haircut, plus you pay the costs of all the moving expenses associated with moving to a different home. If we conservatively estimate that at another $2,000, that means that selling your home and downsizing will cost around $35,000 in terms of agent commission's closing costs, moving costs. You purchase this next home, which means that you take out another mortgage, which has its own closing costs associated with it. let's say that's another $3,000, so now we're up to $38,000 in transition expenses. And then you live in that downsized home for, say, maybe another three or four years.

And then you decide to move out of Austin, thus causing you to repeat the cycle all over again. So I think you can see where I'm going with this. Real estate has some incredibly high transaction costs. Buying and selling homes is incredibly expensive. And so if you think that there's a decent chance that you'll be moving, moving away from Austin within the not too distant future, it doesn't make a lot of sense to insert another real estate transaction into this narrow gap of time between now and when you ultimately leave the city. For example, if you're going to be leaving Austin in seven years

from now, then it doesn't make a lot of sense to live in your current home for the next two or three years, sell it, buy a different home, live in that home for another three years, and then sell it and then move. So let's wipe that option off the table. And then that leaves us with your core question, which is, do we pay off the debt or do we invest? Do we pay off our mortgage or do we invest? And that really boils down to a question of psychology versus math.

The returns based on historic averages, and of course, nobody ever knows what's going to happen in the future, but based on historic performance within the overall U.S. stock market, you can generally speaking reasonably hope for investment returns that are somewhere between 7% to 9% if you invest in broad market index funds in the U.S. stock market, and if you hold them for a period of at least 10 years and you let the capital gains and dividends compound. Now, by contrast, the interest rate on your mortgage is most likely less than 5%. And that means there's enough of a spread between the rate at which you are borrowing money and the rate at which you are likely to receive anticipated returns. There's enough of a spread to justify that risk premium.

So mathematically speaking, it makes more sense to invest your money rather than pay off those loans. However, there is a huge psychological benefit to being mortgage-free. And if that's the thing that motivates you, if that's going to, the cliché is does it help you sleep more easily at night? But I would reframe that a little bit. I would ask the question, does it motivate you to save more money than you otherwise would? Because if so, then that would be the correct course of action. Anything that's going to motivate you to save more than you otherwise would is going to be the winning decision. Because at the end of the day, your contributions are the single biggest determinant of your success.

So I know that it's a bit of a cliche to say do the thing that lights you up, but do the thing that lights you up. Pick the one that sparks joy. Now, I'm going to give a caveat here, which is that I am assuming that you are contributing to your retirement accounts, at least up to the employer match. if you are not doing that, do that first. And if you do not have an employer match, I would still put some money in your retirement accounts because saving for retirement is, in my view, it's a non-negotiable. It's a habit that you always have, no matter what, year in and year out, as fundamental as buying groceries and having electricity.

So I will give the caveat that I'm giving this answer with the assumption that there is some degree of retirement savings going on already. Once you've laid down that foundation, the rest is choose your own adventure. Click personal story to close this out. So I'm actually grappling with a very similar question. I recently hired a financial advisor for the first time in my life. I decided that I wanted to hire a certified financial planner, somebody who is not familiar with my podcast, somebody who doesn't know me, who can just provide detached third-party advice and can spot my blind spots and call me out on any major things that I'm overlooking. And so for various reasons, I have to refinance two rental

properties. And so he and I were talking about that. I was showing him a statement of my net worth, the spreadsheet that I have. And I technically have the cash, or specifically have the liquidity, including money that's in taxable brokerage accounts, I have the ability to completely pay off one of the properties. I could hold it free and clear in order to do. do so, I would have to sell off some investments. I would have to realize some gains. There'd be tax consequences to that, but I could do it. That's an option. So I showed him that spreadsheet, and his recommendation to me, he said, you know what, don't do that. Hold on to your cash, hold on to your investments, and just take out another loan, refinance that mortgage. That way,

you can focus your cash on future growth. You can focus it on reinvesting back into afford anything or buying additional rental properties. You'll focus on that. And so I said, yeah, cool, yeah, I see the value in that. And I had a long phone call about a week later with a mortgage broker. We talked through several of my options. And when I got off the phone, it was a phone calls on a Friday afternoon. When I got off the call, I had this weird feeling in the pit of my stomach. And I spent the whole weekend just sitting with it.

And then most of the next week I kind of was percolating on what that feeling was. And what I eventually realized is I just want to pay a little bit more. off this property. I just want to. And yes, I understand that there is an opportunity cost that comes from selling off the investments in my taxable brokerage accounts and taking an S-Corp owner distribution from afford anything rather than reinvesting that money back into the company. Yeah, there's definitely an opportunity cost that comes from that. And from a purely mathematical point of view, it doesn't make sense necessarily. But the other side of that is if I pay off this property and I hold it free and clear, if I really want that debt, I can always borrow against

that property. That option is always available to me. So if I pay off this property and I hold it free and clear and the next morning I wake up and I'm like, darn, I shouldn't have done that, well, guess what? I can take out a cash out refi. I can take out a HELOC. I'm not tying up my cash position forever. But it took me a while to figure that out. And honestly, for me, it required both a phone call with a financial plan or followed by a phone call with a mortgage broker for me to hear both of them tell me that I should refinance this loan. You know, it required me going and having both of those calls so that I could hang up the phone and then feel that feeling in the pit of my stomach and know that despite. the fact that other people were giving me the advice to do X, my intuition, my gut was telling me to

actually do Y. And so that is my final answer for you. If you're not sure whether to pay off your mortgage or invest that money, and I'm saying this really for everybody who's listening, who has that same question, one way that you could figure that out is to pick an answer, commit to that answer, and then feel what your gut tells you about the course of action that you've selected because you're either going to feel relief at that course of action or you're going to have the same feeling that I had, that upset feeling in the pit of your stomach that you can't quite articulate but that doesn't

leave you. And when you feel that, you'll know that it's the wrong choice. If nothing else, flip a coin. Heads you pay off your mortgage, tails you invest. All right, do what the coin says. And now, don't actually do what the coin says, feel what you feel about what the coin says. That's going to give you your answer. Thank you, Amy, for asking that question. Our next question comes from Catherine. Hey, Paula. My name is Catherine. I'm 23, and I just had an offer accepted on my first duplex that I'll be house hacking. My personal emergency fund is fully funded with six months of living expenses, and I don't have any high interest debt, so the personal side of the equation is good. My question is about the savings who keep specifically for rental

properties. Do you have separate buckets for vacancies, repair and maintenance, and capics? on the blog, I see that you recommend having at least six, but preferably eight to ten months worth of mortgage payment set aside. Is that just a hedge against vacancies or for everything? If you do have more than one bucket for all of those things, how many buckets do you have, and how much would you consider you need to have fully funded buckets? Or are they never fully funded? You just put in X dollars or X percent of rent per month into perpetuity and take money out as required. Assuming there are no issues found in the inspection and I close on the property,

My plan is to pay out of my W-2 income the market rate for rent for the side I'll be living in, including the amount that would normally be considered profit and shovel all of it into beefing up the savings account for the house. This brings me back to my question. How much do you consider to be enough savings for a rental property? At some point, I would like to take the profit on the property and use it to decrease the rent I'm paying out of my W-2 income, but I want to make sure I have a fully funded house fund before I do that. I know that you tend to be a more conservative real estate investor, which by I thought you would be a great person to ask.

Thanks for all you do on both the blog and the podcast. I look forward to hearing your response. Catherine, first of all, congratulations on being under contract on that duplex. You're 23 years old and your house hacking for the first time. That's incredibly impressive. Steve, can we have a round of applause here? So, to your question, how big of an emergency fund do you need? First, there are a few different aspects to your question.

You asked about whether you have one giant bucket versus is multiple sub buckets. That's one aspect of your question. The other aspect of your question is how large should this overall fund be? Now, to the first part of your question, should it be in one giant fund versus many sub-funds, those sub-funds, like specific funds for vacancies versus for repairs versus for maintenance versus for major CAP-X, those are frameworks that help you think about how you might want to spend this money, or frameworks that help you view this not as a giant chunk of funds, but rather as money that's earmarked for a specific purpose. And so if having that framework in place is a mental construct that helps you think about

the rental property emergency fund in a different way or in a helpful way, then there's nothing wrong with having that mental framework. But at the end of the day, regardless of whether you think of this as multiple sub-buckets or whether you think of this as one giant pocket, or whether you think of this as one giant pot, it could be exactly the same amount of money. So let's say, for example, and I don't know what the rent on this duplex is going to be, but let's just say for the sake of example, that this duplex rents for a total of $3,000 a month with each side renting for $1,500 a month, right? So you collect $3,000 a month in rent on this duplex, and you make the decision that you want to have an emergency fund that represents six months of gross rent, which means $18,000.

If you want to, you could just leave it as a giant lump sum of $18,000 that's in one single savings account. Or if you wanted to, if you think that logging into your bank balance and seeing a big 18,000 lump sum is going to trigger feelings of, wow, look at how much money I have, maybe this is excessive. and subsequently then trigger the temptation to raid the account or to try to invest that money rather than keeping it in cash, which a lot of people fall into that temptation when they see a big lump sum. If you think that that's what's going to happen and conceptualizing that money into smaller buckets will help reduce that temptation, then go for it. But at the end of the day, it's going to be $18,000 in this hypothetical example, it would be $18,000. one way or the other. Like no matter how you slice it, the total amount is the total amount. And so that's the real question that you want to grapple with because the rest of it is just a mental construct of how do you frame it. So then let's go to the other question, which is what should that total amount

be? Now, the absolute minimum that I would recommend for anybody is three months of gross rent. But that is a minimum to get started. It's not the optimum amount. The optimum amount, I would say is between six to eight months of gross rent. Once you reach this number, once you've saved between six to eight months of gross rent, then at that point I think it's perfectly fine to dial it back. So to the latter half of your question, which is at what point can I stop paying myself rent out of my own W-2 income? I would say wait until you have the six to eight months and then you can stop paying yourself rent and start using your W-2 income in some alternate way, like saving up for a down payment on your next rental property.

Let me add one more point for the sake of clarification. When I say sub buckets are purely a mental construct or a framework, what I mean by that is that, let's say that your total emergency fund is $18,000. In theory, you could subdivide that out such that 3,000 goes towards maintenance and 6,000 goes towards vacancies and $2,000 goes towards repairs and then $10,000 is earmarked for major capital expenses or CAPEX. Sure, that's fine. But the reality of the situation is if you have a prolonged vacancy that exceeds the money

that you've earmarked for vacancies, you're going to be rating the rest of the emergency fund in order to deal with it. You're going to be rating the money that you've earmarked for repairs maintenance capex in order to deal with that vacancy. Or likewise, if you end up with some major capital expenditure, let's say that you need to replace the roof, and we'll assume it's a large duplex, lots of square footage, and it's a complicated roof line with a lot of peaks and protrusions, a couple of chimneys. And so let's say that the cost of replacing this roof is 12,000 rather than 10,000. Well, if that's the case, then despite the fact that you only have $10,000 earmarked for

CAPEX, you're still going to be rating some of those other buckets, maybe some of the money that you've earmarked for maintenance or for repairs, in order to pay for that CAPEX. So that's what I mean when I say it's all a mental construct. Because at the end of the day, when you start spending the money that is within your emergency fund, you're going to spend it based on actual needs in the moment rather than on a theoretical mental framework that you decided looked good on paper. And so if you do decide that it is a helpful mental construct to put this money into sub-buckets, that's cool. But just realize that theory is not reality. And the way that you will ultimately end up spending that money is going to be very different from the way that you imagined. Thank you, Catherine, for asking that question. We'll come back to this episode in just a minute.

But first, do you run a small business or a side hustle? And you're not sure exactly what to do about paying and filing your federal taxes, state taxes, local taxes. How do you handle 1099 miscellaneous contractors? What are the reporting requirements? What are the forms that you need to send? Well, Gusto is made for small business owners who want to deal with things like filing taxes and running payroll. So if you have a side hustle or you're a solopreneur or you have a small business, they can help you with all of your payroll processing, your reporting.

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app that takes the best key takeaways, the need to know information from thousands of nonfiction books and condenses them down into just 15 minutes that you can read or listen to. So Blinkist is made four busy people who want to get the main points of the books quickly without reading the entire book. With an audio feature, Blinkist makes it easy to finish four books a day, In an hour. You can do four books a day, 15 minutes a book. Eight million people are using Blinkist right now, and it has a massive and growing library. I typically use Blinkist when I'm running a quick errand if I'm commuting for 15 minutes from here to the grocery store. That's not enough time to get into an audiobook or to get into a podcast because it's only 15 minutes,

but it's a perfect amount of time to use Blinkist. I recommend Seven Habits of Highly Effective People by Stephen Covey and Rich Dad Poor Dad by Robert Kiyosaki. Right now for a limited time, Blinkist has a special offer just for our audience. to blinkist.com slash Paula to start your free seven-day trial. That's Blinkist, spelled B-L-I-N-K-S-T. Blinkist.com slash Paula to start your free seven-day trial. Blinkist.com slash Paula. Our next question comes from Miriam. Hey, Paula. My name is Miriam, and I've got some questions for you. So recently you posted on your Instagram account a comment about financial independence and that it's not planning for

the future, but it's giving yourself the flexibility in the wiggle room to adapt to whatever may be in store. A little background about me. My husband and I are in our early 30s. We also have three really young kids, and we both work full time. So needless to say, our lives are pretty crazy and busy, and our schedules are a mess. And we are pretty new to the fire movement, but we are on the bandwagon and getting started. My husband is going down the path of real estate. He and his partner are super excited about that business venture, but I'm not super interested in real estate myself, and I have my own side passions, and I don't have any kind of business background. So I'm not really sure where to go next. I'm sort of at the exact moment that you're talking

about when you posted. So I'm looking to go down a different path and set up a different venue for success for myself, but I'm not really sure what that is. I love coaching others to emotional and life wellness and promoting happiness for all. I had a life. I had a life. life-changing illness last year that was really caused by stress and poor emotional health. And after I recovered from being pretty physically ill, I decided that I wanted to focus on mental and emotional and spiritual wellness. So I turned to podcasts. And when daily devotional podcasts and doing some journaling weren't really meeting my needs, I created my own podcast called Intentional 10. We're on iTunes. But I'm at the point of wanting to ensure that what I love doing, the podcast and coaching others,

is eventually going to get me to, well, maybe a point where it's lucrative and can support me financially in some way, shape, or form. Maybe not totally. I still have a full-time job and obviously the three small kids that we have to focus on. But I want to figure out what the next steps are, or really what my first steps are. I don't expect anything to happen overnight, but I do want to plan wisely for the future of my podcast and a business. Side note, I'm in the process of training to be a yoga instructor. So I sort of envision a brand of mindfulness and wellness one day. My questions for you are, one, when and how do you make the first steps of taking your passion

and turning it into something that could be lucrative? And two, what tips do you have for a new podcaster like myself? Thanks so much, Paula. We love your podcast. Miriam, welcome to the world of podcasting. I think that's fantastic. Congratulations that you've started your own podcast. Here's the thing.

A lot of people ask me, hey, how do I make money from a blog or from a podcast? The thing is, and I can hear this in your voice as you ask the question, it's clear that the reason that you are starting this podcast is not just to make money, but also because you want to be of service to your audience. And ultimately, a blog, a podcast, even social. media, even Instagram accounts, these are all acts of service to your audience and to your community. And yes, they are also yours in that it's an act of creative self-expression. But think about it kind of like being a chef, right? When you're a chef, sure, you get to exercise your own creative liberty as a chef. You pick the ingredients, you put together the dishes, you add your own flare to it.

And what emerges is this beautiful artistic creation. And so as a chef, the work of art that you create is yours. And so you should never hand over the creative liberty of what you're making to anybody else. That is yours and yours alone. But if you're a chef, you don't cook and then just throw the food away. That food, even though it is your artistic baby, it's also an act. act of service for the people in your restaurant. If you're an author of fiction novels, yes, you have total creative freedom to create the plot line, the narrative, the setting, the characters

that you want to create. You don't go survey your audience. J.K. R. Rowling doesn't survey her audience and says, hey, what do you think Harry Potter should do? George R.R. Martin doesn't survey his audience to say, what should happen to Ned Stark? The art is under the direction of the artist. And yet at the same time, that art exists so that the rest of the world can benefit from it. It exists so that the rest of us can enjoy Harry Potter and Game of Thrones. And likewise, as you develop your podcast, you'll find yourself walking along the seemingly contradictory path of simultaneously speaking the words that you have to share, not cowtowing to the whims of the crowd, which is the definition of authenticity. And you'll have to do that in the face of criticism,

sometimes very harsh criticism. You'll have to do that in the face of one-star reviews and people leaving comments that say SMH, shaking my head. You know, you have to stay strong through that because the reason that you're staying strong through that is because while you might be getting met with disapproval from the vocal 5%, you are still serving. the other 95% and you serve them best when you are bringing your full, authentic, genuine self to the table.

When you're in the game with all your heart and all your soul, that's when you bring true value to your creation. And so if you're just beginning a podcast, as you are, and to anybody else out there who's thinking about starting either a podcast or a blog or any other creative entrepreneurial work, I would not love. I would not lead with the question of how do I make this lucrative because the number one way that I have seen people fail time and time again is that they start with that question. And I believe that that's the wrong question to start with. The question that you start with is how do I make this immensely valuable? Because once you make it valuable, that combination of quality and consistency over time,

that is what allows you. to grow a community. And once you have that community, once you have that audience, then there are a million ways that you could monetize it. But that monetization comes later. It comes after you have built a community. And so when you're just starting out, I think it's premature to ask that question.

And the number one way that I have seen people, I go to FinCon every year. It's this conference for people who create digital media around the topic of personal finance. So bloggers, podcasters, YouTubers in the personal finance base. And I'm one of the few people. I think there are around 20 of us in total who have been to every single FinCon, starting in 2011, up through today. This year is going to be my ninth out of nine.

And so in the last nine years, I have seen a lot of people come and go. I've seen a lot of enthusiastic upstarts who are drawn to this world. because there seem to be low barriers to entry. Anyone can do it. And there's the potential for big money. And anytime that you have a situation where there's low barriers to entry plus high compensation or high profit, you get a lot of people at the entry level. The problem is most of those people at the entry level are doing it for the money.

And that is where they fail. Like when I meet a first timer, if their thinking is based around the money that they're going to make, I know that they're not going to make it. Because if you think too much about that in the beginning, you're not going to put in the time, the sweat, the late nights, the early mornings required to create high quality material, particularly for those lean first few years where you're working for free. In fact, you're working for negative money because you're spending all this money on your business. and not turning a profit on it. Those first couple of years are really rough. And the ones back in, I saw this back in 2011, 2012, there were people who argued, no, it doesn't have to be rough.

And they were the ones who reached for the low-hanging fruit. They were the ones who peppered their whole website with sponsored posts, and they bought and sold text links, and they bought, oh, God, bought followers on social media, right? They did all of the gray hat, black hat, gamifying the system stuff. And yeah, they maybe made a little bit of money. Maybe they made $100,000 in the first two years. And then after that, game over, they were wiped out. The system changed its algorithms.

Google updated its algorithms. The mask got pulled away and everybody realized the emperor has no clothes. They were so focused on making short-term money, on reaching for that low-hanging fruit, that they never actually invested the time into developing a true following and developing a true community. And as a result, by year three, they dropped off the map, year four at best. Whereas those of us who have made this a long-term sustainable play, yeah, we had really rough early years. But go back and listen to episode 83. The title of the episode is, this is the toughest episode I've ever written.

recorded. And in that episode, I'm kind of too embarrassed to re-listen to it myself now, because it was raw and it was emotional. And several people emailed me and said that they felt uncomfortable listening to that episode. That's why I can't bring myself to listen to it again, because I don't like disappointing my audience like that. And when I get that kind of feedback, it hurts. But it was real. And in that episode, what I talked about was the struggle that I had with how much money I have turned away how many opportunities I'd said no to in order to build this brand. And when you do that, when you make sacrifice after sacrifice, and then you finally do start monetizing even just a little bit and people criticize you for it, it really stings. Even now, I get iTunes reviews from people

who say, oh, there are too many ads on the show. And I'm like, do you know that I've been doing this for nine years between blogging and podcasting both? And I didn't really. And I didn't really really start making money at this until year seven. And so the money that I'm making now is the result of many, many years of just give, give, give, give, give, give, give, give. And eventually it hit the point where it was unsustainable. And it hit the point where it was holding back afford anything. I couldn't grow. I couldn't hire people. I couldn't hire a designer or a developer or hire a team until I started putting ads on the podcast so that then I could hire people and then I could do the marketing that I want to and I could grow this platform the way that I want to.

Sorry, this is getting to be a lengthy answer. But when your first loyalty is to your brand and your community and your followers, when you do that, then there will be more opportunities to monetize than you could ethically or reasonably take. And when you're in that, situation, you know, as I am now, then you look around at the plethora of opportunities and you pick the one that you're most comfortable with. But you don't get to that point if you start the journey by thinking about monetizing first and foremost, because that's just not how you build a lasting community. So I realize this might sound cliche. Once again, this is the second cliche of today's episode, but lead with a heart of service. Have a servant's heart towards your

audience and the money will follow. Thank you, Miriam, for asking that question. Best of luck with your new creative endeavors. I think that's amazing. So congratulations on starting your podcast. Our next question comes from Nick. Paula was going on. This is Nick.

I was calling to say, I was watching a fire documentary on Netflix, thinking it was F-I-R-E-F-E fire. and I was thinking there should be a fire festival, you know, for people who are interested in fire, people who have achieved fire to come maybe meet up like once a year. I think that would be pretty cool. I don't know if that's something that happens already. I know they have FinCon, but that's more so for like financial bloggers, but just for people who consider themselves members of the community or want to be members of the community

to come meet up in like a central place. I think that would be pretty cool. Because there's like real estate clubs and stock market investor clubs and different types of clubs for different tools that you would use to achieve fire. But there's not really any type of meetup for fire. So I just wanted to know like if you knew about any or if you did it, maybe you get started. I mean, you have a big following in the fire community. I just wanted to know. This is Nick.

I listen to your podcast every time one comes out. Thanks for all you do for the community. Nick, thank you so much for listening every week. I really appreciate that. That's so funny that you bring up the fire documentary on Netflix. So speaking of the Fire Festival, and so Fire Festival meaning F-Y-R-E Festival, the infamous music festival that never was. So a few weeks ago, I was in Austin, and I got invited to an entrepreneur dinner.

So I'd go to this restaurant. They'd rented out this private room at the back of this restaurant. I walk in, it's a room full of people I've never met before. And I sit down at the table and I introduce myself and I say, I'm a podcaster and I cover the fire movement. And everybody just looks at me. People go silent for a second. And then somebody says, wait, you were part of the fire festival? And I'm like, no, no, no, different fire festival, different fire with an eye.

So yeah, I think that's hilarious. The word fire is now, especially fire festival. is now dominating people's thoughts in a way that is definitely not related to the fire community. We are fire with an I rather than fire with a Y. So, Nick, to answer your question, there are a handful of events that happen throughout the year. One event is called the Chautauqua, and there are actually two separate Chautauquas. There's the Chautauqua that takes place in Ecuador, and there's the Chautauqua that takes place in Europe. They are organized by two separate groups or two separate companies.

The one in Europe is organized by J.L. Collins. He was a previous guest on this podcast. He's the author of A Simple Path to Wealth. And the Chautauqua in Ecuador is organized by a woman named Cheryl. The word Chautauqua means retreat, and the Chautauquas draw heaven. from the fire community. For example, this year, I will be there. I'll be in Ecuador for three weeks in November.

The first week I'll be there with Vicky Robin and Tanya Hester. Vicky is the grandmother of the fire movement. She's the author of Your Money or Your Life. Tanya Hester is the author of the blog Our Next Life and also a podcast host. She hosts the Ferrisense podcast. Both of them are big names in the fire movement. That week has already sold out. In fact, it sold out immediately.

And then the second week that I'm in Ecuador, I'm going to the Galapagos, just for funsies. And then the third week, I will be at a Chautauqua with Leaf from Physician on Fire and Steve from Think, Save, Retire. And I believe that there are still spots left for that one. So if you're interested in that, you can go to Above the Cloudsretreats.com and send a message to Cheryl. Or just email her at Above the Clouds Retreats at Hotmail.com, because for some reason, she still uses a hotmail address. There are also Chautauqua events in Europe. They've been held in the UK, Portugal, and Greece. And as part of their speaker roster, they've drawn from the guys from Choose FI, Jonathan and Brad.

They've had Gillian Johns Rudd from Montana Money Adventures. So they've had many people, J.D. Roth, you know, they featured many of the names from the fire community as well. Of course, the Chautauquas, by their very nature, especially because they're international, are limited to a smaller group. And so here in the United States, there are a few different options. There's Camp FI. This is a camp that's held over the course of a weekend, typically a long weekend, like Fourth of July weekend or Columbus Day weekend. But Camp FIs are held in multiple locations across the country throughout the year.

And so this year, there are Camp FIs in the southeast, I believe, in Florida. There's one in the Mid-Atlantic, somewhere around the Virginia area. There's one in Colorado Springs. there's one that's somewhere in the Midwest, there's one in Texas, and then there's one in Joshua Tree, California. So those are the ones this year. Unfortunately, all of the ones for 2019 are sold out. Yeah, you know, the fact that they've all sold out is a testament to the fact that a lot of people do want to connect with other people in the fire movement. So the ones for 2019 have sold out, but if you want to check out the ones for the year 2020, you can go to CampFI.org.

It's campfi.org. There's also an event called Camp Mustache that happens in Seattle every Memorial Day weekend. I will be there. So those three events, Camp Mustache, Camp Fi, and the Chautauqua, those so far are the multi-day retreats or camps or workshops or whatever you want to call them in which people can get together. And of course, locally, there are ChooseFI groups or Mustash meetups. you know, locally in every city there are also people who get together with others in the fire community. And in terms of planning my own events, well, so I guess this is the perfect moment to spill the beans or let the cat out of the bag.

I have actually been discussing this idea with a couple of people. We have tentative plans to start hosting some events. I want it to be a transformative experience. I want there to be a clear before and after. I came in with this question or this problem at the beginning of the day, and when I left, I felt some type of resolution about this question or this problem. That's what I want the benefit of that day to be. And I also don't want it to be about the nuts and bolts of FI.

I don't want it to be about how do I figure out what to do about health insurance. Those questions are Googlable. I want the benefit of an in-person event. to be the type of thing that you could only do in person. For example, get clarity about your post-F-I life. Get clarity about what's next. Sort of a what color is my parachute fire edition. And so what I want to do is throughout the rest of this year.

You know, this year I'll be at Camp Mustache, I'll be at Camp FI, I'll be at two of the Chautauqua's in Ecuador. And I've been to many, many of these in the past. But this year, as I'm there, I'm going to be there with an eye towards and thinking deeply about how do I take what I'm seeing here and turn it into some meaningful transformative experience for people who come to a live event. That's what I'm going to do this year in 2019. And then in 2020, my plan is to roll out the first two events and the first two events will be

in San Diego and in Austin. And I'm going to start those as one-day events until. I really feel like the value, the benefit that people get from being there is just transformative. So I'm not just going to put something together for the sake of putting something together. I'm only going to do it if I know it's good. Initially, I was thinking about full weekend events, full weekend retreats, but I think that in order to be able to develop really stellar material, I'd like to start with one day and then escalate up to a weekend event from there.

When I do host weekend events, the first one is going to be in Rhinebeck, New York. The reason I'm saying this is because I already have local organizers on the ground in all three of those locations, San Diego, Austin, and Rhinebeck, New York. I already have locations or tentative list of locations scouted for both Austin and San Diego, and I have a firm location in place for New York. And so all the pieces are in place. The only thing that is missing is that I want the same. space to think deeply about the content because the socializing, the meeting others, like, that's going to happen no matter what. That'll happen over meal times. That'll happen in small group discussions. And so how do we theme the day? How do we develop interactive games and exercises and workshops that can really make you wiser when you walk out the door than you

were when you walked in. Once I gained some clarity around that piece of the puzzle, I'll be ready to launch. And that's the reason why, you know, initially we were going to try to host these as early as this summer, as early as the summer of 2019. But I think that in order to do the event justice, I need to spend the rest of this year going to other fire events with an eye towards what can I take from this? How can I take the best of all of this? And take those lessons and apply it to whatever I create. So that was my long answer to your short question. Thank you so much for that vote of confidence.

And I am very, very excited to start hosting more in-person events, starting in 2020. So those are all of the questions for today. Now, we have a couple of comments and success stories that I would also like to share. And this first one comes from Mr. Refined by Fire. Here we go. Hey, Paula. Mr. Refined, from Afined by Fire. co. I wanted to call in today and share my story of how I connected with your message.

I've been a listener of the podcast and a reader of the blog for, gosh, a couple of years now. For years, I loyally manned the hamster wheel of corporate America, trading my hours for dollars. And I remember looking around the office at some of the senior employees thinking they look defeated, they look exhausted. And I really didn't want to be in their position 20 years down the line. Sure, I wanted their job title, but I really didn't want my next 20 years to look like their last 20 years. So I found the fire movement, and I remember cutting my budget. One night, I had my laptop on my lap laying in bed, and I was going through my budget, line by line. I looked over at the clock, and two hours had gone by without me being able to find a line in my budget.

I was willing to cut. I felt like a complete failure in fire. I felt like I didn't have what it took to be fire, or to have what it took to be fire, or to have. have a moustache in savings rate. And that's about the time that I connected with your message. I remember the hope that I had when I realized, hey, if I really want Netflix, I don't have to cut it out of my budget. If I just mow my neighbor's lawn twice a year, I can afford that luxury. And then I started looking at all the other expenses in my life through the same lens. What would I be willing to do? How many side hustle hours would I be willing to trade for that thing

that I want or that travel that I want to take or that thing that adds purpose or value in my life. Reframing that topic has completely allowed me to afford the things that I didn't want to cut out of my budget. And that's given me a lot more hope in the fire journey. That means that after the last year, I've earned $10,208, just with that mentality now applied to my life. So I wanted to thank you. I was prepared to donate the next 20 years to corporate America, but now I feel like I'm on a 10-year glide slope to retirement. Instead of spending 20 years, giving that to corporate America trading hours for dollars, now I'm investing that in my own business, my own time, pursuits, and hobbies, in my own relationships, and maybe one day in a wife. That's so much more hopeful than the path that I otherwise would have been on. I just wanted to thank you for the good work. Thank you for putting it all out there for free.

Thank you for being my digital virtual mentor. Thank you for the message that you've kept coming. Congratulations on the Plutus Award. And by all means, keep the fire burning. Thank you, Mr. Refined by Fire. And congratulations. I love what you said about rather than giving the next 20 years to corporate America, you are now giving time to yourself.

You're doing things that are more meaningful, more purposeful. That is absolutely fantastic, so I'm super happy for you. And I notice you also have a second success story, and this is a really interesting take on the difference between thinking entrepreneurially, thinking like the hustle, versus just trying to pinch pennies. So here is your second success story. Here we go. I wanted to call in today and share a story, a little friendly challenge that I had with a girl in my local group. She's an advocate of coupon clipping, and I've tried that, and I'm really put off by that experience. I remember looking for the right papers, trying to cut the right coupons, getting to the store on time before they expired, and showing up to the wrong store with the wrong coupon for the wrong item.

It was already expired. I was just really put off by the experience to not save a lot of money and to feel like I spent a lot of time on it. So I took her up in a challenge. She said that she could save more money coupon clipping than I could in the same amount of time doing something entrepreneurial. Her challenge, she went out, did her coupon clipping, says she saved money on a $130 grocery bill and only ended up spending $65. She admits that she spent six hours trying to do that and went to three different stores. So I took that same $65, and I went to my local Costco store.

I bought five cases of water and five bags of ice and two of those black kegator tote things with the rope handles. and I set them up in my local park. I have a park complex. It has several football fields really close together, and I placed myself right in between them all. It was a hot day in the sunny, steamy southeast, and the football fields were filled with kids and parents.

I started selling water bottles a buck apiece. I ended up making $135 profit that day. So with a lot less time, only four hours invested, I was able to make more money and defeat her in the challenge. That has really just helped me lens exactly what I'm doing with the Afford Anything message. You don't ask and don't tell yourself that I can't afford that. Rather just say, how can I afford that? Because for all of her efforts, and I'm not knocking people that are into coupon clipping

are more successful than I was at it, but by my calculation, she only made $10.83 for each hour invested, whereas I made $34 an hour. So the afford anything mentality, I can just project into every other endeavor that I do. And I hope you guys have the same success with whatever endeavors you're trying to do and sad hustles you're coming up with. Paula, thanks for the awesome messaging. Keep the good message coming and keep the fire burning. I love that. Thank you so much, Mr. Refined by Fire.

And congratulations on everything you're doing. Your life is progressing in such incredible ways. And you're not thinking small. You're not pinching pennies or overly couponing. You're seeing opportunities. You're seeing how you can go big, start a business, not give 20 years to corporate America. That's what it's all about. So congratulations for being on this incredible track that you are on.

We have one more success story that we would like to share. And this one comes from a member of our community who is 10% towards FI. Here's his story. Hi, Paula. First off, thanks for all the. which you put into the show. I'm phoning in after hearing the caller who was wondering if the majority of people on the journey to FI have blogs and podcasts. I'm about 10% of my way to FI.

I was a full-time pilot, but through career hacking, I managed to get a new job where I'll be working six months of the year and the rest of the time will be on holiday. And on top of that, I'll be receiving double my previous income. I just want to let you know that and hope you have an awesome week ahead. Thank you so much for sharing that story.

I think it's so important to tell the stories and hear the voices of people who are on the journey to FI, who are not bloggers, who are not podcasters. By definition, their stories are not getting out there as much because they're not in the business of telling their story. and yet this is the majority of the fire community, the bulk of the fire community are people who have jobs, have side hustles, have investments, and they don't publicly announce everything that they're doing. They don't have some big public profile with lots and lots of followers. And that's what makes their stories so much more authentic and valuable. And so thank you so much for calling in and sharing that story. And congratulations on being 10% towards FI. I was on a phone call a couple of months ago with a reporter from the Wall Street Journal, and the reporter asked me that same question.

She was like, wait a minute, why is it that everybody who reaches fire then just turns around and has a blog or a podcast or a book or a YouTube channel about fire? Is this just a giant pyramid scheme where the only way to reach fire is by talking about reaching fire? And I get it. I get why that is the impression that a lot of people have. But what I said to that reporter and what I'll say to anybody else who asks that question is, no, the reason why you see that is sampling bias. The reason why you only see people who have blogs and podcasts and YouTube channels is because everybody else who reaches fire are doing interesting things like raising their kids or rock climbing in Thailand or. or surfing in Hawaii. They're not sitting in front of a computer,

uploading videos to YouTube. And that's why we don't hear their stories is because they're not the ones who are documenting their stories. So sampling bias would lead you to believe that the only people who are doing it are the ones who are public about it. But that would be as silly as assuming

that the only people who are vegan are the ones with vegan blogs or the only people who are paleo are the ones with paleo Instagram accounts. We know intuitively that you can be vegan or paleo

without having to have an Instagram account about it. But for some reason, that idea hasn't transferred or translated into people's understanding of the fire community.

And so I just want to say thank you so much for calling in and sharing your story because I love hearing from people who are not bloggers. And again, congratulations on all your progress. Congratulations on being 10% towards fire. That is fantastic. And anybody else who has a success story that they'd like to share

or a journey story that they'd like to share, please go to afford anything.com slash voicemail. Leave your story. I would love to share it on an upcoming podcast episode. If you enjoyed today's episode, please do a few things to help us out. Number one, please rate and review this show. In iTunes right now, as of the time of this recording,

we have 1,507 ratings. Woo-hoo! I read every single one of these. Thank you so much to everybody who left us a review. So please, if you have a moment, go to afford-anything.com slash iTunes. That'll take you to the page on Apple Podcasts where you can rate us and leave us a review.

Or leave a review in whatever app you're using to listen to this show. Number two, please share this episode with a friend or a family member. If you heard a question today that reminds you of somebody that you know, please share this episode with them. Number three, hit the subscribe button or the follow button in whatever app you're using to listen to this podcast. Finally, I have an announcement. Drumroll, please. If you are interested in rental property investing, I have a free e-book.

It's called Seven Expensive Rental Property Mistakes to Avoid. If you are interested in rental property investing, you can download that for free at Affordanithing.com slash real estate. That's Affordanithing.com slash real estate. When you download that ebook, you will be subscribed to email updates about real estate investing and rental property investing. And you'll also be subscribed to getting the show notes every Monday morning that describe each podcast episode. And of course, you can unsubscribe easily with just one click at any time. All of it is free. You can find it at afford anything.com slash real estate.

That is our show for today. Thank you so much for tuning in. My name is Paula Pant. This is the Afford Anything podcast. You can follow me on Instagram at Paula Pant, P-A-U-L-A-P-A-N-T. I'll catch you next week.