Afford Anything - Ask Paula: If I Were to Interview Suze Orman Again Today, How Would It Go?

Episode Date: January 4, 2021

#294: Jeffrey is curious: if I were to interview Suze Orman today, would I agree more or less with her thoughts on the financial independence retire early (FIRE) movement? Matt wants to know: if a property cash flows really well, is it worth paying significantly more than the appraised value to purchase that income stream? Sara and her husband are returning to the states after living abroad for a few years. They’re moving to an expensive area where three to four bedroom homes cost $800,000+. They have $150,000 saved for a downpayment, but a $600,000 mortgage isn’t what they had in mind. What should they do? Eva and her partner are squirreling away money before the birth of their baby. They’d like to pay off their $90,000 mortgage in three years, but they’re afraid to use the money in case of unexpected baby expenses. What’s their best move? Justin and his wife want to take a gap year with their children in three years. They plan to visit Spain and London for six months each. What are unexpected expenses that they should factor into their budget? Former financial planner Joe Saul-Sehy and I answer these questions on today’s episode. Enjoy! For more information, visit the show notes at https://affordanything.com/episode294 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything, but not everything. Every choice that you make is a trade-off against something else, and that doesn't just apply to your money. That applies to any limited resource that you need to manage, like your time, your focus, your energy, your attention. Saying yes to one thing means saying no to other potential opportunities. The concept of afford anything is the concept of opportunity cost. And that opens up two questions. First, what matters most to you? What do you prioritize above all else?

And second, how do you make decisions on a daily, weekly, monthly, yearly basis that reflect that? Answering these two questions is a lifetime practice. And that's what this podcast is here to explore. My name is Paula Pant. I am the host of the Afford Anything podcast. Every other episode, I answer questions that come from you, the community. And today, former financial planner Joe Sal C-high joins me to answer these. questions. What's up, Joe? You know what I prioritize, Paula? What's that? I prioritize spending

2021 with you and the Afford Anything family. Oh, and we have an announcement. We do? We do. There's cake. There is cake. There is cake. There is cake. That is an announcement. And you will hear more about cake at the end of today's episode. Dun, done, done. foreshadowing. In addition to there being cake, we have another announcement, which is that Joe, you will be a much more involved part of the Afford Anything podcast starting now, starting in 2021. It's pretty amazing. Got a brand new contract. Got a 70% pay raise.

It was amazing. I thought it was a 2% pay raise. It all is the same. Sadly, it's all the same. So these episodes in which we answer questions from the audience, typically half of them have been with Joe and the other half have been just me. But we've been hearing, Joe people love you. I owe a bunch of people $10. People absolutely love you.

They love the shows that you're on. And the public wants more Joe. So you'll be joining me for all of these episodes in which we answer questions from this community. Well, thanks. It's officially Ask Paula and Joe. Thank you for the opportunity, and I will try my hardest not to mess it up, but we know I probably will. But two brains are better than one. Yes.

And secretly behind the scenes, this is always a ton of fun to make. Like, if you guys are having fun listening to us, we just have fun doing this. It's fun to geek out. It's one of my favorite people to disagree with on Earth is Paula Pan. So yes, and that's part, you know, that's part of, I think, the value that having both of us on these episodes brings is that variety in perspectives. You know, you and I agree on a lot of things, but not on everything. And sometimes the gloves come off and we have our fistfights about X or Y or Z, but that, I think, adds to the educational value of the show where two people who

fundamentally have similar philosophies and frameworks and values when it comes to the way that we approach money can still have differing opinions on specific questions. As long as people realize that most of the time, I'm the one who's right. I think we're doing very well. I can't even say that with a straight face. That's so bad. For those of you who are new here, Joe is clearly the comic relief. I'm just entertaining myself, just entertaining me.

tell you that too. Well, Joe, should we answer some questions today? Let's do it. Excellent. Our first question comes from Sarah. Hey, Paula. I've been listening to you for a while and just wanted to ask your advice on something. My husband and I have been living abroad for quite a few years. Now moving back to the States, have never owned a house before. We've been saving up money, renting here abroad, and hoping to buy a house when we return. However, it looks like, we might be moving to Redmond, Washington, or the house prices are really exorbitant. If we don't live in Redmond, we'll probably live in an expensive area either way because of the type of job my husband has, kind of like Silicon Valley or Redmond or we're going to be one of

those types of areas. We're just wondering if we can put maybe $150,000 down on a house, but the houses that we would like in that area are looking like they would cost something like $800,000. thousand plus, and that's for a fairly simple three to four bedroom house, but nothing extravagant. Probably our idea would be to go and at least rent for six months to a year, kind of get to know the area, see if he likes his job, and if we like the area, if we think we'll be staying longer term, and then think about buying. But at what point is it too much debt to take on? He would receive a pretty good salary for living in that area, but we still don't like the idea of owing so much money on a house in case the market bottoms out or something like that.

I think for his salary, people would take on a house like that, but we're pretty frugal and cautious and we're not sure if it's smart to buy something that costs $650,000 more, then we are able to pay at the time and just to have that much debt hanging over us. So anyway, yeah, Redmond area, there's no cheap houses in that area. So any thoughts would be appreciated. Thank you. Sarah, thank you so much for asking that question. And congratulations on returning back to the U.S.

And on the new home, whatever it will be and wherever it will be. Here are a few thoughts. First and foremost, any amount of debt that gives you anxiety, keeps you up at night, interferes with your peace of mind and the quality of your life. that is inherently, by definition, too much. There are two components to the question of how much debt is too much. There's the mathematical component and there's the psychological component. And when the debt that you have is giving you anxiety, when it is causing you to worry and distress

and to call complete strangers on a podcast to say, hey, do you think this is too high? that's a sign that at a psychological level, regardless of what the math says, psychologically, the debt is too high because it is causing that level of worry. So I would not recommend, based on what I hear in your voice, based on that concern, based on that stress, I wouldn't recommend getting this home. Even if the numbers did work out, I wouldn't recommend it just because of the toll it's going to take on your psyche. Now, with that being said, let's talk about the actual numbers. What I would recommend that you do, first and foremost, is practice what I call the anti-budget, which is that you decide how much money you want to save, and by save, I mean anything that improves your net worth.

So that could be contributions to a retirement account. It could be money set aside for other non-retirement investments. It could be additional payments that you make towards an existing debt above and beyond what's minimum required. It could be literal savings in a savings account. Any money that improves your net worth is what I mean when I say the word savings. So step one is decide how much money from your paycheck and your spouse's paycheck you want to save every month.

Set that money aside and whatever is left over is yours to spend. So then you take that bucket of what's left over and make a decision about how much of that you want to put towards housing as opposed to other categories such as food, travel, transportation, miscellaneous, like, health, beauty, toiletries, gym memberships, all of the things that constitute the expenses of life. How do you want to slice up that pie? Once you have done that, you will know how much money, what percentage of your income you want to put towards housing. And then from there, once you know what you want that monthly housing allotment to be, you can then figure out what that translates to in terms of home value. So rather than fixate on the dollar amount of the mortgage, you know, you mentioned, $600,000 sounds like a lot. When you say it like that, when you say it in terms of we're in more than half a million dollars worth of debt, yes, that does sound like a huge number.

But translate that into what it means for your actual budget. How much of your spending bucket does housing represent? There are generalized guidelines out there on the internet in which people will say, like, oh, spend no more than 28% or spend no more than 30%. I say throw those away because those, are intended for mass market consumption, and they do not reflect the priorities in your own life. The percentage of my income that I spend on travel is far higher than what any expert would ever recommend. And as a result, the percentage of my income that I spent on housing, at least

historically throughout my life, has been far lower than what any expert would recommend. So my budget is a reflection not of these generalized guidelines that are out there online, but rather a reflection of my direct priorities. And so that's what you need to do. Figure out what your priorities are. Figure out mathematically what that translates to in terms of the allocation of your budget. And from there, you'll know how much home you can buy. At the very least, the one number, forget about the numbers on the internet, Paula,

the one number you never want to believe is the number the bank tells you. Yep, exactly. Don't believe that number because you will be in hot water very quickly. using the bank's number. And I can't, I still can't figure that out. Like, why? Like, I get the short term an obvious piece where a bank is very happy with you taking out a bigger loan. And so, you know, sag to you on the monthly payment. But the long term and not so obvious is if your customers remain solvent, you could probably make a lot more money with people who do well financial. I don't, call me crazy. You know what's interesting to me is if you Google how much home can I afford,

most of the articles that you'll find are articles that discuss. how much home you qualify to purchase, which is a different conversation than how much home you can actually afford. I like your discussion with Sarah, though, about the voice in her head. I want to talk about that for a second, Paula, specifically, because your brain is really smart. And people do one of two things when they hear this voice in their head telling them that something isn't right here. Either, number one, they ignore it and they shove it aside. And historically, how many times have we seen that go wrong, right? I mean, how many times have you had a friend tell you, I should have never gone out with

this person or I should have never done that stupid thing in my life if I would have only listened to the voice in my head telling me there was something wrong the whole time. Or even, sadly, when you see these people that get ripped off, right, by these scam artists, you hear them all the time in interviews say there was this voice in my head, but I just kept telling myself that that was wrong. So either we don't listen to it. Or number two, we pay too much. attention to it. And all we ever do is nothing. We never go anywhere because the voice in our head,

for some of us, me included, screams at us all the time that I should be afraid here. I should not do this. There's no way. I'm going to get in trouble here. So here is a great exercise to get through the voice in your head. I use this myself where I take all of the risks that I'm thinking about in my head with this particular issue. And we can take Sarah's as an example here. Take the issue and write down all the things that the voice in my head is telling me. I can't afford the mortgage. I don't know the area. This is going to break my budget. Something's going to happen to my husband's paycheck and the bottom's going to fall out of his career and we're going to be left in this house that we can't afford. Write every single one of those out. Because when you do that,

using the same concept that your brain is really, really smart, draw a line next to each one of them and using that same super smart brain solve for every one of those. And it really gives you this approach that an engineer uses. I had a client back when I was a financial planner who built highways. And she told me, Paula, that they would never start building until they eliminated all these things in this list that could go wrong. So if I'm Sarah, I list out every single one of these.

I draw a line next to it and I solve for all these things. So to get through it, I need to have X amount of money, I need to make sure that maybe I have a backup income stream coming in. Maybe I have a big enough emergency fund that he has a full year to get another job if something bad happens there. Write down all of these solutions. And just the act of writing it down moves you from this fuzzy thinking that something's not right here to very clear, crystallize thinking about the problem. and you feel much, much, you not only feel much better, you are much better off because you've

solved for all of the risk in the problem. Exactly. It's like the left column is the anxiety and the right column is what you're going to do about it, the anxiety and the action. But how many times have we let that anxiety just rule us? Right. You know, one way or the other. We either ignore it and then we regret it or we pay too much attention to it and we don't

do anything with it so we don't. we don't move. Exactly. Exactly. Whereas recognizing it and then taking some type of decisive action that solves the root of the anxiety is ultimately the approach that gets us moving forward. Yeah, which is for me the only way to go. So I would definitely do that, Sarah. I'm not sure beyond that, really, what Paul and I can actually do. Yeah. Besides, recommend that you don't listen to the bank and throw away the numbers online and know what your number is. And Sarah, if you decide that borrowing $600,000 is more debt than you want to take on, and by the way that you've asked that question, I'm assuming that that's the decision

that you're probably going to come to, you do always have the option of buying something that is less expensive than a three to four bedroom single family home. In the question that you asked, you cited the $800,000 sticker price of a single family home that is in move-in ready condition that is between three to four bedrooms. So other alternatives could be to buy something that is a fixer-upper, to buy a foreclosure or a short sale, to buy a townhome or a condo, to buy, you know, a one-bedroom or a two-bedroom. So essentially, if you think of the age and the condition of the property as a variable, if you think of the square footage as a variable, and if you think of the number of bedrooms as a variable,

If you can't adjust the variable of price, then adjust some of those other variables instead. There needs to be, if one of those is fixed, then the others need to be flexible. So determine which variable must be fixed into place and which other variables you are willing to be flexible on. And if you want to make sure that you stay under a given price point, then those other variables, the number of bedrooms, the square footage, the age and the condition of the property, property, the type of dwelling, meaning whether it's a detached single-family home or whether it's a townhome or a condo, the type of home sale, whether it is sold by a retail home buyer or whether it is from the HUD home store or some type of foreclosure. If you want to be firm on the variable of price, then you'll need to be flexible on those other variables in order to accommodate

that. So, thank you, Sarah, for asking that question. Our next question comes from Matt. Hi, Paula. This is Matt from North Carolina. My question is about rental property. I currently have my eye on a piece of property that has a well-established history as a short-term rental. It grosses about $50,000 per year and the seller wants $250,000 as a sale price. However, the catch is the property would probably only appraise for about $150,000 as a residential property. So my question is, would you ever pay significant, significantly over appraisal value just to purchase the income stream from a property. Thank you for your response. I really look forward to hearing your insights. Matt, thank you for asking that question. And I can give you a short answer. Hell no, that seller is smoking crack. You should absolutely not even consider paying that much over an appraisal price. If you were to come to me and say, oh, it appraised for 170,000, the seller wants 175. You know, if we're talking about a nominal rounding error, sure.

But a gap of that much, absolutely not. I'm only laughing, but not because of Matt's question. I'm laughing because I was wondering what you were thinking about that. And we don't talk about this ahead of time. And yeah, it was pretty definitive, Paula. Pretty definitive. I don't profess to know nearly the amount about real estate that Paula does. I'll say this, you know, widening this to just any investment, any investment with an income stream, don't overpay for that, for that income stream.

Because of the fact, if that income stream goes away, all your left is that purchase price. That's all you got left. And so kind of using the same risk management technique we talked about with Sarah, where we list all the things that could possibly go wrong and solve for those things. What could go wrong with this wonderful income stream? And particularly in the world of short-term rentals, a lot could go wrong with it. All it takes is for one aggressive city council to decide that they're going to outlaw short-term rentals in that municipality. And boom, income stream buy-bye or income stream significantly reduced because now you can only rent it out on long-term leases. You can only rent it out on six-month to 12-month leases.

You can no longer do short-term. and that is going to drastically affect your income stream. So if you are one legislative session away from your entire business model falling into the toilet, you definitely should not pay, overpay for that asset. Well, and even pulling away from real estate, I've had people tell me before, and Matt might be thinking this as he's listening to us, Paula, but this is a great opportunity. He clearly didn't tell us all about the opportunity. You need to get away from that opportunity, and you need to be.

to look at many, many different opportunities. And once you get away from this great opportunities, you'll find that there's 50 of these, 100 of these, thousands of these all over the place that don't have this caveat attached to it. Exactly. Also, with any investment, it's important to have, and Joe, I think you kind of alluded to this when you talked about if the income stream goes away, all you have is a purchase price. You need multiple exit strategies. And if you're overpaying for an asset and relying on one and only one course of action, which is short-term rentals, you have only one potential course of action that's going to work out.

So you don't have those multiple exit strategies. You can't turn this into a 12-month rental and have it still be a viable investment. You can't sell it for anything near what you bought it for. You have no other exit strategies. You are completely 100% dependent on everything going right with Plan A. And that is a precarious situation to be in. There's no margin of safety. So thank you, Matt.

And best of luck as you grow your investments. We'll come back to this episode after this word from our sponsors. The holidays are right around the corner. And if you're hosting, you're going to need to get prepared. Maybe you need bedding, sheets, linens. Maybe you need serveware and cookware. And of course, holiday decor. all the stuff to make your home a great place to host during the holidays, you can get up to 70%

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That's your commercial payments of fifth-third better. Our next question comes from Eva. Hi, Paula. I'm pregnant. We save so much, it's likely we live on one income. Our emergency fund is on track to be over 40K before the baby's born. After contributing a hefty amount to my 401K, my take home is about $38,000. I'm around 7,000 away from having a minimum viable retirement. If I can work from home at the same job, I'll do so after the baby's born.

But if that's not the case, I'm planning to be able to stay home for the least the next 10 years. We are talking about holding and growing their emergency fund to about 70K and then paying off the mortgage in three years. And just one lump sum instead of making extra monthly payments. The mortgage right now is around 90K and the refinances 2.5%. I can't explain the logic behind this of why not pay it off sooner, especially when we have such a big emergency fund, but maybe because we're going to be first time parents and we just don't know how much a baby will cost and we prefer to have some money there just in case. But again, after savings, we live on one income. Is this what your recommendation would be?

in this current situation that we have. Thanks. Eva, congratulations. That is super exciting. I also want to congratulate you on having an emergency fund that is going to be $40,000 before the birth of this baby. You're doing a great job. You're saving aggressively.

You've got a great emergency fund. You live on one income. You've made big 401K contributions. So big congratulations on setting yourself up to be in a really, strong financial position right now. You know, you're, you're already in a great financial position and it looks like it's going to be getting better, continue to get better. My recommendation would be to prioritize building that emergency fund, prioritize maintaining savings, and don't worry too much about paying off this mortgage balance. As you mentioned, the balance is relatively small. It's a

five-figure amount. It's $90,000, so it's not an oversized mortgage balance. And it's a 2.5% interest rate that is lower than the rate of inflation. So given that the mortgage balance is so reasonable and given that the interest rate is lower than historic inflation, and historically speaking, it's hard to get much better than 2.5%. If you look at mortgage interest rates over the last 50 years, it's never been better. The mortgage interest rates that are available right now are the lowest of our lifetimes. And I mean that both in the context of our lifetimes so far to date, as well as most likely our lifetimes forever in the foreseeable future, like it's hard to imagine interest rates being any lower. They have not been in the last 50 years, and they probably will

not be for the next 50 years. So if there were ever a time to hold on to a mortgage and not prioritize paying it off, it's now. It's when you've got a mortgage interest rate that's less than historic inflation. That's a rate that's worth hanging on to so that you can have more savings so that you can have a bigger emergency fund. I think she's also, Paula, at such a time of uncertainty in her own life like Sarah is. Sarah is. Sarah's family moving from abroad to the Seattle area, Eva, having a baby. I'll tell you, man, whenever any of my clients had children and every parent out there will tell you this, the cost that you didn't expect are through the, I never realized that buying diapers was like

buying gold. I had no clue. I had no idea. But it turns out it was. I could have just bought, I would have been a Bitcoin billionaire, but Huggies took all my money. That's exactly. true story about what happened. So, but seriously, for some people, children affect the budget a lot of the budget gets cranked a lot for other people. It doesn't that much. So while she has this budget uncertainty in her life, I think a year into her new baby's life and her job transition and she finds out what happens with her income stream, she'll be way, way, way more comfortable making that move or not making that move a year from now. So I'd feel very comfortable putting that off 12 months. And to your point, with interest rates as low as they are, the cost of not making that move now

is incredibly low, right? Yeah. There's not much cost in that decision, which is cool. If interest rates right now were 9%, she might want to suck it up and pay off that mortgage right now. Right. But I think during a time of budget uncertainty, leaving the money alone, I feel like she's right on there. Yeah, I agree. And to be clear, Eva, I'm not.

telling you to hang on to the mortgage because I love the idea of hanging on to low interest debt. You know, that's not the reason. To the contrary, I love the idea of paying off debt. I love the idea of being debt free. There's a lot of freedom in that. But everything has a trade-off. And the cost of being debt-free comes at the trade-off of not having as much cash. And to Joe's point, this is a time when cash is going to cushion you through all of this uncertain. You know, the fact that you can rely on cash to get you through the unknown unknowns is going to be much more valuable, particularly right now, than the relative peace of mind that comes from knowing that your mortgage is paid off.

Both are great. I'm a huge fan of debt freedom, but not when it comes at the price of not having adequate cash or potentially not having adequate cash. that's too great of a price to pay. And the best case scenario is also the most emotionally difficult one, right? The best case scenario is that a year from now, or two years from now, you look back and say, oh, turns out we didn't even need that cash. Turns out we didn't even need this emergency fund.

We could have paid off that mortgage back at the beginning of 2021. The best case scenario is that in two years, your emergency fund is intact, and you look back and wonder why you didn't pay this off. That is psychologically kind of a tough pill to swallow, but it's actually a sign of success. It's a sign that everything went right. Yeah, that's fantastic. I am more opinionated in the new year. You're just salty. I know, right? So for those of you who are new to this podcast, I typically don't provide

hard answers to questions, I typically say, that's an interesting question. Let's explore these different frameworks. Let's explore these different perspectives. Let's review the pros and cons of various angles and options. And then once we've done that, then you, the listener, make the decision. This is one of those rare episodes where I seem to be coming out swinging with a strong opinion on question after question. Who are you? I know, right? So thank you, Eva, for asking that question. Our next question comes from Justin. Hi, Paula.

Me and my wife are thinking about taking a family gap year with our children in about three years. We plan on spending three months in Spain, six months in London, and three months back in Spain. We're starting to come up with a basic budget so we can set our monthly savings goals. I was hoping that you might be able to give me some advice on things that we might not have thought about or resources to look forward. more information. Obviously, we know to budget for things like housing, food, and entertainment. But how about things like international health insurance? Is it really necessary to get, or should we just pay cash? Also, I know that you visit many locations for longer time periods than just a week or two. Is there anything that you've found that you didn't originally budget for, but now know that

you need to consider? Also, do you know any people in the fire community that have done or are working on doing something like this that regularly post things on Facebook, YouTube, blogs, or podcasts. Anything that you can give us would really be great. Love listening to your show. Thanks. Hey, Justin, great question. And as a guy who during 2020 decided that the nomadic lifestyle would be for me, and by the way, Paula,

what a great year to do that. I know, right? Nothing going on. Yeah. Yeah. You know what's the best year to travel 2020? Not. But we started the United States, but our goal was, and Paula, you know this, in December, we were going to be in Bali.

I had a place rented and they wouldn't let us in. I was going to quarantine in Bali. Hey, if I could be a place where the sun is and not be around people on a beach in the South Pacific, sign me up. But that didn't happen. And then we were going to do Portugal in the spring of this year. none of that happened however i'm very interested in hearing how this goes for you because and i like the fact that you're doing it as a gap year instead of as a final retirement idea because paula you and i see people do this decide they're going to do it long term and then they

find out what i found out which is i love traveling but the nomadic lifestyle is not for me not my thing and that was after just a month in vermont a month in a month in in Palm Springs, California, and then a few weeks between Ohio, Michigan, and Texas to learn that that is not my thing. Like some aspects of it, but not long term. That's my first thought, is that I'm happy that you're doing it. As for the insurance, insurance is always a difficult discussion.

And here's the thing about insurance. You're hoping if you buy it that it's a waste of money. And yet the way most people will look at this is, what if I waste my money buying insurance? Right. So it's another situation where the best case scenario is that you regret buying it. That's the best case scenario. Absolutely. But the insurance is only important if you end up using it.

So I think Paula or I telling you not to buy insurance and to pay cash when a catastrophic thing could happen during that time, I think it would be irresponsible of she or I, not to put words in Paula's mouth, but I think that I would need to tell you to buy insurance. Yeah. So, you know, when it comes to health insurance, I don't even think of it as health insurance. I think of it as bankruptcy insurance that, you know, it's an insurance policy that protects me from having to declare bankruptcy for medical related reasons. That's a great idea.

You're taking an unknowable. quantity and putting a fixed cost on it. Exactly. Right. So I'm not looking at health insurance to pay for my flu shot. If it does, that'd be great. But that's not the reason that I buy it. I buy it because I am fully aware that if I get run over by a bus, if I get diagnosed with cancer, if I, heck, even if I break my leg, you know, a broken leg is going to be a steep but probably ultimately payable out-of-pocket figure. A cancer diagnosis that requires sudden treatment, Who knows? You know, that's going to be most likely a six-figure, maybe seven-figure number.

Getting hit by a bus. Same thing. Six, maybe seven figures. High six, maybe seven. So there are a lot of, unfortunately, there are a lot of people who do have to declare bankruptcy because their medical bills got too high. And health insurance is, at least in theory, supposed to be something that protects you from that. I think also just a couple things just in planning ahead for,

currencies is always important. Make sure that your credit cards, if you're going to use credit cards, don't have foreign transaction fees on them. And when it comes to people that write about this all the time, one of my favorite international blogs is go curry cracker. He writes about everything. So he's not going to be specifically focused on this. But when you go back to a lot of Jeremy's earlier writing when he was making the decision to go from being an engineer to moving abroad and living in different places. A lot of the decision making, a lot of the strategies about how he was going to navigate things. I really like those. And I think he's won multiple awards, hasn't he? You know, Jeremy? Yeah, yeah, yeah. He was a guest on this podcast back in its early days.

What a nice guy. Yeah, yeah, he is. In terms of other platforms that talk about this, so there are a few things that I would recommend. First, the Plutus Awards, which is an award for the best in personal finance content, they throughout their history have handed out awards for international personal finance content or travel-related personal finance content. And if you go to their website, you can look back through. not just the award winners, but all of the nominees.

And it's a pretty darn good list of platforms, blogs, podcasts that cover these types of specific topics, international personal finance, international travel with a money angle. So that's one recommendation. The Family Adventure podcast, it's been a while since I've, she's even thought about that one. So I'm assuming they're still running, but they are specifically a podcast based around international family travel. And so that is a good resource. The tropical MBA, that whole platform and that whole community, they're entrepreneurs who live overseas, or lived overseas, at least for a while. And many of the people that they interview talk about building businesses

remotely. And so there's a decent amount of travel content on there as well. I mean, there's a lot. You know, there are a lot of travel blogs and travel Instagram feeds and travel podcasts. Once you start diving down that rabbit hole, you'll be able to find quite a bit. There are a lot of people who talk about homeschooling from the road, which is known as road schooling. So if you just run a search for road school podcasts, there are quite a number of those that you'll be able to find. So I would start there, and that will very quickly lead you into the expansive world. of online platforms that talk about full-time international travel, the full-time expat lifestyle, and there is a very active subset of those that specifically talk about family travel and travel

with kids. On YouTube, there is a couple by the name of Mike and Lauren. They are part of the fire movement. They live very frugally. They travel quite a bit. They have some real estate content as well, but they also have some significant travel content. I would definitely check out Mike and Lauren on YouTube. Steve and Courtney Adcock are also full-time nomadic. They have a good amount of travel content on their YouTube

platform as well as their blog. So check them out. And for general travel information, not necessarily family-related, but for people who just write about full-time travel, nomadic mat is one of the most well-known figures in the travel space. Chris Gillibow, of course, has written quite a bit about travel. I say, of course, like everyone's supposed to know who he is. But he has traveled to 192 countries. So he's traveled to every country in the world as of some certain list based on the... The number of countries that exist in the world are as determined by list makers and subject to change year by year as

political borders and boundaries shift. But at the time that he declared his list, there were according to some governing body, there were precisely 192 countries in the world. And he went to all of them. And so he has a good amount of content based around travel as well. So Nomadic Matt, Chris Gillibow on Instagram, Glow Graphics, Gloria Atonmo, she is one of my favorite travel Instagrammers, as well as my life's a travel journey. Those are my two favorite travel Instagram feeds. I was just looking up on the Plutus Awards website, this category. And actually, the one I mentioned, Go Curry Cracker won the Plutus Award this year for Best International. So, bam, got that one. But also another one that I had forgotten about was Wander Onwards, was also

up for the award this year, International, and specifically speaks just into what you're looking at. Wealth and Wanderlust, Vanessa at Wander Onwards, says she helps people make money moves abroad. There you go. You know, the last thing that I would say with regard to planning your budget when you are abroad is that if you are stationary in one location, your costs are relatively low. And fairly similar to what they are in the United States. You know, when you're in a city, then your costs are housing, food, transportation, clothing, occasionally buying toothpaste, socks.

You know, your costs are very much reflective of just the general day-to-day cost of living in that city. What can get expensive in travel is moving around. So transit from place to place, if you're moving from Barcelona to Madrid to Malaga, that travel inside of a country from city to city or town to town, that can add up pretty quickly. And the same is true, heck, even if you're inside of the United States. You know, if you're in the U.S. and you live in Portland, Oregon, and you don't leave Portland, Oregon, your costs inherently are going to be a lot lower than, you're in Portland, you're going to be a lot lower than, you're in Portland, you're going. then some other person who lives in Portland, but frequently goes to Seattle and then Boise and then San Francisco, right? It's that transition between places that creates costs to add up. So the less that you move around, the lower your costs will be.

We found that just this summer with our experience here. And this was even the strategy that we were going to use. In fact, at one point we were looking at Greece and we're picking a place not just for the specific community it was in Paula, but because it was day trip friendly to a lot of different places. So I was going to be in a region of Greece, which frankly to stay, it wasn't going to be that expensive anyway, but I was going to be in an area that was even a lower cost of living, beautiful place right on the ocean. I don't remember the monthly cost, but it was very, very low. And yet I was a day trip away from four or five different places that I could be and I could get back to that same rental place and lower my cost. But we did that in Vermont,

stayed in a fairly high cost of living place. I mean, Stowe, Vermont is not a cheap place, but because we were staying for a month, we were able to get a really nice rate on a place. If I've been trying to do it for a week, different. Also, because we were off season, a lot of people that want to stay in stow are not hikers like Cheryl and I are, they're winter skiers. And when I looked at the same condos, that we stayed in in February, it would have been three times the amount that we paid to stay there for a month. The same thing in Palm Springs. We did a shoulder season mid-September into early October. So a month again in Palm Springs, again, not a cheap area. But we could get to Joshua Tree. We went to Channel Islands National Park. So we did all these outdoor stuff during COVID. A lot of hiking just in the

hills and mountains around Palm Springs, we could get to all these places centrally and be in a nice place because we committed to four weeks. Right, right. And, you know, the other thing that's great about long-term travel, and I'm sure you experience this show, is that you're not paying for two different sets of housing simultaneously. If a person takes a one week or two-week vacation, they're not giving up their rent or mortgage in order to do so. So if a person takes a one or two week vacation, you are simultaneously making your normal rent or mortgage payment while also paying for a hotel or an Airbnb. Whereas

when you do long-term travel, you're only doing one of those, right? You're living out of a hotel or an Airbnb. You don't have a regular mortgage payment or a regular rent payment. It's just a cost transfer and not an additional cost. Exactly. That well said. That's a very succinct way of saying it. I'm the poll interpreter. Exactly. Exactly. You know, and so a lot of times when I did, I traveled for a little over two years. I traveled for 27 months. And people were flabbergasted at the fact that I used the word flabbergasted in my vocabulary, but they were also flabbergasted at the length of that trip and would frequently ask, like, how were you able to do that? And a big portion of that answer, I mean, there are many facets to that answer, but one major

component of it is that I did not have rent or a mortgage in the United States. So when I was in Cambodia and staying at some guest house in Cambodia, my only housing cost was that guest house in Cambodia. I wasn't trying to pay for two sets of housing simultaneously. And similarly, you know, because I was traveling for so long, because it was a gap year or gap two years in my case, I sold my car before that trip. So I didn't have a car payment. I didn't have a car insurance payment. I actually took the additional step of giving up my cell phone.

And when I was overseas, just getting a burner phone with, you know, a SIM card with some prepaid minutes on it, I don't know if you would necessarily want to do that. That was something that was more appropriate for the year 2009. rather than the year 2021. But still, it's giving up those routine expenses in the United States that create space in the budget to effectively create a brand new life in a new location in another country. To broaden this topic, Paula, just a little bit,

you know, another place where people are surprised by cost transfer are when they have children who go to college. Because if the child is living on campus and has room and board. At first, I thought, like, when my twins go to college, I'm going to have all this extra food expense, not realizing that my kids aren't eating at home anymore. So instead of having this new...

I found my budget slashed when my kids went to college at home, but obviously the cost of school went up, but not up as markedly as I thought it was going to be ahead of time. Right. So tuition costs, of course, were high. buyer, but room and board, or at least the portion of room and board that covers food, was simply a cost transfer. It turns out that whoever ran the University of Texas food program didn't know how much money

they were going to be losing having to feed my kid. I remember that every time Nick comes home, I'm like, man, he can eat. That kid can eat. So thank you, Jeremy, for asking that question. And enjoy your gap here. We'll come back to this episode in just a minute. But first, our final question today comes from Jeffrey. So I'm going to question, Paula.

If you were to redo the interview with Susie Ormond today, how would the conversation be different? Would you agree with her more or less? Thanks. Jeffrey, thank you for asking that question. That's a hilarious question. So first of all, for the sake of anybody who is new to the Afford Anything podcast, anyone who doesn't know what we're referring to, in October of 2018, we aired an interview with Susie Orman in which Susie's, well, you know what, actually, let's just play a clip of it. Have you heard of the fire movement? Yes, yes, of course I have, and I hate it.

Really? I hate it. I hate it. I hate it. And let me tell you why. So Susie Ormond certainly, shall we say, raised some eyebrows when she made those comments about the fire movement. And for, again, for anybody who's new to this podcast, it's January of 2021. So we have a lot of new listeners, people who've made New Year's resolutions to do better with their money this year, who might not know all of these acronyms or know the background.

So if you're new here, the fire movement stands for financial independence retire early. It is a framework and philosophy about money management that prioritizes building investments to such an extent that the passive income generated from your investments could potentially cover your cost of living. That approach to finance is known as the fire movement, and Susie, as you heard in that clip, has some very strong feelings about it. And so, Jeffrey, to your question about how that interview might go differently if I were to have it today, honestly, I don't think it would. At least not from my end. I can't speak for Susie, of course. But I like the way that I handled the interview. And I would do it again exactly as I did.

You'd still ask the same questions. I would, yes. Yes. So my approach with that interview and with interviews generally is that I am simply a thing. facilitator who is there to encourage the guest to talk. And to the greatest extent possible, my role is to get out of the way. When I'm conducting an interview, the spotlight is on the guest. So I make myself as minimal as possible. And I think that stands in sharp contrast with a lot of other interviewers who insert themselves into the conversation and they offer their own opinions

and their own feedback. The interview is not the place for that. You know, you can do host commentary after the interview to give your take on it. But the interview was the space for the guest to talk. So I like to make myself as small as possible, shine the spotlight on the guest, and get out of the way. And that's what I did with the Susie interview. And I would do it again. So you got some pushback after that from some people that you didn't broach some of the topics with her that day on the interview. But you're saying that was really on purpose because it was her spotlight. That was her time to shine.

Well, I did broach topics, but I didn't do it in an adversarial way. There were people who said, you know, why didn't you? Essentially, they kind of wanted it to be like that show Crossfire on CNN, where you have, you know, where you have two people each taking a side and then each fighting one another about their side. and each person defending that side, I still asked probing questions, hey, you know, there are people who say X, Y, Z, how would you respond to that? There are people who say ABC. What do you think about that? I still ask those probing questions, not from a place of provoking a debate, but rather from a place

of seeing how she responded, you know, seeing what her thoughts were on common objections that might come up. And again, for the sake of anybody who hasn't listened to this particular interview, her take was essentially that there are many unexpected events that happen throughout a person's life. And in her view, it is folly to assume that 40,000 a year or 60,000 a year, or even 80,000 a year will necessarily be enough money, given the reality that has to be. And, given the reality that health care costs, costs of dealing with a disability, costs associated with needing to take care of an aging or disabled family member, those costs can be both high and unpredictable. That was essentially the position that she took in colorful language.

Well, and Susie language, right? Yes. All the peacock feathers. Do you agree with that? That is certainly a very, very valid point. And I said that even back then as well. that if the point is, hey, I'm concerned that people in the fire community may not be adequately safeguarding against Black Swan events. And I think that we should be having, we should, as a

community, put a greater emphasis on long-term disability insurance, long-term care insurance, a greater emphasis on health insurance. We as a community should be putting more safeguards in place against financial planning for Black Swan events. if that was the point she was making, and I said this back in 2018, and I'll say it again in 2021, I've agreed with that throughout. Expect the unexpected. And so certainly I've always held to the idea that passive income that stems from your investments is meant to be a safety net for the expected basics.

It's supposed to be enough that it can cover your. housing, your groceries, but all people, regardless of whether you're in the fire movement or not, all people need some type of protection for major health calamities, you know, that that's what health insurance is for, for long-term disability, for long-term care in a assisted living facility or in a care facility. I mean, again, it doesn't matter if you're fire movement or not fire movement, all people need financial planning around how to deal with those contingencies. I think for me, it's not even just about the Black Swan events. I think the biggest Black Swan event that can happen in my life is that I will feel differently as I age than I do now. There might

come a time. And this is the thing that always frustrates me as a former financial planner is that even though you like living in a tent in a woods and making your own furniture today, which means that you can live on $3,600 a year. $3,600? Doesn't mean, you know, I'm being facetious, right? No, $3,600. Like, I can make my own food. I can live in this tent.

I can make my furniture. I can do all this stuff in this backwoods way, which, by the way, all that's fine. it sounds like I'm throwing shade on all those things and I'm not at all. I'm just saying you may not feel like that forever. And when you base your assumptions on these super, super low numbers that you'll see some people in their 20s use to say, hey, I retired at 26. I just really challenge that you're going to want to wake up at 50 in the same

spot. Maybe you will. And it actually isn't even so much about that as what if, right? You're talking about the what if with Black Swan. What if you wake up the next morning and go, I want to stay at a hotel or I want to live in a house. I'd like to live indoors. I would like to buy furniture instead of make it. You know, when your feelings change and your lifestyle changes and you've painted yourself into a minimalist corner. I really like minimalism, but I like meaningful, thoughtful minimalism that's not attached to a way of living that I'm going to have to sustain forever. I like having less, more meaningful things in my life, but I want to have the ability to do more if I choose to, do something expensive if I choose to. I have had a lot of interesting conversations about that topic the last

few years. And certainly your interview with Susie Orman was a big catalyst for a lot of those discussions. You know, I think zooming out, part of what you and I are really talking about right now is the importance of separating the FI part from the RE part. You know, FI, financial independence at its core is generating enough passive. income through your investments that you have a safety net. You know that if your brother calls you tomorrow and says that he has terminal cancer and he has six months to live and he lives in a different country and you need to go take a leave of absence from work effective immediately so that you can fly to that other country and be with him for his last six months, you know, you want to make sure

that during that six month period, you're not worried about how to buy grocery. how to pay the electric bill. You know, you want to make sure that you have a basis so that you can respond to things like that. And that, I think, is the true purpose of financial independence. But the RE part, the retire early, I've personally never connected with that. I've never really liked that.

And what I've seen, at least anecdotally, is that a lot of people who do embrace the retire early portion of it are essentially using the word retire as a synonym for a well-funded career change or a well-funded second act. So perhaps they're transitioning from being a software engineer to being a preschool teacher. You know, there are many people who start their careers as preschool teachers and have many budgeting challenges as a result of the fact that they simply don't make much and haven't made much for their entire careers.

That's unfortunately the reality of how we pay preschool teachers in the United States and throughout much of the world. And so if someone is living a software engineer lifestyle but decides that, you know, their passion is teaching preschool and that's what they really want to do, the fire movement is essentially a vehicle that allows them to do that starting from a position of strength. And so oftentimes when people talk about the quote-unquote retire early component of it, they're talking about that. They're talking about that well-funded second act, that well-funded shift.

And that RE part is where 99% of the arguments over semantics that happened in the nerd community come from. Exactly. Is in that one little piece, which might mean, call me crazy, might mean that the word fire is inadequate, is not correct. You know, it's a neat acronym, but I think it drives as much confusion as anything else, which is why I love talking about financial independence. You know, it's funny. Vicky Robin was talking about financial independence before the fire movement really had a name. And now we refer to her as, you know, the godmother of the financial independence movement. Yet even then, I mean, you know, I remember talking to people in the mid-90s about having enough money to be able to do whatever they wanted to do. Same stuff. No cool acronym, though. Absolutely. Yeah. Yeah. Same stuff, new acronym, essentially. But yeah, but I think we're in agreement that the FI part is what really truly matters. The rest of it is sort of window dressing that can maybe attract initial attention, but is not

truly what it is about and could, depending on your interpretation of the semantics of the word retirement, end up being misleading. That being said, Joe, to go back to something that you said earlier, that how you live in your 20s may not be how you want to live in your 50s, one of the other crucial components of fire that I want to emphasize is that I've long disagreed with the notion of having, quote, unquote, a fire number or a phi number because people generally choose their fine number as a multiple of their current spending at the time that they encounter the fire philosophy. But if you think about the distribution of spending across the span of your life, if you imagine

that your annual expenses every year are laid out on a graph, starting from the age of 18 all the way until the age of 100, and you graph your annual expenses every single year throughout your life, the expenses that you have in the year that you discover fire or the year that you commit to the movement is a random data point along that distribution. But it becomes overemphasized, overweighted when people grab that random data point and multiply that by 25 and say, this is the portfolio value that I need to have in order to consider myself, fie. See, I like it. I don't like it to the point that I'm going to get a tattoo with that number on it because I think that number changes, right? But I do like the fact that we're looking at

these events in the future that we want to envision. We're making them real so that we say for them today like they're real because study shows the more real something is, the more likely you are to put serious thought and effort behind it. But I also want to know that that number is going to change. it's going to morph. And so that's why we call it financial planning and not doing a financial plan. I remember, by the way, at the end of my first year, my mom really wanted to start developing her and my dad's financial plan. And how flippin awkward is this when your mom says, hey, I'd like my son to help us with our financial plan. Of course, my dad, having pride and being of a certain age was like, over my dead body is my kid going to tell me what to do with my money, right? And one of my dad's objections, which I didn't

end up, I mean, I've, I've helped them with many things when it came to their financial picture, but never helped them develop their entire financial plan. And I'm actually happy for that. But by the way, when you hire financial planner, you probably shouldn't hire somebody who's a family member. You just shouldn't. Hire someone who's not. But my dad, one of his objections to it as well was, why the hell are we going to do this financial plan thing? Isn't it out of date like a year later? And I said, no, dad. It's out of date like two days later. Two days later, these numbers that were right at the time are now wrong. But I do like much like we'll use a, and this is such an overused analogy, but it's probably because it works. If you're a pilot headed toward Hawaii from the mainland of the United States, you set this course and then all of these factors blow the plane. off course, right? I mean, you know, wind, air pressure, all these adjustments, maybe the gate assignment changes, whatever it might be. And what do you do? You course correct. Over time,

you continually course correct. And so I love the fact that every, you know, two, three, five years, you're updating what that number is and you're applying new data. And you're also realizing then from the beginning that this number is not a set in stone number. This is the ballpark that gets me toward the island, right? And once I can see the island, like not in my brain, but I can really see it. I'm up close. Now I can start to really put some serious numbers. But even then, if somebody does the traditional retire at 60 thing, they have no idea what life is going to be like when they're 80. Even when I was in the business of helping people at the automotive companies retire, we would have to deal with the fact that there was going to be still a lot of uncertainty.

There was going to be a ton of uncertainty and being comfortable with that uncertainty and keeping some money flexible was the key to a successful financial plan. And that goes to the quote from J.L. Collins, that flexibility is the only true security. Let's be realistic. I said this back in like the 19, jail was probably quoting me. Speaking of the 1990s, I'm assuming that you were saying you said this back in the 1990s, well, I want to close out with a description of one. of my favorite memes from 2020. It's this image of a woman. She's wearing a mask, holding an ice cream cone in one hand, and taking a picture of that ice cream cone with her smartphone in the other hand. Right. So it's a picture of a woman wearing a mask, taking a photo of her ice cream. And the caption just said, imagine going back to 1990 and trying to explain to someone what's happening in this

photo. What the hell are you doing? Right. What is that thing in your hand? Exactly. Yes. What's that thing in your hand? You call it a phone and yet it takes pictures?

How does that even make sense? There is a woman who does these hilarious YouTube videos and maybe some people have seen this woman. She shows up in her house going back in time. So it's her in January sitting there. Julie Nolki, yes. Yes. And like her from April shows up or her from May shows up.

And then she just later on in the year shows up. And they're always so funny. She's like, yeah, you know, you've always wanted a dog. Well, you know, I travel for work. So I can't have a dog. Oh, how cute. You travel for work. No, no.

You can go ahead and get a dog. Joe, I think we did it today. I can't believe. just another great group of people. There's a couple big lessons here that I think. Number one is the fear in your brain is a valid fear and writing all that stuff down and let your very smart brain also come up with strategies to solve those issues. I think for me was a big takeaway from today's questions. And second, a lot of people already today had a feeling that they knew which way they were leaning toward. I think Eva and Justin and Sarah all kind of knew where they were

headed. Just wanted a second opinion by somebody who might know. And I think having those type of people in your corner, I think is very important as well. Just say, hey, is there anything I'm missing here? I think that's fantastic. I feel like sometimes, if we'd ask those questions more often, we're less likely to step in problems that we never saw coming. Wow. We've never done key takeaways at the end of an Ask Paula and Joe episode. Well, I'm bringing it, Paula. In 2021, I am bringing it. This is. Look, the new and improved year already. My bill for the extra service will be in the mail.

Yes, you'll get a 2% raise. What's 2% of zero? Oh, crap. Fooled again. I need to read. That's the third takeaway. Read the damn contract. Read the contract. Don't just say Paula's a really nice person. So, Joe, where can people find you if they would like to hear more of your wacky antics? Yes. When you're not here with me, you'll find me. And sometimes Paula as well with my co-host, O'G and I on the Stacking Benjamin show over Monday, Wednesday, and Friday, wherever finer podcast are listened to.

Yes. And now that 2021 has commenced, myself and some of the other regular guests on the Stacking Benjamin show, on your show, Joe, are now in a new year-long battle to see who will be trivia champion. The winner will be determined December 2021. And for the first time in what, nine years, we have a prize. Yes. And I volunteered a little behind the scenes here. I, on air while we were recording, just volunteered a prize for Joe without even asking you ahead of time.

So sorry about that, Joe. And also, thank you. But it was a tough prize. It was cake. Cake. Yes. You have to play for the cake. A year from now, somebody will be getting a cake.

Yes, which is good. Now that Len Penzo, our friend Len at Lenpenzo.com, has won twice in a row. We'll be able to break his screen. Now that there's cake involved, I'm sure Paula's going to roar to the front. I hope so. I hope so. You tied with them last year, though. Did I?

Did I tie? Yes, it was you. You and Len tied last year and then Len outright won it this year. Oh, so Len and I tied in 2019. Yeah. Huh. Jeez. I guess that's, what, two cakes or half a cake?

Yeah, half a cake. If there's a tie this year. Yeah. Right. But who wants? Would you eat a full cake anyway? Seriously. Yeah, it's true.

Well, not in 2020. In 2021, hopefully we can all have friends over and we can eat cake with other people. We can celebrate the win with a bunch of people. So then getting a full cake might be nice. Maybe where this is really all eating is a party. Maybe what we're saying is in December of 2021, we'd love. like to throw a party. I think even the most introverts among us are going, usually no, but I think I might be able to do a party now. Exactly. I'm able to do one. Just one. Exactly. Exactly. Yeah.

More memes from this past year, you know, I saw somebody post there. I'm like, geez, you know, I'm typically a homebody, but this is ridiculous. So true. All right. Well, Joe, thank you so much for being part of the show. And thank you for being more involved in the show this year. I am excited for all of the awesome questions that we're going to be answering as 2021 progresses. Bring them, people. Bring them. That is our show for today. We have an awesome challenge. It's called the 31-day challenge. It is the best way to kick off the year 2021. So if you want to start this year strong, sign up for a 31-day challenge. And you will get every single day for 31 days,

you will get an idea, a question, and an action. So if you want to improve your life, and we're talking motivation, habits, productivity, success psychology, finance, all of these arenas of building a better life, if you want a daily challenge for 31 days, head to afford anything.com slash 31 day challenge and kick off the year 2021 in a really strong way. That's afford anything.com slash 31 day challenge. It's totally free, and I am so excited to see you there. And that's our show for today.

Thank you so much for being part of the Afford Anything community. I'm so excited to have you on board. Make sure that you hit subscribe or follow in whatever app you're using to listen to this show so that you don't miss any of our awesome upcoming episodes in this new year. And if you enjoy today's episode, please share it with a friend or a family member. that is the single most important thing that you can do to spread the fire, spread the message, spread the ideas and ethos of self-improvement, personal finance, financial independence, and living a better, stronger, more ethical, more centered, more meaningful life.

That's a lot of mores. Thank you again for being part of this community. Don't forget to sign up for the 31-day challenge. Affordanithing.com slash 31-day challenge. And I will catch you in the next episode. Here is an important disclaimer. There's a distinction between financial media and financial advice. Financial media includes everything that you read on the internet, hear on a podcast, see on social media that relates to finance.

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