Afford Anything - Ask Paula: Should I Pay Off Student Loans While in School?

Episode Date: December 17, 2018

#167: Angelisa is a college senior with $30,000 in student loans. She has a part-time job, from which she’s saved $2,500. Should she keep saving money, or should she get a headstart on paying down her student loans while she’s in school? Mackenzie is also a college senior with some student loans. She recently received a settlement from a car accident. Should she invest this money? If so, how? Franchesca is 35 and is carrying $212,000 in debt, mostly student loans. Could she reach financial independence, even with a late start? Erica wants to make environmentally-friendly investments. How should she approach this? Caroline is 42 and has started making after-tax (non-Roth) 401k contributions. Is this a good idea? Schaffer is curious about podcasting. How did I get started? I answer these six questions on today’s podcast episode, alongside former financial planner Joe Saul-Sehy. Enjoy! For more information, visit the show notes at https://affordanything.com/167  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's true, not just for your money, but also your time, focus, energy, attention, anything in your life that's a scarce or limited resource. And so the questions become twofold. Number one, what matters most to you? Not what does everybody else tell you ought to matter most, but what personally matters the most in your life? And number two, how do you align your daily decisions to reflect that? Answering these two questions requires a lifetime of daily practice.

And that is what this podcast is here to explore. My name is Paula Pant. I'm the host of the Afford Anything podcast. Every other episode, we answer questions that you, the community, send in. And today, here to help me answer these questions is former financial planner Joe Saul Seahy. Hey, Joe. Hey, it's so fun being back. How are you?

I'm awesome. And you just came back from a trip to the Virgin Islands, yes? I did. Yes. stayed on St. Thomas, and it's great to see those islands recovering from not one but two hurricanes. Actually, they had a, at the airport, there was a really cute saying on the wall that says, man, this place looks like a hurricane went through, or maybe two. Oh, they actually said that in the airport?

They actually said that. And then it said, excuse our dust while we rebuild. And they used a little bit of humor to show that they've got some ways to go. But it was great, beautiful part of the world. If you have a chance to go, please go, because fantastic. Nice. Speaking of dreams and goals and things that people really want to do, that actually leads perfectly into our first question, which comes from Francesca. So I'm 35. I started learning about getting debt free through Dave Ramsey, but then came across

your podcast. So my question is, is it possible to gain financial independence and invest in real estate? If I start now, I have 200. probably $12,000 in debt between consumer debt and student loans, and the large majority of it is student loans. I am just looking, I have hope, but I just want to know, you know, is it possible? Have people done it? Just coming for some hope and trying to hear what other people, since I'm not starting in my 20s. Francesca, the answer is yes. Absolutely it's possible. Thirty-five is young, very young. My parents were 35 when they moved to the United States, and they enrolled in grad school, or my dad enrolled in grad school at the time. So 35 for them was moving to a new country, going to grad school, and slowly saving up enough money that eventually they could buy their very first car, rent their very first apartment in the U.S., right? So where you are today is already

15 years ahead of where they were. I look at them now, and they're 78 years old. My dad's turning 78 in February. And at 78, they've now been in the United States for 43 years. So just think of it like that. Starting today, you have 43 more years, 45 more years until you turn 8.5 more years until you turn 80. And 80 might sound like it's far away, but think of how much you can accomplish in that time. Like, I've seen my own parents do it, starting from nothing at 35 and eventually getting an apartment which led to a cheap starter home, which led to a nicer home, and then they raised a child, and then they retired. 35 is just not a late start. It's not. You've got decades and decades and decades ahead of you. Now, you mentioned that you have $212,000 in debt. I don't know what your

income is, and I don't know how much you are able to save based on your current income and current cost of living. But let's just say for the sake of illustration that you earn after taxes $70,000 a year, and your cost of living is not including your debt payments, $40,000 a year. That $30,000 difference is money that some of it will go to an emergency fund, some of it will get spent on other big ticket items, but some of it will go to, a big bulk of it can go to that debt payoff. And if you wipe out $30,000 a year worth of debt, we're talking seven years until that thing is gone. Most people hold on to mortgages for 30 years. And I know a student loan is different than a mortgage, but don't think of it as this big insurmountable thing. Most people don't think,

and the reason I make that analogy is most people don't think of their mortgage as this big insurmountable thing. People listening to this podcast might, who are a special crew, but the average American does not think to themselves, oh, I have $300,000 in debt if they take out a mortgage. And the position that you're in is you've got $212 in debt, but if you break it down into how much you can pay off per year and then calculate that out to how quickly you can have that paid off. That's a very short time frame within a very long life. Yeah, there's no age limit on beginning to chase your goals. I think Walt Disney, I keep reminding myself, was 51 when he started Disneyland. So I got a year to get going on my Disneyland. Dr. Ruth

Westheimer, you remember her? Dr. Ruth, the sex expert. I think she was 52 when she started doling out sex advice. And Warren Buffett, I remember at age 50, I don't remember what his net worth was, but it was nothing compared to what it is now. He made the bulk of his money well after age 50. So at 35, she's got so much time. And let's not forget, Susie Orman was 45 when she published her first book. Susie who? You mean, Google her. Yeah, I don't know who you're talking about. So I like all those things. But as a guy who has not just been a financial planner, but also been in training and has worked with people trying to go through what you're going through.

I'll tell you this. I love the fact that you're looking at the top of the mountain at first, looking at all the debt and saying, what if I get rid of this? I think that's awesome to do at the beginning. But it's going to be difficult enough that you have to have celebratory milestones along the way because it's going to be so easy to get frustrated. it because no matter what you do, if you take Paula's advice and, you know, if you look at $30,000 a year and you break it down that way, it's still going to be a number of years to get rid of that. So you have to make sure that you begin with the end of mind and then work backwards and set yourself some guidepost of when I get here, I'm going to celebrate. I get here. I'm going to celebrate. I think that's why people join communities like, you know, like the afford anything community or people listen to people. She said she listened to Dave Ramsey. Listen to people like Dave Ramsey. See, hear the debt-free screams. It's a reason why people have financial planners because of the fact that they have to meet with them

a couple times a year and they have to look at them and say, well, I'm still doing the plan. These accountability things that we do, I think become really, really important for us all as we go toward these bigger and bigger goals. And in terms of Francesca, you asked about financial independence and investing in real estate. You've got loads of time, like loads and loads of time. All right, let's say that it takes you 10 years to pay off your student loans. And let's say that you decide that you want to finish that first before you begin purchasing rental properties. So age 35 to 45, you pay off your student loans.

Age 45 to 55, you buy one rental property per year. By age 55, you've got 10 properties. If each of them are cash flowing 500 a month, then that's, after 10 years. $5,000 per month that your rental properties are producing by the time you're 55 years old. Now, I'm stating all of those numbers in today's dollars. Can I ask you this, Paula? Would you actually do it that way? Would you pay off the student loans first before you started investing in real estate?

It depends on the interest rate on the loans. If the student loans had a low interest rate, like 3 or 4%, then no, I wouldn't. Because that interest rate is close to the rate of inflation. So I would hold on to those and focus on investing in rental properties. Well, and the cash flow from those potentially, might be able to also help make the payments more quickly. If there's that larger interest rate that you're receiving from the properties or higher rate of return that you're receiving from the properties,

then you're paying out on the debt. Yes, exactly. If the property is cash flowing 500 a month and your payments to your student loan are 200 a month, then now you've got 300 extra dollars that you can put towards those student loans. Credit card debt, I would definitely get rid of that first. Yeah. I would get rid of that. The great thing that I like about Dave Ramsey's, he preaches a cash-first lifestyle.

I think everybody kind of has to go through that before you begin using things like leverage. And that's something that people do often when they buy real estate. So I would get rid of the credit card debt. I'd nail your budget, get the basics, get the foundation in line, and then roll on whatever the plan is. Yeah. I think Dave Ramsey is fantastic for the basic building blocks of establishing a budget, thinking about how you treat each dollar that comes in. and making a plan to get out of debt. But that being said, don't let that debt be the hurdle.

I mean, put it this way, there are plenty of people who buy a home at the age of 50, and rarely do they frame that decision in terms of, I'm still going to be paying on this when I'm 80. But if you buy a home at 50 with a 30-year mortgage, that's exactly what you're signing up for. And yet people don't think of it that way. Are you staring at me? because you're about to buy a home, aren't you? I just did.

Over Thanksgiving week, we closed on our new house. Is it a 30-year mortgage or a 15? Of course it's a 30-year mortgage. I'm not going to pay it in 30, but it's a 30-year mortgage. So I always, if the interest rates are very close between a 15 to 30, and this is a little bit of know-thyself, but I will always give myself more flexibility because I'm an entrepreneur. I want to pay it out of cash flow, and I don't want to have to dip into my investments at all to do that. So if something happens, I want to have the flexibility to pay it more slowly

if I need to. So I've always taken 30-year loans. Not best for everybody. I see people make that decision, by the way. They go with the 30 versus a 15. They talk an awesome game about making extra payments or adding to their payments, and they never do. And they end up with the 30. So know yourself first, but that's my strategy. But I swear you were looking at me when you said that. Well, I'm curious, actually, what is, I'm correct, right? You don't frame it that way. Like, when you signed your mortgage documents, was there a moment at that table when you thought to yourself, I'm signing up to still be making mortgage payments when I'm 80, assuming that I don't pay this off early? Never during the decision-making process, the only time was when we were sitting at the closing table that I turned to Cheryl and I went, I'm signing up for debt that if I do nothing different, isn't going to be gone to like.

I'm 80 years old. And then we had a good laugh about it. But yes, I did frame it that way for, you know, an hour. And what got you through that idea? How did you reconcile that? Oh, because I knew that wasn't the case. People that know me know that that that's a pretty funny joke. That that was me joking about just the fact of life that I'm signing up for something

that's 30 years. I was never panicked about it. I'm not panicked about it now. I thought, you know what? let's take the most flexible option that I can get, and that's the one. And so for somebody like Francesca, who's wondering how long it's going to take her to pay off these loans, and then at that point can she start to invest in rental properties, I know that it's not too late.

And I know that, for me personally, I know that because I've watched my parents who started at that age. You know, my dad went to grad school at 35, so he didn't start working until his 40. That was the first time he ever earned money in the U.S. dollars. And so seeing what he built between the age of 40 to the age of 70, that's how I know that 40 is young. But I guess what I am trying to figure out is how to communicate that to people who have not had that experience, who have not seen that role modeled in person. I think that's a difficult thing. I think it has to be internal, which is why I really think you have to have milestones to celebrate along the way and to celebrate. I bet your dad celebrated when he finished a year of grad school.

I bet he celebrated when he graduated. I bet that he internally, and you know, celebrations mean different things to different people, right? But when you finish grad school, you go, okay, great, fantastic. I'm through that. And then now I'm embarking on this new adventure and then set up the new adventure and rock that new piece of whatever the plan is. And then rock the next piece. Well, thank you, Francesca, for asking that question. Our next question is from McKenzie.

Hi, Paula. I'm a senior in college. I've been able to cash flow most of it, but ended up having to take out loans this past year. I was in a car accident about four years ago and just recently settled. With that money, I planned to pay back my loan and finish paying my tuition. I'd really like to start investing, and I've listened to your podcast religiously, but still get confused on where to start. Do I go through a financial advisor, or do you suggest me to do it on my own? And if I do it on my own, what account do I open? And do I throw it, at all of my settlement in at once, or do I do monthly payments to hit the market at different points? Thanks. Bye. Mackenzie, first of all, what account do you open? I would start with a Roth IRA because it's a retirement account in which the money that you put in, you'll get taxed on it now when you are

presumably in a lower tax bracket than you will be in the future. And then all the money that's in there, the dividends, the capital gains, all of that gets tax-exempt growth. And when you go to pull it out later in life, all of that will be tax exempt. So Roth IRAs are fantastic options, particularly for people who are young, who have many, many decades of compounding ahead of them, as you do. And for people who are in a lower tax bracket now, presumably, then you will be 10 or 15 or 20 years in the future. After putting money into a Roth IRA, the next thing that I would do is if you have a 401k, you could, um, your contributions through your workplace into your 401k by virtue of living on a portion of the

settlement money and then redirecting your employee compensation into that 401k. So in other words, if it costs you $3,000 a month to live, you could, the most extreme example, you could try to get your paycheck down to zero, put your entire paycheck into a 401k, and then, then live on that $3,000 that comes from the settlement money. There are people who, when they get very, very aggressive about saving for financial independence, there are people who challenge themselves to go to paychecks of zero for some limited duration of time when they have alternate sources of income that can cushion their cost of living for that period. That's how I would get started. Now, in terms of, do you put all of the money in the market right away or do you dollar cost

average it in. Well, the research actually shows that if you have a big lump sum, as you do, putting the entire bulk into the market in one big lump sum, statistically speaking, makes you more likely to do better over the long term than holding that money in cash and metering it into the market slowly. And the reason for that is twofold. Number one, according to historic averages, the stock market goes up more often or on more days than it goes down, which means that any one given day that you are not in the market is a day in which you are sitting out what is statistically more likely to be an up day. That's one reason. The other reason is because if you hold on to a big chunk of it in cash and only put a small amount in the market

and then meter it out over time, then over the course of the time span in which you're metering that out, you will have a disproportionately high cash allocation. Yeah, I know that a lot of the time people will say, but Paula, the market's high right now. The market's high. But the market's high most of the time. If you will look at chart of the stock market since 1929 to today, on most days, the stock market is high. So my entire career, it's been the market's high.

The market is, should I put money in? The market's high. Yes, the market is high. And people are even talking about, and I certainly, among other people, have talked about maybe an upcoming recession. You've seen the stock market really gyrating a lot more lately than it has the last several years on a daily basis. And when you see that, that even increases people's fear. But I started my career in the mid-90s. 1999, the stock market was really high.

2000 to 2002, this is like Joe's grandpa story right here. 2000 to 2002, the market went through the floor. If you invested in 1999 when the market was, quote, high, and now it's 2018, and you look at people saying the market's high now, and people were saying the market was high then, even though it went through a horrible two and a half year tumble from the time that you would have invested at beginning of 1999, you know what, looking at now in 2018, you are way ahead. You're light years ahead. So not playing the what's the market going to do over the short term game is a fantastic strategy.

But also a little bit of that is also knowing yourself. I know that some people have trouble just sleeping at night, you know? And so you got to, you have to know yourself a little bit. Exactly. And part of this is math and part of this is behavior. Now, according to what has happened. happened historically. So according to probability, as we understand it, based on historic performance, the mathematically more reasonable choice is to put the entire lump sum into the market at once. But human behavior is the single biggest determinant of performance. And so the most important thing to get right is not understanding historic norms. The most important thing to get right is understanding yourself. And if you're a lot of understanding yourself. And if you're a lot of you know that if you put the money in and then the market tanked and that would cause you to panic

and sell and convert those paper losses into real losses, like if you know that about yourself, then you're better off slowly metering it in, not because that's what the data says to do, but because that's what your own inner psychology says to do. I think I've mentioned on previous episodes, I have a much bigger emergency fund than I think anybody would ever recommend. I sure that if I met with a financial planner and I told them just just for afford anything alone, if I told them how much cash I'm holding as an emergency fund for afford anything, the business, they would tell me that I was cuckoo. But knowing that I have that runway and knowing that if income dries up and all of the sponsors go away and I don't sell a single course,

Like knowing that I still have about a year to live, or this company does, this brand still would have about a year to live, that is more valuable to me than any returns that I would otherwise make if I had that invested. That's where I thought you were going to start. I thought you were going to start with make sure you have a cash reserve before you said Roth IRA because of you loving a cash reserve. And I think in your head you just skipped right to investing. Yeah. I think I love cash reserve so much. that I just assumed that that part was taken care of. Yeah, yeah, and a brand new investor might not think that.

So I would actually do cash reserve first. Yes, I agree. And then I think the Roth IRA is an awesome option, partly because of the fact that you can get at it for something like a house, let's say, so you still can get at that money. So I really do like that. I want to address the part of the question about, do I open it myself or do I open it with a financial advisor?

Go for it, Joe. I see this on online forums all the time that I fired my financial advisor because my fund is beating my financial advisor. So I went to a financial advisor. The financial advisor recommended XYZ fund. I went to some other place and I bought a fund that beat that. So I realized that my financial advisor was fireable. So I fired them. And then a bunch of people jump on the post and go, yep, you can invest on your own.

Don't hire a financial advisor. My take on that entire conversation is that financial advisor should have been fired because that's not what a good financial advisor actually does. I don't hire a financial advisor to invest my money for me to take that out of my hands. Here's what a financial advisor does. Think about a rock star with an agent or a sports star with an agent. A good financial advisor helps you rectify when you have competing goals. and to help you set those goals in order. There's somebody to bounce those off of that's a third party not related to you.

They don't know you. They're an objective outside party that can say, hey, you know what, Paula? Maybe you should look at it this way. What do you think if I said XYZ? Then Paula answers. And we have this great discussion about which goal we should chase first. And then when it comes to your risk management decisions, how much risk should you take, understanding yourself.

We talk about that all the time. Your tax planning. So right now, Roth IRA is a great place to start, but is your assets increase, where should we put money for our very specific tax plan? If I have trouble saving, having somebody who I have to look at and say, you know what, I messed up and I've got a bunch of credit card debt that I didn't have and I'm not following my budget. Good financial advisor is going to help you get through that and building a plan. Maybe then your advisor says, I recommend XYZ. and maybe they're an investment advisor as well. But somebody to plot just an investment strategy versus a financial advisor are two totally,

for me, two totally different roles. I don't see much point anymore. I'm about to make a lot of people mad. I don't see much point anymore for a lot of people to have an investment advisor only. I don't think so. I think having a financial advisor and then maybe having that advisor invest for you, if that's a part of their overall service and you like the fact that everything dovetails together so your advisor's helping you invest it according to this plan, then I think that that's okay.

But I still see it as secondary. I don't see it as the primary goal of an advisor. So to clarify, Joe, just in case there are people who are listening to this, we're wondering, when we talk about a financial advisor, we're talking about somebody who is the quarterback for every financial component of your life, including estate planning, planning, saving up to buy a house, retirement planning, like the holistic picture of your financial life, whereas an investment advisor specifically is the person who specializes in your investments and your investments alone. Yes, but I will only disagree with one word.

And I think it's overused a lot. I don't like the word quarterback. Okay. I think if you are not the quarterback yourself and you try to delegate that to some else, shame on you and you did it wrong. I think people go to a financial advisor. And I hated this when I was a financial advisor. People would come to me and go, okay, financial advisor boy, dance. Show me what you're going to do. I don't know what I'm going to do. I'm your coach. My job is to take you and make you stronger. You are the

quarterback. I'm your conditioning coach. I'm your agent. I'm your guy watching out for all of your blind spots. You are the quarterback. But whenever somebody came to me and they said, no, no, no, I just want to give it to you and you take care of it. And then I'm going to get mad when I have no idea what the hell's going on six months from now. Then I'm going to get in some online forum and I'm going to complain about you because I was dumb enough to hand over all my quarterback duties to a third party. Drives crazy. Got it. As you can tell.

Yeah. Yeah. Now I can tell. That makes sense. It's like people who would go to a therapist and say, all right, I'm here. Fix me. Right. Exactly.

It drives me crazy. You can't, yeah, you can't do that. And every time I see financial advisory, not every time, but often, when I see financial advisory posts on online forums, the entire community is looking at financial advisors in what I think is very much the wrong light. So I hope indirectly, by the way, that answers the question, which is, no, this is not what a financial advisor does. and hire a financial advisor to do this. I also don't think you, I don't know, but I don't feel like you've competing goals. If you're just starting out, I don't think risk management is a big issue. Just know yourself.

I don't think tax planning is yet a huge issue. It might be. You're excited about saving. You called into this podcast, so I don't think that's an issue. I don't know, but I don't think that building a plan with a third party makes a ton of sense right now. Just get the money invested. So nope, don't think it requires a financial.

advisor for this particular thing. Nice. The former financial advisor is saying, don't hire a financial advisor right now for you, McKenzie, in your situation. Which is also why we should caution people just about getting your advice from anybody or anything. Getting advice from just a podcast or getting advice just from handing over all your stuff to a financial advisor and telling them go, go, go.

Don't do it. Always check. know what you're doing, know the basics. You don't have to know everything about everything if you hire a financial advisor, but know enough to spot check. I remember I worked with some people that were very successful business people that frankly could have done my job without me. But the way that they hired me, my job was to see their blind spots, help them with some of the complexity and go faster than they can on their own and do the things that they just frankly didn't want to handle. But I remember one guy, his name's Dave. Dave told me that his job was to always spot check my work.

And I remember we would meet Paula and I would sweat for the first half of the meeting. As he goes, okay, did you do this? Did you take care of this? Where are we doing here? What do we got going there? And I would sweat. And then I'd make him sweat because I'd say, okay, Dave, now it's my turn. Did you take care of this?

Did you? And we'd have a fantastic meeting, spot checking each other's work. And because of that, Dave always seemed to be going in the right direction. Right. The two of you almost had a, I don't want to use the word partnership, but. No, but it really was. I mean, I was clearly the, it was, it was more like a 70-30 partnership, 70% him, 30% me, but it was a partnership. Absolutely. Speaking of not taking your advice from podcasts or from any just one source.

Yes, or from the corrections department. We, last time I was on, talked about, we had a great question from somebody about the difference between a Roth 401K and a Roth IRA. And this is what I love about this community. is that we talk about a lot of stuff, Paula. I talk about finance all the time. And you know what? I wasn't thorough enough in my answer. And I actually said something I think is factually incorrect.

And thank you to Colin for catching this. So thanks a ton, Colin, for writing in. But there's a critical difference between a Roth IRA and a Roth 401k. And in a Roth 401k, when you pull money out before ages like 59 and a half, you pull it out pro rata. I said you pull it out LIFO, last in, first out, not true, not true at all. You pull it. So let's say it's 90% money you put in after tax money because it's a Roth and 10% is the growth. Unless you're taking it out, A, when you're allowed to lawfully without having a penalty,

or B, following some of the exceptions to age rules like separation from service, a disability, a home purchase, if you're just taking it out, let's say, to go buy a new car, which, by the way, happens all the time, and it's absolutely horrible.

Oh, it's, it's rotten. But when you take that out, 10% of that money is money that is going to be subject to the penalty because of the fact that that money you weren't able to get at.

So great answer, Colin. It's pro rata based on interest in the account versus the money you put in. Nice catch. The rest of what I said, on that about the 401k versus IRA differences, exactly as we mentioned them last time. Which leads me back to one more time saying whenever you listen to a podcast, make sure that you

don't just go run with it. I would always use shows like yours and mine, Paula, as a starting point to formulate your strategy. Yeah, I think that a big part of what we do, or at least what I hope that we do is teach people how to think about a topic, a framework for thinking, a framework for how to ask questions or how to come up with answers. My role is not to impart information. You can get information from Wikipedia. You can get information from a textbook. My role, as I see it, or what I hope to achieve, is to show people how to, how to to think through a particular question from multiple angles. I want people to be thinking about how to think. And that's really what this show is for. It's to learn how to think.

Absolutely. Thanks, Colin, by the way, for writing me about that. Important point, though, Paul, if somebody's going to do that right now, don't want to think that that money is just last and first out. We'll come back to this episode after this word from our sponsors. Are you looking for a free checking account that pays a super high interest rate? Yeah, who's not. So check out radius hybrid checking. Radius hybrid checking, as the name implies, is a hybrid between the flexibility of a checking account with the high interest earnings that you could get in a savings account. This is a checking account in which you get 1% APY on balances over 2,500 and 1.2% APY on balances of 100,000 and up. Now, that's a heck of a lot more than what you're going to find in the average checking account.

That's a really good interest rate for a checking account. Also, there's no monthly maintenance fees. There are free ATMs worldwide, which means they'll reimburse your ATM fee that's charged by another bank. So you can use any ATM you want. Your first order of checks is free. And you can open an account online in five minutes or less. To open an account, go to radiusbank.com slash Paula. That's R-A-D-I-U-S.

Radiustbank.com slash Paula. Do you want to place trades without paying a commission? Check out Robin Hood. Robin Hood is an investing app that lets you buy and sell stocks and ETFs totally commission-free. So there are other brokerages that will charge you up to $10 every time that you place a trade. But Robin Hood doesn't charge any commission fees. So you can trade stocks or ETFs and keep all of your profits. I have had an account with them, and I've had them on my phone for several years. What I like about them is that I can place a trade on one share or two shares. Just for fun, I can trade a tiny amount, and it's totally fee-free, commission-free.

They're also really easy to use. You can place a trade in just a few taps on your phone. Robin Hood is giving listeners a free stock, like Apple, Ford, or Sprint, to help build your portfolio. So sign up at afford. robin hood.com. That's afford a ff-o-r-r-d.com to get a free stock. Our next question comes from Caroline. Hi, Paula. I love your show.

My name's Caroline, and I'm 42 years old, and I max out my 401K contribution on a pre-text basis around September, October, over every year. So I don't know where to invest that amount for the remaining months of the year, November, December. I really like my 401k allocations. They're all in low index funds. And I recently found out that you can contribute up to, I think it was $53,000 a year. So after understanding the tax treatment of the after tax contributions, not the Roth, but just the after tax, I temporarily

increased my contributions in that mode, the after tax basis. But in a prior podcast, I heard from Joe that we should stay away from this type of contribution. It was confusing once we rich retirement. What's so bad about it? Oh, Caroline, fantastic question. And we see people fall in this all the time because initially it looks awesome, doesn't it, Paula? I can put a bunch more money away. I like the funds that are there. What could possibly go wrong? Dun dun. Yes. And it all is around the tax treatment of after tax money. When you save money after tax, but not in a Roth, the money that your money makes, the returns on that money, now have also never been taxed. But remember, you put money in after tax like you will with a Roth,

but the money that it made does not have all the cool bells and whistles of being able to take the money out tax free later on like a Roth can. So this money, number one, can never be allocated with your other, let's say you leave your job and you want to roll that. that money to an IRA. I've seen people do that before. The new IRA provider knows nothing about really what's going on. You roll that money over. And now you have all this money that's after tax. You've got money that's pre-tax and you just commingled it with other money that was all pre-tax. And now you don't know how much is after tax and has been taxed. You don't know how much is it becomes a huge tax nightmare figuring out what's what. Now, an easy answer to this is, well, this is easy,

Joe, I'll just leave it in my 401k and I'll keep it separate, which is fine, assuming that your employer between whatever age you are now and the age that you're going to get that money does the right thing. Because the bad news about a 401k is that even if you've got a phenomenal 401k now, you are a passenger. You are not in control unless you're one of the fiduciaries on your own plan. You're on the steering committee for the 401K investment choices. you're a passenger.

And if for some reason they decide to get cheap and the investment fees go up and you don't like it anymore, there really is nothing you can do with that money because it's going to create the biggest tax nightmare you've ever seen. When I was a financial planner, one of the toughest things was always working with someone that had after tax 401K money that they were trying to roll over to an IRA or maybe they had rolled it to an IRA and now it's a mess. So when I say you shouldn't do it, it's just to avoid a ton of messes. The best way to avoid that mess is going to be if you can do what's called an in-service

withdrawal from your 401K, roll that money to an IRA by itself so that we know ahead of time what's after tax and what's pre-tax. Do not commingle it with other dollars and then do a backdoor Roth IRA with that money alone. You solve the problem and you created a best. backdoor Roth IRA, which is much smoother and very easy for your tax professionals to help you deal with later on down the road. Wow. I've never heard anybody describe a backdoor Roth IRA as smooth because when I set up a backdoor Roth, I swear, nobody seemed to know what I was talking about. I talked to my CPA. I talked to the people at Charles Schwab. Literally, everybody was drawing a blank. And I'm like, seriously, it's a backdoor Roth. This is supposed to be common. Why is nobody getting this? Yeah, and Michael Kitts is, who you and I both know, has said publicly, and I totally agree this, he's like, listen, dudes, if we want to keep this loophole alive, we have to quit calling it a backdoor Roth, which I totally agree with. Calling it a backdoor Roth tells the IRS, hmm, we might have a little loophole here that we're...

The fact that everybody refers to it, essentially is a loophole. But to get back to your original comment, Paula, the fact that I called it smooth, and you and I know a backdoor Roth that is, is not smooth, shows you how anti-smooth after tax 401 contributions are. So that answers, Caroline, why you shouldn't do it, which brings up the question. Now, Paula, she has all this excess cash flow, right? And she loves her 401K. What does she do then? Oh, the possibilities are endless.

It's the holiday season. It is. It's her November and December savings. That's right. There's always a standard taxable brokerage account. Remember, when we are choosing different types of accounts, whether it's a 401K or an IRA or a 403B, these are all accounts that have certain tax advantages. If you qualify for an account that has a tax advantage, then it makes sense to bias your money towards that first. But you don't have to get a tax advantage from an account in order for it to still make sense for you to. just invest that money. So a standard taxable brokerage account at a low fee brokerage like Vanguard or Schwab or Fidelity is always an option. And if you're going to use the regular investments that Paula talks about often on the show like an exchange traded fund, you look historically, those haven't thrown

off many taxes anyway. So the use of a tax shelter is always nice. I like zero tax. But until you sell, you're not going to have huge tax consequences along the way. Only when you sell are you going to have to really have maybe more tax. Yeah. Well, I think, I mean, I understand the feeling grumpy about the idea of paying income tax on it in the year that you earn it and then also paying capital gains and dividends taxes on the way out, right? Given that these other accounts, whether they're traditional or Roth tax advantaged accounts, you get a break at one end or the other. You get a break at one end or the other. either get the break in the year that you earn the income or you get the break at the end in the year that you withdraw. But we sometimes get so accustomed to getting a break at one of those

two ends that the idea of paying taxes on both ends can feel unappetizing. Which is the perfect word. Whenever I'm filling out my tax forms, I always think this is unappetizing. Thank you, Caroline, for asking that question. Our next question comes from Ange. Hi, Paula. My name is Ange. I'm 21 years old. I'm going to graduate from college in May 2019. So I just had a question regarding my savings and student debt. When I graduate, I'm going to have about $30,000 in federal unsubsidized student loans that has to be paid off. And the interest rate is about 5%. I work part time right now, and I've been saving a couple hundred dollars a month. and right now I have an emergency savings of about $2,500. My question to you is, as I start to prepare for graduation, with the money I'm making

for my part-time job, should I continue putting that money into savings, or should I get a head start on paying down my student loans so that by the time I graduate, they will be as high and as scary? Please let me know what you think. Love your podcast. Thank you so much. Congratulations on being ahead of the game, on thinking so clearly and being so aware of your financial situation now while you're still in college. Here's what I would recommend for you.

You mentioned that you have $2,500 in emergency savings. I don't know what your cost of living is, but I can't imagine that that would cover more than about one months of expenses, maybe two months of expenses if you're living very, very cheaply, like with a whole bunch of roommates and you walk everywhere. and you eat mostly pasta. I was going to say ramen noodles, but that's too cliche. Spoken like somebody who's been there, by the way. You're getting weirdly specific. Barilla pasta and eggs, because eggs are a very cheap source of protein. There it is, yes.

So that $2,500 that you've saved is going to cover one month of expenses, maybe two months at the most. I would build a bigger emergency fund first. I would build an emergency fund that covers between three to six months of your living expenses, particularly because when you graduate, you don't know how soon you're going to find a job. And you don't want to be in a position in which you have to accept a subpar. You know, it's fine to have like a side job like waiting tables or cleaning houses or doing something that brings you some pocket cash. But you don't want to be in a position in which you have to accept a salaried. career type of a job that is subpar to what you would otherwise want to accept because it's

three months since graduation and you have to get something now and you just don't have the runway of another three months to look. Yeah, that's going to give you so much flexibility. You know how powerful that makes you feel when you're looking for a job out of college and you're looking for the right job knowing that you have this reserve in place. And listen, even if the reserve gets big enough that it is three months expenses, let's say something happens or six months, whatever the number is that you decide works for you, still save it into saving knowing that once you lock down that new income stream, now you're going to take whatever's off the top that no longer applies to your three to six months living expenses and put it as a single

payment toward that student loan debt then at that point, if that's most important to you. So Joe, what you're saying then is if Ange gets a job, let's just say for the sake of example that her cost of living is $2,000 a month. And she decides to save five months' worth of expenses. So she saves $10,000. She graduates. It takes her two months to find a job, but she's also babysitting and dog walking and waiting tables

during those two months. And so she actually ends up not even needing to dip into these emergency savings at all. And so by the time that she starts her job after two months after graduation, she still has that $10,000 runway that she's saved. What you're saying, Joe, is she can take that whole 10,000 and put it as one giant chunk? No, because she still needs an emergency fund then. Cool. But let's say that for some reason it went up to 12,000.

Let's say that she received a, we're giving Ange all these things that happens to her. Let's say she's walking the dog for an elderly gentleman, and the gentleman puts him in her will. And he passes away mysteriously one day. And now she has an extra five thousand. No, seriously. If instead, let's say that she gets a signing bonus, you know, maybe she gets $5,000 for relocation expenses. My son got something like that.

He didn't spend the whole thing. He did it very frugally. We actually drove through the desert. We met Paula, went to an escape room. And his whole goal was to save as much of that moving expense money as possible. So he was very frugal with that. But then if he's got this additional, let's say that Ange has this additional $5,000 then. knowing that she still has the 10 sitting there, she can now drop that 5,000 on that student loan debt,

and now she's much further ahead on paying it off. Absolutely. And so that's my answer. I would save that money in an emergency fund so that when you graduate, you'll have cushioning, you'll have runway that will give you flexibility for finding a job and finding not just any job but the right job. And like I said, you might not even need it. you might have side gigs that provide enough for you to live on, but the peace of mind that you'll experience from knowing that it's there, from knowing that you don't need that babysitting money

while you're looking for a job, that piece of mind alone is incredibly valuable. It's funny because you and I just focused a lot on peace of mind and yet I will hear people often say, why have a cash reserve in the first place, I have a good job, I've got good cash flow, I'll just make sure that I've got these instruments. And if something bad happens, an emergency, I'll just go in and use these debt instruments. Like a home equity line of credit. People say that. Yeah. Yeah. And I don't mind a home equity line of credit, but I used to call it the ice cream scoop on the top of the cone. You'd have your first second, maybe third tier reserve. And then you might have the scoop, an open line of credit on top of that. But instead of trying to

maximize every dollar, what I love in a bumpy market like we're in now, is, you know, having that reserve makes you more confident in your investment decisions. If you're super aggressive with your investments and the market's bouncing around all over and you don't have an emergency fund, I believe you're going to sweat a little. You might sweat more than a little. But if you have a three to six month or in Paula's case, a one-year runway, you know that the market has plenty of time to do whatever it's going to do and you can stay aggressive. So I found that not just for me, but for friends that I've talked to or for back in the day my clients,

having that emergency fund was able to actually make us a more aggressive investor because we had freedom from worry from the day-to-day CMBC, Fox business, local news, pummeling us with the daily gyrations and why we should all be worried that the world's going to end tomorrow. And that is one reason why a lot of people who go into all equities, for example, or invest in very aggressive ways have what is known as a barbell allocation, where their investments might be all equities, but then they also have the strong cash reserves. So if you imagine a barbell, it's heavily weighted on both sides with nothing in the middle. So to be clear, afford anything has a one-year runway. My rental properties have a runway of three months of gross rent, which is approximately six months of operating costs. And I personally have a runway of actually only about three months of personal expenses. But my businesses have good runway. But your businesses are what you rely on for fuel, which makes that secondary reserve less important. That truly does become a one-time emergency fund in my head. You know, like if you have a big emergency or big opportunity you want to take advantage of, because your businesses have these other funds and your streams

of income have emergency funds attached to them, you can take advantage of an opportunity much more quickly with your personal money because you have that freedom for morey because of the other reserves. Right. Yeah. So, Ange, congratulations again on being so on top of it as a student. I think that's fantastic. The fact you know exactly what your student loans are.

You know exactly how big your emergency fund is. You're saving. You're thinking about precisely how to manage future money. you're doing things really well. So congratulations. Keep it up. We'll come back to this episode in just a minute. But first,

are you a small business owner, a freelancer, or a solopreneur? If so, you probably don't want to spend all your time doing invoicing, chasing down payments, dealing with paperwork and tax stuff, tracking expenses, trying to figure out how to get paid. That is the mundane, boring, necessary, but unpleasant part. of being self-employed. So why don't you check out FreshBooks? FreshBooks makes easy to use cloud accounting software. They simplify tasks like invoicing and tracking expenses, which means that you spend less time dealing with that and more time growing your business or enjoying your life.

And when tax time rolls around, you will find tidy summaries of your expense reports and your invoice details and sales tax summaries and a lot more. So if you are a freelancer and you're not using FreshBooks yet, now's the time to try it. FreshBooks is offering a 30-day unrestricted free trial to my listeners. To claim it, go to freshbooks.com slash Paula. That's FreshBooks, F-R-E-S-H-Books.com slash Paula. And when they ask, how did you hear about us? Mention, afford anything.

Again, 30-day unrestricted free trial, you don't have to input a credit card, freshbooks.com slash Paula. If you've been reading my blog for a while, you've probably read me, make reference to the fact that I tend to wear yoga pants every day in the winter because they're comfortable and why would I not wear pants that are comfortable? Duh. But every now and again, I need to go somewhere where it's just not appropriate to wear yoga pants, like go to a conference or go to some sort of a professional setting. Fortunately, I can still wear yoga pants when I do it and nobody will know because there's this company called Beta Brand and they make

this thing called dress pant yoga pants, which are yoga pants that look. like dress pants. So they've got the comfort of yoga pants and the professionalism of dress pants. They've got different styles like boot cut or straight leg. They've got colors like navy, gray, khaki. They've got a faux zipper and a front button and belt loops. They really look like dress pants, but they're yoga pants. Which means you'll be comfortable. And that's why I started wearing beta brands, dress pant yoga pants. Visit betabrand.com and use my code Paula to get 20% off yours. Millions of women agree. These are the most comfortable pants he'll ever wear to work. That's betabrand.com, B-E-T-A-B-R-A-N-D.com. Use my code, Paula, and get 20% off your

dress-pant yoga pants. Our next question comes from Erica. Hi, Paula. Given the dire warnings in the new UN climate change report, I want to ensure that my investments go toward promoting a sustainable world. My Roth IRA and 401K are in two ESG funds with Calvert and Trillium that screened for good corporate practices, although the fees are fairly high. I also see that Vanguard has an ESG index fund, but I'm not sold on some of the holdings in its portfolio. What advice would you give to investors wanting to address climate change, either through

mutual funds or otherwise? Thanks. I absolutely love this question, Erica. And you know what I like it, Paula? It actually has less to do with ESG investing, ESG investing, which is environmental, social, and corporate governments. Governments. Governments.

No, no, no. It's mince like you'd eat a mint. Governance like Nancy Kerrigan. Well, no, no, no. The government hands out these mints to people that invests this way. You've never heard this? I'm obviously kidding. I hope Steve leaves all this in.

My mouth doesn't work great some days. But the reason I like it is more. I love it when an investor is passionate about the things that they're investing in. And this is what I like about the real estate community when it comes to investing. They are plugged in because I know that house. I might have worked on that house. I know what is going on with my tenant. I know what's going on with my stuff.

And I think too many investors are checked out. So when I hear a question from somebody who's clearly checked in and wants to make sure that their investments are doing the things that they want, I think that's fantastic. As a financial planner, I'm not going to have trouble. If Erica's my client, she's going to show up for the meetings. She's going to actually take her money seriously. She's going to make sure she's getting out of it exactly what she wants. So without getting into her particular social cause, I think that's fantastic.

You know, the best advice that I could give would be to lean heavily on a website like Morningstar, because Morningstar is going to give you probably the broadest collection of those types of investments. And the thing I like best about Morning Star is that even though there are advertisements from many, many different financial houses on that site, there is a very thick wall, very thick, because most of the investment community relies on Morning Star, Morning Star reporting as their source of knowledge. I can't think of a pro that I've ever known that doesn't go to Morning Star first. I can just put it that bluntly. So I would go to Morning Star. Star, I would look at which investments are available in the RSI or ESG community and choose there.

You mentioned Calvert as an example. Calvert has a great track record of social responsibility, but you're right, has very high feet. You're going to pay for it. And I think that ESG investors know that you're going to pay for it. I think the thing to do also is, Erica, is continue to, you know, if you're this passionate about it, too, keep leaning on. companies that are in that space about their fees. And I think as we see more people be not just activists about the investments inside, but also activist about the fee structure of those investment streams, I think they'll open up to a wider array of people. Now, Joe, within your answer,

you mentioned RSI. You meant SRI, right? Socially responsible investing? No, I meant RSI. Of course, I meant SRI. I was trying to come up with something very quickly again. ISI is what the name of the government meant. Right, right. Ron Sally International. So those are five questions that are specifically about money and investing. We're going to close this episode out with a question that is a little bit about entrepreneurship and side hustling. And specifically, it's actually a question about podcasting.

So it's going to get a little inside baseball. Hello, Paula. My name is Schaefer. I've been listening to for about a year. I'm a huge fan. I think that you're down to earth, thoughtful and Prince Bold. And you just create a really good podcast. And speaking of podcasts, I'd love to learn about how you got started with podcasting a little bit about the nuts and bolts, the prep work, and then the journey in general, what you've learned along the way. Thanks so much.

Anonymous, first of all, thank you. I am flattered that you think so highly of the show. I'm really glad that you're part of the community. I recommend that you leave a review if you haven't done so yeah, wink wink, nudge, nudge. Hashtag, peek into the brain of a podcaster. Yes, right there. She's learned right there. Some positive, please leave a review. How did I get started? To be embarrassingly super honest, this is not my first podcast. I had a podcast before this that I don't think anyone listened to. We had, I don't know, maybe 10 listeners in an episode. I don't even know what the stats were. I recorded it with a co-host when I lived in Atlanta. And back then, I was thinking that podcasting sounded fun, but it also just sounded

intimidating. And for me, when I thought about blogging, that seemed much more doable because I've been writing my whole life. So writing is writing. But the thought of moving into a broadcast medium, I had no idea how. And so to get started, myself and a co-host in Atlanta, we got together in person, and we just recorded a bunch of episodes. And we didn't do interviews. We didn't really plan the episodes. We basically just, I think we had my, yeah, we did. We had microphones. So we basically just plugged a microphone into our laptops and recorded it and uploaded it to a hosting service called Libson, L-I-B-S-Y-N, we'll link to it in the show notes, it's what I still use. And from that, we created our very first podcast.

And like I said, we had no listeners. And the idea behind it was basically to get our feet wet and to make it feel less scary. And so we recorded, I don't even remember how many. episodes, maybe 30-ish, each episode being five or ten minutes. Then we stopped recording and then eventually we pulled it off the air. But the purpose of that was just to take this thing that was big and scary and daunting and to make it feel a little bit more approachable, to do it however imperfectly, just so we could say that we have done it. How long were you on stacking Benjamin's before you created this show? Oh, that's a good question. Oh, geez. When did you start

stacking Benjamins, Joe? You were at least on a couple years. Yeah. So we are, well, you know, we've had a couple iterations, as you know, and you've survived those bumps, too. Right. What year did you start stacking Benjamins? 2012, I believe. Okay.

So when you first started, the roundtable was that doctor with a thick southern accent who lives in Georgia. Yes, Dr. Dean. Dr. Dean. Yeah. Carrie Smith Nicholson and Dominique Brown. Mm-hmm. And Len Penzo. Right.

And then Carrie left very quickly, very shortly. And we needed replacement. Is that when I came in? And you were nice enough to come in. So I'd say probably that was within, I don't know, six months of starting. Wow. So I joined the crew of the Stacking Benjamin's podcast. And I remember, Joe, you would send us email saying like, today we had 42 downloads. Right. I was so excited. See 42 people in a room. You're like, that's a lot of people. I think I still might have the email from you the first time that you talked to triple digits in downloads. The first time you were like, more than a hundred people downloaded this episode.

I was so excited. And you know what? And Joe, I remember at that time that everything that you were doing also felt very intimidating. It felt very, like, magic. Like, I had no idea what you were doing. I knew that my role was just to show up to the microphone. but I had no clue what you were doing. And you had all these fancy statistics and numbers and stuff.

Yeah, exactly. And a plan and you did things and you planned the episodes. Well, this is about you, not me, but I do want to say this. I waited a year to start that show before we actually did it. And if I had anything that I would do differently, I wouldn't have waited a year. because while those hurdles that you talked about and I spoke about earlier exist, they're one-time hurdles. Right. And I think even though, you know, we've segued away from talking about investing, I think that's the same when you're saving.

A lot of these hurdles people have are one-time hurdles. And so just jump that one hurdle and the next time it won't be as daunting. And I should have jumped it earlier. Waiting 12 months now just makes me go, oh, what could have? could have been. Right. Right. Because if you think about the growth of a show and you think about where you were a year ago versus where you are today and you project that out, all right, it's, we talk so much on this show, linking this back to investing, we talk so much on the show about opportunity cost and about how growth compounds upon itself. And what that means is that the earlier you get started, the faster you learn, the faster you iterate, the more you grow. And eventually that growth compounds on itself. And it turns out. into more growth, right? I started that one podcast, then we ended it, and then we pulled it off the air. And then there was probably a good three or four years between when I had that podcast versus when I started this one. I was going to mention that. What I love about your show is that even though

we're talking about audience size and show growth and sure, if you're going to keep podcasting, that's important. And if you make a good show that's true to who you really are, instead of making a show that you think is going to quote sell. Like I've seen so many shows come and go that people thought, oh, well, this will sell. Make a show that you would want to listen to. When you look at great shows, I think that's what makes a great show. Yeah. It's a commitment to quality above all else. It's a willingness to practice publicly and create stuff and put it out there that years later, you will look back on and think, wow, that's embarrassing. That is my favorite quote, by the way. My favorite quote by a great podcaster who I respect a lot.

He is a show called 99% Invisible. A lot of people listening have heard of it. His name's Roman Mars. Roman Mars said, the stuff that I created a year ago, I'm embarrassed by. And the stuff that I'm making now, I hope like hell 12 months from now, I'm embarrassed by that. You're always reiterating. I heard this phrase today. And I love this phrase.

And it describes me when it comes to my podcast. And I think Paula describes you, that you're always in beta. mode. Always in beta. I think about my podcast as beta mode. Let's try this. You and I were talking earlier before we started recording about some dorky thing that I've thought up for my show. And just always be in beta mode. And I think it makes it more fun for you, more fun for the audience, and always innovative. Right. So to answer your question, number one, if you're thinking about starting, just get started. Don't do what both of us did, which is decide that we want to start. wait for years before we actually did so. So yeah, number one, the only way to start is by starting.

So start. Number two, the more you produce, the more that that production is practice. And as you move through the years, you will find that that is always true as well. Every episode is practice for the next one. And if I can add my third to a question that wasn't addressed to me is make a show that you're proud of, no matter what, anybody else says, just make your thing. You're not going to find your voice at first. It takes a little while, but make a show that is the exciting thing that you want to see in the marketplace. Right. I listen to each of my episodes multiple times. I mean, when I'm going through the editing process, I listen to the entire first draft, notate various edits. I will listen to, if not all of it, then at least major snippets of it again oftentimes.

And then when it comes out on Mondays, I then listen to it again. So I will sometimes hear the same show three or four times. Similarly, I listen to the pieces. And, well, as Paula said before, we have a big writing process of writing the Stacky Benjamin show. So there's a lot of prep work that goes in ahead of time, but similar to what Paula does. afterwards, after Steve puts the show together, I do the final edit. I always give it the final edit and give it my thumb up before it goes out. Generally, I'll cut another, I don't know, 5 to 10% of the show.

Yeah, I do the same. Joe and I both have the same editor, this guy named Steve. Say hi, Steve. Hey, Paula, long-time listener, big fan. I figure your voice should cameo. Steve. So specifically, if you want to know my workflow, for these episodes, the ones in which Joe I answer questions, so not the interview episodes, but these Ask Paul episodes, here's exactly how it happens.

We use a service called SpeakPipe to gather the voicemails. My assistant Aaron goes into SpeakPipe, listens to the questions, notates down whether they are real estate or non-real estate, and then notates the episode number in which each question should be answered, depending on mostly first-come-first served. I have a spreadsheet that's an editorial calendar, in which I note down the date, the episode number, whether it's an interview versus an Ask Paula, and all four of the sponsor slots, plus I leave a blank column next to it for the timestamps for each sponsor. So I'll look at that spreadsheet on the editorial calendar. I'll know that there's an Ask Paula and Joe episode coming up. I'll go into SpeakPipe.

I'll pull out those questions, listen to all of them, email them to Joe. Joe and I arrange for a time to meet. When we sit down, we record the episode. Often, before we record, we have a conversation about what we want to talk about during the episode, what major points we want to hit, all of that. So there's a pre-episode meeting. Then we record the episode. Once it's recorded, I put it in a drop box folder. Steve gets the episode.

He edits it. He sends me that first draft. I open up another spreadsheet. Column A are timestamps for cuts. Column B are timestamps for restart. So when that cut finishes. and then column C are any additional notes. So I'll listen to the full episode,

and I don't listen to it while I'm multitasking. I have to listen to it at my laptop because I'm constantly hitting pause and then writing down timestamps. So it will take me two hours, two and a half hours sometimes to listen to a one hour episode because I'm sitting there, giving it my full attention,

and pausing it frequently in order to note timestamps. I send that spreadsheet of cuts to Steve, along with readings for all of the sponsorship slots, as well as a show title, the show notes, the Libson episode description, the photo for the audiogram, which is what we publish on Instagram, notes about any bloopers that should run at the end, and notes about any additional cuts that we should make. Steve will then do a second edit of the show based on all of that feedback, and depending on how close we are to publishing, and depending on just the specifics of that show, I may or may not listen to it again prior to when it gets published. But then when it does get published, I listen to it on the date of release for a third time. And those are just the Ask Paula and Joe episodes. For the interview, these are the easy ones.

The interview episodes are a lot more prep work. Because if I've got a guest coming on, I will read the most recent book that that guest put out. When James Clear came on, I read all of atomic habits cover to cover. When Susie Orvin came on, I read her most recent book, Women and Money, cover to cover. I make sure that I do that so I can have an informed conversation with the guest. And what that means is that every time I have a guest on, that's an eight-hour commitment right there just to read the book. That's not even counting the process of choosing guests, approaching them, asking them if they want to come in, all of the other administration as well as high-level strategy thinking that goes along with it. Yeah, researching which guests are going to be appropriate for the show, which guests are available.

I don't know about how you do it, Paula, but I have also multiple other ways that I look for guests that might be outside the usual realm of, and I'm sure you do too, that might be outside the usual realm of financial people. They still give great lessons to the community. And that process is generally starts about five weeks before an episode goes to air. Yeah, I do the same because I don't want to produce another podcast that just has the same usual players that you hear on lots of other personal finance podcasts. If you look at the space of personal finance podcasts, there are a lot of people who are oftentimes bloggers or people in the community who appear on a lot of shows. And then it kind of ends up becoming an echo chamber. And so I like breaking out of that by going to cousin genres. So I like talking to productivity experts or people who are experts in behavioral economics or the decision sciences.

And I typically don't bring on people who request to be on the show because A, I'm not inspired to talk to them, given that they requested it and it wasn't my idea. And if I'm not inspired, then I'm not going to want to do eight hours of prep work. B, people who request to come on my show often are making that request of multiple shows, and I don't want this to be yet another echo chamber show with the same guests. Yeah, so that's a lot of the thinking that goes behind an interview guest in addition to the actual preparation for the guest. And that is all in addition to writing the show notes, creating the audiogram, notating the timestamps for cuts and restarts, notating the timestamps for the outro quotes that go into the key takeaways at the end of the interview episode.

there are many, many hours of production, both pre-recording and post-recording that go into every single episode. Joe, I know you do that too, and I think it's because of the fact that you and I put so much effort and labor and thought into every single episode. That's why we both are in that very, very narrow percentage of podcasters who earn enough from our podcasts to be able to. to make a full-time living at this. That's a slim group of people. And I think that part of the reason behind that, there are many reasons why Joe, your show and mine have both succeeded. But I think part of the reason is that there are so many people who think that podcasting is nothing more than showing up to a microphone in talking. And when you 10x the workload, you often also 10x the results. Well, and I think it's differentiation. I think in any crowded market, and especially a market

where there's a low barrier to entry. When there's so many different choices on the store shelf, you can't have a Me Too show. And you have to be making that show that appeals to a certain amount of people and then go out and find those people and consistently lead those people where you want to lead. I've never been bad. This is going to sound horrible. I've never been big on asking my audience what they want next. Oh, yeah, no. I have a whole rant about that.

Yeah, I've never been big about that. You know, this is you show up in my kitchen and I'm the chef and this is the chef's table. My show is the chef's table and you're going to get what the chef is serving that night and he's going to give you as much artistry as he can possibly pull out in every episode. And that's the fun of it. Yeah. I absolutely agree. My entire speech at the World Domination Summit was about that topic. And if you want to go back and listen to that, the title of that speech is how to lead an authentic life.

and we played it in a previous episode. You can find it by going to afford anything.com slash episode 138. If you want to hear me deliver a speech about how authenticity is the art of not giving a shit about should. And if you're going to do that, which I think is the correct path, well, I'm even going to go stronger than that, which I know is the correct path. You also have to have a thick skin because you're going to have members of your tribe

that do not like the way that you're taking the show. And I'll tell you, I mean, and Paul has been through almost every single one of these. We've made some pretty severe changes to the Stacky Benjamin show over the years. And the last major change we made a couple of years ago, I lost a third of my audience after that change. I mean, they were just gone. And I got so many letters saying, oh, the old show was so good. The new show is not that great. And I had to believe we weren't good because of the fact.

that we hadn't done it very much. The old show, we had down. We didn't have the new one, but I thought the new one was more who we really were. And it was more represented the life of, of what that show is, the circus that it is. You know, within four months, though, we had not only recovered all that audience, but that's when the awards started coming. And as, I mean, I'm going to sound like I'm bragging my head off, but the awards came quick after that, you know, and the audience size grew quickly. And as I mentioned, I wasn't that worried about the audience growing. I wanted the show to be more about what it was.

So I had to be firmly rooted in I'm leading, not my tribe. One of my quotes in that speech that I gave in episode 138 is that design by consensus, by definition, yields average results. But I do remember though, Paula, thinking two weeks afterwards, what the fuck if I'm done. I totally I totally remember thinking and then I went, nope, like then I go back through all the boxes. Did I? Yes. Yes. No, this is exactly where I want to go. It is what it is. It's what I like better. It's definitely where I think we need to be, which I think ultimately makes it more fun. It isn't fun putting on a show that's all requests. I will say this. Yeah. I love quotes by top podcasters. and I try to listen to as many top podcasters as often as possible.

I believe if you get into anything, go find out what the people who are really good are doing. And don't try to do what they do, but learn from their technique and what they think about and how they work. Because there's a reason why Roma Mars is great. There is a fantastic Disney podcaster named Lou Mangelo. And Lou Mangelo, going back, Paula, to what you said earlier, about the microphones, comparing microphones or comparing equipment or whatever that might be. He had this great phrase. He said, nobody went up to Michelangelo and said, is that a number two brush?

Where did you get that brush? When he's doing the Sistine Chapel, nobody's asking Michelangelo about that. You know why he's great at this, this whole Siscatine Chapel thing, Paula? It's because he's using a whatever brush. It uses this quality paint. Nobody thinks about the paint. Nobody thinks about the brush. That's not where the art is.

Certainly those have to be. to speed and they can't be friction. You know, anybody that took communication 101 in college or heck even in high school knows that there's a sender of a message and a receiver of a message and there's friction in between. My goal with my equipment is to make it good enough to make sure that there is as little friction as possible between my message and my listener. I've listened to plenty of podcast where I can't get the message because it sounds like

crap. I guess that is the fourth and final point to your question is. Whatever you produce, make it your art. And I realize this might sound like a funny thing to hear from a personal finance podcast, but when it comes to something like this, make it your art and the money will follow. Don't try to make it too much of a business, especially in the beginning, because those don't succeed. The people who get into this because they think they'll make money at it, they're not the ones who make it.

The people who get into it because it's their craft, they're the ones who make it. We talked about making money from our podcast. There's a really wide moat. There is a desert of absolutely no money for a long, long, long period of time. And my co-host, OG and I, I remember one day him looking at me

after we've been going for two and a half years and he said, do what the hell are we doing? I said, what are you talking about? We're making podcasts. This is great. He goes, yeah, it's fun hanging out with you and this is great, but this ain't going anywhere. And it's funny that it was just after that conversation that it began going somewhere. Like just when you think it's not going to go, just around that Ben is for us anyway, what it took.

But, you know, that it's funny. Then three years later people are talking about, I just discovered this new show, the Stacky Benjamin's podcast, which have been around for two and a half years. three years. We're like the longest overnight success in history. Thank you for asking that question. And Joe, normally I end these by saying, hey, where can listeners find you if they want to hear more of you? But I think that's been pretty well established. I think we might know. You'll find me here chatting with Paula. Well, thank you so much for tuning in. My name is Paula Pant. And this is the Afford Anything podcast. And if you like the show, please hit the subscribe button on whatever app you're to listen to podcasts. That plus letting your family and friends know about the show and writing

an awesome review of the show, those are the three most important ways that you can support this show and allow us to continue making amazing podcasts for you. So thank you so much for tuning in. My name is Paula Pant and I will catch you next week. Oh, hey, Joe says that I should put a disclaimer in this show. So here we go. This is not legal advice. It's not professional advice, it's definitely not financial advice. Don't listen to a word that I say, please contact a real professional, which I am not one, and I don't hold myself out as anybody more than just some totally random person who happens to have access to a microphone. That's it. Don't see me as anything more than that. This show is for entertainment purposes only, so thanks for

listening. Because at... Whoops, one day I'll learn to not keep my ringer. on when I record a podcast.