Afford Anything - Ask Paula — Would You Live in an RV to Save Money?

Episode Date: May 3, 2019

#191: Should Russell rent a cheap apartment, or should he take out a loan for an RV in order to save money on rent? Carl is working two jobs that each pay $12 per hour. He has $5,000 in student loans. What can he do to improve his situation? Caroline is about to finish paying off her student loans, and in the next few years she wants to buy a home. Where should she park her savings in the meantime? Philip is saving for financial independence, but he’s not sure what to do with his time once he quits his job. How can he discover what ignites him? Amanda is receiving an inheritance, a New York City 4-plex valued at $500,000. How should she handle this? And an anonymous caller wants to know what the step-by-step path to wealth building would look like. I answered all of his questions in today’s episode, plus I feature a short follow-up interview with Kim, the firefighter whom we met in Episode 139. Enjoy! For more information, visit the show notes at https://affordanything.com/episode191  Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else, and that doesn't just apply to your money. It applies to your time, your focus, your energy, your attention. It applies to anything in your life that's a limited resource that you have to manage. Saying yes to one thing is implicitly saying no to something else. And so the questions then become, what matters most to you, and how do you align your days accordingly? Answering these two questions requires a lifetime of 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. Normally we're a weekly show we air every Monday morning. But once a month, on the first Friday of the month, we air a first Friday bonus episode. So welcome to the May 2019 first Friday bonus episode. In today's episode, I'll be answering questions that come from you, the community. And today, we're going to cover the following questions. We're going to talk about how to discover your passions or interests after you reach financial independence. We're going to discuss seven steps to building wealth. We're going to talk about whether or not you should move into an RV to save money. We're going to talk about how to handle an inheritance. We're going to discuss how to find a job that pays well without a college degree. And we're going to talk about where to put your money while you're saving for a down payment. Let's dive into that right now with this first question, which comes from Philip. Hey, Paula.

I have a non-financial question for you. For some background, I'm a 29-year-old homeowner, married with no intent to. to have children. We plan on reaching financial independence through W-2 employment and don't have any interest in starting a business or a rental empire. We currently max out our available retirement vehicles and overall save just about 50% of our gross income. We could definitely do a bit better on our discretionary spending to get us to fire faster, but that isn't really the focus of my question. My problem is, I have no idea what I'm going to do when we get to financial independence. During the week, we keep pretty busy at work or at the gym, but when we finish all our chores on

weekends, we typically default to watching Netflix or reading. We do travel a few times a year, but it's typically either to a new city to sightsee and try local foods and drink, or to a beach location where we can sit under an umbrella and have cocktails delivered to us while we read. Fire, as I see it, is exclusively to eliminate the pain of giving up my time to an employer, but I don't know what I'd do at the time if it was my own. What exercises or resources would you recommend to help people like me find out what I should do with the time once fire is reached. Philip, that is a fantastic question. First of all, congratulations on all the progress that you're making towards financial independence. That's amazing. Now, to your question, which is,

how do you unlock your passions, your interests, your purpose of your post-F-FI life, I have three tips. Number one, look at what you are reading as a clue towards what your interests might be. What I hear in your question is that within the span of a one-minute question, you mentioned reading twice. When you talked about what you like to do on the weekends, you said that once your chores and errands are done, you default to reading. And then when you talked about what you like to do on vacation, you again said that you enjoy going to the beach and reading. Certainly, once you reach FI, once you quit your 9 to 5 job, I'm sure you'll be reading a lot more, but of course you can't read every waking hour of the day.

You need other interests as well. So look to what you are reading to provide a clue about what those other interests might be and then figure out how you can pull those interests into the real world. So for example, if you read a lot of historical fiction, perhaps you have a passion for history. And one way that you could go deeper into that or a few ways that you could go deeper into that might include volunteering at a history museum, being an actor or a director in historical fiction community theater, writing your own historical fiction, joining the board of some historic preservation society in your local town. If you notice that you're reading a lot of historical fiction, then you have a passion for history. And so figure out ways that people who share that passion, what do they do for fun?

What are their hobbies? and lean into those types of opportunities. Likewise, as another example, if you find that you're reading a lot of science fiction and you have perhaps a latent interest in science, cool, maybe you can go do really fun Bill Nye-style science experiments for kids or for senior centers and nursing homes. Or if you read a bunch of comic books,

then you might look around and notice that there is a nonprofit in your city in which volunteers dress up like superhero characters, and visit children at cancer hospitals. I give that example because there's an organization here in Las Vegas where I live that does exactly that. They're called Critical Care Comics. What an amazing thing to be able to dedicate your time towards, particularly if you're already passionate about comic books or superheroes. Or if you or somebody you know has been affected by childhood cancer or both. That's the type of thing that you can really get passionate about and devote a lot of your time towards.

But learning about those types of organizations and those types of opportunities comes step by step, right? First, you take a look at what already interests you. And looking at what you're already reading is a great hint about that. Then, once you figure out what you're already interested in, then you look around to find out what organizations in your city are doing things related to that topic. So that is tip number one. Look to what you're reading as a clue. Tip number two. Take a bunch of introductory classes in various skills.

So take perhaps a class that meets once a week for eight weeks to teach the basics of improv acting, improvisational comedy. And by the end of that eight week class, you'll have a pretty good sense of whether or not this is something that interests you and whether or not you want to go deeper into it. And if it does, then you can join a troop that gets together and plays improv games. and strengthens their skills three or four times a week, and then they do performances on the weekends. Once you take that introductory class, you'll know whether or not something like that sounds interesting. Likewise, try introductory classes in guitar, piano, painting, sculpture, programming, woodworking, welding, carpentry. There are so many skills that you may not have yet had the time to explore. And taking a four-week or six-week or eight-week, introduce.

introductory class for beginners will give you a much better sense of whether or not this is something that you would like to deep dive into now that you have the time to do so. So that's tip number two. Take a bunch of intro classes and see what sticks. And then tip number three is to volunteer. At least in the beginning, the purpose of volunteering might be to take a couple of shifts volunteering for a variety of different organizations to see which one meets with your skills and talents the most? Like, do you really enjoy building houses through Habitat for Humanity? Or would you rather volunteer at a wildlife sanctuary and work with animals? Or are you more interested in trail restoration and outdoor work, or community gardening, or joining a political campaign? And given that one of the

biggest determinants of whether or not you enjoy your volunteer experience is going to be the people around you, taking a few different volunteer shifts at a wide variety of organizations will expose you not just to what they do, but to how cool slash how fun the other people who you would be working with there are. And if you find an organization locally that serves a great cause and you love the people who are there, that's the ultimate one-two combination. Because oftentimes, no matter how meaningful the cause is, if you don't like the people who are there or if you don't like the work environment, you're probably not going to stick with it. So give a bunch of them a try, and you'll have the time to do that when you don't have the constraints of a nine to five job.

Those are three exercises that I would recommend. Number one, looking to what you are reading for a clue. Number two, taking a lot of introductory classes. And number three, volunteering for a wide variety of organizations before you pick the one or two that you really want to double down on. Thank you for asking that question, Philip. And best of luck with whatever you choose. And congratulations on all of the progress that you're making. taking towards FI. Our next question comes from Carl.

Hi, Paula. I'm Carl, 25, working two jobs that I don't really like, one part time and one full time, making a little over $12 an hour at each. I have an $1,000 emergency fund, and I'm very close to paying off my credit card, but still have about $5,000 in student loan debt from a technical college that didn't really work out. I have a passion for personal finance, and I'm constantly consuming audiobooks and podcasts on the subject. I even write a blog about it, but it's not very popular. It's hard to find jobs in my area that pay as good as what I'm making now without any special skills, and I'm nervous about going back to school. I'm not really sure what to do.

Could you help me out? If it helps, the jobs I work at are Aldi, the supermarket, full-time, and Universal Studios part-time. The main thing I don't like is how physical they are. Carl, first of all, congratulations on your interest in personal finance, and for building that emergency fund and for being so close to paying off both your credit card and your student debt. That's awesome. You're making incredible progress. What I hear within your question is how do you find a job that pays better without going back to school, something in which you could be making more than $12 an hour, preferably in a non-physically demanding job,

yet without needing to go back to school and get into another pile of student debt again. So to answer this, I want to refer to two articles that Mr. Money Mustache wrote back in 2013. I'm going to link to both of these articles in the show notes. But the title of the two articles, the title of the first article, is 50 jobs that pay over $50,000 without a degree, part one. And then the second article is that same title, part two. I'm going to link to both of them in the show notes. The show notes are available at afford anything.com slash episode 191. So you can go there for a link to both.

That's afford anything.com slash episode 191. Just to quickly recap some of the options, anything from becoming a WordPress developer to being a private tutor, becoming a home appraiser or a home inspector, or a real estate agent. Those require only very, very short trainings. When I got my real estate agent's license, it cost me less than $1,000. You could become a private tutor, particularly if you are skilled at a specific subject like guitar or a foreign language or really anything, anything that people are willing to pay for. There are a lot of sales jobs that don't require a degree. You could become licensed as a property manager.

You could walk dogs. You could become a podcast editor. The thing is, rather than continuing to throw a long list of ideas at you, I almost wonder if what you need is not relating back to, Phillips question, it might not be a shortage of ideas. It might be a lack of a specific passion or calling in any given one. Because many of the things that I've just mentioned, you can make good money in these fields without a degree, but you need to really throw yourself into it. Let's take property management or becoming a real estate agent as an example. It's very cheap to get a real estate agent's license. Like I said, I got mine for less than $1,000. But to actually build a business as a

real estate agent or to actually build your own business as a licensed property manager, that takes a ton of work. You mentioned that you have a blog. Same thing. Anyone can start a blog. There are extremely low barriers to entry. But to actually grow an audience, create a community, make that platform successful, that takes a massive amount of work. And so the question is not what can I do. You can do a lot of things. The question is, of these options, which one of these options would I be excited about doing every single morning when I wake up, when I jump out of bed? Which of these options would I be willing, happy to stay home on a Friday night rather than going out with my friends because I'd rather be working on this instead? And so similar to what I said with Philip, try a handful of different things, and often passion is the result and not the precursor to doing the work. So if you test drive, you make tiny free bets on a lot of these ideas, you've already tried blogging. Take a free online course about how to build an app and then build a super, super simple one and see if that's the type of thing that you enjoy.

Take tiny, tiny little test drives of each of these ideas and know that the overwhelming passion might not be there at first, but there's going to be, if you try 10 of these ideas, there's going to be one of them that pulls you a little bit more than the other nine. And that's the one that you should lean into. The thing you'll be most successful at is the thing that you enjoy the most for the simple reason that that's where your enthusiasm is going to be. And where there is enthusiasm, there is dedication and hard work. and quote unquote sacrifice that doesn't even feel like a sacrifice because it's what you want to be doing. Like that Friday night example, you don't really want to go out. What would you do? Sit at a bar and talk about nothing?

You'd rather be at home working on the super cool side hustle. That's not a sacrifice. That's a personal preference. And when you get to that level of enthusiasm about some type of money-making endeavor that doesn't require a degree, then you've nailed it. That's what it is. So try a bunch of different things and lean into the one that calls you the most. Thank you, Carl, for asking that question. Our next question comes from Russell.

Hi, Paula. Russell from Sonoma County, California here. I'm currently moving out of where I was living, and I have two options. I can either go rent a place by myself, or I can take out a loan and get an RV and live really far out of town with my parents without giving them any rent. Now, I'd like to buy a home here in the next five years. And if you Zillow Sonoma County, California, you will find that prices here are really outrageous. But I'm a landscaper here and my business is pretty tight here. My question to you is, is it worth it to be uncomfortable for two or three years living in a trailer

really far away from where I work, or is it more worth it to just keep saving and keep moving and try and rent out a place that's kind of below market value somewhere around 1,100 to 1,300? We really love to get your thoughts on what you think the most efficient way might be. I want to add in. I'm a larger person, so I'm 6'2, and I'm pretty big, so living in a smaller trailer isn't really an option. I would have to probably buy a bigger one. Anyways, thanks. Russell, first of all, thank you for asking that question.

And congratulations on thinking creatively about how you're going to buy this home. So let me reframe your question in a slightly different way. And I think that by doing so, this might shed light on the answer. There's going to be a particular price difference between the cost of renting a home and the cost of living and this RV. Let's say that renting a home is going to be $1,200 a month, and the monthly payments on the RV are going to be, I don't know, I'm just making up a number here, let's say, 200 a month, or 300 a month. So let's say that there's a price difference of about $1,000 between the two options. And of course, you should run this calculation with your own numbers based on how much that RV would cost and what

the payment would be. Then take a look at that price difference, multiply it by, you know, about 1.25 in order to adjust for taxes. So if it's a $1,000 price difference, then increase it by another $25%, we're talking $1,250. And then ask yourself the question, would I rather live in an RV that's going to be small and cramped and far out of town? Would I rather take that inconvenience, or would I rather work enough extra hours that I would make an additional $12.50 per month? Which of those two tradeoffs would you prefer? Would you prefer to put in enough extra hours to cover the difference in price? Or would you rather not work those extra hours and take the living in an RV that's far out of town tradeoff?

You mentioned you have a landscaping company. Let's say that you make, I don't know, I'm just totally making up a number here. Let's say that you make $35 an hour. If the price difference between those two options is $1,000 of after-tax money, which is $12.50 in pre-tax money, well, $12.50 divided by $35 is $35. Would you rather work an extra 35 hours per month? Or would you rather live in the RV that's located far out of town and have an additional 35 hours a month to spend in whatever way you prefer? Because regardless of which one you choose, you're going to either be paying, if you're, rent the apartment, you'll be paying in the form of money. And if you buy the RV, then you'll be paying in the form of quality of life. So in order to make that decision, let's put an actual

monetary value on that money and then associate a time value with it as well. And that way, you have specific numbers that you can use when you are evaluating between your money or your life. So that's how I would look at it. Now, at the risk of making this overly complicated, there's one other way that you could also look at the same question. And that is by estimating the number of waking hours that you'll spend in the RV per month and dividing that by the cost savings. So again, let's say that that cost savings is $1,250 of pre-tax income. All right, now let's take a look at the number of hours that you'll be in the RV.

So there are 168 hours a week minus 566 hours. a week of sleeping if you sleep eight hours a night, minus another 50 hours when you're at work and or commuting back and forth to work, say 40 hours working and 10 hours commuting, so that's 50 hours. And then let's say there are another 12 hours that you're out, like at the gym, running errands, hanging out with friends, right? So 168 minus 56, minus 56, minus 50, minus 12. That brings us down to about 50 hours a week at maximum that you would be in the RV,

most of which are going to be on the weekends, or the days that you're not working. That means in a three-and-a-half week month you'll be in the RV for a maximum of about 175 hours. Of course, you'll probably go out a little bit more on the weekends, so let's actually round that down. Let's say it's 150 hours per month that you'll be in the RV. So a cost savings of $12.50 per month divided by the 150 hours that you'll be in the RV is a cost savings of $8.33 for every hour that you're at the RV. Right. So another way to look at it, I realize I'm like giving away my like sometimes nerdy, overly logical way of looking at the world because I realize that what I've just said does not factor for the emotional and psychological impact of being there. I totally acknowledge that. But just to run with this thought experiment for a moment, if you run that math, assuming that hypothetical set of numbers, then for every hour that you are there at the RV, you are saving $8.00. and $3.33 of what otherwise would have been an expense. So then the question becomes framed as a trade-off. Would I trade off $8.33 per hour in order to be in a nicer place? Like, would I pay an extra $8.33 per hour as my admission fee to a nicer home? Or would I not pay that much as my hourly admission fee to a nicer home?

And again, once you put actual numbers with this question, then you can quantify the trade-off. Yeah, I can hear from your question that you would prefer not to live in this RV. But do you $8.33 per waking hour prefer it? Like, would you pay that for every hour that you're there? Put a value on that time and then you'll know the answer. So thank you, Russell, for asking that question. We'll come back to this episode after this word from our sponsors. Do you run a business or do you know somebody who does?

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Our next question comes from Anonymous. Hi, Paula, it's Anonymous Calling. I was just wondering if you had to do your own version of Ramsey Baby Steps, what would they be? If you had to break down wealth building into seven easy steps, what would it look like? Thanks for all you do. Anonymous, that is a really big question. I could see that being the premise of a book, but often books take years to write for a reason, and it's not because of the speed of typing, per se.

It's that writing is the physical manifestation of a lot of thinking and reflecting, and to be able to take everything that I know about how to go from zero to wealth and consolidate all of that into a step-by-step path that's limited to only seven or eight steps, I mean, that would be like the opus of perhaps a lifetime career within this space. You know, it's Dave Ramsey has his signature seven baby steps, but if you think about it, Dave Ramsey has been in this world for decades, and that's the thing that he's best known for. So I wouldn't want to even attempt coming up with something like that in a matter of days or weeks.

That would just be shortchanging it. What I can say, though, because I was thinking a lot about this question last night, is the problem with steps is that they are by definition linear. You do one, and then when you finish that one, you do the next. But the very first and most important aspect of building wealth is the mindset component of, of it, understanding what your cognitive biases are, such as loss aversion, understanding what your heuristics or your mental models are that are interrupting your decision-making process, such as resulting, recognizing, and letting go of limiting beliefs that you might hold about abundance, money, wealth. I mean, all of that broadly ties under the umbrella of mindset.

And that piece of it, the behavioral finance piece, is what I would call step. one through infinity because, yes, it's the first thing that you do, but there is never a point at which you're done. Working on the behavioral finance aspect of it and gaining that deeper understanding of yourself, it's kind of like exercise. There's never a point at which you're finished exercising for life. You don't say, you know what, I've put in a thousand hours at the gym, and so now at the age of 42, I'm done with that step. I can move on. That's just something that you do forever. And the behavioral finance component, the mindset component, that is something that you work on forever. And so I would call that, rather than a step, I would call that the gauze that

overlays all of the steps, regardless of what those steps are. And I bring that up because I believe that that is the single most critical thing that a person can do, regardless of where they're currently at. Now I realize you might want a more concrete answer. So let me walk through a hypothetical case study of a person starting from zero. And again, I don't want to create seven steps because there's a risk of reducing wealth building into steps. There's a risk of it being reductivist. I don't want to create an oversimplified model. Of course, I want to make one that's simple, but not simplistic. How do you simultaneously simplify in deep dive? How do you reduce something to its core elements without being reductivist? There are components within wealth building where that you can break down into more granular stages, like Joshua Sheets has his seven stages of financial independence, where you go from financial solvency all the way up to financial abundance. But stages are different than steps. Steps implies a very actionable approach. And when you're talking about one particular thing like getting out of debt, which is what Dave

Ramsey is done, you know, you can make a recipe for a particular dish, but how do you make a recipe for all of cooking, right? So similarly, you can create seven steps to getting out of debt, but how do you create seven steps to overall building wealth? At any rate, let's take the hypothetical case study of a person starting from zero. what would they do? Let's say that you don't even have a bank account or you do, but it has, you know, less than $10 in your checking account and $0 in your savings account. We'll also say in this hypothetical scenario that you have $30,000 in student loans and maybe $2,000 on a credit card. You've just accepted your very first job and your first day of work is on Monday. What do you do?

How do you get started? In that scenario, the first thing that I would do, and this is, actually mirrors Dave Ramsey seven baby steps, it's sort of a modified version of step one, I would save one month's rent and always keep a cushion of one month's rent in your account so that you know that you're always one month ahead. And then in this hypothetical scenario, because this person already has $2,000 in credit card debt, they've shown that they do carry a balance on their card. And if you're the type of person who carries or has a history of carrying a balance on your credit card, then it's better to not carry a credit card for a while until you solve that problem. So step one is save the one month's rent and pay for all of your other expenses

like groceries with cash. Step two is that you use any additional income to start paying off the balance on that card because a credit card is high interest debt. And then step three would be that once that credit card is paid off, then return back to building out a stronger emergency fund, and at that point I would build an emergency fund of at least three months of basic living expenses, three months of necessities. Now, in this hypothetical example, I'm assuming that the person does not have a job that gives them a 401k employer match. If the person does, then get that employer match first and foremost above everything else. Otherwise, people call it free money, but it's not free. You're working for that money. That's part of your compensation.

and you are rejecting a portion of your compensation if you don't take it. So the asterisk or exception that I would put on all of the steps that I've just outlined would be to max out the employer match if you have one. So at this point, you've saved a month's rent, then you've paid off your credit card, then you've saved up a three-month emergency fund. Your next step would be to put at least 15 to 20% of your income into retirement funds. so you're already getting the employer match, but step four would be to then boost your retirement savings to the point where now you've got between 15 to 20 percent in it. And then, you know, I would leave it at step four because steps five through infinity are going to be so highly dependent on your personal goals, right?

Whether you then put your money into a 401k or an IRA or you create the down savings for a rental property or you create, savings for your own personal residence, or you create a stronger savings account so that you can go travel the world for a while, or so that you have the freedom to move to a different city in the event that you get a job opportunity there. Those are all excellent options that you could choose, and which one you choose would depend very much on what your five-year and 10-year goals are. I mean, in this hypothetical scenario, you're just starting out, you're just starting your new life, There are a lot of different pathways that you can take. And there's no way that you're going to have any accurate prediction of what you'll want or what your expenses are going to be 20 years in the future.

So all you can really do is make sure that you're saving enough for retirement. And then beyond that, look five years to 10 years max out at what you want your life to be and then start working backwards from there in order to build the savings to make that happen. So if what you really want is to reach financial independence as early as possible, then you keep shoveling more money into your retirement accounts and buy rental properties. But on the other hand, if what you want is to move to your dream city or to purchase a car because you've never owned one before and you're tired of taking the bus everywhere. Or if you decide the FI financial independence is not a priority and you would rather save money for your own personal residence, you would rather prioritize that than buy a rental property. I mean, at this point, like, that decision is yours, and there isn't, it would be a disservice to try to artificially create a linear pathway that operates as a one-size-fits-all, you know, because life is not one-size-fits-all. Life is a choose-your-own-adventure novel. And so long as you have that basic foundation in place, the basic foundation being no credit card debt and a healthy emergency fund, and at least 15% of your income getting contributed towards a retirement account.

And by the way, when I say retirement, that could be a 401K. It could be savings for a rental property if you plan on living on the proceeds from that property in retirement. So as long as you're putting at least 15, ideally 20, but 15 to 20% towards, we'll say, you at the age of 60 plus, right? as long as you're putting one-fifth of your paycheck towards the latter one-fifth of your life, then beyond that, the rest of it is a super-choose-your-own-adventure novel. I'm not going to tell you to pay off a student loan at a 5% interest rate when you could otherwise be using that money to start your own business

or to house hack into a triplex. So my answer, Anonymous, really, is that steps that get you out of credit card debt. Sure, that works. But steps that generally you can use to manage and improve your relationship with money throughout the span of your life, regardless of whether you want to be an entrepreneur or reach FI or travel the world or all of the above or none of the above, the model, I think, doesn't apply. So if the question is, hey, I really want to start an online business as a freelance graphic designer, or I really want to start an online business as a freelance graphic designer, or I really want to start an online business selling items on Amazon.

Sure, we can bake that into a step-by-step model. But if the question is, hey, I just want to build wealth, there are so many different incarnations that could take that then it becomes a flowchart rather than a recipe. So those are my preliminary thoughts on that question. Do you remember in one of our previous episodes, the interview that we did with Dr. Sarah Fala, one of the things that we chatted about is on the topic of how to become a millionaire, there's a huge variety of models.

There's the frugality, spend significantly less than what you earn and invest the difference model of becoming a millionaire. There's the ultra high income model of becoming a millionaire. There's the risk-taking entrepreneurial model of becoming a millionaire. Like those are three different models among a universe of various ways to do it. So in the question of how do you become a millionaire, pick your favorite entree off the menu, right? Same is true with this seems like a closely related question. How do you grow wealth? You pick an approach.

And inside of that approach, you might find step-by-step models that help you execute elements of that specific approach. But there's no one-size-fits-all formula to growing wealth in the same way that there's no one-size-fits-all formula to becoming a millionaire. So hopefully that helped answer your question. Thank you so much for asking it. We'll come back to the show in just a second, but first, do you enjoy reading or listening to audiobooks or both? If so, then if you're anything like me, there's probably a really long list of books that you want to read,

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Some of the books that I recommend, Seven Habits of Highly Effective People by Stephen Covey, and Rich Ed Pordad by Robert Kiyosaki. Right now, for a limited time, Blinkist has a special offer just for our audience. Go to Blinkist.com slash Paula to start your free seven-day trial. That's Blinkist, spelled B-L-I-N-K-S-T, Blinkist.com slash Paula to start your free seven-day trial. Blinkist.com slash Paula, P-A-U-L-A. If you've been reading my blog for a while, you've heard me mention many times that I pretty much live in yoga pants.

What I like about yoga pants is that they're super comfortable, but unfortunately, I can't wear them everywhere. Like when I go to conferences or if I go to a meeting where it's just, not appropriate to wear a pair of yoga pants, I have to wear some type of dress pants. The problem is I often feel uncomfortable in like work attire, quote, unquote. Those starchy dress pants, I just feel really uncomfortable in them. And what I like about Beta Brand is that they have these pants that feel really comfortable. They have this thing called the dress pant yoga pants, which is really, really comfortable. They're as comfortable as yoga pants.

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But compared to other uncomfortable pants, you know, you don't have to be uncomfortable when you have to dress professionally. I wear mine even at home when I'm by myself. To me, they're just like any other pair of yoga pants. pants. They're that comfortable, except that they look a lot nicer. They look professional. So that's why I started wearing Beta Brand's dress pant yoga pants. Visit Betabrand.com slash Paula to get 20% off yours. Now, Paula is all lowercase. Millions of women agree that these are the most comfortable pants you'll ever wear to work. That's Betabrand.com, B-E-T-A-B-R-A-N-D,

dot com slash Paula, all lowercase, to get 20% off your pants. That's beta-b-B-R-A-B-R-A-N-D.com, B-R-A-N-D, to get 20% off your dressed pant yoga pants. Betabrand.com slash Paula. Our next question comes from Caroline. Hi, Paula. I'm Caroline. I'm a relatively new listener, but I love your show, so thanks for all your advice. I have one question for you, and it has to do with saving. A little bit of background about me. I'm 29, and my husband and I both work full time, but we've spent the past four years or so getting out of college debt. We're nearly there. The only single debt we have is about $6,000 on a student loan, but we're set to pay that off in the next month or two.

Other than that, we're debt-free, no car loan, no credit card debt. And we did think it was important to continue saving during this time. So we have about $30,000 in the bank, which doesn't include our 401ks. However, most of that will go toward purchasing a home in the next couple of years. My question is, do we keep all of that liquid cash in a basic savings account so we can easily access it for purchasing a home? Or do we stash some of it into an emergency fund and put the rest into a different type of account that earns more interest and then pull it out when we actually want to buy the house? Thanks. Caroline, first of all, congratulations on being super close to paying off your student debt. Congratulations for having no other debt, no credit card, no car loan, for having

$30,000 in the bank, for building up a down payment on a house. You're doing a great job of managing your money. So to answer your question, because you need to access this money, within the next few years, you want to keep this money in a vehicle that is low risk. And when I say low risk, what I mean is that you don't want to risk the loss of principle because you need this money in the very, very short term in order to make a down payment on a home. And so for that reason, you don't want to invest this money. Investments are great if you have a 10-year or greater time horizon. but if you have a time horizon as you do of just a couple of years, then you want to leave it in cash or in some type of cash equivalent.

So options for you to choose from include a high-yield savings account, which these days there are savings accounts that pay around 2%. You could put it in a money market account. You could put it, if you wanted to, you could put it in laddered CDs. Lattered CDs are when you buy a CD, which is a certificate of deposit from a bank, that CD has a certain length of time that you you need to hold it. So you might buy a six-month CD or a 12-month CD or a 24-month CD. And if you buy what's called laddered CDs, then you buy a variety of different CDs with various term lengths. That way, you have the liquidity of being able to access the shorter-term CD money without penalty, right? So you can, at the quickest, you can access some of that money within three months or six months. But you also,

also then get the slightly higher interest rates that are paid by longer-term CDs, like the 24-months. So as the nearest term CD expires, you then recycle that into the longest-term one. So essentially, you're building a ladder where you keep taking the ones that mature, the short-term ones that mature, and then using that money to buy into the longer-term ones, and then that way you have that combination of flexibility with the slightly higher payout. But that's a huge hassle. it's a lot of time and management. Frankly, I think that unless you're dealing with an extremely large sum of money, like unless you're, if we're talking about how do I handle $200,000 in cash,

sure, okay, I could see that. But if we're talking about how do I handle maybe $50,000 or $60,000 in cash before I use it as a down payment, I wouldn't get too sophisticated with it. I would find a savings account that's good enough and then put it there and then leave good enough alone because your time, your energy, your mental band, with those things are valuable and they have a cost. And if you're spending a lot of time trying to over-optimize where you park your savings, sure, you might eke out an extra fraction of a percent, but in sheer mathematical terms, that extra fraction of a percent is worth, what, a thousand, maybe two thousand at the most, depending on how much money you have and how long it's there.

And that extra $2,000, I mean, sure, $2,000 is some money, but if you're a lot, to put that same level of time and energy into doubling down at work so that you could try to get a promotion, then heck, you would make 10 times more than that. So the takeaways from my answer are, number one, don't take inappropriate risks with that money by trying to invest it, because investing is great for a long term, but you don't want to expose this money to the risk of loss, so don't put it in the market. And number two, in terms of savings vehicles, just find the 80-20 good enough minimum viably okay solution and then and then focus your attention on bigger things because starting a side hustle or getting a promotion those things are going to be

much bigger wins than trying to optimize for an amount that will ultimately end up being a rounding error so i hope that helped and again congratulations on all of the progress that you're making the debt payoff the savings that's fantastic so Steve can we get a round of applause here Our final question today comes from Amanda. Hi, Paula. Thank you for taking the time to answer listener questions. I love your podcast and have found it enormously helpful over the years. My family has a house in New York City that I'll eventually inherit.

It's a four-story, single-family townhouse with four independent apartments. The apartment I used to live in, I now rent to a friend, and the rest are inhabited by my family. The building is owned outright by my grandmother. and valued at around half a million dollars. Similar buildings in the area have sold for at least one million. Additionally, next month there will be a discussion about registering the neighborhood as historic. My mother's just retired and does not seek any ownership in the building unless it would benefit me. When I do eventually inherit it, I plan on doing some renovations and then renting out the apartments. My questions for you are, what is the best way to pass down the building to me,

and will historic registration affect how this is done? Thank you. Amanda, first of all, there are four unit buildings in New York City that are valued at $500,000, so a value of $125,000 per unit? Wow, that's a much better prices than I had imagined New York City having. I mean, even at the $1 million mark for a four unit building, that's still $250,000 per door per unit. That sounds like, well, much, much better prices than, I don't know the New York City market, but that sounds like much better prices than what I imagined New York to be.

So congratulations. I think that's great that you're going to be getting that building and you're showing excellent stewardship of it by thinking ahead about what some of the implications are of how this building gets passed down and how you should handle it. So I would absolutely talk to an estate planning attorney because when it comes to gifts, inheritance, estate planning, there are a lot of details to be cognizant of, and you don't want to be in a situation in which the building ends up in probate for a very long time, or there ends up being a dispute about who the beneficiaries of a trust are, or any other type of unfortunate and unforeseen consequence. I am very strongly an advocate of paying for professional help because what I have learned often the hard way in my life is that not setting up the legal paperwork in advance,

a person might think that they are being frugal by not paying for that prevention, but that ends up often being very, very expensive down the road. The single most expensive mistakes that I have made in my life have been mistakes of trying to be too cheap. They've been mistakes of not hiring lawyers and accountants and financial planners at the beginning to make sure that everything was set up correctly because when they have to come in later and clean up the mess, it costs 10 times more. Not just in terms of money, but in terms of agony, anxiety, stress, worry, and then the ultimate result is still subpar. So absolutely hire an estate planning attorney who has experience in real estate in New York City, particularly given that this is a historic neighborhood, you want a subject matter expert on your side, helping you set all of this up.

Thank you so much, Amanda, for asking that question. And congratulations on approaching this in such a wise way. You're for taking the time to think about how should I do this properly? What should I be thinking about in advance? Like, the fact that you're so proactive about how you're going to manage this is a huge kudos to you for that. So thanks Amanda. Best of luck. Now, before we close out today, I also wanted to share a short interview with you. Now, a few months ago on episode 139, I interviewed one of my best friends.

Her name is Kim, and she is a firefighter in the city of Austin. As you recall, if you listen to that episode, Kim is halfway to financial independence, and she has built that without even being conscious of it. So she works as a firefighter. she started working there five years ago with a starting salary of $42,000. And she's had a few raises, but she still, to this day, continues to earn a middle five-figure income. And yet, she has saved 50% of her income over the last five years. She's invested that into largely into rental properties as well as other retirement contributions.

And if you listen to the interview in episode 139, she doesn't think of herself as part of the fire movement. Her goal was never to reach fire, and her progress towards fire is a natural consequence of the way that she prefers to live. She prefers to live below her means, drastically below it. She prefers to save a big portion of her income, 50%. Then because she has all those savings, she figures she may as well buy some investments with them. And so without even expressly setting out a goal of reaching $1.5.5%. fire, the way that she lives has already brought her halfway there. So I was in Austin for five weeks. I just came back to Las Vegas a couple of days ago. This is my day three back home in

Vegas after being in Austin for five weeks. And during the time that I was there, she and I spent a lot of time together. She came to a couple of realizations about ways in which she could, now that she realizes that she's inadvertently halfway to fire, she figured out ways that she could level up even more. And so in this brief conversation that we're about to have right now, Kim is going to join me in order to talk about retirement, side hustles, motivation, and limiting beliefs. And we're going to talk about that right now. Hey Kim. It's an honor to be a part of this wonderful community and to know that I'm already along the path. My goal is to not work forever. I don't think I'm alone in that. Something that you and I talked about while you were here is the

traditional idea of life is that it comes in three very clear stages. It comes in the preparing to live when you're young and going to school and you make all of your choices so that when you live, it'll be good. And then there's the life stage in the middle where you graduate from college and you get a job and you start a family and you have kids. And then there's the post living that happens when you're done with that and you want to just retire and take it easy for the rest of your life. And I guess for me, those stages never really made sense. Like I didn't I didn't want to wait to start living. I didn't want college to be this thing that I had to do in four years and struggle through.

And I don't want my living to be identified with spending my time for someone else and not for me. I want my living phase to still be activities that I'm engaged in and excited about. And I don't ever want that to stop. Like I don't ever want there to be a day where I'm not excited to do the things that I want to do. and what I'm excited about will shift. It already has shifted significantly. It'll continue to shift again. And I want my life to be able to mirror that.

I want it to be able to reflect whatever the new interests are and change and roll with it. When you see somebody, especially a best friend who lives a fire lifestyle, how does that impact your experience? I guess the first question is what is the typical response from people in the podcast? What do they voice? A lot of people basically say, like, I was a little bit of. bit dubious about fire or on the fence or, you know, they very much interpret it to be like, do you just drink margaritas on the beach all day? But then when I'm like, you know, my why of FI is to help my best friend do a few loads of laundry. That's what fire is for me.

And when they see that it's that unglamorous and that meaningful, I think that makes it a little bit more real because I'm not trying to like go live in Chiang Mai, Thailand and do something really exotic. That stuff plays well on the internet, but it doesn't, and it's great, don't get me wrong. It does evoke the dream, but it also, for many people, isn't sufficiently motivating. But coming to Texas to fold my best friend's laundry, that's real. And that is motivating for a lot of people. I don't know. I think that something that you and I have in common that I didn't realize was part of the fire movement, maybe it is, is just saying, I'm going to set the parameters of my own life. And if the parameters that you want are to go to Chiang Mai, then do it and set up your

life in a way that you have the freedom to do it. And again, something that you and I have had in common from the beginning is not wanting the outside constraints of life to prevent us from doing the things that are meaningful. And that's not to say that travel isn't ever-meas. And that's not to say that travel isn't ever meaningful. You and I were talking this morning. You had asked me, like, has fire made you more excited to travel? And I kind of laughed because we've both done some traveling. Like, excited to travel just isn't where we're at. But excited to spend time with a friend and have a month of being with her and with each other and being close. Like, that's exciting right now. So yeah, that was funny to me too, because I was like, yeah, has this made you more

excited to travel? And you were like, nope. Yeah. Yeah, I think it just comes down to live as you want to live, and that's your brand, right? Afford anything. You can afford anything, whether it be a time allocation or a money allocation. You've got a limited number of resources, and you can spend them however you want, so choose wisely. Seeing me here, has anything changed? Well, first, I've gotten to spend a bunch of time with a very good friend in an extremely lovely Airbnb, so that has been fabulous. I should add lovely and very cheap. which are two. It was $2,000 for five weeks.

Wow. Wow. What a score. You guys, I cannot even tell you how beautiful the places that we're in right now. She did well. What has changed, we've gotten to have a bunch of really close conversations. Like, it's having good, meaningful conversations on the daily basis has just been a part of our world.

And so the more that we talk, the deeper we get to go. And I've realized that I am ready to make some changes. I'm still going to work for the fire department. It's great. I'm able to change my position in a way that allows me more free time. It means less time outdoors, which is a little sad. But if I make this shift, it gives me time to start working on drumroll my own business. I want to start putting my time into a project that is more personal and more meaningful to me. And Paul and I have done a lot of scheming on how to get that started, how to set up a website, how to roll out my brand, what kind of services I want to offer. So that's exciting. Like, that's what I'm really sparkly about at this moment. And what's interesting to me about it, Kim, is I've watched you transition from having this limiting belief of, I don't have time to have a side hustle while I have a full-time job. And like, you're a firefighter. You have a very demanding full-time job where you can't just phone it in, like lives are on the line. I get one full day off every three

days, which is kind of a lot, but there's no continuity there. There's no, it's not easy to start a project and keep rolling on a project. I start a project and then I have to put it on pause for two days and come back to it. And that just, it makes it challenging. And so my limiting belief was that I needed to wait until I quit my job for my own reasons to have like the momentum and the energy. And what I'm realizing is I can just restructure my time. I guess I felt like the enthusiasm that I needed to really put into this to make it happen could only happen when I had all of my energy and all of my excitement to just dump into it full force. And that's not true. Like enthusiasm, another thing that you have in large quantities that you can allocate however you want. And so maybe

right now, instead of putting my enthusiasm into jogging the green belt with my dog, I want to put my enthusiasm into starting a business and making the sacrifice of spending a big part, of my off time indoors at a computer, which for me is challenging. That's not something that I do well or easily, but saying it's worth it because I really want this to take off. It is a second career that's really meaningful to me that I want to roll big, especially when I'm done with firefighting. In order to do that, I need to allocate for it now, and I can't. And I want to, and I'm happy about it. So five weeks ago, you were of the limiting belief that you could not start a side hustle while you were still at a full-time job. Now, five weeks later, that limiting

belief has shattered. How did that transition take place? I think that the big shift is at through our conversations and through going more in depth, I've gotten a lot of clarity around what that side hustle would look like. When it was just a vague idea off in the ether, it's hard to really get excited. It's hard to put energy into the specifics because I don't know what the specifics are. And then it just is more ideas churning in my head, which is great, but it's hard to take action on vague ideas churning in your head. And then when there's a really clear idea of this is what I want to do, this is how I'm going to present it, this is how I want to roll with it. Now there's something for me to put energy into. And now it's worth making the sacrifice. It's worth saying,

you know, my time off of work, I'm going to spend an XYZ way towards XYZ goals. And so then I want to allocate resources towards it. That makes sense. So by making it more clear and by having not just a vague idea, but having a clear idea of this is exactly what my side hustle will be, you find the time. You make the time. Yeah, I think everybody needs a good friend to bounce ideas off of. It's critical, really. You made this interesting comment that in order to, we were talking about being outdoors.

And Kim was like, in order to be outdoors, you simply have to not be indoors. I'm like, we were talking about travel. And this morning, I was like, in order to travel, you simply have to not be in the city that you live in. And likewise, what we've kind of come to around fire, and Kim, I'll let you share that. What did we come to? Well, you don't have to identify as a member of the fire community or be a big spreadsheet nerd. I mean, I am. Many of us think that's great.

But for the people who are reluctant or people who have spouses or family members who are reluctant about this whole fire thing, you don't have to identify as part of the fire community to be pursuing fire. You simply have to make good money and not want to work forever. Or decent money. It doesn't even have to be a lot. I'm helping a friend with budgeting right now, and she just got her first big job at $60,000. When she's used to living on a lot less, you can make $60,000 and save enough to be fire.

I am helping her with the spreadsheets. I'm helping her with the saving numbers. She's in a great position. And your starting salary was $42,000. Yeah, it was... And that was five years ago. Mm-hmm. Yeah.

Yeah, it was $30. for the first six months, and then I got my big jump to 42, which was the most money I had ever made. I felt so rich. Yeah, anybody can do it. I think that's the message. Anybody can be an outdoor rock store just by leaving their front door. Anybody can be a traveler, extraordinaire, just by taking a Greyhound bus out of their city. Anybody can be fire with a little bit of money management and common sense. Well, thank you, Kim. Thank you so much, Paula. I can't even tell you like I know that everyone closes by saying it's been so great thank you for interviewing me but I want to say it's been so great having you here it has been really really wonderful and

I'm so glad that you made the decision to come and be in Austin and to have this time together it has been meaningful in such a profound way so thank you what a fun way to close out congratulations Kim on starting your business and more importantly for overcoming the limiting belief that you couldn't or wouldn't have time to start a side hustle while you're at your full-time job. A lot of people think that, and part of the reason that I wanted to share this interview is to show an example of somebody overcoming that limiting belief because oftentimes I hear from people who say, hey, I want to start a side hustle, but I'm way too busy. And as you can hear from this story, Kim was one of those people.

She also used to think that. But once she found something that she was excited about doing, then she figured out how to make the time. And so this kind of goes back to the questions that kicked off this episode, the question from Philip and from Carl, both of whom asked, how do I find something that I'm passionate about, or how do I find work that I enjoy? And what I hope Kim's story illustrates to tie it back to the beginning is that when you add some specificity or some clarity to what an interesting side hustle might be, then the passion grows, it amplifies. And then it kind of becomes this self-perpetuating cycle where the more work you do in it, the deeper your passion grows.

And the deeper your passion grows, the more you want to work in it. And so then passion and work feed one another in this self-perpetuating virtuous cycle of really enjoying what you do. And the more you enjoy it, the better you are at it, the more lucrative it becomes, the more you want to keep doing it. And then you're just on the spinning wheel of awesome. in which meaning and purpose and income all are hand in hand. So I wanted to share that story as an example. Thank you so much for tuning in. My name is Paula Pan.

This is the Afford Anything podcast. Coming up on next week's episode, we have an interview with David Bach. If you've ever heard the expression, don't buy lattes or skip your morning latte, David Bach is the person who came up with that. He is a New York Times bestselling author who has written nine books. He joins us on Monday's episode to talk about the latte. factor. So make sure that you hit subscribe in whatever app you're using to listen to podcasts so that you won't miss that episode or any other episode. Thank you again for tuning in. My name is Paula Pant. This is the Afford Anything Podcast. I'll catch you next week. Hey, my lawyer wants me to tell you, none of this is professional. This is not legal advice. It's not financial advice. Don't make any moves before you talk to an actual licensed professional. Everything that you're hearing here is for entertainment purposes only. So don't listen to me. Listen to a real grown up.