Afford Anything - Ask Us Anything #4 - Betterment, Wealthfront, Robo-Investing -- What's the Deal?

Episode Date: May 9, 2016

#24: You ask. We answer. Let's grab a beer. This is the first Ask Us Anything in which we hear YOUR voices -- which makes this episode extra-awesome.  In this week's episode, Paula and J. Money tackle listener-submitted questions, such as: Investing: What's the deal with these robo-advisors? Should I plunk my money into their accounts? Betterment, Wealthfront ... what's the deal with these companies? Who can keep track? Index funds vs. rental properties -- what's better for scoring tax breaks? Entrepreneurship: I'd like to hire a virtual assistant. How do I start? What should I look for? Grab Bag: Don't forget about Canada! What are the best blogs and podcasts for money-savvy Canadians? Find out the answer to these questions and more in today's episode. Note: We received so many real estate questions that we'll devote another AUA episode exclusively to that topic.  Today's episode (mostly) covers other arenas. Enjoy! Visit http://TheMoneyShow.co for more great episodes Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hey, Jay, have you filed your taxes yet? Of course I have. I'm a financial blogger. Uh, no comment. Did you get money back, Paula? I don't know. I have, I just filed an extension. You filed an extension? I always file an extension. Didn't we have this talk like six months ago that you said you weren't going to do it again?

Yeah, yeah, old habits die hard. Welcome to the money show, a podcast about mastering your money and time so you can live your optimal life. This show features interviews with entrepreneurship. entrepreneurs, financial experts, and regular people who share amazing insight into investing, business, money management, and productivity. There are many roads to financial freedom. This show explores them on. Grab a beer, kickback, and enjoy the money show.

Hey, Jay, guess what we're going to do today? Are you going to ask, answer, ask us anything questions? Wait, wait, we're going to do what? We're going to answer, ask us anything. questions. You can ask us and we will answer it. Yes, you can ask us anything. Ask us anything and we will answer it. Yes. We'll never ask us anything other than money though. I was hoping for really random, like awesome. Why do you prefer the color black over green or something like that? Are kittens cutters cuter than puppies or are puppies cuter than kittens? That's right.

Exactly. But nobody asked us a question like that. But we did get a lot of questions about Robo Advisors. We got questions about Betterman, Wealthfront, Vanguard. Acorns. Yeah, acorns. We got questions about what should I do with extra side hustle money that I'm earning? Should I put it into the market or put it into a rental property? Taxes, failing. Yeah. But I feel like the dominant theme of today's episode is market investing and specifically what to use and where to keep your money and all of that, how to manage your market investments. Yeah. If you've ever been curious about robo advisors or some of the different entities out there, that's what we talk about on today's show. Yeah, so if you hate investing, click away and go back to a different episode.

Which episode should they go to? Lucky number seven. I have no idea what that one was about. Oh, let's find out right now. Hey, everybody, it's Steve, that guy who does stuff for Paula and Jay. I'm pulling up a list of previous episodes. In episode number seven, lucky number seven, is actually an interview with Brandon. The Mad Scientist. Very interesting story.

And he teaches us how to hack your HSA health savings account. So you can always go back and listen to that. That you can find at themoneyshow.com slash 07 for lucky episode number seven. There you go, Jay and Paula. Oh, that's a good one. Lucky number seven. Mad Scientist reveals the science of financial independence. Good old Brandon the Mad Scientist.

Although we talk about investing on that one too. You can't get away from it. It's always here forever and ever. All right. Well, I hope that you enjoy this sequence. Oh, and by the way, this is the first Ask Us Anything where you will get to actually hear the questions that the listeners submit. It's really cool.

It's super cool. We have gotten a little bit more technological. Yeah. And if you want to submit a question in the future, just go to the money show.com slash voicemail. Take 30, 40 seconds and ask your question and you might get famous. on our show. So with that being said, let's get to it. All right, let's do this. Let's listen to this first question. Hi, Paula NJ. My name is Sherry and I am in beautiful Nova Scotia Canada. Hi. I love the podcast. It's so much fun to listen to. I'm wondering if with all of your connections with other

bloggers and so forth, you could give us Canadian listeners some recommendations for other blogs or podcasts, especially about investing. Because a lot of the things about debt reduction and so forth, apply to us, but when it comes to investing and your 401ks and stuff, that doesn't apply to us. So if you could send some recommendations out there into the podcast of verse, that would be great. And your Canadian listeners would appreciate it so much. Thanks so much and take care. Bye-bye. Yay. Aw, thanks, Sherry.

Thanks, Sherry. I love that. A boot and out there. I love that so much. You have just incurred the wrath of Canada. That's awesome. You're lucky Canadians are so polite. Well, it's actually a really good question because that's like a biggest concern, especially with like new financial tech companies, new apps. Like Canada's always being left out. It sucks because there's a lot of cool stuff that people are coming up with, you know?

But this is a good question. And I've actually, I did a little research for this one because I'm not from Canada and wanted to make sure I gave you some good tools. But I talked to my friend Kate from Blonde on a Budget, who's a Canadian fellow personal finance blogger. And she gave me a list, so I'll just go over some of them. But she said a lot of people follow the Canadian Couch Potato method of investing. And that's Canadian CouchPotato.com.

Then there's Rob from Boomer and Echo.com. He's currently going to school to become a financial planner. There's Mark's blog at my own advisor.ca. It's Mark. And then also Kyle and Justin over at young and thrifty. dot CA. Those are some of the good bloggers. And then, oh, here's some more too.

Jessicamorehouse.com slash blog. Jessica's awesome. Give me back my five bucks.com is another one. And then my friend Kate also listed a couple of different podcasts. Budgets and Sense.com, which is the one that Kate's actually on. Good plug there, Kate. Jessica Morehouse has a podcast. and then becausemoney.ca.

So there's a lot of different podcasts, blogs. There's a lot of people talking about this stuff, but you're right, there is an essential place that someone should actually create and build. Oh, oh, oh, oh, oh. Go, Paula, go. Actually, there is. Good. What is it?

Okay, in the financial blogging community, we have this annual award called the Plutus Awards. And so the Plutus Awards are these awards. It's like an industry award, right? It's given to financial bloggers. And every year they have a category. Like, you know, in the Oscars, there's like best supporting actor, best actor. You know, they've got all these different categories, best lighting design.

So the Plutus Awards is the same way. They have all of these different categories of different types of blogs, best deals and bargains, best entrepreneurship. And they have a category for Best Canadian Personal Finance Blog. So if you go to the Plutis Award, dot com and plutus is spelled pl, P-L-U-T-U-S. So the-Plutus.com slash finalists. You can see all of the finalists from the past six years for Best Canadian Personal Finance

blog. And so that is the closest thing that I'm aware of to a central organizing spot for finding Canadian blogs. And so I'm looking at that page right now and blonde on a budget is there. as well as Canadian budget binder. There's a blog called Million Dollar Journey, mo money, mo houses. That's Jessica Moorehouse now.

Oh, cool. Yeah. Awesome. Awesome. And yeah, and like the finalists page has the most recent one, but you can look back through the archives and see the other ones as well from previous years. And that's pretty good too because that is a, yeah,

it's not like, oh, here's like all the Canadian blogs, but it's more curated because they're the ones that people have voted on. It is curated a bit, which definitely helps. Yeah. Go Canada. Cool. What's our next question, Jay? I don't know.

Let's hit the play button and see our new fancy thing we're integrating here. What's up, Jay, Money? This is Chris here. Big supporter of everything you do and love the Money podcast. Questions in regards to my Roth IRA. I've been feeling inclined lately to move my Roth from betterment to Vanguard. I love betterment and feel very connected to them because of the ease of getting started as a novice investor. And I still am. However, I feel like Vanguard is the gold standard with their stability, history, and low cost.

I feel like it could be the best option. What are your thoughts? Is there any reason for me to keep my Roth in betterment as opposed to moving it to Vanguard? For 2016, I recently just maxed out my Roth IRA and have about 14K sitting in it right now. Damn. Look forward to hearing from you. Thanks, man. Look at that one, Paula. Nice. Max and IRA action.

I love it. Heck yeah. Paula, you're probably, you're more intellectual and investing. I'll give my two cents. Then you can come with like a serious answer. Yeah, I mean, honestly, first, I think either place. like you honestly can't go wrong. So just the fact that you're A, investing and then B putting it somewhere decent, like it's good.

So it's a matter of, you know, one could be better, maybe not depending on your situation, anyone listening. If you just pick one, you're good. So you're 80% there, right? I think you also hit it on the head that you need to get started investing because there's some confusion on where should I invest? Where should I put it? What company should I use?

What brokerage? Should I do robo advisor? Should I do this? And betterment, wealth front, some of these places. that helped make it easy for you just to hurry up and get started. And in a smart kind of way, I think it's good. So for anyone listening that just doesn't know, like research some of these places and just pick one and start slamming the money in.

And you can always change later, but just whatever gets you to start investing, you know, do that first. I love the visual of slamming the money in. Slamming it. You pile it all in there. Yeah, so I don't actually use Betterment, but like 98% of every finance blog I've read loves them. I think they're legit.

Yeah. Yeah, Paul, why don't you jump in and talk about a little bit of betterment? And then your thoughts and I'll come, I'll slam back in when you're done. Sure. When you invest in Betterment, you're actually investing in Vanguard funds. So basically, the choice between Vanguard and Betterment is fundamentally the choice of, do I want to be responsible for rebalancing my portfolio periodically and taking advantage of, you know, like tax loss harvesting and all of that stuff.

Like, do I want to do that myself or do I want to outsource that for an additional reasonable fee? Either way, you're invested in Vanguard funds. If you go directly to Vanguard, then you pay the lowest possible fees because Vanguard offers really, really low fees. And they're not attacking on anything extra just to use their system like Betterment, which they should, right? They should make money because they're in the business that's making money.

Right, right. So if you invest in Van Gogh. then you are, let's just say hypothetically that you had your portfolio split between some percentage of stock funds and some percentage of bond funds, right? And then over the course of the year, the market moves in different directions. And so after a year, your allocation is out of whack. And so you would need to rebalance that so that you could get back to your desired allocation, let's say it's 6040 or 7030 or whatever split you want. If you invested directly in Vanguard, you would have to do that yourself. And if you invest with Betterment, they'll do that for you. And they do

charge an additional fee, but it's a very reasonable fee. Ultimately, your money is invested with Vanguard funds either way. So it comes down to how much work do you want to, how much time do you want to think about it and do it versus just have someone else do it for you? Yeah, exactly. If you want it to be like completely automated, then I think Betterment is a fantastic option because, you know, their fee is reasonable. and it's totally automated so you just don't really have to think about it. If you want to save a little bit of extra money and don't mind logging into your accounts or even enjoy logging into your accounts to like check them out and kind of grow the nursery, then...

Grow the nursery. Thinking of like a garden nursery, not like a kids nursery. Either nursery is still funny. So that's basically the answer. Both are really good options. Yeah. And it seems like too that Chris, like you've already done, like you've used betterment how it should have been you're new.

You want to start. You want to learn. You did it. And now you're like, I feel like you're asking what the next step is. Right. And I think Vanguard would be the next step, you know, depending on, you know, again, if you want to manually do it yourself or not. I'll tell you that I have all my money in Vanguard.

And I've probably said this before. So it's annoying to some people. But I literally just have one fund, VTSAX, a total market index fund. So for me, I just literally throw it all. into the Vanguard and then I just leave it there and every year I get more and I just throw it in there and I leave it there. So that's a totally different strategy. Some people have one. Some people have three. So you can still kind of be like I don't rebalance anything because I just have one, right? But that might not be the route you want to go. But that's like another option too,

if it does, you know. And another option is Vanguard also has target date retirement funds and those do get automatically rebalanced. There you go. The drawback to it, though, is that, you you know, they assume that everyone who is going to retire at a particular time has the same kind of risk appetite and profile and all of that. Right. That's sort of the limitation. You can hack it. You can work around and game it by being like, okay, I'll put some amount of money into

target date 2050, but some amount into target date 2030, you know, so you can like, you can kind of hack it that way. But yeah, I mean, it's up to you. There's like a million different, I hate the expression, ways to skin a cat, but I can't think of a better profession. You are good on the nursery. I don't like the skinning the cap.

Yeah, I don't like that either. You're one for two right now. A million different ways to. A million different ways to make personal finance personal. Oh, you love that one. Yeah, but it's kind of cheesy. I want a more visual analogy. There's a million different ways to end this sentence.

Yes, and this call. This whole podcast. Yeah. Hope that. Oh, Paula. Before I move on, are there other places like Betterment? Like, I always hear Welfront a lot. Do you know much about them?

Is there other like, you know, what are other companies people can look into? You know, I will say that Schwab is pretty much equal to Vanguard in terms of its fees. I actually have accounts at both Schwab and Vanguard. And if you look at their fees, they're almost identical. In fact, Vanguard and Schwab have been known to compete with one another on who provides lower fee funds. So if one of them lowers the fund fee by like, you know, one tenth of one percent, the other one will lower their fund fee by like two tenths of one percent just so they could beat them. And they're in this like race to the bottom that's fantastic for us. Oh, yeah.

So I'm a big fan of Charles Schwab as well. And I, you know, you can't go wrong either way. Fidelity also has pretty low fee funds on offer. So I've personally never used them, but I've looked at their fee structure and their fee. structure looks really, really good. So if you, for the listeners out there who already have accounts at Schwab or at Fidelity and are listening to this and are like, oh my goodness, should I move? Yeah, don't bother. If you guys, if you're in super low fee funds, then you're doing well. There you have it. All right, Paula P. Should we move on to the next one? Let's do it.

This next question is from Jeff. What up, Jay Money and Paula? This is Jeff from South Jersey. I wanted to say thank you for answering my question in a previous Q&A episode. Your thoughts and ideas and insights really helped to spark some fire in me and get started on some projects that I've wanted to begin for some time now. So I really appreciate that and wanted to say thank you. Awesome. I had a follow-up question for you as it relates to using virtual assistance. I've never used one before, but have started to maintain a list of potential tasks.

and ideas in which I could use a virtual assistant. But I'd love to get any thoughts from you guys in terms of any areas in your personal life, business related, that you have used a virtual assistant for before, as well as the sites, companies, or online resources that you use. There's a ton of them out there, and I just want to make sure that if and when I'm getting into this, I'm using a good resource. So any thoughts would be much appreciated. Thanks again for the great content and love the show.

Hey. Oh, oh, can I go first? Can I go first? Yeah, I was going to say, I have no idea. Let's ask Paula. I don't use them even though I know I should and Paula will probably tell us about a thousand reasons why. Jay, you do use them. I do?

Yeah, because do you know how we handle the listener questions that we get? Oh, we use your person. We're using one right now to put all this together. We have a VA who once a month at the end of the month goes through all of the questions, opens up a spreadsheet in one column. Column A, she writes the category of the question. So investing, business, real estate, you know, she'll categorize it so that that way if we have a bunch of questions that are all in the same theme like real estate, we can group them together. In column B, she writes just a quick summary of the question so that we can look it over.

Column C, she posts a link to the audio file so that we can click on that link and listen to it. Those are the ones we're hitting Clay on, by the way. Yeah. And then in column D, Jay and I, you know, we look at the questions and listen to them. And then in column D, we note down whether we want to answer that in the next show or not. So we use a VA to like process and manage all of that. I just thought it was you, Paula. I do remember now, yes. And Paula, how much does it cost us to do this? I know it's different because of your situation, but how much would something like this cost if you just went out and hired someone? Well, so I pay, I actually, I have two VAs. I pay both of them $25 an hour. And when I started, I started hiring VAs years ago. And, you know, the big headline grabbing thing was like, oh, you can hire someone in Bangladesh or Pakistan for five bucks an hour. And I'm sure that you could.

And I know that many people do. But in my experience, and this may just be because the work that I do is very content-based, I had a very hard time. I was spending a lot of time managing to the point where it wasn't really much of a time savings just for how much time I had to spend in a managerial role. So I decided to find some experienced U.S.-based VAs, you know, people whose judgment I trust and people who will really be a part of the team and who will give me feedback and, you know, just people who are more like just true members of the team rather than

a person just performing tasks. So I made the deliberate decision to, you know, to pay people a higher rate in exchange for getting that quality and that judgment and that reliability. Well, and also the people that you hire are people that you knew in the, like, you're smart and pick people in the personal finance online world. Right. And so that goes to the second part of his question is how do you find people? The $5 people, I went to Upwork.com, which at that time was Odesk. And I just hired people off of Odesk. But when I decided that I wanted to get a different caliber of VA, I went into my community, which is the community.

of, in my case, that's a community of other finance bloggers, and just looked around at who is already active and involved in that community, because my thinking was, I don't have to train them on the basics. If I were to hire a VA from scratch, like, who didn't know anything about blogging or personal finance or running an online business, like, there's so many basics that you would have to train them on and explain to them. But, you know, if you work with someone who has kind of made a niche out of working with people in your same industry. Like, I guess for lack of a better term, people who also work for your competitors. Not that I think of other bloggers of competitors, but you know, you could think of it like that if you wanted to.

Find the people who work for your competitors and hire them. That's a good one, Paula, P. One also, I don't know if you met Chris Ducker, Paula. But this guy named Chris Ducker, we met at a, okay, at a conference. And he was really cool. I didn't know what he did or how big and popular he was or not. I just started talking to him. But apparently, like, he runs like a huge site helping people find VAs too. It's called virtual stafffinder.com when they're all in the Philippines. But he like built this thing. That's where he lives. And he like, I think he has a podcast and blogs. And he goes in and out about all the stuff, how to best use VAs and how to manage your business as an entrepreneur. So that could be a good resource to check out. Even just his blog. Yeah. He has a book also.

called Virtual Freedom. Okay, there you go. One of my biggest takeaways from that book, I'll just share it right now, was he said, don't rely on one person to be your super VA. Like oftentimes as a beginner, as somebody who is first hiring VA's, you kind of expect that one person will do it all, which is a mistake for two reasons. Number one, different people have different skill sets. And number two, if you lose that one person, you're back to square one.

Yeah. You know, hire a few different people who do a few different people who do a few different things. That's a good one. For example, I guess, well, you may have heard us talk about, he's not a VA, so this is not exactly the same analogy. But, you know, we have Steve, who's the editor and producer of this podcast. And then I've got two VAs, one who specifically works with afford anything. And then the other one works with my content marketing company. So I've got like a number of people in a number of different roles who are all part of the team. And that way, if one of them had to quit, I wouldn't be totally in the lurch.

Well, and I think, too, it depends on what the tasks are trying to do and how much, like, I feel like, and I could be wrong because I don't, I've never gone out and hired a VA. But I've partnered up with people. Like, Paul and I partnered up for the show, which is different. But like I have rock star finance and I needed help. So I found someone in the community that believed in the site. That was good. That was connected that I trusted. So we partnered up. And I share income with her. It's Kate. I share income with her when she helps me. And so I wanted someone with not. that was smart, but I trusted that I liked to be a bigger part of it, whereas I could have just hired a VA to, you know, maybe research articles for me and just do kind of the non, not the non thinking part, but you know, the more manual labor type stuff. And that could have just been a separate transaction. Hey, I need like 100 blog articles in this, you know, go put them in a spreadsheet, right? Like that might not require, I might not need brains for that and or like opinions. I might just want data. So I feel like in Paula, maybe I'm incorrect that like VA, are great for data finding and stuff.

And you can use them for more, right? Like your people on shirts. This goes back to kind of, this is exactly the thing I was talking about earlier, like hiring a VA to perform a task versus hiring a VA because you want their judgment. And you want them to be. Did you see that?

Yeah. Oh, I'm zoned out or something. Whoops. So for anyone who's hiring a VA for the first time, I'd encourage you to ask yourself that question. you know, what is the purpose of this hire? Do I literally just need someone who can perform routine tasks? And if the answer to that is yes, then it's very straightforward.

All you have to do is create an exact step-by-step set of instructions on how to execute that task and assuming that that particular task is very repetitive and routine, then all somebody has to do is follow that set of instructions. and they'll be able to do it. So, you know, you can hire a VA for that purpose for, you know, $10 an hour. But if you want somebody who can exercise judgment or raise issues to your attention that you may not have known of before, you know, and offer suggestions and things of that nature, you know, like Jay, like Kate is for you with Rockstar Finance.

Yeah, she's coming up with all ideas, like, let's do some quick. quote pictures. Let's share this on social media. I'm like, yeah, you go run it. Like, you're good. Yeah. And you could also too, like maybe you said this Paula. Hopefully not. Not like afraid to talk. But like some projects that I do, I'll partner up and give people ownership of like, hey, let's get 50, 50% ownership in this project. So you're not paying anyone, but you're building it together. And this is like way out of the scope of VA. So maybe I shouldn't bring it up. But there's other ways to pay people than just, you know, cash money. I am way not a fan of that.

I know you're not. But there's and there's different sets of pros and cons. But yeah, starting out just pay and test out. But just know there are options to go other routes. For example, if you have no money, but you need help. Right. You can get interns. You can do all kinds of stuff.

Oh, interns. Yeah, that's another good one. I have not done that, but I know of people who have hired interns. And for that, there's like more paperwork hoops that you have to go through because most interns will want college credit. So you have to talk to a local college and structure, you know, fill out whatever meet whatever requirements they have such that your internship would qualify as college credit. But yeah, that is another option.

There you go. All right. So we do another one? Let's do it. My husband and I are both teachers and started a side hustle designing and selling our lesson plans in order to pay off our student loans. We are now very close to becoming debt-free and since our side hustle is passive-eastern, income, we are hopefully going to continue to have an average of $1,000 extra a month and most likely more as we continue to grow our business.

Nice. We are trying to decide the best way to invest this money in order to get the most tax breaks. Yeah. We already have Roth IRAs and a pension plan. I would love to hear you to discuss whether buy and hold real estate investing or stocks would give us the most tax breaks with our side hustle money. I love the idea of real estate investing. Yay, team Fala.

But my husband is more on the side of Jake. Smart husband. Any help would be greatly appreciated. Thank you. Team Paula. That's an interesting, right? Because usually you hear like, I want to figure out how to grow a lot of money and take over this and that. But this is like very tax case.

Yeah. Like, hey, I've got money. What do I do with it? That's a damn good problem. Yeah. Yeah, that's an excellent problem. Yeah, congrats. I'm figuring out a side hustle, too.

I assume you make these planners. You do all the hard work up front, and then you're done, and you just send them out as the money comes in automatically. Yeah. That's pretty cool. That's awesome. Yeah, I don't even know where to start because I max out my IRA at 5500 or whatever. I max out my SEP IRA because I don't have a pension plan or 41K, and that's based on my business income. So that, you know, this year was $25,000 before it's been like $15,000.

And, you know, so I never have enough money. I max out those two. And then I never have anything left to do extra. But I know you do some stuff, Paula. Yeah. So I'll say, first of all, I feel like there are two aspects to this question. There is the portion of the question that asks, what are the tax advantages associated with market investing versus real estate investing?

And then there's another portion of the question that asks, what should we invest in? and I want to kind of take a step back and voice that I don't think that those two should be the same question. In other words, I think that you should choose the investment that you believe will give you solid long-term returns. And once you choose the investment that you want, then figure out how to approach that investment in a tax-advantaged manner. In other words, don't let the tail wag the dog. You know, taxes are the tail, but the investment itself is the dog. So don't go into any investment purely for the sake of tax benefits. You know, go into investments for growth.

Because you're going to make a lot more money. Right. And even if taxes are high, it's still going to outweigh it, if in the worst case scenario. Right, right. Like, you know, when you pay taxes, you're spending 30 cents after you've earned a dollar. So that other 70 cents is yours. That's why people say never to pay off your mortgage. So you always have a tax credit or tax, you know, and you're like, I'd rather just not have a mortgage.

It costs to a lot more money to pay a mortgage than taxes. Right, right. So a couple of things that come to mind right offhand. Number one, I'm assuming that you have some kind of a business structure like either an LLC or if you're a sole proprietor, you're at least structured as a sole proprietor. and filing taxes as a sole proprietor. And so either way, you're running a business, which means that you have a certain amount of business write-offs that you'd be eligible for. You may already be taking those.

You may already be maximizing those. But just in case you're not, I just want to kind of throw that out there that the easiest way to track it is to keep your business expenses and your personal expenses completely separate. So have a business bank account, a business credit or debit card, either one. you know, and then get some bookkeeping software. I use one called less accounting that you link to your business accounts and that'll track all of your income and your expenses. And so that way at the end of the year, you have your profit and loss statements and you

have your balance sheets. And it's much easier to be able to track all of your business spending. So any expense that you make for your business, whether that's website hosting or going to a conference or getting some educational material. like anything that relates to your business is a tax deductible expense against the income of that business. Even fees, like PayPal fees. If people are paying you and someone's taking a percentage of that payment, that's a fee. Yeah. That's an expense. Yeah, exactly. So, so number one, you know, make sure you're doing that and I'm going to assume that you are. By the way, sorry,

this is a shameless plug. Shameless affiliate plug here. Okay. Less accounting will totally hook you up with a free month. When you sign up for an account, go to billing, which is under settings and just type in coupon code afford anything. Shameless plug. There you go. Well, I get a shameless plug, but you don't get paid or anything free. I don't get paid or free. I use outright.com, which is bought out by GoDaddy. But it does the same thing automatically track stuff. But yeah, you don't get anything free. It's another option if you want to check it out. All right. So make sure that you're doing that. Make sure that you're writing off all of your legitimate write-offs. Beyond that, you could qualify to open

a retirement account through your business. So in other words, because you have a business, you could, and again, I don't know the specifics of your personal situation. Like, you know, you mentioned you have a pension and a Roth IRA, but having a business, having an LLC means that you can open a retirement account such as a solo 401k or a SEP IRA. Now, again, there's like different rules and regulations and qualification standards. Vanguard actually has a really good chart that kind of walks you through, am I eligible for this or am I not? And it also walks you through the difference between a SEP IRA versus a solo 401K,

all of that. So if you were to take a market investing route and you were looking for more tax advantaged accounts through which you could, you know, invest your money in the market in a tax advantaged way, opening up another retirement account would allow you to do that. Obviously, though, the drawback to opening up a retirement account is that you can't access that money until retirement without penalty. So, you know, you'd have to think about that too.

Like, might you possibly want to access that money in 10 years or five years, 15 years? A hundred years. And so this is where it comes back to don't make choices based on tax advantages, make choices based on your life and designing the kind of life that you want and then find ways to tax advantage that. So if there's a chance that you might want to tap that money in 10 years, then in that set of circumstances, it wouldn't make sense to put it in a retirement account. What about health savings too? Does that fall under there? Because don't you guys hide money and health savings to grow and get tax, you know, all that? Yes. So, well, if you're a teacher,

I'm assuming that you probably get health insurance through your school. I mean, if you were eligible for a health savings account, like if your current insurance plan was HSA compatible, I'm assuming you would already have that by now, given that you get health insurance through your school, you probably have, I'm assuming that you have a low enough deductible that your plan is not HSA compatible. And I will say, don't cancel your health insurance and go out and buy high deductible insurance just for the sake of the HSA. If I had the option to get company sponsored health insurance, I would totally do that. I have an HSA because I have no other way of getting insurance other than buying it individually.

Good. So that being said, sorry, this answer is getting long. Yeah, but that's good. I mean, mine was like 10 seconds and I'd even go into any of the good stuff. I mean, that's why you're here. So with all that being said, for Team Paula and to throw, you know, some fuel on the rental property fire, there are also a lot of tax benefits that come with rental property ownership. It would take an entire, not just a show, it would take like an entire season.

Yeah, season to go into all of that because with rental properties it just gets, there's a lot to dive into. But the short answer to that is you get to depreciate that house over time. The building itself, the physical structure depreciates. So let's say that you have a rental property. after all, you know, obviously any expenses that you pay, the repairs, the maintenance, the property management, if you use a manager, you know, all of those expenses obviously are business write-offs. But on top of that, so let's say that you, like, after paying all of your expenses, you walk away with maybe an extra $5,000 a year, because you can depreciate the house,

you can actually, in many years, show a tax loss because of a tax loss because of the house. You can actually, of that depreciation, even though you have an actual gain in your bank account. So that's what's really cool about it, is that, you know, your house is depreciating. And every year, you're writing off a portion of that depreciation. So, you know, you may end up with, you know, X number of $1,000 in your account, but show revenue neutral or even a loss on your taxes as a result. And does that bring up, like, you're probably going to do it at some point, but cash flow, like, If you invest in retirement, yeah, like you said, you can't pull it out, but the rental stuff, you're getting cash money mailed to you every month.

Exactly. That's the other thing is if you have a rental property, then as you're receiving that cash flow, that's liquid cash. It's literal physical dollars in the bank. And so it's up to you what you want to do with it. If you wanted the best of both worlds, you could buy a rental property and then use the cash flow to make additional stock market investments. you know, that would be a compromise between those two options.

Or you could use that cash flow to pay off the mortgage faster. Or you could use that cash flow to make down payments on more rental properties. Or you could blow the whole thing on like champagne and caviar. You know, it's totally your choice. And so that's one of the things I really like about rental properties is that cash flow is totally up to you how you want to spend it. Yeah. Well, and too, and you know, you've touched on it before, but and I've touched on like a billion times on the show. But taxes, income, cash flow, all this stuff aside, just make sure, like, I don't, and this is my

personal opinion, like, I wouldn't just go out and get a rental if you can't, like, handle the stress and the stuff that could happen good or bad, regardless of your systems in place. Like, I think it's a bigger thing than just how can I save money on taxes or grow money. Like, it's a lifestyle thing, right? And you can limit it to a certain degree, too, right? Paula is obviously great at it and I'm really horrible at it, you know. So just keep in mind this.

stuff, like there's all these sets and pros and cons. There's a difference though between investing in this stock or this fund or indexes or this, right? It's all you can go in and out at any time. Rental property when you're in it, like, it's harder to like quit and give it up and sell and do all that kind of stuff, right? Yeah. That's the other side of the liquidity. You know, it's like, man, yeah, you get the liquidity of the cash flow, but you lose liquidity in that you're, you know, you've got some assets that are tied up in equity and those are a lot harder to to liquid. Yeah. And mental liquidity too if you don't like have a system in place where you're not getting the phone calls and managing, right? But it could still be stressful and weigh on you

even if you're not touching anything. And again, like I'm skewed, but that is something to keep in mind how can both of you, you and your husband deal with it? Is this okay or is one of you against it? And are you okay doing it by yourself if that's the case, right? That was a good answer, Paula. Well thought out. Bravo. Thank you. You're welcome on the show anytime, Paula. Oh, why, thank you, Jay. By the way, just so you all know, we got, remember how earlier I mentioned that we categorize what these questions are about? So we have a whole bunch of questions that fall into the real estate category. We're going to tackle all of those on a different episode because we just found most of our listeners are either interested in real estate investing or they're not.

By putting all of the real estate investing questions in one episode, it makes it really easy to say, hey, this is an episode where we answer real estate investing questions. If you're into it, keep listening. If not, skip this episode. And by we, we mean you. Yep. I'll be answering those questions. Although I ask questions too because your answers make me have like a thousand questions. All right. And also, this is why I thought you were going with this, Paula. There's three voicemails in here that are not categorized by you or your VA. I know. I don't really have no idea. Yeah. I know. Yeah. This is the random bonus round. So these are all questions that in recently and the VA, our VA hasn't gotten to it yet. So I have no idea what's about to come up.

Now that I say that, I'm realizing it might be a real estate question, in which case I'm going to look ridiculous. You just say pass. This one's awesome. This was by a guy by the name of radio. Do we know it's a guy? I guess not. I guess I was just assuming. Most radios I know are males. So, you know, I just, you know, I want to do your countdown. Okay, ready? Three, two. One. Testing. One, two, three, Jay Money. What's going on?

Radio right here. It is a guy. I have a question about wealth front. I've been hearing a lot about it lately on a lot of different podcasts. And I understand that they will handle $15,000 of my money for free. So I was thinking about transferring out of my IRA, $15,000 and let them handle it. So I was wondering what your view is on that. All right, man.

That's it. Later. Wealthfront. We talked about that. Yeah. Cool. But I didn't know about the $15,000 for free. Does that change anything?

I'm trying to think. Huh. I don't think so. I think it's still a matter of if you'd rather do it yourself or you want to have an automation thing going on, right? I mean, it's not going to save that much money in the long run. I don't think. What about you? Yeah.

I mean, honestly, I wouldn't like, are you familiar with the concept of passive barriers? The idea behind a passive barrier is that if something isn't a huge pain in your life, if it's only like a mild irritation and there are some obstacles to changing it, you're probably not going to change it because it's just not going to be enough of a priority. So for example, if you have a bank account with a $2 per month fee and you know that there's another account that's free, two bucks a month, you're probably going to let that continue for a long, long, long, long time, you know, versus if your bank account had like a $50 per month fee, then it's painful, so then you would change it right away. Right. The thing is,

is a $15,000 portfolio, and I don't mean to sound flippant, I believe that your portfolio will continue to grow pretty quickly, you know, based on your contributions to it, you know, because people who listen to this episode or to this podcast are, you know, they're interested in saving and investing, and people who, the type of people who listen to these types of podcasts tend to make good contributions. So you're not going to have a $15,000 portfolio for that long. Why would you go through the trouble of transferring it to some entity only to like have to transfer it back out if they hit you with other fees after that? And the only reason you had them in the first place was because of this like, you know, premium offer. But now you have to go through the hassle of switching and you're not sure if it's really worth it.

But you'd rather be here. Like your time is worth more than that. Pick whatever brokerage house or entity you want to house your house. money with. It doesn't matter to me what it is. You know, it could be wealth front. It could be betterment. It could be Vanguard. It could be Schwab. I'm not telling you which one it should or should not be. But pick the one that you want for the long run and just start there. You know, don't, don't waste your time playing the like transfer game to save a couple of dollars, you know, a couple of small dollars. Right. Well, because it's obviously he has more too because you just

had transfer out 15,000 of this bigger pile that we don't know how big it is or small. But it's more than 15,000, which is big. Yeah. So I think I guess, yeah, I think I would agree with that. I mean, I think it would be different, too, if you were going to move all of your money to wealth front, tested out with 15. Oh, I like these guys. They save me time. The fees are okay.

You know, all right, let me move all my money now. So it's all in one place. And because I believe in the benefits of wealth front. So if you, but yeah, to your point, I wouldn't transfer 15 out in there to save money. and then as it turns into 16,000, transfer out a thousand or 16,000 back somewhere else for like, you know, $10 or $20 or $5 or whatever it is. Yeah, that just sounds like such a pain, you know? Yeah.

Yeah. Okay, yeah. So, yeah, I'm sorry, I didn't catch that part of the question. So, yeah, I mean, I guess the idea would be that you could transfer $15,000 and just keep that $15,000 there and the rest of your portfolio elsewhere. But, yeah, so even if that didn't grow via contributions, it would still grow via gains. And then you have to deal with that. You know. Right, right. Well, and I think, too, to radio, like, I think he wants a review of wealthfront. I've never used it, so I can't really give one. But I know if you do, like, Wellfront blogs, like you'll find all of our personal finance buddies that have all reviewed Wellfront. I think Frugal Rules did one recently, if I recall correctly. But there's a lot of bloggers that will give you down the pros and cons and everything. So I would definitely Google that. But I love the question and I love your name more than more than anything. It's bad

I don't even care if it's real or not, but if it's real, it's even like 10 times as bad shit. Oh, man. All right, you want to do another one? Yeah, let's do it. We've got two more. Hey, Jay and Paula. This is Pat. I have a couple questions. Number one,

what do you guys think of the robo advisor, Appslack Acorns Inbetterment? And number two, I live currently in Hawaii and we'll probably be inheriting some rental property in Tennessee. I was wondering what Paula, how she would advise me to handle this. And I would also probably have a sibling involved in running this rental property. It'd be about 15 units. Thanks. Whoa, did that go real fast and then real slow to you? Yeah. That was so weird, but it was cool

at the same time. I know, right? I can't tell if it was fast or if like he was just talking fast, but I think he talked really slow and there was a glitch speeding it up. Yeah. I like it. I like it too. That was cool. That was weird, that's cool. Good job, Pat. Okay, so there's two pieces of the question. Jay, do you want to take the first part about Betterman, Acorns, all of those? Yeah, yeah. And I think, I mean, the Betterment, you know, we've talked about them in Wellfront. Not Acorns as much, but pretty much acorns for those that don't know, I personally use them. I love them. I've used them for about a year. It's helped me save about $350 that's invested.

And the way it works is you just tie your checking account or credit card to them. They round up every transaction and drop the difference, you know, of that money to the dollar, the difference is they drop it in an investment portfolio that they help you set up. And it's like, you know, lots of like mutual funds and there's some Vanguard stuff in there. But it's pretty much like a no hassle, like no thinking thing. You just automatically invest pennies every day, depending on how much you swipe your card or pay stuff from your checking account. And it all drops into account for you. Whereas Betterment and everyone else, I mean, they don't have like these tricks of rounding up.

I don't think it's just transferring money in there and them automatically handling it for you. But it all goes back to the same thing, right? Like if you're not saving or investing anything and you suck at it and you need help, try Acorns, right? It'll automatically, every time you swipe, invest even if it's like 25 cents, right? So that's better than nothing, regardless of the fees. And if there's like a, you know, I think they charge like a dollar a month after some point, right? Like it's money, but being charged something on a pile of money is better than no money. So I'm a big fan of Acorns.

It's similar to Digit, too, which we've talked about that helps you save. So my personal opinion on all this stuff is do whatever is going to get you to save and invest piles of money. And then once you're doing that, figure out there are better places for less feeds or to mix your personality, right? Like if you get index investing now and you're like, you know what? I don't need to pay these guys money anymore. I can do it on my own. Then switch out, right? You've already got the system down.

You're humming along nicely and go ahead and automate it as much as you can with the other. with other guys. It's funny, we've gotten so many questions today about Betterment, Wealthfront. I mean, they're blowing up for right reason, too. They're helping people, I think. I think that fundamentally, these are questions about system building. The specific question might be about a given company, but the broader question is, what is the system, what is the process that I use to save and then invest? and there is no one correct system. You could automatically transfer money from your checking account into your Vanguard account every month.

You could automatically trans- like there are so many ways to build that system. Or you could quote-unquote, like trick yourself a little bit by using something like acorns to round up every dollar. or by using something like digit to, you know, automatically siphon off a little bit of money from your checking account in small doses. All of these functionally are systems questions, you know, like I've written on Afford Anything about how much it helped me. I used to budget in like detail. Like, you know, this is how much I spent on groceries and this is how much I spent on. Why is your voice sounding like making fun of budgeting? I hate you.

I know. But it was so tedious. And for me, it didn't work. And there are some people who are really good at line item budgets. And I am not one of those people. And so I tried a system. It didn't work for me. And so then I tried a different system.

And my new system is just pull your savings off the top every month. You know, decide what you want your savings rate to be. Pull it off the top. And then, you know, spend the rest. And then once you have a pile of savings, you look at that pile and I actually kind of let it accumulate for a while until it becomes a really big number. So I forego a little bit of like opportunity cost in doing so because it's sitting in cash until it reaches whatever number it reaches. And because then when I see that big number,

I have more clarity in the decision that I want to make. I look at that big number and I ask myself, All right, do I want to max out my entire annual 401k contribution in one check? Because I can do that now. Or do I want to throw 20 grand as an extra mortgage payment and really whittle that down? Or do I want to pay cash for a rental property? For me, that system works. But again, that is really specific to the way that I think. And so I guess the point that I'm trying to get at is that these,

questions about, like, should I use Betterment? Should I use Wealthfront? Like, that's not really the question, you know, because at the end of the day, assuming that the company has a reasonable fee structure and is like a legitimate company, which both Betterment and Wealthfront and Vanguard and Schwab and all of these choices are, then really the question that you're asking is, what system do I build within my life that helps me make the best decisions with my investments? Yeah, that's true. I will say, though, which is funny that you just went on about this because you use Digit, right? You don't need to use Digit. You can automate X number of dollars, but for some reason you're using it, and maybe that's testing, and maybe that's just extra.

Like, I use Digit and Acorns because it's all extra and it makes me feel extra good to do more than I'm already doing. Yeah. You know, but some people test and then shut down and then test and then shut down. I guess that's a question for you. Why are you using Digit if you're already like got the systems down? Because I found that I, at this point, I've, Will and I have been saving at least half of our income for so long that at this point that save half idea is so ingrained in me that there's, I'm not going to save less than half. Like that's just, to me at this point, that's just not even an option. And so saving 50% of our combined income, that's being done. That's no problem. But pushing myself past. that, you know, and at my peak, at our peak, we saved more than 70%, I think.

Damn. You know, but I'm nowhere near that north of 70% peak anymore. Like, we've generally been trending right around that 50%, you know, save half, spend half. And when I say save, I mean that I'm using the word save to refer to anything that improves your net worth. So paying, making extra payments on a mortgage, for example, you know, is, you know, is, which is additional debt paid out. And that to me is savings.

I like that. Yeah. So we're like pretty comfortable at that 50% mark. And so I found that that was a system that worked for me. And then, yeah, I made those tests where I introduced Digit. And I introduced, I have a free app on my phone called Robin Hood that lets you place individual stock trades with no transaction cost. So I use that.

And there's a website called loyal3.com. And I use that a little bit as well. You know, but those are really, really small bets, just tiny amounts of money that I use to kind of push myself into that next step. It's not the core system, but it's the periphery. It's the accessories. Yeah. Well, yeah, and I think that's good and fun.

I think, I don't know, for some reason I'm trying to like be on all these guys aside, because like I feel like asking all these questions is really good, right? Because like you and I would, I mean, everyone does. Even these guys, like they research. Like, oh, I've heard of Digit and Wellfront. Let me research it and see if it's something for me. You do it and we all do it. So there's nothing wrong with these questions.

Oh, yeah, yeah. No, I'm not implying that at all. I'm just encouraging people to take a step back and make sure that you're asking the right question. And, you know, as to the specific caller, Pat, you know, I've only heard. his voice for 30 seconds. I've only heard a 30 second snippet of this voice. Yeah. So I don't know his story well enough to be able to make an assessment on that. But I know that there are thousands of people who are going to be listening to this. And so for all the listeners, make sure that the specific question you're asking might not just be a symptom of a larger question. Yeah. That's fair enough.

And my takeaway is test everything, try things out. If it sucks, keep going. And hopefully you find one. And then from that point, you don't switch around and keep hobbing from one side to another and this and that. I mean, it's like, I don't know if credit cards go to them, but like savings account. Like when savings accounts used to be like 2% interest. And this one has 2.1 and 2.4. And everyone was like moving like large swathes of cash from one place to another like every 30 days. Yeah. It's like, oh my gosh.

Like you're, it's literally only like a dollar savings a month or something small. You know, like it's so like that hurts my brain. So I totally get it. So I guess it goes back to what phase you're in in this process. And you're probably similar to. Like, I'm in the 80. If it's 80% good and I don't have to do anything, like I don't need that extra 20% of like perfectness. Done is better than perfect. Yeah. Yes, it is. All right. One more question, Paul. What do you say? Oh, go ahead. So Pat had asked the other part of his question was about real estate. Real estate. He wants to buy a 15 unit in Nashville. Pat, if you could call back, I, you, because like, you asked if I had advice on how to handle that,

but I don't, I don't know what you're asking. Is your advice how to choose that property? Is it how to structure the business partnership with your family member? Is it how to manage from a distance when you're in Hawaii and this property's in, like, call me back and let me know what specifically you're asking because, just knowing that you're an out-of-state investor isn't really enough information for me to be able to say anything about it. And then we can put it in the real estate, ask us anything too.

Yeah, exactly. So that'll help everyone even more. Yeah. Ah, good catch. I didn't catch that. Thanks, Pat. All right, let's get this last random one up here. This question is from John.

If this is a better man or wealth front one, I'm going to last. Hi, Jay and Paula. This is John Clubundi. I'm from Hawaii. I'm 52. Another Hawaii. And I am financially free. Yay! But what I wanted to talk to you about is failure. Failure. Why we have hangups on failure. A guy by the name of Matthew Leske really turned me around on this issue about five to ten years ago.

And I bought his information. You know the infomercials with a guy with a big question mark with a yellow suits, the guy who's crazy on Saturdays and gave you this idea. of get these loans from the government for free. And he's just a crazy guy. Well, he has an excellent video when you bought his course on failure. If you can research it and look at that, you will be amazed. You'll be blown away. Be blown away. I don't know.

Basically, he talks about how, who cares about failure? Everyone's too interested in their own lives to worry about your failures. And that's the basic ball of wax of what's behind this. and it just frees you up on who cares about the stupid failure stuff. Everyone fails, right? My name is John Clubbani. I just want to know what you guys' thoughts on this. I was wondering if there was a question to it.

Yeah, I was wondering that too. That's good, though. I'm going to actually Google this guy. I mean, yeah, I agree. Like, we all fail all the freaking time. And I think as an entrepreneur, you fail more, like you take more risks, I feel like. So I think you might fail even more than that. average person. But I agree. Like, it's totally normal. And honestly, like, the thing that

piss me off on Twitter, on Facebook, on Instagram, and a reason why I don't, the only place I really hang out is on Twitter is that a lot of people only post all the wins and all the awesome stuff about their life. So they're always like, on the beach, drinking a margarita, or they just got a bonus or a raise. Like, they're always awesome all the time. And they don't share all the bad stuff and the fails, rarely. Nobody posts a photo of, like, Knicking themselves shaving. Yeah, right. And some like fashion people, there is some trend that like, hey, here's like a picture of me and then here's one of me like five seconds ago before I put makeup on. And I love those because you can see like the drastic difference. Right. And it's so powerful and

it's more real. Right. It's not all like only putting out the perfect stuff all the time. So yeah. No, I mean, my personal opinion is I think failure is normal. And honestly, if like you're not failing at times, like you have to wonder if you are like risking enough, you know. whether in life or in business, right? Like there's no, like no one never fails unless they don't do anything. I don't know what the question was besides our thoughts, but I'm all for failing. Just hopefully, like, on smaller levels and winning on bigger levels. The one of the best expressions that I heard about this.

And I think it was Rameet, who said this, Rameet from I will teach you to be rich. He said, it's not a failure. It's a test. Dang, getting all smart up in here. And so I would encourage you and everyone listening to approach life with that attitude. This attitude of like life is my laboratory. And I'm going to make lots and lots of experiments.

As with any experiment, sometimes it'll work out. Sometimes it doesn't. I mean, if you like I can't afford anything when I started, when I first became an Airbnb host, that very first blog post that I wrote about Airbnb hosting, I was like, you know what? I have no idea if this is going to pan out or not. Let's give it a try. It was juicy. Yeah.

Let's experiment. Let's see what happens and document it. Yeah. Well, and that's all I'll say if you have a platform where you can share failures too, like people love listening to them and learning from them. And obviously, they're glad it doesn't happen to them, you know? And so it does. It makes you more real in a person.

So anyone in the media, anyone in blogging, Twitter, whatever, post all this stuff and even have like, hey, like, what's one thing you failed today? Like, everyone know that you're normal, right? And you can experiment with money too. Like, I know this isn't really money related, but like you can siphon across. Let's say you want to experiment in stocks or business, right? Siphon off like a fraction of your money where you can lose it all and be okay, but you can take good risk and learn a lot, right? Like kind of expecting to fail but hoping to win, you know, so you can do it with money your life.

Or you can just try like a demo. You know, there's demo accounts and paper trading accounts, but you're not actually doing real money. But I would think, yeah, I mean, I'd say that if there's, there's kind of one thing that I would say about this topic, it's don't think of it as failure. Just think of it as an experiment. And anytime, like, if you're a scientist and you're running experiments in the lab, you know, some experiments will confirm your hypothesis and others will not. And that's just the nature of running experiments. So it's not a failure. It's just an experiment. Yeah. I mean, even on this, answering this question, I hear my kids screaming in the background and a siren going off. I'm assuming that's where you are,

Paul. Yep. So that's a fail right there. We should probably edit all this out, but Steve, do not edit it so you can show a failure. Yeah, but it's real. I mean, it's real life, you know, like no one's perfect. And I mean, you hit it on. I don't know who this guy with a question mark and the yellow suit is. We might edit that part out. But yeah, but no, I also, congrats on hitting early retirement. You know, that's awesome, man. And you're listening. And you're still talking and thinking about money. I love it. That's all the questions, Paul Pee. Yeah, that's it. So we'll do real estate investing questions in a different episode, but that's it for today's episode of Ask Us Anything. Cool. Thanks for listening, guys. We hope it helps.

Hey guys, thanks so much for listening to our show. If you enjoyed it, please subscribe and leave us a review. Thank you. Might you possibly want to access that money in five years, five, ten, five, blah. This one's awesome. This one's got by name a bad, blah.