Afford Anything - I’m Retiring at Age 34 and a Half!

Episode Date: May 28, 2024

#509: Rob wants to retire early, but a real estate investment led to $30,000 of credit card debt. Should he take on more debt to pay it off? An anonymous return caller took Paula’s advice and ran with it, doubling her income within a few years. Should she update her investment strategy now that she’s in a higher tax bracket? Humaira is tired of paying rent with nothing to show for. Can she leverage some benefits by using her credit card to pay the bills? Former financial planner Joe Saul-Sehy and I tackle these three questions in today’s episode. Enjoy! P.S. Got a question? Leave it at https://affordanything.com/voicemail For more information, visit the show notes at https://affordanything.com/episode509 Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hey, Joe, do you know anybody who retired at the age of 34? I, no. You're about to. One of our callers is 31, has a goal of retiring in three and a half years. So by the time he is 34 and a half. And a half. I like the half. And a half.

You know, because in the world of financial planning, 59 and a half is a significant age. 70 and a half for RMDs is the significant age. And 34.5 happens to be. 34 and a half. Significant age. Exactly. Welcome to the afford. podcast, the show that understands you can afford anything, including retiring at 34 and a half.

But you can't afford everything. Every choice that you make is a tradeoff. That applies not just to your money, but to your time, your focus, your energy, your attention. So what matters most and how do you make decisions accordingly? Answering these two questions is what this podcast is all about. My name is Paula Pant. I trained in economic reporting at Columbia University. I am the host of this show. and my buddy, former financial planner, Joe Saul Seahide, joins me every other episode to answer questions that come from you, the community. How's it going, Joe? It is going great as people can hear.

My voice is a little bit rusty. I'm a little bit sick, but I'm ready to go. We got some great questions. We have incredible questions. And Joe, our first question comes from an anonymous caller who has doubled her income and is now trying to grapple with how to deal with a much higher tax bracket. Then we're going to talk to a renter who is wondering how to make the most of the fact that she's paying so much in rent. And finally, we're going to close out with a 31-year-old caller who is trying to retire in three

and a half years. We're going to start by giving our anonymous caller a nickname. Joe, what would you like to name her? You know, back on a topic that I like a lot, which is recent television, I know Paula, you and I are the same there. You're all about, you're all about pop culture and about watching the latest thing. For those of you new to the podcast, I am absolutely not. She's not. She's not at all. And I'm going to say a few words that Paula won't know anything about. So there was the show, Paula, called Downton Abbey, which was pretty. What's a show? That's right. What's a television? I've seen Downton Abbey, actually. Yeah, Downton Abbey was great. And there's a newish version that's on Max called The Guilded Age. And the Guilded Age is about the Robert. Barbarans and about the people and the making of New York City. So from Jay Gould to Mrs. Aster, the Society of New York City. And one of my favorite characters on this show is the spouse of a man who runs a big steel company. So he's kind of the Andrew Carnegie of the time. And her name is

Bertha Russell, who is the spouse of a big steel company. So he's kind of the Andrew Carnegie of the time. And he's kind of the spouse of kind of an Andrew Carnegie character. And she is a socialite making her way in the world. And what I like about this for this person is that this anonymous caller is doing the same thing. She's making her way in the world, Paula. She's doing some great things, much like Bertha Russell on the Gilded Age. I highly recommend the show, by the way.

All right. Then our first caller, who is anonymous, will be named Bertha. Hello, Paula and Joe. I am an anonymous caller who called in a couple years ago when I was experiencing cash flow issues having recently split with my partner. Your responses were very helpful to me. And I am happy to report that I'll be starting a new job in the coming weeks and my income will go from 140,000 a year to over 290,000 a year, including RSUs and bonus payments. That's incredible. Congratulations. I'm trying to decide how to structure my investment. going forward considering the significant pay increase. I am 47 years old filing single. I have the loose goal of retiring by age 55, desiring approximately 80,000 in annual retirement income and a paid off primary residence. Here's the structure of my current investments. I've got 220,000 in a Roth IRA, 20,000 in a traditional IRA from a 401k rollover years ago, over $520,000 in a traditional 401,000 in a traditional 401k from my current, soon-to-be previous employer, approximately $140,000 in a brokerage account

where I have about 75% of those funds in ladder T bills and approximately $500,000 in combined equity between my existing home and one rental property. And last but not least, I've got $90,000 in cash savings in high-yield accounts and CDs. I'm considering making these adjustments in 2024, given my job change and tax implications of this higher salary. I'd love your thoughts on these changes. First, I will roll my previous 401k into my new employer's 401k. I am wondering if despite being in a high tax bracket now and in the immediate future, should I make partial or all Roth 401k contributions into this new account? I will also have an employer match. Second, to maintain the option to contribute to a Roth IRA, I am thinking to convert the $20,000 traditional IRA in 2024 to a Roth IRA.

My taxable income should be less this year considering the partial year in the lower income position. So my thoughts are to convert this before I have a full year at my new income with bonus payouts, etc. I'm also reading about the pro rata rule. And if I convert the full amount of this existing RRA, it will clear the way for me to make backdoor Roth contributions. in the future. I love to get your thoughts on these adjustments and for you to weigh in on some of my questions. I prefer to be a DIY investor, but also wondering if I should involve a financial investor in some of these decisions. You two are the best, and I never miss an episode. Bertha, first, wow, congratulations. I couldn't even get through your question without having to

play a round of applause. That is incredible. I am so happy for you. I am so proud of you. What a huge success. That's incredibly exciting news. Wow. This makes my day. Joe, this is why we do what we do, right? Like to hear success stories like this. Yes. That's great. So to your questions, first of all, what are the offerings in your new employers 401K? Are they good offerings? Do you have a variety of choices? Are the expense ratios reasonable? I don't even think any of that matters, Paula. Yeah. Well, the reason is, is your 401k provider can change that at any time. So even if it's good right now, if they decide to go cheap for some reason or somebody decides they got a buddy who sells 401K plans, they make some decision that you don't like. You're stuck with it. So I would never roll it. Even if all of the answers to your questions are great, which is the criteria most people use, I still wouldn't roll it to the current 401K. You'd roll it to a separate account. In a place like Schwab or Fidelity or Vanguard, you have every choice imaginable. And so your 401K is going to have some stuff it's really good at and some stuff it's not good at. And those are going to change based on whatever the committee that runs the 401K decides to do with it over time. And as that changes, you can then change your IRA allocation to match that.

So if your 401K doesn't have a great international fund, your IRA allocation, could be overexposed to international because you'll have none inside of your 401K. Well, okay, hold on. I feel like we're talking about two different things right now. Number one, there's the question of where should she roll over her 401K? But number two, there's also the question of if you have a condition in which one particular type of account doesn't give you a good selection of assets, how do you then play the asset location game across a variety of different accounts?

In your example, if you have a 401k that doesn't have access to good funds within a particular asset class, you can offset that by locating that asset class inside of a different type of account. Right. But that is distinct from the primary question, which is should she roll over her 401K to her new employers? But it's not. The reason it's not is because if the 401K is where you're restricted, Paula, if you're restricted based on whatever the 401k committee decides to do, then you need an unrestricted account where you can kind of pour over these asset classes to mitigate the risk that you might not be able to get that asset class inside the 401k the way that you would want it to be.

I suppose all of this does become moot if she simply rolls over the 401k to, to a location that is not controlled by her employer, because then she would have control over that location. So, for example, if she rolled it over to a rollover 401k account in one of the big three discount brokerages, Vanguard Schwab Fidelity, then it all becomes moot. Well, not 100%. Because remember, when she's still adding money in the future,

if she doesn't have a great asset class, if there's an asset class that she needs, if there's something she needs that she can't get in her 401K, it still is going to be material how she then allocates that IRA and sets that up to offset the fact that she can't get exposure to this asset class that she really wants. Right, but those are with new contributions inside of her new employer's 401K, and she'd be offsetting that with assets in her rollover 401K as well as in her IRA. Yes.

I suspect that the reason that she's thinking about role. rolling over the 401K to exist inside of the new employer's plan is so that she can manage one dashboard. Absolutely. That's typically the motivation. 100%. And so there's a distinction between the mathematical answer and the behavioral answer, because behaviorally, it is more convenient to manage out of one dashboard. But the drawback to that, of course, is that fund selection can be curtailed.

And when she leaves this position at some point, she already has this master IRA. The average person now changes jobs more than seven times during their career, which is why I like having this master IRA where I can have complete flexibility at any time. And then I'll always contribute to my current employer. And then when I leave that employer, it goes over to the master IRA, which is kind of my home base account. Okay. So I think you and I then are converging on a similar answer, which is roll over the 401K to an independent location. not to the new employer's plan. Yeah, absolutely.

All right. Solved. To your next question, which is, given that you are in a high income bracket, should you make Roth contributions? That's a fascinating question. And my question back to you is, how long do you plan on being in a high income bracket? if you reasonably think that you want to remain ideally, under ideal circumstances, in a high-income tax bracket or you want to remain as a high-income earner for the next 20 years, make a Roth contribution, absolutely, because then you get the capital gains,

you get the dividends, all of that is tax-exempt. But if you think that this is something that's temporary, if you plan on, being a high income earner for, let's say, the next four or five years, and five years from now, you want to take an early retirement. Under that set of circumstances, the Roth would not be a good plan. So largely it depends on how long do you plan on continuing to earn a high income and how long do you plan on continuing to be in a high income bracket? But I think of what I'm hearing, Paula, is that your bias is like mine. We have a bias toward making Roth contributions, not away from it, bias toward.

Correct. But if you're going to be only in a high income spot for a few years, then flip that. Yeah. That's a good point. My default is Roth is better unless there is some type of extenuating circumstance that would compel you to not make a Roth contribution. And so the last caller, the final caller that we're going to talk to in today's episode, Rob, Rob wants to retire in three and a half.

years. That is an example of an extenuating circumstance, right, a goal of no longer earning an active income in three and a half years from now. That's an example of an extenuating circumstance that would lead me to say, all right, don't bother making Roth contributions because three and a half years from now, when you do quit that job, you're going to be in a dramatically lower tax bracket. But again, if you're planning on staying in that job for 20 years, 15 years, heck, I'd say even 10 years, even if it's a 10-year plan of staying at a high-income threshold, I'd make Roth contributions. And the reason for that is because the benefit of tax-exempt growth, compounded tax-exempt growth, is not something that you want to pass up unless there is a compelling

reason to do so. Yeah, totally agree. Which also, I think then Paula feeds our answer on the converting the small traditional IRA to a Roth IRA? Absolutely. Because if she thinks that her income now is going to be a little lower that it's going to be for the next several years, do it now. Yeah, exactly. Sooner the better. Bertha, you mentioned that you're 47 and you have a flexible goal of retiring by age 55, which means given that it's a flexible goal, you know, you plan on working for at least another eight years, but it might be 10. It might be 10. It might be 12, and that is a long enough time period to spend in a high tax bracket that making Roth contributions right now for the first few years, I think would be a good plan. As you get closer

to your ideal retirement age, when you think that you're five years away from it, I would reevaluate. And by the time you get to that point, you'll also have a better sense of whether or not you still plan on retiring at 55 versus whether you want to push that to 58 or 60. But at this point, given that you are at least eight years away and possibly more, I'd make Roth contributions for the first couple of years. And the last part of Bertha's question involved whether she should hire a financial advisor. She said she prefers to be a DIY investor, but she's wondering if a financial advisor can help. as you know, Paula, I am very pro-advisor, but my definition of advisor is different than I think a lot of

people when they think about financial advisors. So as I answer this question, I just want to be clear about what we're talking about. You should hire financial advisors who make you smarter, who will argue with you, who will push you, who will make you better. You need to be the CEO, which means no matter whether somebody else presses the button or not, I believe that you still are in control of your own destiny. So you need to be the one who's responsible for your goal. And I think a lot of people think that when they hire a financial advisor, they're going to delegate all this financial stuff. You take General Motors and Mary Barr, the CEO of General Motors. Mary doesn't come into GM twice a year and go. So how's this car thing going? Right? We doing okay? No. But people

think that when I hire advisors, that that's what I should do with my money. But you are Mary Barrow. You are the CEO. And so because of that, you have, quote, vice presidents or advisors who know more about power train than you do, who know more about how the steering works, about the different pieces of the car than you do. But you still need to know everything yourself. So I like financial advisors, but I don't like ones that just take it away and do the magic thing. I want somebody who's going to help you continue to become even better at this. Now, is it hard? No. And can you do it yourself? Absolutely. But every smart person I know surrounds themselves with smart people. They have smart people around them who make them even smarter. You know, heck, I mean, imagine Paula, you've had Morgan Housel on the show. Imagine if Morgan Howzel were in your corner and he knew you personally.

You know, how much. That'd be incredible. Yeah, how much better would you be with your money if you had Morgan Housel who knew everything about your goals and was helping you? That's what we're looking for when it comes to financial advisor. So broadly speaking then, it's have what I think of as a board of advisors. Absolutely. Yes.

And you can also delegate some of the stuff that you could do, but you know that they'll get it right and they can do it quicker. Like as an example, if you're building out like a retirement game plan, right, and how you're going to spend money over your retirement years and how you want to access your accounts, there's plenty of calculators online that can do that. And advisors done this hundreds of times every year. They'll do it much faster than you do. So you may pay for expedience. You know what I mean? Like, how much is your time worth? So you may pay for some of that stuff too, where you're like, yeah, I could do that. But I'd much rather have. have it done for me by somebody who's done it a thousand times. I know it's going to be right.

It's going to be done much quicker. And now I can save my brain power for the stuff that actually matters versus inputting stuff into a spreadsheet. So I like both of those functions. I like number one, person that pushes me. Number two, if I'm building models, somebody who has a shop where they do that all the time. I'm a smart guy. I could build a car. And by the way, I'm not being funny. I think I could build a car. It would take me about eight years. And it would probably run like, crap, but I could build a car. I prefer to buy one because these companies do it every single day, and I know that it's going to run reliably. The real skill set to develop is the skill of selecting people, recognizing talent. The skill is the skill of recognizing skill. Oh, totally agree.

Yeah. When people tell me that they don't like financial advisors because they had a bad one, I don't think that's indictment on all financial advisors. I think that's an indictment on your interviewing skills. Right. There are A players, B players, and C players in every field, from financial advisors to veterinarians. To car manufacturers. Yeah. Hey, just because you're hating on my Ford Pinto.

All right. Well, Bertha, I think that answers your questions. Thank you for asking those questions. Thank you for being such a long-time member of this community. And huge congratulations to you on this incredible new step, on doubling your income. That's amazing. Next, we're going to answer a question from Humera, who is tired of paying rent with nothing to show for it. She's wondering what she can do.

But first, I'd like to thank the sponsors who make it possible for us. to bring you no-cost information about financial literacy. The holidays are right around the corner, and if you're hosting, you're going to need to get prepared. Maybe you need bedding, sheets, linens. Maybe you need serveware and cookware. And of course, holiday decor, all the stuff to make your home a great place to host during the holidays,

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And I'm wondering if it would be better if we just pay the rental with a credit card where we can earn either miles for traveling or cash back. I'm not sure if that's an idea that people have ever done. But I know it's a very simple question. If any of your staff or somebody could just quickly email me the answer, something, I'd be so appreciative of that. And by the way, I love, love your podcast show. And I've been listening for the last few days. And I'm just really grateful for it. Thank you so much. Humaira, thank you for being a new member of this community. I'm so excited that you found the show and that you are loving it. I want to ask you to go listen to episode 504, 504,

with Brian Kelly, the points guy. Now, I know you left your question before that episode aired. In fact, we are actually recording this episode before that episode aired. So I know you haven't heard it because we haven't actually aired as of the time that we're recording this. We haven't aired that episode yet. But by the time you hear this, we will have aired that episode. And Brian Kelly, the points guy, had a role in developing something called the built card, built B-I-L-T. If you are going to pay your rent with a credit card, use built because it was designed specifically for this purpose. Now, here's the thing. A lot of landlords do not accept credit cards. Or if they do, they charge some type of a fee. What Bill does,

and by the way, this is not an ad. I have no financial relationship with them. I make zero dollars and zero cents from anything related to Built. So I have absolutely no financial interest or relationship with this. What they do, and I think this is very cool, is if your landlord does not accept credit cards or if your landlord charges a fee for a credit card payment, which is typically the case for most landlords, Built will process it as a credit card transaction, but then built will actually mail a check to your landlord. So your landlord receives a check as though it's any ordinary checking account generated rent payment, but meanwhile, you get the credit card reward. You get hotel rewards, travel rewards, dining rewards, shopping rewards, whatever you

want. Typically, travel rewards tend to, broadly speaking, have the best redemption value. Now, I'm going to put a giant asterisk here and say the thing that I hope is so obvious that it should go without saying, which is if there is any risk, any risk at all that this might turn into a source of revolving debt, meaning you might end up racking up debt by virtue of doing this, then obviously don't do it. And that goes not just for paying your rent with a credit card, but for paying for any consumer discretionary purchase with a credit card. This is a very financially savvy audience. So I hope that you're all listening to that disclaimer and going, well, duh, but for the sake of anybody who might be new here or listening to a personal finance podcast for

the first time, that, of course, is foundational to any discussion about the use of credit cards for generating rewards. You know, Paul, this might be a good time for a primer for people to know more about what revolving debt is, like how that works and how it's different than other debt. Ah, all right, glad you asked. There are two types of debt, revolving debt and installment debt. Installment debt is the type of debt that has fixed periodic payments. So, for example, a mortgage is the type of installment debt where you have typically a monthly payment, a fixed monthly payment. Now it could be adjustable if you have an adjustable rate mortgage, but it is a monthly payment of a fixed amount for a specified duration. Even if you have an adjustable rate mortgage, there is still a fixed amount that exists for a specified duration, right? That is an example of installment debt. Another example might be student loans where you pay a particular amount every single month as a monthly installment for that student loan.

A car loan. Same thing. For your car loan, for the people who have car loans, you pay a fixed amount every month for X amount of time. Now, by contrast, a credit card is an example of revolving debt where the monthly payment fluctuates based on the size of the balance. If you have an outstanding credit card balance of $1,000, well, of course I hope you pay it off in full, but the minimum monthly payment that you're required to make, if your balance is $1,000, is going to be different than the minimum monthly payment that you're required to make if your outstanding balance is $10,000, right? The duration doesn't change, but the size of that minimum required monthly payment changes based on the size of the balance. That's an example of revolving debt.

A home equity line of credit is another example of revolving debt. Now, revolving debt tends to be where people get themselves into trouble for a variety of reasons. Number one, the interest rates on revolving debt tend to be higher. that's one of the reasons why credit card debt is a hole where when people start falling into that hole, the hole tends to get deeper faster because the interest rates are so high. But in addition to the interest rates, part of the second reason that revolving debt tends to be a source of stress for the people who have it is because of the fact that that monthly payment fluctuates and therefore it's much more difficult to plan for. So by contrast, if you have, let's say, an adjustable rate mortgage, yes, that payment is going to fluctuate, but it will do so only at pre-specified intervals, which makes it far less burdensome than a payment that fluctuates every month and therefore is much, much more difficult to accommodate in a given fixed budget. It's also the revolving nature of the loan that gives it the higher interest rate. You know, companies when they're being repaid, and this is how I like to think about debt

and make sense of it, is that if they know they're going to get a set installment on a set date, it's very easy to assign a fixed interest rate to that. But if they're saying, hey, Paula, I'm going to give you access to $25,000, use it as you want. And you're more likely to probably use it when you're experiencing financial stress. and you're not going to use it when you're not experiencing financial stress, that's going to raise the interest rate because of the unpredictable nature of how you will use this line of credit. Exactly. That's the reason, by the way, that your credit score will temporarily drop when you apply for a new line of credit.

The credit rating agencies see the fact that you are applying for credit as a potential red flag because it signals to them that you need the money. Yeah, you might have an issue. Right. Now, your credit score won't drop for long, but anytime that you apply for a new line of credit, your score will take a temporary ding. That shouldn't dissuade you from doing it, but it does mean don't do it too often and don't take out a credit card the week before you apply for a mortgage. Right, right.

But, Humaira, to answer your question, I love that idea. I love the idea of getting rewards for paying your rent, because typically, a rent payment is the biggest monthly expense that you have, so why not get rewards for it? I'm going to link in the show notes to two sources of information. One, of course, there's episode 504, our interview with the points guy, Brian Kelly. The second is a video that we ran as a YouTube exclusive. So every now and again, we interview a guest and air that interview only on YouTube and nowhere else. And we ran a YouTube exclusive with Jason Steele. He is the founder of CardCon, which is, believe it or not, it is a conference about credit cards. There

conferences about everything. So he's the founder of CardCon, which is a conference about credit cards. He and I met in person in Atlanta and sat down and did a lengthy interview about credit card rewards, and we aired that on YouTube as a YouTube exclusive. I'm going to link to that in the show notes, which you can access at no cost by going to afford anything.com slash show notes or by visiting our website. So thank you, Humaira, for the question and enjoy those rewards. Joe, guess what's up next? Oh, I can't wait. Bet you're going to tell me. It's Rob, the 31-year-old who wants to retire in three and a half years. Oh, awesome. Awesome.

We're going to hear from Rob in a moment. But first, I'd like to thank the sponsors who allow us to bring you financial information. All right, we are ready. Our final question today comes from Rob. Hey, Paula and Joe, this is Rob up in Canada. I have a question for you as I'm so grateful for all of your insights. But first, a little about myself. I'm 31, married, and no kids.

And I have a goal to quit my job in three and a half years. My wife has had no earnings since 2020 whenever I quit my corporate job, sold our house, to free us up to move around wherever we want to. I earn 65,000 a year, which comes from freelance consulting and rental properties and employment. We have 325,000 saved up, and our expenses are $3,000 a month and $5,000 a year for travel. I own real estate through two rental property partnerships. Now, Partnership One has had some issues, but I'm working through those based on, well, based on your advice from previous episodes.

So hats off to you. Thank you so much. But I need your help with partnership too. So help me, Paula Juan Canobi. You're my only hope. Okay, I'm sorry. I know you struggle with pop culture references. I need your help, though, with partnership too.

I'm a 50% owner of two properties worth 160,000 and 125,000. They have mortgages that are 92,000 and 78,000, respectively at 3% and 2%. The combined cash flow is $700 a month after all the costs are factored in. Now, we budgeted for some repairs whenever we purchased the properties, but I underestimated the cost. So I ended up contributing an extra 30,000 of my own money to pay for everything. Now, the business is paying me back $2,500 a year. So at this rate, it's going to take years to recuperate these costs, and we're going to continue to be low on reserve funds.

That's why we're thinking of doing a 40 to 50,000 cash out refinance in fall of 2025 when the mortgage is renewed. I'll be paid back in full, and we'll have 10 to 20,000 in reserves that way. Between the current 6% interest rate and a larger loan balance, our monthly payments would go up quite a bit. We still have free cash flow, but man, something's still nagging at me. So I ask you, what do you think of our plan? Are there any red flags that I'm not seeing? Now, you probably have no idea how appreciative myself and your audience is for all of your insights, so I would like to close by just saying, thank you so much.

Rob, I totally get where you're coming from when you're like, something just doesn't, you know, I got this nagging thing for everybody wondering, we'll pull back the curtain. Paul's like, Joe, are you okay? I'm like, it's nagging me too. Whatever's nagging, Rob, is nagging me. And here I think is the crux of my issue, Rob, which is that what you've done with that cash out refi is you've taken money that you already had in equity in a house. and instead of really creating a reserve,

you've just taken money that you already had and you made it liquid, but you've now added an interest rate that you have to pay to a bank to access that capital in your house. Well, and I will say this is future tense. He hasn't taken out the cash out refi yet. Yeah, I'm just saying if he does this, this is what he's created. He truly hasn't created any new wealth. He's just put money in a spot where he feels.

more comfortable, but he's going to pay a bank to do that, right? Which means that he really doesn't have any new money created. He has an extra expense and it knocks down the cash flow, which is fine except for that interest rate to the bank. If he were taking that money and deploying it somehow to earn an interest rate that beats the interest rate that he's paying to the bank, I would go, that's a interest rate. I would go, that's great. But taking that money and just making it available for an expense that hasn't happened yet

just makes me go, okay, I get it. And I understand how that would make me feel more comfortable too because I love the emergency fund, Paula. You know how you and I love the emergency fund. But an emergency fund that is just money sitting that we owe an interest rate on to me. Right. Exactly. And I feel exactly the same way. The idea of taking out a cash out refinance increases your interest payments. It increases the level of risk by virtue of increasing the monthly payments. And it creates a drag on the growth of your overall net worth. I would rather see you take out a HELOC than I would see you do a cash out refi. Yeah, me too.

The beauty of a helock, as we just described when we were answering Humaira's question, is that if you don't need to access the money, then you don't access it. It's similar to having a credit card in that regard. You know, if you have a credit card with, say, a $10,000 line of credit on it, you could theoretically, and not just you, but any person listening to this theoretically might have a credit card with a $10,000 line of credit on it, you could theoretically, and not just you, but any person listening to this theoretically might have a credit card with a $10,000 line of credit card. credit, which they have forgotten about and is sitting at the bottom of a drawer and is completely untapped. But if they ever needed it, that line of credit is open and is there. Well, a helock is like that, except, of course, it's much better than a credit card in that it has a much more reasonable interest rate.

But it serves the function of being money that you can tap if you need it, but existing purely as an open line of credit, such that if you don't need it, you don't need it, you know, to tap it for any type of emergency, you don't have to. There will be usually an annual fee for that, but that pales in comparison to the interest rate cost that you'll pay if you do a cash out refi. Yeah. I think the answer that I have, Paula, though, is a little different for Rob, which is just be okay with the company owing you the money, the partnership owing you that money over

time. It is what it is. The property is going to continue to. appreciate or not based on the value of that property. And you will still have the same number on your net worth statement, which means that I think the way to create the emergency fund that you're looking for is going to be found elsewhere. So I would dig further than into other income opportunities and come up with the money for the emergency fund a different way. Right. I do want to applaud you, though. You know, you and your spouse both jointly live on $3,000 per month. That is, certainly,

you don't have a spending problem in your personal life. Like, that is an incredibly low cost of living. So I want to applaud you for managing to keep your living costs down to $36,000 a year. That's incredible. That's remarkable. And that'll make it much easier to retire in three and a half years. Right. Exactly. But yeah, I agree with you, Joe. I think, replenishing the emergency fund should not come out of a cash out refi. It can come from either slowly through how the business pays him back or it can come through increasing his income. Accessing that through a cash out refi fundamentally means, Rob, that you would be paying a high interest rate on money that is designed to just sit in a savings account, which is sort of the opposite of arbitrage

paying a higher interest rate so that the money can sit in an account with a lower interest rate. Well, thank you for the question, Rob. And congratulations on everything that you're building, the savings that you've amassed, especially relative to your income, right? You're 31 years old. You have an income of 65,000, and you've saved 325,000. So by the age of 31, you have savings that are five times. your annual income. Not to mention the equity in her property. Rental properties. Yeah, exactly.

So there's this notion in the book, The Millionaire Next Door, that some people are what's called prodigious accumulators of wealth, meaning that the level of wealth that they've grown relative to their income and their age is remarkably high. Looking at your numbers, it's clear that that's what you are. You are a prodigious accumulator of wealth. You're, net worth relative to your income and age is astonishing. So huge, huge props to you. Thank you for being part of this community and for providing that example to the community. Joe, we've done it again.

I can't believe it. Such great questions. Blue by. Yeah, it certainly did. Joe, what are you up to these days? Where can people find you if they'd like to hear more of you? Well, with Memorial Day, just happening in the United States, Paula, We have a thing every year on stacking Benjamin's where the gentleman from the number one website for theme parks of all things comes on the show to celebrate the beginning of summer.

It's obviously a time that lots of families thinking about going out and traveling. And if you are, you may be going to a theme park. So where's all the fun at? How do you save money? And if you can't save money, how do you make sure it's actually worth it? I've been to Disney like some people have and you see. these families, Paula, that are having the opposite of fun. They are all crying and everybody's miserable and hot and annoyed and they didn't really do a great job of planning. So we celebrate the

beginning of summer every year at Stacking Benjamin's with Robert Niles from Theme Park Insider. So it's almost like, you know, how Paxitone Phil sees his shadow and you find out whether there's six more weeks a winter or not. On Stacking Benjamin's, you know, summer is here when Robert Niles comes back. I believe this is his eighth appearance on the show. Wow. And you know what else is happening right around now? So this episode is coming out on May 28th. That's 528. Guess what? The next day is 529, the day that you make sure that you have a 529 plan. Duh. So for those of you who are saving for somebody's college education, whether it's for your kids, for yourself, for your grandkids, for a niece or nephew. 529, May 29, is the day that you check in on your

529 plan. So, happy 529. Happy 529. Well, thank you so much for tuning in. You can access the show notes. As I mentioned, we're going to leave links in the show notes to a lot of the things we've talked about. You can find the show notes at Affordainthing.com slash show notes. That's where you can subscribe to get the show notes sent directly to you. You can also chat with other members of the community by going to afford anything.com slash community. Both the show notes and the community are absolutely no cost. If you got value out of today's show, please support us by following us

on Apple and Spotify, and come find us on YouTube. We are YouTube.com slash afford anything. Please leave us a review in your favorite podcast playing app. These reviews are instrumental in helping us book amazing guests. And reach out to me on Instagram where I am at Paula Pant or on Twitter where I am at Afford Anything. Thanks again for tuning in. I'm Paula Pant. I'm Joe Sol C-Hi. And I'll meet you in the next episode.