Afford Anything - Interview on the FI Show: Financial Independence Philosophy and Origin Story | Paula Pant from Afford Anything

Episode Date: September 30, 2019

#217: It’s September! If you’ve been listening to the show for the past few months, then you know that I’m on what I’ve dubbed my September Sabbatical, in which I’m taking a break from podcast production and traveling the globe. In light of that, we’re digging through the archives and airing some of my favorite interviews on the show, in between airing interviews I’ve done on other podcasts. Earlier this year, Cody and Justin from The FI Show interviewed me and asked some excellent questions about my journey to financial independence, entrepreneurship and passion, and minding the gap between your income and expenses. We talk about the importance of side hustling and how to create a well-paying job from your skills. We touch on real estate and why I chose this strategy to reach FI. We also discuss the bone I have to pick with the financial independence movement. Finally, we chat about what financial independence is really about, because it’s not about sipping margaritas on a beach. It’s about having the freedom to use your time in whatever way you want. I hope you enjoy it as much as I did! Thank you to Cody and Justin for giving us permission to air this interview. P.S. - Starting with the next episode, we’ll return to our usual routine of brand new interviews and Ask Paula episodes. :) For more information, visit the show notes at https://affordanything.com/episode217 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else, and that doesn't just apply to your money. That applies to your time, your focus, your energy, anything in your life that's a limited resource. Saying yes to one thing implicitly means saying no to something else. And that leads to two questions. Number one, what matters most to you? Not what does society say ought to, but what actually is a high priority in your life? That's the first question, and the second question is, how do you make daily decisions that support that?

Answering these two questions is a lifetime practice, and that's what this podcast is here to explore. My name is Paula Pant. I am the host of the Afford Anything podcast. And today, the release date of this episode is September 30th, which means this is the final episode in what I have been calling the September sabbatical content. So if you're a longtime listener of this podcast, as you know, I am taking the month of September 2019 off in order to travel. I visited four countries in five weeks. And in order to facilitate this, that during this month of September 2019, we are airing two things. Number one, we're airing some of the interviews that we've held in our archives, interviews that came out one, two, three years ago that many of you haven't heard. And then number two, I'm also airing interviews that I have done on other people's podcasts. And that's what we're going to play today. Today, what you're going to hear is an interview that I did. I recorded this interview in 2018

on the FI show. That stands for the FI or Financial Independence Show. I chose this interview, by the way, because I've done a lot of interviews on a lot of podcasts. The reason that I chose this one is because I was incredibly impressed by the level of preparation that the podcast hosts did in advance of the interview. As someone who's been a guest on a lot of shows, I can tell how prepared the hosts are. And honestly, the vast majority of hosts don't prepare. They might skim my about page, read a couple of blog posts, and that's it. these guys, they showed up prepared, they asked great questions, and that's how you stand out as a host, and that's how you create something better for your audience. And so I am proud to share that interview with you today. Before we get into today's interview, I also want to make a quick note to say that today, September 30th, 2019, is the last day that you can enroll in our course, your first rental property. So if you have ever thought about owning rental properties, but you're not sure where to begin, and, Everything in your area is expensive anyway, so you might have to invest out of state.

If you've had that thought, head to Afford Anything.com slash enroll to get all the details about our course. It's a 10-week-long course aimed at beginner rental property investors. Again, today is the last day to enroll. Classes start tomorrow, October 1, 2019, and classes run for 10 weeks. So we will wrap up our semester in mid-December of 2019. Again, you can get all the details at Afford-anithing.com slash Enroll. That's afford anything.com slash enroll. Now, with that being said, here is my interview on the FI show.

That stands for Financial Independence, which we recorded in 2018. Enjoy. Welcome to the FI Show, where you get a behind the scenes look into financial independence. Here's your host, Cody and Justin. What's up, guys, and welcome to another episode of The FI Show. So today, Justin and I have probably one of our favorite episodes we've recorded to date. And it just went so smooth. It was super conversational and just awesome philosophy about the whole financial independence movement. And who we have on today is Paula Pant of Afford Anything.

Justin, how did you like this one? I love this one. And I think coming into a new year, it's one of those great shows to kind of get you kicked off for the start of the new year and get to thinking about that gap. But if you don't know what the gap is, she should probably turn over to Paula. Take it away. So, when I was in college, I really wanted to study abroad. But, The study abroad programs were prohibitively expensive. They were between $15,000 to $20,000 for a single semester. And so I thought about it and I realized I didn't actually want to study. I just wanted to go abroad. And so it occurred to me that when I graduated, rather than getting a job and spending the next 40 years there, I thought, what if I graduate, work for a few years to save up some money and then quit that job and go travel. And that's what I decided to do. So really the origin of all of this was that, I just wanted to go travel. I wanted to go see the world. And that was a strong enough motivation that it was the overriding factor in a lot of the decisions that I made right out of school.

So I graduated from college in 2005, and I took a job at a newspaper, a small newspaper, in Colorado. And I earned a starting salary of $21,000 per year in 2005. And I spent three years at the paper. And at the time that I quit, which was in 2008, I earned $31,000 a year. And that I didn't know it at the time, but that would be my last time ever working for somebody else. So 31,000 a year is the highest salary that I ever earned working for someone else. During those three years that I was at the paper, I freelanced during the evenings and weekends. And I saved every dime of that freelance money after taxes into a travel fund. And so at the end of three years, I had saved $25,000, which was, I mean, if you think about, put that in perspective, that's like on average a full year of salary from what I was making at the time. And broken down, I mean, that average is out to like saving about 800 a month. So, so I'd save the 25K. And then when I did that, I quit my job. This was in April of 2008. Quit my job. Let the lease, I timed the quitting of my job at the exact time that the lease on my apartment was going to expire. So I quit

my job. I didn't renew the lease on my apartment. My cell phone contract was over. So I didn't have any other commitments. And then I just traveled. I backpacked around. I mostly went to countries where the dollar exchange rate really worked in my favor. So I spent a lot of time in Egypt and then in Southeast Asia, you know, Lao, Cambodia, just places where the U.S. dollar can can really stretch further. And I lived on a budget of $1,000 per month. And I did that for the next two years. I came back to the U.S. in 2010 and I decided I wanted to make a full-time go of self-employment. I didn't want to go back into the workforce. And so I started, you know, I'd already been freelancing while I was at the newspaper.

And I'd freelance just a little bit while I was traveling. But I decided I was going to ramp that up and turn it into a full-time thing. And it took about a year and a half between when I came back to the States and when my freelancing became like good enough, robust enough that I started making a six-figure income. So that was eye-opening for me because I saw that, like I said, the most I'd ever made working for someone else was 31,000 a year. And within a year and a half of actually taking my freelancing seriously and actually trying to do it full-time, within a year and a half, I was making six figures. So that was a big eye-opener in terms of like the notion that I could make a lot more working for myself than I could somebody else, at least in my situation. But then the other thing was that I was really scared, you know, because self-employment can be volatile and you go through feast and famine moments. And I was very scared that I might have to get a job again. Like, what if I go through some prolonged contraction and a bunch of my clients drop me all at the same time and work dries up for six months? Like, what if I couldn't survive that? And I had to go back into like bumper to bumper traffic. I didn't want to do that. And so, I started just saving up all of my money. I lived as though I was still making 21K. I lived that same lifestyle and just saved all of this extra money that I was making and used it to start buying rental properties. And kind of one led to the next led to the next. And so eventually I built a big enough rental property portfolio that last year my rentals grossed 125,000 and netted 43,000 after all expenses including the mortgage.

So by doing that, it was, ironically, like, yeah, it's building financial independence, but I didn't, ironically, I didn't build it so that I could retire. I built it so that I could work. I built it because I wanted to be self-employed and I wanted to safeguard against having to do any other different type of work other than the one that I wanted to do. So, Paula, I just want to stop you there for a second before we get into the afford anything era and ask you, have you heard of the fire movement? I have heard of it and I love it. I love it. I love it. I love it. So, yeah, I was just curious when you were, you know, you'd work three years and then you said, I'm just going to go travel. I'm going to quit my job. I'm leaving my lease behind. Did you have like friends and family who were telling you you were nuts or would you have a pretty supportive group around you? No, everybody told me that I was absolutely bonkers. And if you think about it, so 2008, that's the recession, right? The recession had just a recession had just

started. And I worked for a print newspaper, which I'm sure the younger people listening to this are like, what's that? So I was in a declining, dying industry, like the Seattle Post intelligentsor had just shut down. The Rocky Mountain News had just shut down. All these major newspapers were either shutting down or going online only. And, you know, I'm in this dinosaur of an industry during the biggest recession of our lifetime. And everybody told me that I was never going to get a job again. And in hindsight, they were right. I never did get a job again. The last thing was, so what are you freelancing about that you were earning six figures? I mean, you come from a, you come from a newspaper gig and then you're traveling.

How do you, how do you, what are you actually freelancing about at that point? Ah, that's a really good question. So, so this was the most important thing that I did as a freelance writer, is I niched down. And in the beginning, I was like, I can write about anything. And when you try to write about everything, you end up writing about nothing because nobody hires a person who claims to be able to write about whatever. And so I knew that I needed to find something that I would specialize in. And for a while, I didn't know what. Like I thought about wine writing, because I was like, that'd be cool. I could just drink wine all day and call it work. But then somebody gave me the advice to write about what I love to read the most. And nerdy as this may sound, I've always loved reading about personal finance, like, always loved reading Kiplinger magazine. I read the book The Millionaire next door when I was in high school. So I just became a freelance personal finance writer. So Paula, I think that we're eerily similar. Like when I heard about your story, I'm like, that's me in girl form. And something I'm curious about, I haven't really heard you talk about this much. It seems like your hunger for outside

success stems from a fear of not having enough or running out of money. And I'm wondering why you didn't make like the full traveler leap. Like when I went to Australia, I saw so many people who were just living day to day, like through the gig economy, they're living it up. Like they're a scuba instructor in Thailand. And there are people who make that career work for, you know, 30, 40 years. So do you ever consider that route? Or did you always want to come back and kind of earn that outsized income?

Yeah. No, a lot of my friends do that. Like a ton of my friends are permanent gig lifers. I'm wired differently. I think I, I think there's a big part of me that feels that, and this is, this indicates a level of emotional unhealthiness, but I think there's a big part of me that ties my sense of self-worth to my achievements. And when I say achievements, I don't mean monetarily. Like, we'll take newspaper writing as an example. You know, nobody goes into newspapers for the money. But if you can get a byline in the New York Times, there's still that element of prestige there, even though there might not be a financial benefit or a big financial benefit. And I think that I've always tied my sense of self-worth to how much I have achieved in a broad but career sense of the word. And so for me personally, if I had done the permanent gig life thing, if I had been like a snowboarding instructor during the winters and a whitewater rafting instructor during the summers, and and had spent, you know, like a lot of my friends do, you know, and they're like six months in Guatemala and then six months in Bali or whatever. Like, I think that there would be a part of me that would always wonder whether or not I had the chops to really cut it in like the U.S. career world or the U.S. business world. Okay.

Yeah. No, that's very interesting because I've heard a lot of people say like the go curry crackers and millennial revolutions of the world. world, they're just those gig economy people who are too scared to make the full leaf so they build up this crazy nest egg and that's what we call fire. Oh, yeah. Big time, I would agree with that 100%. Like, there are a lot of people who are living the benefits of fire without the money. Like, if we think about fire as a fully funded lifestyle change, there are millions of people who made the lifestyle change with zero funding, right? We, like the fire movement, we are the more conservative. end of that who secures the finance part of it first before we go and make the leap. But, you know, I've got, like on my podcast, I interviewed my friend Kim. She's one of my best friends. And her whole life story is this perfect example of just she went gig to gig and then she worked in AmeriCorps for a little while. And she was an art model. She just basically with sometimes

no more than two or three hundred dollars in her bank account, just like ran around. working gigs and supporting herself and having adventures. And a lot of people do that. And there's a part of me that's like, man, I would probably be a lot more chill if I had the temperament, like if I was wired in a way where I would be happy doing that. I know myself well enough to know that I'm not. But it's cool to see people who are. Yeah. I mean, you have to have like no fear and you have to be very comfortable with that with a ton of risk, which a lot of people in the fire community just aren't. I mean, you always see a lot of us who just keep building up contingency plan of a contingency plan. And so it is admirable to kind of see somebody who can

throw that caution to the wind, even though a lot of us would advise against it. It would be nice to have a little bit of that mentality sometimes. Yeah. Okay, so going on the same thread of like the fire person versus the crazy gig economy person, what do you say to a college student who's kind of deciding their major? Do you tell them to go pursue their passions even though their passions might pay 25K a year? Or do you think they should aim for a more high level salary type of position? Oh, no. I think if you choose a major based on the income that you think you'll make, you'll last for maybe a couple of years and then you'll drop out because the passion's not there. Cough, cough, me. You can only fake it for so long. And if you're not interested in a topic, if you're not interested in a subject, then what's most likely going to happen is that you're going to spend years in school, possibly accumulating thousands or or tens of thousand dollars worth of debt along the way in order to get a degree in something

that you don't even like and that you don't actually want to do. So that just seems like compounding loss on top of loss. It's much wiser in my view to choose the thing that excites you because you are most likely to succeed in the thing that excites you. And basically everything, even things that are traditionally low-paying can, if you are flexible, be spun in a way that they become high-paying. Again, we'll just take journalism as an example. Working at a small-town print newspaper as an entry-level reporter pays $31,000 a year. But taking that same skill set of writing articles, being good at mass communication, conducting interviews, learning deeply about a topic and then translating a complicated topic in easy to understand simplified but not

simplistic terms to a mass market audience, those are the skill sets of a freelance writer or a blogger or a podcaster. So while newspapers themselves may not pay much, or at least in local markets, in many local markets, they don't pay very much, you can take that same skill set and use it to become a six-figure freelance writer or a very successful blogger. podcast or a whole myriad of other things like you could start your own PR firm. You could write scripts for YouTube videos for for major channels. There are so many things that you can do if you think a little bit more creatively about the thing that interests you. I think that mentality, especially with the college degree question, is spot on. I'm right behind you, but it does seem to

go against the grain a good bit with the typical person in the United States and probably what they're telling their kids or the pressures they feel themselves. I'm curious with all the amazing places that you've traveled to? Have you noticed anything in some of these different cultures where you feel like, oh man, these people just really haven't figured out compared to the way the United States does things? So I'm Nepalese. I was born in Kathmandu. Yeah, I can't speak for all cultures, but I can at least speak for Nepal because that's the one that I'm most intimately familiar with. You don't have the luxury of wanting to follow your passion. You can either live in Nepal where there are no jobs, there's no infrastructure, and there's civil insurrection

that caused 13,000 civilian casualties in the last two decades, you can either live there, or you can try to get a visa to a more stable, developed country like Australia or England or the U.S. But in order to get that visa, you're going to have to find an employer who's going to sponsor you. And that means, most likely, that you're going to have to come here on a student visa, see if you can get an H-1B, the industries in which that's most likely to happen, probably engineering, maybe programming. Maybe if you come here and go to med school, you can get high.

hired and then get sponsored for a visa. Eventually, if you're lucky, turns into a permanent residency. So there are a lot of very pragmatic considerations. Self-actualization is the top of the Maslow pyramid. And you can't get to the top of the Maslow pyramid until you have security nailed. We'll come back to this episode after this word from our sponsors. Did you know that 70% of people say they want to use natural environmentally friendly products, but only 2% do, right? Because healthy living, is more than just eating right. It's about getting rid of those potentially harmful chemicals. Bad for you, bad for the environment, but it takes a lot of time and you don't know where to go,

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You can try it without entering any payment information for free. Just go to freshbooks.com slash Paula. And when they ask, how did you hear about us? Type in Afford Anything. Again, that's freshbooks.com slash Paula. So something I've heard you talk about Paula, and I think this is just, a perfect lead in from what we were talking about before, having a first generation immigrant background kind of just shape your whole financial views. And I know that one of the beefs you have with the fire

movement in general is that a lot of people claim and scream frugality when it's just what other normal people do that don't have a lot of money. And so I'd love if you could talk about that a bit. People like, oh, like I'm house hacking. People might live in a one bedroom house with like seven people in a really poor country. And it's just not out of the ordinary. So I'd love if you could just Touch on your philosophy there. Oh, you nailed it. Like, you said that so well. That's exactly, that's exactly it. It's totally my beef with the fire community is like, and I mean, okay, I should asterisk here. I'm very happy that there is a subset of the population that would otherwise be living these wasteful, extravagant, indulgent lives, but that are not doing it because they have found the fire movement. Like, I'm very happy about that. But at least speaking for myself, again. When I first started reading about some of the more popular fire bloggers many years ago, I just, I couldn't relate to any of it because everything that other people described as frugal, to me just sounded like, that's just how you live. People are like, drive a 10 year old car. And I'm

like, well, duh, doesn't everybody do that? Yeah. I think sometimes we just forget our fire privilege when we're debating whether we should like contribute to a traditional or a Roth. And then there's people in other countries trying to figure out what they should eat for dinner. Yeah, and not just other countries, but here too. So I have a friend who lives here in Las Vegas. I'm going to pull her story because it would be very easy for me to fall back on stories of my cousins who just moved to the U.S. And they're living like the recent immigrant lifestyle. It's very easy for me to pull stories from there. But even outside of like new immigrant communities, I've got a friend who lives here in Las Vegas who is recently divorced. She's 42 or 43. She is a son who I think is around nine. And because of the divorce,

like she's, she basically doesn't have a whole lot right now. And so she lives with roommates. She shares one bedroom in a three bedroom home with roommates. And her son, her nine-year-old son, lives with her half of the time. He's with his dad, the other half of the time. And when he's at her house, he shares a bedroom with her, right? So she's a mom, a single mom, living in a home with roommates, and her nine-year-old son shares a bedroom. And that's not because they're frugal. That's because that's all that they have the money to do. Like, that's the best that they can afford. So I guess one of my frustrations with some people in the fire community, like, I get very frustrated when people say, I can't. And oftentimes people say, like, well, I can't.

X, Y, Z, because I have kids, and my kids need their own bedroom, or I've even heard people claim like, my kids need their own house. And I'm like, have you ever met people who just don't have that option? Because there are a bazillion people out there who I'm sure they would love to have the luxury of making the choice that you're making, but it's not a choice for them. They just don't have the money to do it. Like, end of story. full stop, that option is just not on the table. And so for you to say that you quote unquote can't or to claim that it is impossible, like negates or invalidates the reality that a lot of lower income people have. It also negates or invalidates your own ability to choose.

Yeah, that just had me thinking about like my own situation where as a kid, you know, like when it's just me and my mom and she goes back to cosmetology school, we have zero income. we're getting like back channel meat that is out of date from my uncle who is like a magic for grocery store. Like if I would have heard of these podcasts and stuff that's talking about, you know, skipping out on a on Starbucks, I would have been like, well, what is Starbucks? I'd never even seen one like growing up in the middle of nowhere Mississippi. So yeah, I mean, it's true that it's it doesn't just, it's not just people in other countries.

It's not just immigrants. There's so many pockets in the U.S. where no matter how frugal we may think we are, they're doing this out of necessity and they're not, you know, they're not doing. it and patting themselves on the back, they're doing it because they have to. Exactly. So, Paula, I'm not that close to that community. I guess I was very fortunate to grow up in a middle class lifestyle where I knew that every meal was coming. But for someone in that situation, which may not be a high percentage of the listeners, what would you say to someone? Like, how do they pull themselves out of that hole? I would say, you don't have a spending problem. You have an earning problem.

and the way to pull yourself out is to make more money. And that's another area in which I disagree with a lot of the fire community. I mean, I guess people often talk from the perspective from which they're coming, right? So when you have these voices in the fire community that say, like, oh, it's not about what you earn, it's about what you save. Well, what you earn determines how much you can save. because at a certain point, there's a minimum floor beyond which you can't really frugal down any further. I mean, you know, you can live in the back of your car and cook ramen noodles on a camp stove. But in order to do that, you still need a car and you still need a camp stove, right?

So there's a certain point beyond which, like, you don't have a spending problem. You have an income problem. And I mean, in my own experience, the route that I found towards making more came from entrepreneurship. Because, and that might not be true for everyone. Like, certainly if you have a law degree, you could probably make more money, you know, being an attorney or finding a job at a more well-paying job at a bigger law firm that has a bigger budget to pay you. Sure, absolutely. But if you have a high school degree or if you are a liberal arts undergrad from a state college, as I was, and you don't have a long job history and you don't have a lot of, you don't see a lot of opportunities in the like normal nine to five job market, working for yourself, starting that side hustle and growing it can be really, really powerful. Like the big opportunity that you have, having a lower income is that, an extra $1,000 a month, which to a high earner sounds like a rounding error, to you is a life-changing amount. And because you're already used to living on a very slim budget,

you can then take, just continue living the way you currently are and take all of that extra income and save it. Yeah, I love that philosophy. And I'm going to go grab my tent now because I'm definitely in your camp there. But Paula, I bet I can guess your favorite clothing store. Favorite clothing store? Is it the gap? Ha ha ha ha. That's a beautiful segue. Because the way that I, so I struggled with this for a long time, right? Like, my frustration with all these voices saying, oh, you know, it's, if you earn more, you'll end up spending more. So clearly the solution is frugality. Like I got really frustrated hearing those voices. And so eventually the compromise that I found the piece that I found with it was I started to realize that at the end of the day, both earning and saving are tactics, right? But what's the goal? The goal is not to earn or to save. The goal is to increase the gap between what you make and what you spend. And so earning more, spending less, Both of those are tactics, but the ultimate objective is to grow the gap, mind the gap between what you earn and what you spend.

And then once you've created that gap, you invest that gap and then keep doing it. Well, so I'm actually, I mean, I love this discussion on philosophy and stuff, but I'm actually really curious on some of the technical aspects of your real estate investments. So I want to know as someone who obviously didn't have a real estate background. So you were writing for a newspaper, you go traveling, you come back, you're freelancing, and then you get into real estate. I would like to know what is the systems you built when in looking at a property and saying, okay, this one, this is a property that I can make money on because that's one thing that I'm struggling with right now.

You know, I'm thinking about getting into real estate. And it's like you can read all these podcasts and everything, but it's like you just wish you had like a cheat sheet, a checklist. What is it that you? look for when you go to look at a property. I get the, you know, I get the way the math works out on income and, you know, what you need to rent it out for and what you put in it. But what is your actual checklist when you're looking at a property? Sure. The first thing that I do, and as a disclaimer, this was not what I did with my first property, but this was what I learned over time.

The first thing that I do is I check to see if the property meets the 1% rule, which is, does the property rent for at least one percent of the purchase price? So in other words, for every $100,000 worth of home, does it rent for at least $1,000 a month? If it's a $200,000 home, it should rent for $2,000 a month. $300,000 should rent for $3,000 a month. That's the first pass sorting metric that I use. And if it meets that, then I'll look into it further. If it doesn't meet that, then I just pass it over. Now, the second thing that I do is if a property meets the 1% rule, when I say that I look into it, it further. What I really mean is that I calculate something that's called the cap rate. And the way that you do that is first you look at how much this property could rent for at full occupancy. So if it rents for

$1,000 a month, that means it rents for $12,000 a year at 100% occupancy. Then you subtract out vacancies. So you'll, instead of it renting for $12,000 a year, it'll rent for $12,000 times 0.95. And then you add in any other income that it might get. So parking fees, coin operated laundry, pet fees, any other ancillary income that that property might have. And you are left with at the end of all of that, your gross operating income on that property. And so then from that gross operating income, then you subtract out all of the operating expenses. So that would include repairs, maintenance, major capital expenses like replace. placing a roof, property management. In terms of the mortgage, a mortgage has four components, principal, interest, taxes, and insurance. You separate out the principal and interest, but you do include the property taxes and the homeowners insurance within the operating expenses. So then you take that gross operating income, you subtract out the operating expenses, and you're left with a number that's called the net operating income.

Now the net operating income divided by the price of the property and then multiplied by 100 so that it's expressed as a percentage, that is a figure called the cap rate, capitalization rate. And that figure represents essentially the dividend payment on a house. So it represents how much a house would, if you think of the house as a stock, it would be the dividend. It's the income stream from that house, the unleveraged income stream from that house. house relative to the cost of acquisition of that house. And so the total return on the total unleveraged return on a property would be that cap rate plus any capital appreciation. And if you conservatively estimate that as it keeping pace with inflation, but no more, which would be 3%, then that's how you can arrive at the unleveraged total return on a property. So that's what I look at. And then I noticed that when you started investing, though, you weren't investing houses locally around you, you started investing in Atlanta, correct? Oh, I was living in Atlanta at the time that I... Oh, you were living in. Yeah. So I bought all of my properties there and then I moved away from Atlanta. I moved to Las Vegas three years ago. Okay. And the other thing I just

noticed when you kind of started spouting off all those awesome metrics is, you know, that shows like a level of intelligence. And so that's one thing I'm curious what you think as far as you see a lot of these other people who say, you know, maybe it's not about saying you just need to earn more, maybe have some of the, or they don't have a saving problem. an earning problem. Do you think, though, that there's probably a decent amount of people in those low-income areas that just simply don't have that level of intelligence and ingenuity that you have? And maybe that's not as realistic of an option. I don't think that I'm that smart. I think I just read a lot. And so I think that what it takes is the willingness to read. Certainly, if you were illiterate, you'd have, it would be, things would be a lot, lot, lot harder. And,

And I think also even before the Internet, when the only way to access information in the U.S. was through libraries. And, you know, it might be harder to get to a library because maybe there isn't a good bus route there or you can't get childcare. It was probably a lot harder back then. But now that, you know, what the Internet did was it democratized access to information. It made it cheap, almost free and ubiquitous for anybody to access any information. And so now the, at least assuming, that you can speak and read and write in English, the delineating factor is, are you willing to read and read and read and read and read and read as much as possible? And listen to podcasts, of course. Definitely listen to podcasts. We'll come back to this episode in just a minute. But first, are you looking for a deodorant that's made without a bunch of scary ingredients? Native deodorant is made with clean, safe, simple ingredients. It's made without aluminum, without paribins, and without talc. It's made with natural ingredients like coconut oil, shay butter, and tapioca starch.

They have no animal testing. They have free shipping and returns in the United States. And people rave about it. They have more than 8,000 five-star reviews. So you can make the switch to a natural deodorant and use something that smells great and that works very effectively. I have the eucalyptus and mint version. I've brought it with me. I've traveled with it everywhere. So I've used it in Las Vegas where it's 110 degrees out. I've used it in environments that are hot and humid where there's just a ton of humidity. I've used it in a lot of places and it works great. If you'd like to give it a try, you can get 20% off your first purchase by visiting nativedeodorant.com

and use promo code Paula during checkout. Again, for 20% off your first purchase, visit nativedeodorant.com and use promo code paula during checkout. That's nativedeodorant.com, promo code paula. for 20% off. Do you run your own business or have a side hustle or small business? Well, as you know, you have a lot of things going on. And there are certain things that you have to do as a small business owner, like filing taxes, running payroll.

They're necessary, but that's not the reason that you got into business and that's not the thing that's going to 10x your revenue. That's where Gusto comes in. Gusto makes payroll, taxes, and HR easy for small businesses. They offer fast, simple payroll processing and benefits and expert HR. all support that's all in one place and designed for small business owners. Gusto will automatically pay and file your federal state and local taxes so that you just don't have to worry about it.

These old school clunky payroll providers, they're not built for entrepreneurs, solopreneur, small businesses, but Gusto is, so let them handle that because you've got better things to do. You can get three months free when you run your first payroll. So try a demo and see for yourself at gusto.com slash paula. that's g-u-t-o.com slash paula p-a-u-l-a gusto.com slash paula to get three months free so paula we actually sent out a tweet i know yet you saw it and asked some listeners to ask some questions and there's a perfect one to segue into here and so i know that while you were in Vegas you started remotely investing in birmingham alabama and so captain DIY asked how

did you get started investing in a different state and so something i kind of wanted to touch on before was Like, what physical attributes are you looking at when you're deciding on a property? But you don't exactly have that tangible luxury when you're investing from far away, from 2,000 miles away. So I'd love if you could talk about some of the physical criteria you're looking at numbers excluded when you're looking to buy that long range investment property. Cool. First of all, Captain DIY has the greatest Twitter icon, like the greatest Twitter photo ever. So everyone should follow him on Twitter. Shout out.

All right. So first, to clarify, so I'm looking at properties in Birmingham, but I haven't bought anything there yet. I haven't, yeah, I've narrowed it down to my favorite neighborhoods there. And I have an agent there. So I've got the ducks lined up. But, yeah, but I haven't purchased anything there yet. In terms of, I'm going to answer this question in two ways. There's what I look for in a city and then there's what I look for in the property itself. Okay. In a city, and this kind of speaks to why I chose Birmingham, and I will say I'll put another asterisk here, if I end up not investing in Birmingham, my other choice would be Cincinnati. So my next purchase will be in one of those two places, I think. But what I look for is a diverse economy. So I don't want to be in a city that is overly reliant on just one industry or even worse, just one employer, because that has the risk of suffering in the way that Detroit did. So I'll look for diverse economy with a lot of different industries and a lot of different employers. Ideally, I'll look for something that is, it doesn't have to be a huge, but at least big enough that I have a selection of property managers, contractors, plumbers, electricians, people, I have a selection of people who can be on the team. I don't want to be in a town that's so small that there's one or two property managers in the town. and if they both suck, then I'm just S-O-L. I'll look for a place ideally that is close to some type of major public transportation, like by public transportation, I mean like an airport or a major interstate highway.

So I guess that's not public transportation, but you know what I mean. That's close to some type of major transportation. So again, I don't want something, I don't want to invest in a town that is so remote that it's hard to access. and of course the place needs to, broadly speaking, have good price to rent ratios. All of that being said, like, you know, both Birmingham and Cincinnati fit that bill really well. What I look for in homes there, so I only invest in residential properties, which are single-family homes, duplexes, triplexes, and four-plexes. Anything that's five units or above is considered commercial. And, you know, commercial is great.

It's fine. Who knows, maybe one day I'll go into it. But when you get into commercial, then lending is totally different. insurance is totally different, like a lot of the rules change. And so in order to keep it simple and focus on doing one thing and doing that one thing really well, my specialty is buy and hold residential. In the house itself, all else being equal, I prefer, if it's a single-family home or a duplex, I would prefer a one-story brick ranch with a simple roof line. And the reason for that is in terms of the roof line, the more protrusions a roof has chimneys and peaks and valleys,

the more expensive it's going to be to replace. And if a property is two stories rather than one, that's also going to add a degree of complexity when it comes to the mechanicals. You know, when you've got a one-story property, then the mechanicals are all going to be, especially if it has a crawl space. I would much rather buy something with a crawl space than something that's on a slab foundation. But if you're talking about a one-story property with a crawl space, you know that all the mechanicals are going to be either in the attic or in the crawl space, which means they're going to be easy to access versus a two-story where, you know, maybe you've got some mechanicals that are in the attic, but you need to fix something that's on the first floor. And then there's this whole,

like, you got to navigate through that floor in between. And it's just, it's just, that additional story adds additional complexity. So, yeah, so I guess to summarize single story, brick ranch with a crawl space and a simple roof line. Love that, love the tangibleness to those. That's like a very specific. Another good question that we had coming in from the Twittosphere was from A Purple Life. And they said, so you have an amazing blog podcast, social media presence, et cetera. And not that you need to, but is there anything new and crazy on the horizon?

Oh. So in 2019, I will officially be launched. my real estate investing course, which has been under construction for an embarrassingly long period of time, like, I think three years. And I have a second round of beta testers who are in there right now. We're going through the course together. They've been great. They've given me some really good feedback. We've made a lot of adjustments to the course based on what they've said. So I'm very, very proud of this and very excited to roll it out. So that's like big in 2019. The other thing, speaking of single moms, actually, my best friend, best friend from college, I've known her for 15 years, she's going to have a baby and she's going to be a single mom. And she lives in Austin, Texas. And so this is a perfect example of why reaching FI or fire is meaningful and important and is more than just drinking margaritas on the beach. Like, I want to be there. Like I want to, you know, go be there for when that baby is born. And,

like be there to support her, especially through that first month, because it's, it's her first child and she's going to be a single mom. And both of her parents have passed away. So, you know, she's my best friend. And I have the ability to like not be tied to a nine to five job. I can just decide that I'm going to go spend a month in Austin to support my best friend. And I can just do it. I can just buy a plane ticket and go. You know? And like the biggest thing I have to worry about is who's going to feed my cat while I'm gone. So Paula, on that same thread of time flexibility, this is another question from the Twittosphere. So Tim from Life for the Better is asking, what can someone who reaches fire do with the extra time that they have? Like, what are some of the best ways that they can give back to the community? And do you have any plans of your own? Oh, yeah. So speaking of cats, so I have joined the advisory board for a local and non-term.

profit cat cafe. Oh. So it's opening up here in Las Vegas. It's called Meow or Never. And they take cats from shelters, like cats who might otherwise be put down because of shelter overcrowding. And they're opening a cat cafe. So that's super cool.

Like to be able to be involved in that and to be part of that and like watch it open. Yeah. And watch it become part of the down. in Las Vegas community is, I don't know, it's just, it's fun. It's really special. They've been doing, because they're not open yet, so they've been doing these little pop-up cafes. So every now, and they do that to fundraise. And so every now and again, on like a Saturday, I'll go and volunteer at the pop-up cafe, like selling tickets or selling cupcakes or just doing whatever they need me to do. That's awesome. I just had a quick question about

that Susie Ormond episode. I just got to ask, when I listen to it, the thing that struck me was just how kind of calm you are. And you even preface the episode by just saying, I'm just here as an interviewer. I'm just asking questions. Mentally, what was that like sitting there and just keeping calm and asking just very, like, you know, you weren't being aggressive. You were just letting her talk. What was that like? That's a good question. I was very much trying to come from a place of curiosity. I really, I wanted to deeply understand her perspective. And if she had, left more pauses in the conversation, there were a lot of follow-up questions that I wanted to ask because so many things that she said just lent themselves to a lot of follow-ups. But then I didn't really have a chance to ask that follow-up because she would keep talking and I didn't want to interrupt. So as she talked, there were just, there were so many follow-up questions

that many, many more than I had the space to ask. So, it wasn't difficult. Like, it was very, very easy to really, to just come from a place of asking questions because I just wanted to understand. Like, I was curious and wanted to understand why she felt the way she felt. Awesome. Yeah, I totally respect you for that because I would have been, like, seething while I'm listening to that. I couldn't believe your composer, but props to you. That was awesome. Thank you. So I don't want to leave the last person hanging on the Twittosphere that Left a question. So, Paula, you've been immensely successful in your entrepreneurial career. You started making a six-figure income freelancing. You hit a million in net worth by, I think, around 30 you've disclosed before. If you could go back in time, would you change any of your investment choices and why? First of all, that's very good, because I've said that network thing a few times, but I haven't, like, promoted it a lot. So whoever knows that has been paying attention.

That's me. Oh, nice. So if I could change any of my investing choices, I would have bought more rental properties. It's not the investing choices that I would have changed. It's the number one, I would have started working for myself or at least more aggressively side hustling a lot sooner. Because I worked for three years just kind of freelancing a little bit and then I traveled for two years. And during those two years that I was traveling, I was so focused on saving money. Like, if I hang out in Lao and don't move around too much so I don't incur a lot of transit expenses,

then I can keep my budget to $10 a day instead of $12 a day. You know, like, I was so hyper focused on saving during that trip when for not that much more work, let's say an extra five hours a week, I could have been earning and I could have grown my income more. I'm certainly not suggesting that I should have pushed it to the point where I was completely out of balance and I'm certainly not suggesting some crazy 80 or even 40 hour week, but I think that I hyper focused on saving because I doubted my ability to earn. I just didn't have that confidence. And if I had had that confidence, I would have acted accordingly. Like the fact that it took me, I know 18 months sounds quick when I say that I came back to the U.S. and it took me around 18 months before I earned

the equivalent of a six-figure salary. So that was the first time that I earned a five-figure month. But when I say 18 months, those were like 18 months of lots of stress and self-doubt. And I think if I could have changed anything, I would have just known that I could. have done it and gone after bigger clients right from the get-go. And yeah, I guess not wasted so much time doubting myself, which I still do. Like, I guess that's, that's not something that you get over once. It's a daily practice. Don't doubt yourself, Paula. Come on. Oh, thank you. So, Paula, is there anything that we haven't really talked about today that you'd like to cover that you could share with the audience? Before we get into the final questions. Ooh, dun, done, done. Well, I guess I just want to say,

I hope I wasn't too harsh when I was talking about my frustrations with the dominant fire paradigm in terms of like, yes, I agree frugality is important. And yes, it's awesome that there are a lot of upper income people who are choosing not to live McMansion lives. So I do want to clarify that I am fully wholeheartedly in support of that. And I also think that we need more voices in the fire space that speak for low to mom. moderate income people because I think that those voices and that experience is underrepresented in a lot of fire conversations. Yeah, before we move on to the final questions, I actually listened to your episode today that you released yesterday and you talked about the selection bias. And so the only people you hear about is people like you, you hear about Mr. Money Mustache, you hear about the mad fintists. It's all people earning these six figure outsized incomes. You don't hear about the people who retired who are living on $20,000 a year, just living their best life because they don't care. They don't want to be public, you know? Yeah. Yeah, exactly. Exactly. And

like, blogging, podcasting, like, it's a lot of work. It's a ton. As, as you know, right? This is like, this is a bunch of work. And the majority of people just don't want to do this kind of work. Like, there are a lot of people who have made the lifestyle change, whether it's fully funded or not. But, you know, but fire people also who have made that fully funded lifestyle change who they didn't make that lifestyle change so that they could then sit in front of their laptop in their closet on like, you know, which is where I record my podcast from, like sit inside of their closet on a warm, sunny afternoon when they otherwise could be out hiking, right? Those are the people who are out hiking. And because they're doing that, we don't hear about them. So the lesson there is that the people who are most public about fire,

myself included, are not necessarily the people who are representative of the average early retiree, because a lot of them are doing way more interesting stuff than writing about it. Well, Paula, this has been, you know, a great episode. But for those people who just can't get enough of you and your story, they want to follow along with you. They want to, you know, check out this new course you're launching and I just want to get in contact with you. Where's the best place they can do that? Well, I have a free ebook. It's at afford anything.com slash escape. And that's a an ebook about the fire movement and the fire philosophy, although I never actually use the acronym fire. And I'm not even sure if I use the phrase financial independence. It's more like a

philosophy of life about escaping the nine to five and doing it in a way in which you've got a bunch of money. So, so yeah, so that's, I would, I would encourage people to download that. And then you can find me by listening to the Afford Anything podcast. I have a new episode that comes out every week. And I'm on Instagram at Paula Pant, P-A-U-L-A, P-A-A-N-T. So feel free to say hi. Awesome. Well, we will link it up in the show notes. Cool. Thank you. And I'm definitely going to check out that e-book. Awesome. Something we like to ask all of our guests is what is your number one tangible tip for someone who's just starting out on this path of financial independence. Like, what is the one thing, if you were to

tell them to do, that they can get started today doing? Well, the one thing is grow the gap. Because at the end of the day, it doesn't matter if you're focusing on earning or you're focusing on cutting. Like, at the end of the day, it's all about that gap between what you make and what you spend. So grow the gap, invest the gap, repeat until free. That's basically the formula. Have you tried getting Gap as a sponsor in your podcast? They read the line about her buying all her clothes at Target and was like, sorry, I can't do it. All right, Paula.

So now we're ready for the real star of the show. Now this is the question that you're obviously not ready for. No one is ready for because it's been kept secret under military-grade encryption until just seconds ago. And so we're unleashed it here for you. It's a wild card question. You ready, Paula? I'm ready. So if you could interview any human being from any time period, who would it be?

Oh, from any time period. Okay, when you said any human being, my first thought was Oprah. But any time period. So any human being in all of history, well, I mean, I'm inclined to say either Buddha or Jesus. I have a feeling that interview would, well, that interview would certainly go viral. Yeah, I think that's a safe bet. Probably less ranting, though. I don't know.

I mean, you'd say, I feel like it'd be a calmer demeanor than your previous spiral. I guess now that I say that out loud, neither of them spoke English. So I'm assuming that I would have a translator, or I would magically be able to speak in their language, or they would be able to speak in mine. That works for this scenario. Yeah, I think it's fair to say that I think Jesus could pull off speaking English. Yeah. If you can walk on water, he can speak English. He's fine, Paul.

Well, Paula, this has been such a treat, and I've been such a big fan of your podcast and your work for the past few years. So thank you so much for coming on our podcast, just sharing your knowledge, sharing your story, and kind of enlightening us to your philosophy. Oh, thank you. Thank you for having me on. Yeah, Paula, I love some of the insights you gave, and I like how technical you are and tangible you are. This was not just a ton of fluff. You're giving some real insight and some different ways of looking at philosophy. So I really enjoyed it.

Oh, thank you. Hope you enjoyed that interview. So we recorded that interview in 2018. It aired originally on the FI show. And hope you enjoyed all of the material that we put out during this September sabbatical. This was a new experiment for me. It was the first time in three years that I've taken a month off from releasing new podcast episodes. And I've gotten great feedback. A lot of people have reached out on Instagram, sending me messages, telling me that they've enjoyed what they've heard. So glad that you've liked it. Coming up later this week. week, we are airing a brand new episode. So later this week is the first Friday of the month. And as you know, we always air a bonus episode. So coming up on Friday is an interview that we did with Kristen Berman. She, along with best-selling author Dan Ariely, are the co-founders of Irrational Labs. So make sure that you hit subscribe or follow in whatever app you're using to listen to these podcasts so that you don't miss that conversation. Before I sign off, once again, a reminder that our course, for For beginner rental property investors, which is called Your First Rental Property,

the last day for enrollment in that course is today, September 30th, 2019. If you miss the deadline for enrollment, then you'll have to wait until spring of 2020 before we offer this course again. And the reason for that is because it's a 10-week-long course, and our students go through it at a group pace. You're certainly free to go through it at a self-pace if you want to, but a lot of our students find a lot of value in having a community that's going through all. of the lessons together so that they can talk to one another about the lessons. Hey, today we

learned about this particular concept around how to analyze a property. Let's discuss it in a group setting. So there's that. We have small group accountability. We form groups of three to five students where everyone has that small group accountability with one another. New for the fall 2019 semester, we also have three TAs who are very actively involved. They're on the forums. They're making sure that students have their questions answered as quickly as possible. So we have all of that student support over the span of this 10-week course. Again, today is the last day to enroll. If you go to afford-anything.com slash enroll.

You can get all of the details and enroll there. Again, that's afford-anything.com slash enroll. I also wanted to take a moment to reflect a little bit on what the experience of this September sabbatical has been because it was very very. different than what I expected. As you know, if you're a long-time listener, I spent the last five weeks traveling to Europe and then Washington, D.C., and then Japan, four countries in five weeks. On this show, we've had many episodes in which we've talked about the importance of taking mini retirements or taking sabbaticals. We had David Bach on the show talking about his

radical sabbatical that he's taking in Italy. We've had Bob Lodich on the show talking about the year that he took off from his business. And so, Given that I'd been interviewing all of these people who've talked about taking these little mini retirements, I thought, you know what, I haven't had a break in three years. Why don't I take a month off from producing new episodes and give myself that one month break? And as it turned out, it was not even remotely a break at all. It was a break from creating new material on this show, and that's the most public-facing thing that I do. But the behind-the-scenes of everything that goes on backstage, that still existed, if anything, it amplified.

And what I failed to do was to restructure this business, this brand, internally, so that less stuff was falling on my shoulders. Essentially, my strategy of simply putting up an away message and letting the emails pile up, letting the Slack messages pile up, letting the DMs and the requests and the documents that have to be submitted and the back and forths, my strategy of just pulling up, putting up an away message and letting all of that pile up, did nothing to solve the underlying problem. The underlying problem being that I spend far too much time working inside of the

business rather than on it. It is a common problem among solopreneurs, entrepreneurs, and so for the first two weeks of the trip when I was in Croatia and Slovenia, I could, you know, kind of chill and relax and enjoy that time. But by the time I got to weeks three, four, and five, so much had piled up and so many people needed things from me that was due yesterday that the last three weeks of this five-week mini-retirement, I mostly spent working. And in fact, it was harder work than I had ever done before because I didn't have the comforts of being in my home office. I had my same workload, but compounded with jet lag and constantly switching hotels and and all of those other daily stressors and distractions.

And so the big takeaway that I got from it, the major lesson that I learned is putting up an away message and sequestering yourself away from the world, that's only a Band-Aid solution. The true solution is to do the hard work of rethinking the way that you are operating your business and your life, such that there are more systems in place, there are more processes in place, you have a bigger team that's helping you. That was the major thing that I learned in these last five weeks. And I've done that very well in my rental property business, but I have clearly failed to do that in this online business. And that was a big takeaway for me. In the coming months, I'll be exploring more of that. I'll be exploring more of, all right, how can an entrepreneur

systematize, how can an entrepreneur scale? I've done that very, very well in my rental properties, but not so well in this online business. And that's what I'll be exploring personally, and I'll be sharing a lot of those lessons with you too. So for anyone out there who is an entrepreneur or has a side hustle, who is wondering how they can do the same thing, how do you grow? How do you scale? How do you leverage your time so that you can take those mini retirements? I'll be sharing all of those lessons with you in the coming months as I dive deep into that hard but necessary work myself. So those are my reflections on the September sabbatical. Thank you so much for tuning in. My name is Paula Pant. This is the Afford Anything podcast. Once again, remember, this is

the last day you can enroll in our course on rental property investing. Affordainthing.com slash enroll is where you go to do that. Thanks again. And I will catch you on the Friday episode. See you there.