Afford Anything - Q&A: $1 Million Invested, $100K a Year to Live On. Do We Ever Need to Save Again?

Episode Date: October 20, 2026

#760: A couple in their late 30s and early 40s with $1 million invested may never need to save another dollar for retirement, because left alone, that money could grow to about $4 million. The harder question isn't the money. It's which of them keeps working to carry the family's health insurance.Paula and Joe start with Beth, an accountant married to a burned-out tech worker, who wants to know whether they can cut back on work now. Then they tackle a retiree's Ivy League financial aid questions and a New Yorker asking whether renting forever is a financial death sentence.In this episode, we discuss:How to tell if you've saved enough for retirement to stop contributingWhy one spouse should stay employed to carry the family's health insuranceWhere to find part-time work in fields that rarely advertise itHow to turn a high savings rate into more time with young kids nowWhy lowering your income may not unlock more Ivy League financial aidWhy test prep may matter more than hiring an admissions counselorWhy renting in an expensive city isn't throwing money awayIf you've built a solid nest egg but feel stuck working five days a week, this episode shows how to check whether you can ease off now instead of waiting for full retirement.⏱️ TIMESTAMPSNote: Timestamps may vary slightly depending on dynamic ad placements.(06:53) $1 million by 40 and burned out: can they downshift?(10:18) Why one spouse should keep the health insurance(11:41) Where to find part-time work that still pays well(14:41) Why work-life balance comes in seasons, not days(16:49) What it really means to stop saving for retirement(18:10) How $1 million could grow to $4 million untouched(20:47) Turn your savings gap into time with your kids(27:40) Why a lower income may not unlock Ivy aid(37:12) Why test prep beats an admissions counselor(50:32) Is renting really throwing money away?🔗 RESOURCES MENTIONED👉 RETIREMENT ALREADY COVERED? MAP WHERE YOUR NEXT DOLLAR SHOULD GO — ON ONE FREE PAGE: https://affordanything.com/cornerstone👉 Joe's conversation with Lynda Gratton on taking breaks and changing careers over a longer life (Stacking Benjamins SB1898): https://www.stackingbenjamins.com/rethinking-retirement-100-year-life-1898👉 Read This Before Planning for College (Stacking Benjamins x The College Investor): https://www.stackingbenjamins.com/collegeguide👉 The College Investor, Robert Farrington: https://thecollegeinvestor.comSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Joe, if a person lives in an expensive city and they have not yet bought a home, do you think there's any hope for them? No. Nope. All hope's gone. It's over. Farewell. You're done.

Sucks to be you. Sucks to suck. Hate that you lost the game. Yeah, of course there's hope. Come on. There's always hope. Well, we are going to be answering a question from a younger millennial who has precisely that question.

That's not coming until the end of the show. Because first, we have a deeper financial planning question, you know, a family financial planning question. We're going to kick off with that. And then in the middle of the show, we're going to talk about college admissions. So we've got a very well-rounded show today. I guess so. We have to admit we're part of the college admissions discussion.

We have to admit it. Where we like surreptitiously discussing college? I was just wondering what admission. we were going to admit about college. I had no idea. Oh, yes, yes, yes. I see. You have to admit. I think that's admittance and not admis. Well, I guess. Tomato, tomato. Who knows? Well, welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. This show covers five pillars, financial psychology, increasing your income, investing, real estate, and entrepreneurship acronym's double-eye fire.

I'm your host, Paula Pant. I trained in economic. reporting at Columbia. Every other episode-ish, we answer questions that come from you. And I do so with my buddy, the former financial planner, Joe Sal C-high. What's up, Joe? Not much, Paula. Man, I am so excited about these questions. I mean, real estate, financial planning, and college. Like, we're covering the gamut. Yeah, this is true personal finance day. Before we get started, a couple of quick notes. Number one, if you have a question you want to submit, afford anything.com slash voicemail is the place to do it. And number two, we recently got a voicemail from somebody who was asking, where was your October 1st Friday episode? We realized, because I think Joe, you and I talked last time,

that we did Rob Berger's interview as the latter half of the first Friday episode. We did not title it first Friday. So to anyone who's listening, who's like, whatever happened to it. You actually got it. Yeah, yeah, yes. So if you go and you just find the Rob Berger interview, that, was our October 1st Friday episode. We didn't follow our normal titling nomenclature, and so that was one of the voicemails we got. Thank you to today's sponsor, Vinted. So have you recently cleaned out your closet? You're trying to declutter and you realize you've actually got a bunch of money sitting in your closet, not literal money, meaning not literally cash, but you've got clothes that could be an easy way to earn a little extra money. So if you want to be

less wasteful and give your clothes a second life, check out Vinted. It is a secondhand marketplace app that makes it easy for everyday sellers, people like you and me, to sell pre-loved clothes, pre-loved fashion, and make some extra money. And there are no selling fees, so you keep everything you earn. I'm right in the summer to winter transition, so I'm looking through all of my summer clothes, downloaded Vinted. It's free to download. And I'm deciding, all right, which of these summer clothes do I not want to put in storage? Do I just want to sell? Looking through Vinted, user interface is very simple. Listing items is quick, it's simple, it's not a big, like time suck,

and once an item sells, Vinted creates the prepaid shipping label for you. Ready to clean out your closet and make some extra money? Download the Vinted app for free and start listing. With no seller fees, you keep every dollar you earn. Let's get to our first caller, Beth. Hi, Paula, long-time listener here. I'd love your take on a Coast VAT question. My husband and I are in our late 30s and early 40s. He's in tech and I'm an accountant. We have two kids, one in preschool and one in elementary school. And our day-to-day support is limited. We're both working full-time and we'd love more time to rest and recharge. We also want more quality time with our kids because they're only little ones. My husband is pretty burned out and work stress has been affecting his sleep and health. He has a chronic health condition, so health insurance is a huge factor in our plan. My job isn't super stressful, but I'd love to

Keep it low stress. I don't want a higher level role than I have now, and I want more flexibility. In a perfect world, one of us would stay full-time or close to it in a low-stress role to carry benefits for the family, and the other would work part-time and take on more of the kid-in-home management, hopefully freeing up more time for both of us. The challenge is that good part-time options are hard to find in both of our fields. We're open to retraining, but we don't know what to retrain into. AI is also on our minds, especially in his field, because it's changing the work,

wonder how secure either of our careers will be. And just as a side note, we both often fantasize about completely changing our jobs, doing something totally different from our sit in front of a computer office left style now. Here's where we are financially. Our house is paid off. Our cars have paid off, and we don't plan to take on any debt going forward if we can avoid it. Together we earn roughly $290,000 a year. We have around $100,000 in an emergency fund in a high-yield savings account, about 330,000 in taxable brokerage accounts and a bit over 700,000 in retirement accounts. We save about 40% of our income on average. For the kids, we've started 529 plans but are keeping them modest since we don't know if they'll want to go to college.

We also have a separate brokerage account for them, and altogether they have about $40,000 saved. We conservatively assume that we need about $100,000 a year to live on once daycare ends, and that's when we're targeting our downshift. Coase-Fa appeals to us because stopping work entirely feels skiske. Gary at our ages and we'd like to keep a foot in the working world. The idea is to earn enough to cover our expenses without drawing down our investments. So my main question is, are we at KOSFOT now? What about in four years when we're targeting our downshift? If we are, what should we be thinking about as we pivot? What careers could we realistically have that come with benefits,

but also allow more part-time work? As we get older, we'll probably want to keep downshifting in full retirement. We both have so many hobbies we're passionate about. If we're we could get off the five days a week, Marygo round, working more years would feel much more sustainable. Thank you so much for all that you do. Beth, I love the question. I hear two components of the question.

There's the career component and the financial component. I want to tackle the career component first. The good news about the fact that he's in tech and you're an accountant, because those are both knowledge worker jobs that have a lot of

varied types of opportunity around them. And I don't know specifically what he does in tech. You know, I don't know the details of that. But both of those are the types of jobs that lend themselves to one person, either of you, being able to work from home on a part-time or contract basis in a much more flexible way. So I agree one person should always, especially for health insurance purposes, stay in the workforce. stay in W-2 employment, get the health insurance for the family. I think that is a crucial part of the plan.

But the other one of the two of you, and given the types of jobs you have, I think, and again, I don't know the details of what kind of tech he does, but both of you have the ability to either do part-time work for a small business or contract slash agency type of work. The downfall, you mentioned that you are dreaming of not sitting in front of a computer looking at a screen all day. The downfall with the plan that I just named is that you would be doing a lot of that. That's the trade-off if you want the flexibility and you want the part-time hours. It will be a lot of sitting in front of a screen.

But what you get for sitting in front of a screen is that flexibility. and that added time with the kids and that added time being able to focus on home life. I think finding that part-time work is fairly difficult. This is treating the job search like a job. So I may devote some time every weekend. Like as part of your job is getting out there and seeing what actually is available. I would do two things. Number one, I would look for other people in each of your respective fields who,

are doing the type of work that you would want to do. And by type of work, I mean, who have the type of work lifestyle, the flexibility, the part-time hours. I would look for other people in your fields who have that. And I would, A, chat with them, reach out to them and chat with them about how they got to that position. But B, take note of what kind of companies they're working for companies, agencies, like, are they cobbling together a bunch of contract work? You know, is that the route that they've taken? Or are they employed, but employed by a small business, possibly on a contract basis, or even on a W2 basis, but with reduced hours? Like, I guess, let me be more specific because I'm afraid that I'm speaking in too broad of generalities.

So I'm thinking of a couple of different models. Number one, I'm thinking of a few accounts. and bookkeepers that I've worked with who specialize in working with small business owners, those accountants and bookkeepers have a handful of clients and they simply have cobbled together contract work by assembling a motley crew of clients. That is one model that I've seen.

An alternate model that I'm on the other side of, There is a person who works for afford anything. There's a person who works inside of our organization who initially, when we were looking for this job posting, we wanted somebody full time. And initially, this person came on as a full-time person and demonstrated such incredible value that later when they said, hey, could I go down to three-quarters time? Could I go down to 30 hours a week? I didn't want to lose them. You just want to keep them on the team. Yeah.

I was like, heck yeah, you can do whatever you want because you've demonstrated so much value that I'm not willing to lose you. And so you can pretty much call your own shots. They are that good. That's the type of flexibility that you get when you're working with a very small business, right? When you don't have these procedural layers of bureaucracy

that block decision making because you have a direct line to the decision maker because the team is only 5, 6, 7, 8, maybe 10 people depending on, like, if you think about the technical definition of a small business, I think is per the ADP payroll survey, I think they say it's under 50 people. But if you go to like the smaller half of that,

you go to any business that's like, let's say under 25 people, then you start to lose the bureaucracy and you really start to get a lot more flexibility in return. I spoke with Linda Grattan about this topic recently. She's a professor of business practice at London Business School and is largely recognized for her discussions, Paula, about the future of work. And this idea of taking some time off and then finding the right work for you, and you're drilling down and down and down, but you're also elongating your career because this burnout that people find, which is real, often isn't the desire to stop working.

It's the desire to find meaning, right? To find something meaningful that they truly, truly want to do. Now here, meaning might be spending more time with the kids. So the meaning might truly be outside of work. But for a lot of people listening, this idea of work-life balance is largely BS, right? how many people that you find that are really, really happy with their life are balanced. They're generally not balanced. They'll spend a lot of time doing the thing that they love. Then they'll spend a lot of time away recharging the batteries. There's no balance.

It's I'm 100% in, that I'm 100% out, then I'm 100% in, that I'm 100% out. Right. So the balance is episodic rather than continuous. Yes. Nice work. Yeah, that's why they pay me the medium bucks. Those big podcasting dollars. Which Linda also brought that up when I talked to her about this, which is there are also times when you do a full reboot. And the thing that I find interesting, two things I find interesting about that.

Number one is, Paula, you decided to take the interesting piece of this question, which was this whole career thing first. But the second piece is you didn't cover yet the financial piece because the financial piece is easy. And what they've done is they built themselves a nice asset base. So that dream they have of completely changing everything, I kind of think they could just do that. All right. So to her question, Beth, to your question, am I coastfi? Oh, God, yes.

Well, I want to define because coastful, okay, just so we are all operating from the same set of vocabulary. My definition of Coast FI is the point at which a person has sufficient retirement assets that they don't have to say for retirement anymore, which means they can go on living their life without thinking about making additional retirement contributions. Now, what a person does when they reach that point varies. So like our mutual friend Andy Hill, who's been on the show, he and his wife, when they reached that point, for them, it was retirement assets of about $550,000. They were 39 years old. Their kids were 9 and 7. When they reached that 500, 550,000 retirement balance,

they said, all right, we're not worried about making any more retirement contributions. Therefore, we're going to scale back at work. And we are going to, like, Andy scaled from 40 hours a week down to 25 hours a week so that, he could spend more time with his kids at ages 9 and 7. What a person chooses to do once they reach that point might differ, but like the, I just want to make sure we're talking about the same definition of the term. Yeah, yeah. No, I like that. Cool.

So in terms of do you have enough money in your retirement accounts to not have to contribute to retirement anymore? Yeah. You've got 700,000 in your retirement. accounts, you've got over 300,000 in taxable brokerage, put that together and you've got a million bucks invested by your late 30s, early 40s. If you don't touch that money, rule of 72, assuming 8% returns, that's going to double in the next nine years. Let's take the median age of them. We'll call them 40. So at 49, at 58, again, at 67, if they keep money in growth assets,

but the first two, they're going to get at least two, maybe two and a half doubles, depending on what their retirement goal is. So they've already saved instead of a million, that's $2 million, $4 million. They have $4 million right now, save for retirement. Now, of course, inflation is going to double every 18 years on average. So, you know, the price of everything's going to go up. But still, I think a $4 million nest egg sitting right where they are, if they want to pivot to something that they love, they don't touch any of that money,

I think they're easily there. It depends on with the $330,000 in the taxable brokerage account, since they have the ability to get at that money, it depends on are they truly committed to not touching that money until retirement or not. If that 330 in the taxable brokerage is truly hands off until you're in your 60s, then yeah, I'd say you're Coast 5. If they did use that money, at the very least, I think they bought themselves the time and the flexibility to explore what. their next move would be, you know, if they did completely change careers, which she, you know, I don't know. I don't know if it was just me, but I kind of heard this, really, I heard that thing that I hear when somebody really wants to do something. Like, oh, we've dreamt about, you know, we fantasized about maybe being in something completely different. As knowledge workers,

and particularly as knowledge workers who want flexibility, it is really hard to find something where you're not staring at a screen. because oftentimes anything where you are in person out and about collaborating with other people necessarily involves being on the same schedule as the rest of the team and in person with the rest of the team, which is by definition a trade-off in flexibility in order to have that access to community. It's a very exciting time for them. Beth, I will also say you estimate that you'll need about $100,000 a year to live, live on, what that tells me is that the gap between your living expenses and your income is,

your current income is tremendous. And what that buys you, and you'll need the $100,000 after daycare ends. So there's, you know, temporarily some added expenses. But once daycare ends, I mean, the gap that you've got between income and expenses is so wide, that Delta is so wide that given that your retirement is covered and you can kind of, you can kind of, you can kind of, you've got, check that box and let it go if you want to, that means that you can take that delta, put it all into short-term reserves so that you can buy yourself the short-term reserves that you need to have more time with your kids now while they're young. Well, Paula, I don't even think you have to do that because they're saving 40% of their income.

So if one person's... Well, I mean, after taxes. Well, right. But if one person's going to scale back, if they truly are Coast-Fi, and I wouldn't just take our word for it. I would still do the simulation. I would still map that out to make sure that we're right, but 90% sure we're right. Once they know that, that they are Coast-Fi, then they can cut back on that 40% savings, and there's the difference between working today and working later. Right. Use the fact that you've got that delta and the fact that you no longer have to save for retirement to scale back your hours now

while the kids are young. I just want to address this final point. In terms of part-time being difficult to find in both of your fields, target ultra-small businesses, like micro-micro-small businesses, look for work that is not just W-2, but also contract-based, and be open to either a contract-based position with a small business or cobbling together multiple contract-based clients. If you're looking for part-time, those are your most likely avenues.

Well, thank you for the question, Beth. Call us back in six months, 12 months, and let us know how things have progressed. Give us an update. We'd love to hear it. We're going to take a moment to hear from the sponsors who allow us to bring you this show at no cost to you. When we return, we are going to hear from someone, who is about to send his daughter to college. His daughter's a high school sophomore, so he's got some college-related questions. And then after that, we're going to hear from a young millennial

who's wondering if he can ever buy a home. Welcome back. Our next question comes from Daniel. Hi, team, this is Daniel from the Phoenix area. I am a recent retiree and now planning college for my sophomore daughter. She's a 40 high-powered student, only looking to go to a high echelon school, and Ivy. And I'm trying to get as much information as I can quickly regarding the college hack system, maybe ways to lower my 1099 for FAFSA. But, you know, that's the interest that I'm living off of looking to gather as much information on admission advisors, SAT tutoring. It's a big topic to unpack, but I'm sure you can help out. Give me a buzz if you need me. I appreciate your help. Thanks. Daniel, I think that you leave a lot of voicemails for friends as a retired guy.

whose friends might work because leave us a buzz if we need you. Give me a buzz. Or give me a buzz if we need you is the kind of thing I would say at the end of a voicemail that I'm leaving for one of them. Give me a buzz if you need me. Joe, see you later. But thank you for the offer. But I think we can handle this question without having to give him a buzz.

I think we can do it. First of all, congratulations on retiring. That's amazing. Second, let's address your question. lowering your 1099 income is not going to have a very big effect. You mentioned your daughter likely wants to go to one of the ivies. The ivies use the CSS profile. They rely on that much more heavily than they rely on the FAFSA.

The CSS profile takes a look not just at your income but also at your assets because it understands that families might have low income but high assets. the CSS profile, which is what the Ives are going to be looking at, that's what that is scanning for. The good news is if you have a, it's not even a low income, if you have like just a middle class income, the Ives, they have huge endowments and they pay for middle class people. If she's going to Princeton and you have less than $250,000 worth of income, then Princeton will cover tuition. If she's going to Harvard or Yale and you make less than $200,000, they cover either partial or full tuition. With income caps at somewhere between 200 to 250,000, a lot of these IDs have programs that will cover it.

The quote-unquote catch, and the reason that they use the CSS profile is that if you are in a position where your income is substantially lower than what your assets might suggest it would be, that's where CSS comes in. So if you've got an income that's less than $250,000 and you have the type of assets that would be reflective of the type of person who has an income of less than $250,000, right, then she's covered. But if you've got $10 million in assets and only $150,000 worth of income,

that's the thing that the CSS profile is designed to catch. And this is where being an early retiree and doing a great job of saving might not work in your favor as much because you might have a lot of money in saving. And there's so much to cover here. To your point, we're not going to be able to cover how to plan for college in a 20 minute discussion, even a five-hour discussion. We won't be able to do all of it. But I think the first thing to do is going to be to look at where your assets are located versus what the CSS looks for. in terms of where they're located because rightfully so, the CSS is going to look at, you know what, you do need some money for retirement.

And it will harbor some money and go, you know what? We're not going to ask you to spend this money because you're going to need it for yourself. So they do that. And by the way, the SAI, which used to be the expected family contribution, the index around the FAFSA does the same thing. Where it goes, you know what? Emergency fund, parents should have a little bit of emergency fund. So your first X amount of money, we're not going to really count for college.

Because we want college to be a priority. We don't want it to sink you financially. So that's what they're after. There's also one interesting loophole. So I don't know if you have a mortgage. Your home equity from your primary residence mortgage is excluded from the FAFSA. So if you've got a bunch of cash and you use that cash to pay off your mortgage, if it's your primary residence, then that's a way of moving cash into.

primary residence home equity, which lowers the amount that you would reflect on the FAFSA. Now, in terms of the CSS profile, whether or not that's going to help you depends on the school. So if she's applying to Penn, for example, Penn does not count the equity in your primary residence, but there are some other schools that do. So schools vary when it could. For the CSS profile, schools vary on their treatment of primary residence home equity. But for FAFSA, it doesn't. So for FAFSA, moving cash into mortgage paydown is the best FAFSA move. And I'm glad you're calling when she is a sophomore because best practices to begin making your moves.

This is probably why he called right now, Paula, he may have known this, was you want to make these moves two years ahead of time because of the fact that there's going to be this look back where the FAFSA form just very naturally looks back far enough that you want to have made any moves like. that far enough ahead of time that it doesn't get caught in the system. Yeah. Now that said, you know, we're talking about, quote, gaming a system. And I know I can hear some people going, well, is this really fair? Well, it is fair because they make it so anybody can do this. Number one, I don't think it's gaming the system, Paula, as much as knowing what the rules are and following the rules. These are the rules for financial aid. Follow the rules, right? It's just like when we do tax planning. Is it fair that some people do a Roth conversion? Other people don't. Rules are the same for everybody. Understand the rules. Know how you fit and follow the rules. So these are the

rules much more than gaming the system. We're not going to tell you to do what was the thing those popular actresses did where, you know, we're not going to pay off of, we're not going to pay off. Becky from full house. Lori Loughlin. Yeah. Yeah. We're not going to go. We're not going to go falsify some documents and, you know, put them on the rugby team or whatever, whether or not. really on the, we're not going to do any of these wild gyrations, but we are going to know the rules. And I think it's important to know how far back they look and to make the right moves ahead of time. Yeah. Speaking of, Joe, you mentioned, like, Roth conversions. Right now, while we're still in 2026, if you want to do any Roth conversions, do that now, because any

conversions that you do, you know, your daughter's a sophomore, the year, 2027 is going to be the first year that counts. So you don't want to be making Roth conversions starting in 2027. So do your Roth conversions in 2026 and then hold off on any other Roth conversions until between 2027 to 2030. Yeah. And the reason for that is because even if you don't spend a dime because you're doing the conversion, all that money coming out of the account counts. It's going to count. So watch out for that. Yeah. It's interesting. You ask this question, Daniel, because we have a resource. It's Stackyedibedgemans. We have a guide to college that we've done in collaboration with Robert

Farrington and the people at the college investor. And you go to stack of Benjamin's.com slash guide. And not only stackybedjamins.com slash guides, because we have multiple guides for other topics as well, the guide not only is huge and you don't want to read it, it comes with built-in AI so that you can just ask your college planning questions. And instead of read, every page of the guide, it will direct you specifically into the question. And how's that different than like just asking chat GPT? Well, because it's only trained on what Robert and I and our teams put into it, the chance of getting old information that's been outdated is zero. The chance of a hallucination is zero. So use the AI inside the guide. It's pretty neat. And then use the guide to get

educated on whatever areas of college planning you want. Wow, that's cool, Joe. It is a neat resource. In fact, Robert, as you know, Paula, is just a great resource on his own. I was actually just thinking that. So shout out to our buddy Robert Farrington. So he runs a brand called the College Investor. Joe, you and I were just hanging out with him in Palm Springs, California a couple weeks ago. What a smart guy. Robert is amazing. Hat to Robert. Hats up to the college investor. Joe, you and I have been doing this for a long time. We have seen a lot of personal finance brands come and go and a lot of voices of varying quality. Robert is a durable, long time, high quality voice in the personal finance space. Yeah, that's why when we

created our guide, I'm like, who are we going to collaborate with on college? No questions asked Robert. Follow him on, he does a live on TikTok every week as well. So you can even just ask him questions on TikTok. He's quite a cool dude. Yeah. A couple of other points before we sign off, you asked about college admissions counselors. Hot take, but I don't, I mean, I'm not sure how much value there is in an admissions counselor versus just focusing on testing. She's a sophomore. She hasn't taken the SATs, ACTs yet. Instead of an admissions counselor who might guide her towards rounding out extracurriculars, blah, blah, blah. I would put that emphasis into SAT prep, ACT prep,

get the highest score possible on those, as well as obviously make sure she does well in all of her classes. Take the most rigorous competitive AP and honors classes that she can and get straight A's in everything. That plus SAT, A-C-T, I think. I think a lot of times people spend too much time focused on the peas rather than the steak, and academic performance is the stake, whereas all those rounded out extracurriculars, that's the peas and carrots. I will say it's hard.

You know, with Ivy admission at the undergrad level, it is hard to differentiate yourself at an undergrad level. My hot take is I think it's actually easier to get into grad school, especially if you have some professional experience prior to going into grad school, you have differentiated yourself professionally. And so if you have professional accomplishment, if you have professional differentiation, that plus a super solid airtight undergraduate transcript, that one-two punch can really give you a competitive grad school application.

packet in a way that like how much can you really differentiate yourself as a high school student unless you've started a company or you've done some groundbreaking research it's very very hard to differentiate yourself from all of the other straight A students in high school one of the reasons that I emphasize SAT ACT prep so much is in an era of great inflation standardized test scores are a better predictor of preparedness than GPA. Now, notice I said, this is also hot take, right? Notice I said preparedness. They're not necessarily a better indicator of intellect,

but they are a greater indicator of preparedness because in this era of rampant great inflation that we live in, we don't really know anymore what an A represents. we don't know the level of rigor that a given teacher or school or school district mandates in order to give out those A's. That's why standardized testing, which for a while took a back seat for a while was no longer necessary, that's why it's come back into Vogue because when there's rampant grade inflation, we need some standardized method of comparing student A to student B, to students see across a variety of cities and towns and districts. So I would put as much effort as you can into SAT and ACT prep. That's going to matter a lot more than the 4.0. Those are multiple hot takes on the college slash grad school admissions process.

I've spent a lot of time thinking about it. I couldn't tell. It doesn't seem like you've thought about it at all. And starting with the high school class of 2028, S-H-T and ACT scores are mandatory for all eight of the IVs. What's cool is prep resources are pretty cheap. It can be incredibly valuable. The prep resources talking to students and surveying students with Robert the last few years,

just the prep will calm you down, make you feel like you've seen the test before. You go in, you know, a lot of people, you hear this story over and over. If you haven't seen the test before, you just naturally kind of freak out. And yet if you can go in there just calm, cool, collected, even that can add points to your score. Yeah. So Daniel, thank you for the question. Best of luck with the admissions process, the upcoming admissions process.

We're going to take one final break to hear from the sponsors who let us bring you this show at no cost to you. When we return, we're going to hear from a young millennial who is wondering, can he ever buy a home? All right. Our final question today comes from an anonymous caller. hear the question and after that, we'll give him a name. Hi, Paul and Joe, this is Anonymous. I am a younger millennial in my early 30s, and I've recently started thinking about my finances a little more seriously, in a way I didn't really

in my 20s. My question regards long-term financial goals. In the back of my head, I've always assumed I would be a homeowner by my mid to late 30s, which is when my parents moved into the house where I grew up. But as is the case with so many in my generation, that has started to feel like an impossible dream. Making matters worse is the fact that I live in New York City, and God help me, I love it here, is the greatest city in the world, and I don't want to leave. I guess my question is this. Do you think homeownership is still a good or even viable financial goal for folks in my generation?

Is being a lifelong renter just a financial death sentence that I should avoid like the plague? Or are there other ways to think of building out wealth where it might look a little different from how my parents did it? but it fundamentally gets me to the same place of financial security. We'd love to hear any and all thoughts. Thank you so much. Oh, I have so many thoughts.

So many thoughts. I suppose we have to give them a name first. Yes. Do you remember that band? So I was thinking about, because I'm young millennial, what music was popular. I'm probably not the best person to ask this because I don't know a whole lot about music or popular bands.

But you remember that band better than Ezra? Yes. I've always liked the name Ezra. I was thinking, what if we name him Ezra? Well, I like better than Ezra too. The difference is, Paula, when I talk about a movie or a band or something, I just saw them. It's not out of the blue. Like, this is your show, but you've got to get better at like, oh, I was listening to better than Ezra this week.

So I wanted to. No, I was literally thinking about like, all right, what bands were popular in like 2010? And that one came to mind. So you're thinking millennial here. Yeah, yeah. I'm thinking about he, because he said he's a young millennial. Now I got you.

Okay. Right. We could have used that context up front, Paula. Oh, well, you know. Sometimes the synapses, we can't follow. You got to paint the full picture for us. I'm out there is where I am. Generally, when it comes to cultural references, correct.

Yes. But better than Ezra. How about that one? That's good. Better than Ezra. All right. So his name will be Ezra. Yes, I like that.

Home ownership, good or a viable goal. There's a lot to unpack here. So let me just get started. Number one, I want to attack the premise that home ownership is necessary or even desirable for building wealth. There is something that's called the price to rent ratio. Let's say that there is a home that costs $800,000 and you could rent it for, $2,000 a month. That's scenario A. Scenario B is there's a home that costs $400,000, but that same home you would also rent

for $2,000 a month. In both scenario A and scenario B, your rent is $2,000 per month, but what you get for that money, you get double the value in scenario A than you do in scenario B. And that's the reason that we look at the price to rent ratio. Now, here's where lazy people on TikTok go wrong, because a lot of people are like, well, renting is throwing your money away. $2,000 a month, that's $24,000 a year. You've just, quote, unquote, thrown that away. First of all, that's insane. I don't throw money away on groceries.

I don't throw money away on any consumer product. When you purchase a product that you consume and use, that is not throwing money away. that is consumption-based spending. And housing is the same. When you are a homeowner, you're paying not only property taxes and insurance, but also all of the repairs, maintenance, ongoing capital expenditures, the roof, the windows, the siding, the flooring. We often don't think of those on a year-to-year basis because when it comes to replacing the roof, you do that once every 25 years. When it comes to replacing the water heater, you do it once every, if you're lucky, 12 years. if you're unlucky eight years.

These are major components that because they are infrequent, we often don't mentally calculate them in the cost of home ownership, but ultimately all of that is baked in. And then people will argue, yeah, but your home goes up over time. It may or may not. If you look at Cincinnati, for example, the homes across the 1980s, 1990s, early 2000s, mid-2000s, did not rise above the level of inflation in most parts of Cincinnati.

I know this because I'm from Cincinnati. In nominal dollars, there was an increase, but in inflation adjusted dollars, there was not. A, there is no particular guarantee that homes will rise in value. B, you are spending as a homeowner just as much as you are spending as a renter. see as a renter you have the benefit of knowing that your costs are fixed that no major repair is going to come up from out of nowhere if your dishwasher breaks if your refrigerator breaks if your water heater bursts you're not going to have to outlay a whole bunch of unexpected money for that right so you've got that guarantee and that allows for better financial planning and ultimately what you want to do is we want to take a look at the price to rent ratio

where you live. Again, take a look at whatever place you're renting. Look at what that place would cost if you were to buy it. If you're renting a place for $2,000 a month and you could buy it for $200,000, that's a no-brainer you should buy it. If you're renting a place for $2,000 a month and you would have to pay $800,000 to buy it, that's a no-brainer you should rent it. That's why the price to rent ratio matters so much. Now, you stated that you live in New York. That could mean, that could mean flush in Queens. That could mean Staten Island or that could mean Manhattan. And the price to rent ratio is going to very wildly depending on what part of New York you live in. But particularly if you live in Manhattan, I can tell you as a Manhattan resident, it makes sense to

rent. I don't care how much money you have. It makes financial sense to rent if you want to live in. in Manhattan specifically. The play, if you want to live in Manhattan, is to rent in Manhattan, and if you want to be a homeowner, own in a place where the price to rent ratio makes sense. That means own in Cincinnati, own in Indianapolis,

own in Bentonville, Arkansas, own in Texarkana, Texas, own in Oklahoma City, like own in the places where it makes sense to be an owner. that way you can be a homeowner, you can collect rental income, you can get on the property ladder, you can diversify your investments across index funds and direct ownership of properties where you get to directly influence the types of returns that you get, which is different than owning a REIT because in a REIT you don't have that kind of influence.

So rent in Manhattan, own in the Midwest, in the South, in these mid-cost or low-cost cities. I have a completely different take. Ooh. You know, the first thing for Ezra is I wouldn't take on the burden of his entire generation. He said, for people, my generation, is it, for some people, it's going to be great. For some people, it's not. It truly depends on what your goal is. I do agree with Ezra that it's harder than, that it used to be. And hearing older people go, well, you know what, all you got to do is buckle up and just say, whatever, it is different. It is different. It's, the game is 100% different. So I agree with that.

But I wouldn't worry about the generation. I would worry about him. If the crux's question, Paul, is around building wealth. I would say never buying a personal piece of property will help you build wealth, period. It might, but there's much better ways to do this than to go buy a house that you're going to live in. You are going to decorate it better if you own it. You are going to spend more money on maintenance if you own it. you're going to have all kinds of associated fees and expenses with people to keep your house working the way that you want it because of that.

A primary residence is a crappy way to build wealth. Do not think that that's any different. So it really comes down to how long are you going to actually be there? And if we look at job statistics, you know, if we really want to play young millennial versus older millennial or Gen X or whatever, you know, people are staying at jobs fewer and fewer years. The is it worth it or not, train has not moved over the last 20, 30 years. It still is with all the fees and costs associated with a mortgage. If you're not going to be there for seven years, it doesn't really make sense.

So the true question to ask yourself is, what's the chance I'm going to be in this area for seven years? Then maybe it's great, but it's still a lifestyle decision. And I agree with you wholeheartedly, Paula. In Manhattan, it's much more of a lifestyle decision than it is in Texarkana, right? In Texarkana, I might be able to still buy a house and have it make sense. In Manhattan, it truly is a lifestyle decision because you're just flexing the fact that, hey, I can afford to live in this super, I can afford to buy in this super duper expensive city, and it's not going to affect my other goals.

That's the way I look at it. The answer is no. Owning a house is not a great way to build wealth. and it comes down to how long are you going to be there, and then I start doing the affordability test. Yeah, I mean, I would say if you want to build wealth, build your net worth, again, if we're talking about Manhattan specifically, don't buy. I don't care how much money you have.

You could come into $5 million. The answer would still be don't buy, specifically in Manhattan, if the goal is to make the financially responsible choice. Now, there are some people who buy for emotional reasons. Even if we're talking about high-end luxury units, right, even if we're talking about a place that you would rent for 15,000 a month, the purchase price of that equivalent place does not make sense from an ownership perspective. It just doesn't.

What I love about the price to rent ratio is that it is the great equalizer. And by the way, for anybody listening who wants to apply the price to rent ratio to your own domicile, if the price-rent ratio is 15 or under, it is a slam-dunk buy. Go ahead and buy that thing. If the price-to-rent ratio is 25 or over, it is a slam-dunk rent. And if it's between 15 to 25, you're in the gray zone. I'd say even 15 to 20, you're in like light gray leaning towards buy. 20 to 25, your light gray leaning towards rent. And the way to calculate it is the price is the price that it would cost to purchase that piece of property. And then the rent is the annual rent on that property. So again, 2000 a month is 24,000 a year, right? $3,000 a month, $36,000 a year. So price of the property

divided by annual rent of the property. That's the price to rent ratio. Got to know it. Yeah. And I would base all decisions on that. And again, if that price to rent ratio comes out, between 15 to 25, that's when I would let factors like what you talked about, Joe. How long are you going to be there? Where you'd even begin that journey? Yeah. Yeah, exactly. Like those types of individualized factors, those come into play when the PR ratio is between 15 to 25.

That's gray zone area. But under 15 is slam dunk over 25 a slam dunk. And in Manhattan, I guarantee you it's going to be over 25, which is slam dunk rent. Now, again, if you're out in Flushing Queens, that's a different story. I would still love watching Ryan Sirhan's show. I would still love to own a house of Manhattan. A house. Nobody, what's a house, Joe?

I mean, an apartment, a spot, a hundred and fifth floor condo. Looking out over Central Park, maybe 80th floor condo. You know what I mean? You know what I mean? There's just watching those real estate shows. you to sit and you're, you know, it's just 100% a... You know, it's even better than owning one of those? Renting one of those.

Do I really want to rent that, that apartment? Yes, you do. You want to rent that apartment and then you want to take the delta between what you pay in rent and what you would pay to own it. Take that delta and put it into an index fund, put it into VTSAX. It's interesting though, Paula, if I have that kind of money, I don't care. I mean, do I care? Do I care?

If I'm paying $30,000 a month in rent or $50,000. $50,000 a month in rent. I have a friend, a former guest on this podcast, who pays $17,000 a month in rent. Yeah. This person got to the point where they can spend $17,000 a month in rent because they are an investor to their core. What really motivates them, it isn't index funds. They take on some riskier investments that historically have paid off. But this person is very, very motivated by.

the joy of analyzing companies thinking about what the future is going to hold and making informed bets with their money on what that future is going to hold. So yeah, even, you know, with this particular person, with rent of $17,000 a month, which that's very affordable to them, a very small portion of their overall net worth,

it brings them joy to put their money into investments. That's interesting. The math still maths, no matter how many zeros are behind it, is what you're saying. Yeah, yeah, exactly. The math still math. And so you take that delta and invest it. And that's where you, oh, and by the way, that is, see, here's my hot take on the difference between older millennials and younger millennials. I think there's a very important question, which is how old were you in 2008?

If you're an older millennial, you were in your 20s in 2008. And if you were in your 20s in 2008, that means that you were young enough that you did not lose significant assets during the crash. And also, you were young enough to begin your investing experience in the aftermath of the Great Recession. You were young enough to begin your early investing years in 2009, 2010, 2011, 2011, 2000. Even if you never bought property, even if you actually would be better if you didn't, at least in terms of a primary residence, even if you only put your money into index funds, if you just VTSAX and chill, and you started that in 2009, 2010, 2011, which is what older millennials got to do, that put older millennials on a path. If you were putting your money into VTSAX, put you on a path of, being an early investor in what turned into a 15-year bull run. So I do think there is a significant difference between, frankly, the luck that older millennials had versus younger millennials, because if you were not in your 20s in 2008,

2009, you were just a little bit too young to get that benefit that the older millennials got. It is funny, though, because you call it a benefit. I've seen that as a two-way street, and it depended on which, lesson you chose to get from that. I have read through some studies where there are some millennials that were coming of age then that were like, I'm not buying any of this stuff. It's dangerous. You know, it's almost bury your head in the sand like the Great Depression. I'm going to not do investing. And it was difficult for some people seeing what happened to older people around them to actually learn the right lesson. Other people went in and went, hey, it was right next door to me.

And it didn't hit me, so I'm going to start investing while the markets are low. Other people, I'm not going to invest. It purely depended on what you chose to, which path you chose at that point. Yeah, Joe, you and I were talking yesterday about what's more important, having a high income versus having financial knowledge. I think this is a key example of having financial knowledge. That's the name of the game. if in 2009 you were anywhere between the ages of 22 to 30 again you would have not lost a significant amount of money in the crash but you'd be in your 20s you'd be young enough to to start investing in 2009 and if you have the financial knowledge to know that markets are cyclical and this is a great buying opportunity this two shall pass Yeah, exactly.

Then all you had to do is buy VTSAX in 2009. You don't even have to pick individual stocks. You didn't have to buy it. You didn't have to do any fancy, sophisticated stuff. Just literally a total stock market index fund starting in 2009. And, you know, fast forward 15 years and you'd be good. You know, I think it was a lot harder to be 40 in 2009 because you would have law. half of what you'd already worked for. And it was a lot harder to be 10 in 2009 because you

weren't old enough to be able to take advantage of that opportunity. So I think being in your 20s in 2009 was just there's something really uniquely special about that. Joe, how old were you in 2009? I was a little bit older. I was slightly older. I was selling my practice in 2009. I'd actually already sold it and I was moving to Texarkana. I was 41. All right. So then tell me about when you sold it, did you then have a lump sum that you put in the market and then watched it take a 50% haircut? No, it was the way businesses like mine often get sold is where you have an earn out over a number of years. I was being paid partly. So the cool thing was I got to dollar cost average, right? I was paid every six months and every six months when I got

this big bundle of money for my business, I put that in the market. And so as the market was coming up, I put money in a bit at a time. It's funny, the first payments happened right after the market crater. This is well, I sold my business and within six weeks, Lehman Brothers collapsed. Oh, wow. I actually felt bad for the guy that bought the business from me because he bought it at a time that was phenomenal timing for me, but very difficult timing for him. Wow. You have a similar story to Joseph Moore sold his house like a week before the markets collapsed. Right.

Well, I guess the takeaway is just keep buying. Because even you, Joe, 41 in 2009, but you just kept buying. Throughout the crash, throughout the recovery, you just kept buying. Yeah, and ignore the blips. And at the very least, don't sell during that time. But this is wow, because we started off talking about real estate. And the whole thing that you were talking about was real estate. And of course, the big through line is do your math and then go back to the basics, right?

Yeah. And if you want to be a homeowner, I strongly encourage you to do so, but I encourage you to do so in the geographies where it makes sense. rent in Manhattan, own a home. Come be my neighbor, Ezra. Come be my neighbor. Yeah, own a home in Texarkana, Texas, next to Joe. Well, I'm just going to say, even in the New York area, you know, you can own a duplex. Yeah, but who wants to do that when you can be my neighbor?

Let's focus, Paul. Stay focused. Well, thank you, Ezra, for the question. Joe, we've done it again. Again, we did it. And what the, you know, sometimes we have a theme, but this one, we cover. with the spectrum. We were all over the place. Yeah. So this one, comprehensive financial planning from every angle. Real estate, college, coast by life. Joe, where can people find you if they'd like to learn more? I mentioned talking to Professor Linda Grattan. You can hear my discussion with her at Stacking

Benjamin's 1898. If you want to go into living this longer, thinking about your life in terms of 100 years instead of just a career that's 30 years and then 30, 40, 50 years of retirement. If you think about your life a little differently as you're changing paths, I think this is a great discussion, especially for Beth, who called today. But if you're somebody that's like, you know what, I'm a little burned out at work, listen to this woman who's phenomenal at where the future of work is headed and how to elongate your career in a meaningful way that you're going to, going to love. So Stacky Benjamin's 1898, Linda Gretton. Amazing. Well, thank you, Joe. And thanks to all

of you for being afforders. If you have a question that you would like to submit, afford anything.com slash voicemail to hear your voicemail on the show. That's afford anything.com slash voicemail. If you enjoyed today's episode, please share it with friends, family, neighbors, colleagues. Share it with the people in New York. Share it with the people in Texarkana. Share it with anyone who's going to college. The people helping you at ACT, SAD prep. Right. Share it with people in tech and people in accounting.

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And don't forget, afford-anything.com slash voicemail to ask your question. Thanks again for tuning in. My name is Paula Pan. I'm Joe Sal C-high. And we'll meet you in the next episode.