Afford Anything - Q&A: She Has $884K Saved — So Why Can't She Retire?

Episode Date: June 23, 2026

#726: Hey, we're mixing it up today with a super deep dive. We normally go fairly deep on this show, but today we're going even deeper and turning one caller's question into a case study. Download the Four Cornerstone Worksheet to follow along: ⁠www.affordanything.com/cornerstone⁠ An anonymous caller is reevaluating their finances after a series of health challenges, caregiving responsibilities, and major life changes. With most of their wealth tied up in retirement accounts, they’re wondering how to balance tax advantages against the need for greater flexibility and access to their money. We spend most of the episode answering this question in deep detail. At the end of the episode, we talk to another caller whose HOA hit her with a massive unexpected bill. She bought into an HOA, turned her former home into a rental, and years later was hit with a surprise $15,000 special assessment—with only months to pay and no payment plan available. Now she's wondering why the risks of HOA ownership, especially the possibility of massive special assessments, aren't discussed more often—and what prospective buyers should know before purchasing in an HOA community.” We'll dig into that in today's episode. Resources: Download the Four Cornerstone Worksheet: www.affordanything.com/cornerstone 7 Expensive Mistakes Real Estate Investors Make: http://afforanything.com/mistakes Video: Japan's Soccer Fans with Blue Bags Video: Norway's Vikings Fans on Escalator Learn more about your ad choices. Visit podcastchoices.com/adchoices

Joe, we're going to do a deep dive today. We're going swimming. We got a call from a 50-year-old single woman who thought that she could retire early and is now thinking, you know what? After a closer look, she might not be able to retire early. Can she or can't she? We've got a lot of detail. And so we're going to really dive into it. Awesome.

Can't wait. Welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. This show covers five pillars, financial psychologists, increasing your income, investing, real estate and entrepreneurship, acronym Double I Fire. I'm your host, Paula Pant. I have master's in economic reporting from Columbia. Every Tuesday-ish, or most Tuesdays, I answer questions that come from you, and I do so with my buddy, the former financial planner, Joe Sal C-high.

How are you, Joe? Fantastic. We're working on my health lately. I've been thinking a lot about that, so I've been at the gym. And while I was at the gym, I was wondering to myself, like, you know, sometimes you want to a little lazy. Like what what exercises do lazy people really like? And then I figured it out. You know what exercise lazy people like? What is it? Didly squats. Come on, come on, come on. Speaking of health, the caller that we're going to hear from today, she's about to get surgery.

Because she's getting surgery, she has to step away from work for a little while. And during this time off, she's going to be rethinking whether or not she can retire. Speaking of health, yeah. In the voice mail that we're about to play. She gives a lot of information. That's actually the reason that we can do such a deep dive. And she goes really fast. So if you're listening to this, don't be overwhelmed because we are going to break it down. You're going to hear a lot of ticker symbols. You're going to hear a lot of numbers. It's going to all come at you really fast. But don't worry, because Joe and I are breaking this down. Here's our question from Anonymous. Hi, Paula and Joe. I'm seeking your thoughts as I consider changing my investment approach. I'm untaxable, tax exempt and tax deferred accounts.

I'm a 50-year-old single woman who has experienced career changes and health issues, which have impacted my finances. I'm undergoing surgery this month, dealing with an aging parent, my 77-year-old mom, who has a fixed income and several health issues, such as diabetes, high cholesterol, knee pain, and juggling ongoing home maintenance and repairs. Surgery will force me to take a short pause and recovery. I want to use this time to reset how I approach my investing. I want to grow my investments and have more flexibility in accessing the money. My questions are, do I consider investing more in my taxable and tax exempt accounts. If yes, what is the best ways to determine how much to invest in these accounts? At what point do I minimize my contribution amounts for my

work for 3B? How much do I need to have in cash for my own emergency fund versus my families? I realized I needed to have these amounts in different accounts to make any progress on my own. Emergency fund, lastly, I wanted to retire early but considering my circumstances, that might not be possible. Overall, I want to focus on financial flexibility. Here's what I have. In tax-devert accounts, of work 4.3B, which include employer contributions, and I'm 100% vested, 142,993. Traditional IRA, 583,570, and annuity, 18,995, where an automatic transfer of $77,000 to my traditional IRA occurs yearly. And tax exempt accounts, a work Roth 4-3B, where I'm 100% vested, 25,000, Roth IRA, 43,278, and taxable accounts, a Vanguard brokerage account, which is my fire account, 39,100.

10. Amount is invested in federal money market fund, VTSAX, VGT, VPU, VYM, and VXUS, a Fidelity brokerage account, which is for family and home repairs, $10,939. Amount is invested in FZR-O-X, F-U-T-Y, F-L-P-S-X, and individual stocks. For cash-on-hand, a Vanguard-Banguard cash-plus account, my own emergency fund, 17,315. A money market account, my family emergency fund, 4,713. I will have a monthly pension amount of 1,490, which increases as I continue working. I'm 100% vested. My current debts are a mortgage of 16,154 at a 2.25 interest rate, car loan of 6,793, at a 4.19 interest rate, a credit card balance of 1,207, which I pay off the entire balance every month, surgery expenses of 6,227, which I'll pay via payment plan at 0% interest rate. my current salary is 119,184.

I have been contributing 10% to my pre-tax 4-3B and 0% to my Roth for 3B in my Vanguard account of by $203 of BTSAX each pay period for a total of 26 pay periods. Also for background, my yearly expenses have been anywhere from 80,000 in 2022 to the highest at 101,100 in 2024. Paul, you weren't kidding. That's a lot of information. It's so much info. In this case, I mean, we all have. Let's start off with a couple things. Number one is we all have a lot of this. We have a lot of data, right? And it can seem overwhelming.

And just listening to all the stuff that she is going on in her life, it's easy to feel overwhelmed because it feels like a lot of complexity. So we have to build some constructs that help us take this thing that seems very complex. I mean, she has her own health to worry about. She is aging parent to worry about. She has home maintenance issues to worry about. She wants to retire early and hopefully still can. So she has all these things. And then she has all these wonderful savings toward these things.

but putting this all together, it initially looks like a mess. That's not just her. This is, this is everybody. This is just life, right? Right. Yeah. We all have 50 things going on. And over time, when you get to 50 years old, you just have six different accounts.

Each one has five positions. And then it's ticker, ticker, ticker, ticker, ticker, ticker symbol. So let's not focus on them all at once. I do this thing. When I was trained as a financial planner, you have to be able to look at this stuff and get away from some of the complexity. And the way that we do this, I use this construct called the four cornerstones. And the four cornerstones takes all the information that she just gave us and draw on a sheet of paper like a plus sign with four quadrants. And we're going to lay these things out in the four quadrant so we can take a look at each quadrant and see.

how they look. So that's the first thing I do. For anybody who wants to go through this exercise at home, we're going to have a downloadable cornerstone, four quadrants. You can download this and follow along at home and do this with your own finances. You can download it at afford anything.com slash cornerstone. Let's go over what the four cornerstones represent. And we don't have all the information for the cornerstones. There's some that is missing. So we're going to have to make some assumptions or we can just work around it for now. It's easy when you look at the four cornerstones approach to know what information you still need, what information you don't have. So the upper left cornerstone, this is your day-to-day living, Paula. What gets you through your daily life? So

this is cash flow. So she told us how much money she makes per year. She told us how much her expenses are per year. So we already have those things. So your budget is in the upper left quadrant. And for my clients that needed budget help, sometimes this is the first thing that we did because we needed help freeing up money that we'd be able to save. So money coming in, money going out is in the upper left. How does that look? And generally, what I would put when I was a financial planner for most people is exactly what she gave us. 119,184 coming in. 10% to the pre-tax 403B.

I actually don't put that there, but I'll get to that later. You don't put that in the upper left. I don't. Annual expenses, 80, 100,000. Yeah, between 80,000 to 100. Not 82,1001,000. Thank you. Yeah, so that's going to be a little flexible.

So I'll put that down. But the more granular you can see that we get about that, the better. And what I also want to put in that upper left is any free cash flow that she has. What is an amount of money that she might have that she's not saving right now? We don't know what this is. But I don't think there's a lot, Paula, because she's putting money toward VTSAX, $200. And she has money going into her 401k, 10%. So I don't know.

But that would be question number one up in the upper left. second thing that's in the upper left is going to be her emergency funds funds that she has available for short term what if needs she has two different emergency funds one is actually not really an emergency fund it's for house projects it's what she calls her house account and family fund so we're not going to put that in the upper left but we will put the 17,000 dollars in her vanguard cash plus account in the upper left because that's truly paula the emergency fund. We also put any debt then in the upper left. Mortgage 16,954 at 2.254, car loan 6,783 at 4.9%. Surgery expenses on a 0% payment plan, $6,227. So we have all those in the upper left. All right. So the upper left is

your income, your expenses, your emergency fund, your debt. all of that day-to-day living stuff. All of that stuff. So we have some of that heartbeat. The question is, the immediate question is, and we'll begin analyzing this more later and see how we can help her reach her goals, which we'll also get to in a minute,

because we're not even up to the goals yet. We're just laying it out. And then we'll go to what does she want to do later? One initial question is, inside of her budget, is there a number that represents free cash flow? We don't know. I don't think so. It sounds as though every dollar is accounted for.

It does sound like it. Because the money that she isn't using for her living expenses is being directed towards intentional savings, such as that 403B. And there still can be some optimization there, right? I mean, is she spending according to her values? Are there things, you know, subscriptions that she's not using a cell phone plan? Is there any way that she can change things or are there economies of scale that she's not taking So there might be some things, but we're going to let all that go now. We're not focused on that. We're just laying it out. Then we go to the upper right. If the upper left is our day to day, our upper right is what happens when things go wrong. So upper right is going to be your insurances. You can also have that emergency fund really straddle upper left and upper right. If you've got a decent emergency fund, you can raise your deductibles as an example. So So emergency fund really can go upper left and upper right, kind of straddle the two.

One framework, just to put a pin in that and add some description here, one framework that many people use because the term emergency fund can be really broad. And some people have these different buckets of kind of different sub buckets inside of an emergency fund. There's the portion of your emergency fund that might represent one or two months of living expenses. And it's that portion that you tap when expected, I don't even want to call them emergencies, but, you know, the expected big ticket items that you know will happen, they're guaranteed to happen from time to time. You just don't know when.

Your refrigerator breaks down. Your refrigerator breaks down. Your car engine goes to crap. You run over a pack of nails and get four flat tires. It's a bad day. Yeah, it's a bad day, right? But you know that these things will happen from time to time. You don't know when they're going to happen, but at some point, you're going to drive over a pack of nails.

And on the base of that, Paula, it's insurance. It is insurance. And it's why I don't like, I don't like thinking about buying insurance. I like thinking about managing risk. Right. So when you say it's insurance, you mean it in the metaphorical sense of the word. Yes, in the much broader sense. And I think we take a broader term.

we're no longer going to say, should I buy this insurance or not? The first thing we're going to ask is, what is my risk and am I covering it? Right. So then in terms of the emergency fund straddling both the upper left and upper right, what you could do is the portion of your emergency fund that covers, we'll say the day-to-day living of major things that you know will happen, but you don't know when, such as appliances, car repairs, things like that. That can be the upper left portion. And then the like true black swan emergencies, you get sued. You get disabled. Yeah.

The things that may never happen in your lifetime, hopefully you go your entire lifetime without ever getting sued. Yeah. But if you do, this is the portion of the emergency fund that is available for that. You can go crazy in the upper right listing all the different risks. there are a few that I would put, there are five specifically that I put in the upper right. You can put more. My five are disability.

What's my disability coverage look like currently? Life insurance. Is there anybody that needs life insurance coverage? If I have it, what is it? How much is it? We'll think about if it's enough, if it's too much later, but we're just going to list it. What disability insurance do I have? What life insurance do I have?

Those are the two things. there's a one in one chance that you will die someday. No, no, no, no, just get out of here alive. Disability is a much higher percentage. And depending on the source and how broadly we term disability, it can be as high as one in seven people, has some short-term disability event that happens during their life. A more common statistic is about one in 30 that you'll see. So looking at disability, I want to list that. Then, then the smaller ones, but important, because why,

the magnitude might not be as high, the chance of it happening still is very high. Your auto coverage, what is your auto coverage and what is your homeowners? And you might list just a few of the basics there just to make sure that you have those down. You might be thinking, Joe, that's only four. Then my estate plan. Do I have a trust? Do I have a will? Do I have power of attorney? Do I have health care patient, patient advocate designation? So my estate plan, homeowners or renters, auto insurance, disability coverage, life insurance, all go in the upper right, plus whatever portion of my emergency fund is to keep my deductibles high and to cover, you know, what if I end up being sued as part of an auto insurance claim?

Auto insurance is going to cover part of it. It's going to be a part that is on me. What's my deductible? Deductible management goes over there. Now, for other people, they might put other risks that they have specifically in their life. as you imagine we can go crazy on this side as well, but we just want to get it in front of us, so put those things out. She didn't leave us any of those details, Paula. It wasn't important to her question, but in terms of getting it all out, what we're going to be looking for

and looking at as we unpack this is we're going to answer her specific questions, but what we also don't want to have happen is unintended consequences, right? We answer the question, but then something else, rears its head and because we're focused over to the right, something happens on the left. As a financial planner, I always wanted to make sure that things didn't come out of the blue. Because what's crazy is working with about 120 families, I will tell you, something doesn't come out of the blue for you every day. But when you're helping 120 families manage their money, something's coming out of the blue for somebody nearly every day. I was getting a call going,

guess what happened? Right. This weird thing happened. Right. Nearly daily. And technically, this time, we'd be focused on the left and something comes out of the right. Right, exactly. Yes. And Joe, to your point, broadening this out for the entire audience, as you're going through this exercise yourself at home and going through the four corners and laying out your own details in your four corners sheet, your own risks are going to be very individual. There are some people who are listening who are business owners. And if you own a business, you have a certain set of risks that double.

W2 employees like this particular caller. By the way, we need to give her a name because she's anonymous. We do. But you have a certain set of risks as a business owner that W2 employees don't have, and that would go on the upper right. If you are here on an H-1B visa and you're not sure if you're going to be able to get permanent residency and you have to make contingency plans based on what's happening with that application, right? There are a whole bunch of contingencies that you may need.

planned for. We interviewed somebody recently, the director of an autism organization. If you have a child or any loved one, a cousin, a sibling, if there's somebody in your life who you are caring for, who has some type of developmental disability, there's a whole set of risks that are associated with that. We'll talk later in this episode about this particular caller caretaking for her 77-year-old mom, how do you manage that? For every person listening, your risks, you know, though, what could go wrong is incredibly individual. Yeah, that upper right is going to be, you know, you could also put your health insurance there or especially if you have very minimal coverage when it comes to health care. You could put that there. You could, there are so many things.

your HSA will go in that upper right quadrant then, Paula. These two, I call the two that you live by. We live our life and we experience risks. We never know when they're going to hit, but we want to make sure that that's taken care of. So I actually have a much closer to a double line between the top two and the bottom two, because the bottom two are the ones that we're going to grow by. So any goal in the next few years, and few years depends on your time frame, your outlook,

but your, we call them short-term goals for most people. I'm looking at goals seven, eight years and less. So I put those in the lower left-hand quadrant right below your budget and your emergency fund and any debt that you have and free cash flow. So I put that there. So this would be her house fund, right? So this would be that Vanguard account with roughly $17,000 in it will go into that account. Now, she could also put, because she's 50, depending on when she wants to retire, she could put the early years worth of money that she wants for the early retirement. She could put that in the lower left. I sometimes find because my goal is just to parse this out and keep the goals. separate, even if it's an early retirement, I kind of like keeping retirement together on the right, just because I'm trying to get a clear picture of this goal versus that goal. Am I taking care of this one? And if I've got part of retirement in the left, like if you're retired now

and you're doing this yourself, even though you're going to spend some money in the next seven years, I kind of like leaving your retirement assets all together in one spot. So that'll be the lower right hand. And that's where she's going to put her Roth 401k, her Roth IRA, her traditional 403B, the annuity, all of those assets, those tax deferred assets are going in that account plus her fire account, as she calls it, is going to go in that account, the taxable piece. And that truly is the crux of her question, right, is how do I change my saving in these? Her first question was, tax-wise, do I slow down the money into my 403B?

do I pick up more money into my fire account? How do I manage all these different goals? Right. And we actually, because she gave a lot of numbers, we consolidated these numbers into tax deferred, tax exempt, and taxable plus your cash reserves to give the audience a snapshot of the numbers that we're going to work with in this case study. She talked about 403B, trad IRA, and an annuity. We lumped all of that together into tax deferred accounts. That amounts to $744,000. She also talked about a Roth 403B and a Roth IRA. We lump that together into tax exempt, and that amounts to $68,000.

And then she talked about two brokerage accounts. We lumped that into taxable, and it's approximately $50,000. And then cash reserves about $22,000 split between personal and family emergency funds. So that's the first thing. I have now taken all of this huge amount of data that she gave us. and I've now put it into four quadrants. We've actually been able to use three. We don't have information on the fourth.

We're going to want that to make sure that everything dovetails because it truly does. If I have, she has a surgery, which I'm sure you generally don't plan on surgery 20 years before they happen, maybe a year before they happen or two years before they happen, depending on what type of surgery. But generally, that's not on the radar until all of a sudden it is. we want to make sure that our risk management strategy dovetails with all the answers that we give. And we don't have that information. So we know that. We know on the upper left quadrant budget-wise, there might be some things she can do inside of her budget that we don't know about.

Then we can dig into the lower left-hand quadrant and say, are these assets relevant and meaningful for a goal that's less than seven years? These are things we should be holding in that account? And then for goals that are over seven years is our tax strategy really good. Now, tax strategy is going to play a part everywhere else, but really in that lower right, we can really laser in on, do we have the flexibility that we need tax-wise? And obviously, is there enough money there? I don't use this for that last question. Is there enough money there?

This is the first illustration. There's a second one that I then pair this with. So I've got this to help me stay organized. The second is, then we build a timeline. Because on the timeline, we want to now take her questions and we want to make sure that we can see them next to each other. And the reason I like this, Paula, is because the sequence of events matter. We worry about sequence of return risk. So we worry about that in the earliest, but we don't worry enough, I think, about sequence of our goals risk. And what happens is we do one or two things generally as people. We either hyper focus on the short-term goals and we never think about the long-term goals.

This is society in general. We don't save any money because we think we can't afford to, right? I've got too many short-term things going on. I can't afford to save. And then all of a sudden we're 55. We wake up and we go, oh, my God, I didn't save nearly what I should have. That's not generally this community. That's going to be some people that finally found us.

We're glad you're here. And you know what? it's easier to get on track than most people think, which is really exciting when you hear these success stories. But for most of our community, I think we hyper focus on the long-term things and optimizing. And then this, oh, my goodness, all of a sudden, this thing came out of the blue and I don't have money in the right place. What do I do? We want to make sure that we're looking at all of the goals, not just hyper-focused on the thing that's in our brain. So I take this, we have to give her a name. I can't just keep saying this wonderful woman.

I have an idea. Yeah. I don't know if you know this, Paula, but there is a soccer tournament going on right now. Oh, I've heard there's a globe and a drinking vessel. That's right. Yes. A big drinking vessel. Holy cow. Yes, I believe it's called the World Cup. And the stories I hear about the World Cup are So wonderful. And of course, this is the men's World Cup, but I'll get, we'll, we'll, we'll bridge that gap in a minute. But I love like the stories of the Japan team. Have you seen the Japan fans with the big blue, they get these big blue things that

they beat during the game. They fill them full of air and they beat them during the game. They look like big plastic blue bags. No, but IKEA has some big plastic blue bags. They do. Yeah, that's what I imagine. Well, let me tell you what they do. I'm imagining them with the IKEA.

bags. They shake them and they beat on them. You can go look up, you know, on YouTube or TikTok or wherever, Instagram, look up these videos of the Japanese fans. And I love the different ways that different fans celebrate their teams. But not only do they use them to cheer. And so the whole Japanese section is all this blue, the sea of blue. Afterwards, they turn them over and they are trash bags and they pick up their section. Oh, wow. Isn't that cool? Oh, that is cool. Wow. That's That's so community responsible. It is so awesome. And the Scottish fans do two other cool community things that we've heard about. The Scottish fans, number one, the rumor is that they drank so much beer in Boston that Sam Adams had to get more. So I want to party with the Scottish fans. But number two is they also clean up after themselves. Wow.

Which is really, really cool. So, you know, we have a big party at the end of the party. we make sure everything goes back where it is. Just some neat traditions. I saw a bunch of Norwegian fans. Norway hasn't been to the World Cup in a long time. A bunch of Norway fans going up an escalator. They all have those famous Viking horn helmets on.

And they're sitting on the escalator all rowing as they're going up up the escalator. Oh, that's great. Yeah. So just looking at all these traditions around the world, I thought who is maybe one of the top soccer stars. of all time. And it's got to be this wonderful woman, Mia Ham. It's got to be Mia. Oh, yeah. Yeah. So American soccer star Mia Ham. So we should call her Mia. Mia. Okay. In honor of the World Cup. Mia. Anonymous, your name is Mia. So we draw a line. So we draw a timeline. All right. And again, you can download all of this.

We're going to have it all mapped out at afford anything.com slash cornerstone. And we'll also have a synopsis of everything that we talked about there. So you'll remember what goes in, what quadrant, how to think about all of that. We'll have the double line between the top, which represents the goals we live by and the bottom, which represents what we grow by. On the timeline, and by the way, the timeline is the part of my book where we take a part of the Afford Anything podcast, and it's actually in my book. Yeah. Because we illustrated timelining before here. In timelining, we draw Mia as a stick person on the left, and then we draw a line and that line represents the timeline of her life. And then we start setting out these goals.

So the first goal, we're going to put a big half moon somewhere around age 60. It is this big bag of money she's going to need to get her from 60 through the rest of her life. And this is financial independence. And one of her questions is, I want to retire early. I don't know when I can. I would put it around 60 to start with just to see, you know, you put it 50. I don't care where you put it. Just put it 55, 60, 62, wherever. Then inside of this ball, you put a question mark. Unless you already know how much money it is.

Because my first question when I was a financial planner was, okay, Mia, your goal is early retirement. Let's say you retire at 60, question mark. How much money do we need in this ball? You've got all these assets. How much money would you need? And, Paula, you already know what the answer was 99% of the time. Well, if her expenses are around $100,000 a year, then she would need.

about 2.5 million. You overestimate the average person. Ninety-nine percent of the time the answer was, I have no idea. And actually, Mia needs less than that because she is a pension. That's right. She has a pension. Yes. And she also has social security. We don't know how much, but she will have some social security. Yeah. So the question is, we've got to figure that out. If we just set a year, so Mia and you and I would agree on a year to start with, just to put a point down, If I'm going to get minimum viable retirement, what age do we want to start at and how much money we're going to spend per year? And then we need to know what that number is. A lot of calculators to do that.

You can either be back of the envelope to start off with or you can get really granular with a great calculator or with a financial planner. But we need to know that number. And then we've got these short-term things. You have the house fund, the repairs. What repairs is she talking about? What maintenance? What years does she want to do those? And how much are the individual repairs? Again, we plot that on the timeline. I want to do redo all my windows in the house. It's going to be $15,000. It's going to be two years from now. Boom. I've got this ball of money. 15,000 bucks. I've got care of my mom. What does care of mom look like financially? That's going to obviously last a good amount of time. I actually put a second little arc line below the timeline for this, where I know something's ongoing and ongoing expense. And so you're recreating mom's reasonable timeline where you're helping mom from now until

the end of her lifetime. So help out mom ongoing expense during this timeframe. Because now you can already see. Now we have helping mom. and we have house repairs in different buckets on the same piece of the timeline together. These goals are going to create friction against each other because you're going to want to make sure you have money for both to help out on both sides. You have the surgery, which is sounds like it's right now.

It's happening very soon. Surgery date. Any amount of money that you're going to need for ongoing expenses over and above the 0% surgery payback. Is there any other expenses, if there are, that goes on the timeline? I would then continue to quiz Mia about other things coming up. Oh, when I retire, I want to take a trip around the world, that very specific amount of money that she has. People say, I want to buy an RV. I want to buy that rental piece property. Whatever it is, you put a ball on the timeline. So we're going to fill up as many of the knowns as possible. And by the way,

at this point, Paula, be happy to dream, you know, can I do something else? And Mia has a dream, right? How early can I make that? I started her at 60. Can we move that up? And if we do move it up, what does that take? So now I have these two things. I can look at the goals against each other, which I love because then it becomes a cage match. It becomes this really cool goal friction against each other and then we have these valuable conversations about if I can't have them all, what comes before what, which is really a great conversation. This isn't about money. The afford anything shows not about money. It's about what do I value and getting what do I really, really want to afford and what am I going to let go? And the timeline is your vehicle that does that. And to make

sure it's not a mess, you've got the four cornerstones to help you just keep it all separate in your brain, and then I can begin applying these four cornerstones into the timeline. And now with these two things working together, now we're actually ready, Paula, to start answering Mia's questions. Well, let's take a moment to hear from the sponsors who allow us to do the initial set up work so that we can answer Mia's question. Spotify, it's Jay Shetty. Are you one of those media strategy people, scrolling through spreadsheets, searching for an audience that pays twice as much attention to your ads than they do on social? Let me introduce you to fans. And they're here with me on Spotify. Trust me, I know fans. They don't skip. They stay for hours. They don't move

on. They manifest. They're not a demographic group. They're fans. Spotify advertising. You're among fans. Welcome back. All right, so we've drawn the four cornerstones. We've created a timeline. You followed along, afford anything.com slash cornerstone. Now it's time to answer Mia's question. So let's go back and begin parsing out then, Paula, her initial questions. My questions are, do I consider investing more in my taxable and tax exempt accounts? If yes, what is the best ways to determine how much to invest in these accounts? So question number one is, do I put more of my taxable and tax exempt accounts? In order to build out that tax triangle, yes, because she has 744,000 in the tax deferred accounts

and only 68,000 in tax exempt, and only 50,000 in taxable. The thing that I like about the tax exempt accounts, let's start there. The thing that I like about that, Paula, two things. Number one, she's talking about how on the tax exempt front, if she takes time off, work. My first question would be, does that mean she's not getting paid during that time? Like as she's recovering from surgery? Yeah. If she's getting money from a disability as an example, if she gets disability payments or maybe she's not being paid at all. If she's not, then her income's going to be lower. We don't need the pre-tax burden the hand right now as much.

Burden the hand, meaning she gets a tax break immediately. It makes it even easier to put money into the tax exempt side anyway, because there's going to be less of a tax break. burden. I would like it from that standpoint as well, not just from the tax triangle standpoint, but the second thing I like, which I think I like even better, is the fact that she's either going to have to wait till 55 or 59 and a half to get at her pre-tax money. And that tax exempt money, the money she puts in initially the contribution she could take out whenever she wants. So she gets more flexibility toward her fire goal, as she put it, her retire early goal. So if she is able to retire early, it'll also help with that, Paula.

The major thing that I like about tax-exempt accounts, well, two things. One is I love the fact that all gains are tax-free. And given that she's only 50, she's very young, if we're planning on this money existing until she's in her 90s, a portion of it will, then that's 40 years of growth. And to have 40 years of tax-free growth, or even 30 years, right, for the bucket of money that she's going to be spending at the age of 80, 35 years at 85, you get the picture. That is an incredible amount of growth. The contribution is going to be negligible relative to the growth that will accumulate in that account over the span of 30 to 40 years. That's one of the two reasons that I like it. The other is, as she's tax planning, and we don't know over the same.

span of the next 40 years, what tax rates are going to be, where the band between different tax treatments is going to exist. We don't know in the future what's going to trigger Irma and what's not. We don't know what's going to affect Medicare Part B and D in terms of tax issues that could impact that. Like, we don't know where those lines are going to exist over the span of the next 30 to 40 years. So having a pile of money in tax-exemptic counts, gives her flexibility to tax plan as tax law changes, which it will, which it always does, as tax law changes over the span of the next three to four decades. Matching on her money is automatically added as more pre-tax as well.

So she's still going to be putting money in the pre-tax portion, the company will. So loading up more on the tax exempt works. our answer you can see already, Paula, through the work that we've done just laying this out, the answer about the taxable brokerage question really depends on a few things. What are we talking about in terms of help with mom? Right. What about additional surgery expenses? What are the housing expenses that she has?

And then how is she doing overall based on what her goal would be? Is it to live a similar lifestyle as today? Is it live on less? Is it live on more? Some people feel very comfortable living on $50,000 a year in retirement. They don't spend a lot of money. Other people feel horrible spending $200,000 a year in retirement. So we don't know that.

But based on what type of retirement vision she has, then she looks at that number. How is she doing now? Meaning how much if she really is not going to be able to retire before 55, and the other goals are handled, then I think staying in tax-advantaged accounts makes a lot of sense. If there's a real possibility that she's going to move that needle forward and have a lot of need for funds before 59.5 and especially if it's pre-55, then by all means, we want to use the taxable brokerage more.

Right. And this is where that exercise of laying out the cornerstones and then timelining that out comes in handy because that arc, Joe, that you described, the arc that you draw at the bottom of the timeline that shows, you know, she talked about family emergency fund, right? It shows caretaking for her mom across the span of her mom's life. How much does caretaking for her mom cost? What is the dollar figure that we're going to associate with that? Is that a fixed amount or is it a dynamic amount?

So, for example, are there going to be certain one-time expenses that she'll need a plan for? And how long reasonably does she expect that arc to run? And I love that while we can't answer the question, you can already see how this is going to help her zero in on the answers. It helps you get very, very clear on the answers in a hurry to those questions. So use the Roth. Yes. taxable brokerage depends on how she answers those. I agree. But definitely, definitely tax exempt. Mia, I'd like to see you significantly grow the portion of your assets that's in tax exempt accounts.

Ready for her next question? All right. Let's do it. What's her next question? At what point do I minimize my contribution amounts for my work for 3B? How much do I need to have in cash for my own emergency fund versus my families? Lastly, I wanted to retire early but considering my circumstances, that might not be possible. Overall, I want to focus on financial flexibility. I think we just answered most of those questions. However, let's dig in more. Well, in terms of reducing the amount of money that she's contributing to workplace tax-deferred accounts, I would put as much as possible into tax-exempt.

I mean, the employer match has to go to tax-deferred. that's the law. There's no choice there. Everything besides that, put it into tax exempt. Assuming that she has enough money, and this is the assumption we're making that we don't know the answer to, I really want to dig into what these housing costs are and how much money she needs to help mom, but assuming that those are under control and she has those mechanisms in place that she may or may not be okay there. I see the amounts of money that are in place now, and they look like nice sums.

Over $10,000 in her current emergency fund is a nice emergency fund, and then $17,000 in the house account is a nice amount of money. What I don't see right now, Paula, is any mechanism to replenish those. Her money's going into VTSAX, which for me is the fire account, right, is the financial independence account. I think financial independence is what you're talking about, continuing to put money in tax exempt, and not slowing that down, which is a question she asked, but keeping it going, but making it all tax

exempt as much as possible, I may move VTSAX, stop that, and have that be the money that replenishes her housing fund. VTSAX is a horrible fixing house problems in the next five years fund. The reason is it's going into the stock market, which over short periods of times, incredibly volatile. We don't want it to go there. You wanted to go to that Vanguard money market plus fund. Instead of $200 going to VTSAX, I'm not sure what the number is, but we can figure It's a knowable number if we ask the question, what's the rate at which we're going to be spending down the house fund and helping mom? But I may change the VTSAX over, Paula, to something more like the money market instead. Do we want to talk through her asset allocation?

We do because then the next question is, are these assets the way they are in the right place based on where they're at in the timeline? Right. Exactly. Because while I'm thinking two things, there's asset allocation and there's asset location. So what you just talked about when it comes to VTSAX and its current location, right? VTSAX is a great, great index fund. I mean, big, big portion of my net worth is in VTSAX. But for her, it's not in the right place. Yeah. When I heard going into a fund that I might spend, well, she called it her fire fund. So right now, she's funding this thing that might be seven, eight, nine years out, ten years out. So if she continues to do that, that's fine. But I didn't hear any money going in to replenish all these short term issues that she has. And I think that's going to get rid of some of the stress between these competing goals on the short term end. So in terms of what she told us her goals are,

I think it's in the wrong place. Based on what she told us she wants to use it for, I think it's a fine place to put it. Yeah. Well, the unknowable question is when does she want to fire? And when can she realistically? Yeah. And when can she realistically fire? Yeah.

But let's go into this because the house fund. Number one, individual stocks in a fund that you're going to be spending in the next couple of years. Yep. That's a no. Bad idea. Too volatile. Absolutely too volatile. And I want to make the point.

This is for the sake of everybody listening. I've been having this debate with a friend of mine recently because I have a friend who is completely financially illiterate and he recently asked me for some help. I took a look at his very meager retirement account and it's all in individual stocks. I ordered him to sell out of everything and to put it all into index funds.

He sold out of a bunch of stuff. And then, lo and behold, a week later, I go to check in on like, hey, how are you doing? What did he do? He bought the SpaceX IPO. He bought it at 170 a share, 171 a share. He sold it at like 191 a share. And he was like, look, look, I made a bunch of money.

He was like, look, I made. And based on the quantities he bought, I think he made like $4 or $500. He was like, I made that much money in a couple of minutes, just a couple of minutes of work. And I made all of that money. Huge risk for non-life-changing returns. Yeah, exactly. It's frustrating speaking with him because the idea that I cannot break him of, you know, he sees the result, the outcome. He sees that he made a few hundred dollars for a negligible amount of work in a very short time period in a couple of days. And he's like, wow, look at how much money I made in just a few days with almost no work. And that's what he sees, right? he sees what's on the surface.

The SpaceX IPO is a whole different thing. There's so much FOMO going on. I wrote about it in my newsletter. We did an episode. At the end, when I share what we're doing on Stack & Benjamin's, people can go listen to our whole episode where we break down the SpaceX IPO and how IPOs work and all that stuff. Here's the thing about SpaceX IPO. They raised $75 billion.

There were 71 other IPOs this year. there's been so much press around the SpaceX IPO that people may draw one or two conclusions either. A, I feel like I missed it, so I got to get the next one. I got to get the next IPO because I missed this one, aka all IPOs are the same. You just print money, right? The second thought is it went well. This is your friends. That one went well.

So you learned the wrong lesson, which is I'm going to do the next one. Right. That IPO raised $75 billion. get this there were 71 other IPOs since January 1st combined they raised $35 billion. One IPO double the amount of the other 71 IPOs. All IPOs are not built like this. It's not the same thing. And it's going to be so easy for people to learn the wrong lesson from the SpaceX IPO.

He definitely learned the wrong lesson. that's where it gets tricky because sometimes it works out, but that doesn't mean that it was a good idea. Anyway, we started talking about this because we got onto the topic of individual stocks. Yeah. And the other positions, we would want to look at where they're at along the timeline. So as an example, let's take VPU. VPU is the Vanguard Public Utilities. It's the Vanguard Utilities Index. utilities aren't known for growth, utilities are known for paying a dividend. So what we have is a high dividend is throwing off dividends, which means it's also throwing off tax liabilities, and we still have some volatility.

Now, for a five-year goal, VPU might be great. So if she can begin allocating this fund into what bucket serving which of these house goals, then it's going to be easy because VPU might be great if it's five years out, Paula, but if it's a year out, again, she's got too much volatility in that spot. She has now a bunch of VTSAX. VTSAX is rotten in this account. It's horrible in the lower left. It's great in the lower right when it comes to the four corners.

Vanguard high dividend yield is something that sounds like something we want, Paula. but carries a lot more risk than most people think. When something pays, these are high dividend paying stocks, in some cases maybe high dividend paying bonds. When you look at something that pays high dividend, that sounds awesome until you start thinking about, why does it pay a high dividend? It pays a high dividend either, A,

because it's a utility and it can't grow. Right. Or it's something risky, like a high dividend payers include shipping containerships, which if you buy a container ship and something bad happens to your container ship, there it goes. If it's on the bond side, they change the name, I think to make it more marketable. This is Joe's conspiracy theory. They changed the name to make it more marketable what used to be called junk bonds. And they now call them high yield bonds.

same thing, but the reason a bond is a junk bond is because if Paula has such bad credit, she can't get credit from anybody else. She has to offer this very high repayment. It's the same thing for any person. When they go get a loan, if they can't get a loan from anywhere else, they go down to the payday lender. And the reason they go to the payday lender is because it's the only place they can turn. High yield junk bonds are not high yield because these people,

are givers, their high yield because they have nowhere else to term, which inherently tells you that it's has a little risk built into it. And here's the thing, Paula, those aren't specifically for the house fund. That's just in the taxable brokerage. And so my question is the taxable brokerage, where are we putting it? Emergency fund in the upper left house, take care of mom stuff, or is it lower right? Which quadrant is the taxable brokerage in? What are we doing with it? That will determine whether VTSA FITS. Currently, I don't think any of this fits because I think it's going to be lower left. If it turns out that it's lower right, then my question is, is inside a taxable brokerage,

if it's in the lower right, why do I have these high dividend payers? Because all we're doing is throwing off taxes. I want it to grow. I want the brokerage account, but I want less tax. And I know that I've got a long enough time frame that I'm not going to throw off those things. In the house fund, we have utilities. We have the individual stocks that we mentioned earlier.

And we also have a fund that has a fund manager. It's not an index. It's the Fidelity Low Price Stock Fund. It's a really good fund. It is a really, really, really good fun. Fidelity Investments has a management team that goes out and finds stocks that they consider using a lot of mathematics, why they think these stocks are under price.

The fund gets five stars because it's a management. fund. It is a high expense ratio. It's earned its by high expense ratio. I mean 0.89. So almost 1%. But the results have been there, Paula. There have been great results. But when we talk about a house fund and I'm buying low price can do stocks in a fund that I might spend in the next five years, it's a great fund that I think is misappropriated. I think that part of the plan just needs to be reworked. It does. Begin with the timeline. Forget about the assets you have. Think about the bottom line, Paula, and then start building it according to the timeline. And I say that because people fall in love with what I already have. Yeah. Yeah, there is the endowment effect.

We ascribe added value to things that we already own. Like my daybed, for example, this thing that I got from Wayfair. Because I own it, I have a huge emotional attachment to it that goes way above and beyond its actual value. Right? But we do that with everything that we own. We do it with shoes. We do it with stocks. We do it with everything.

This is why we like index funds because they're hard to fall in love with. It's so hard to say, oh, my goodness, that's the best index. But as an example, you know, this. To an extent, some people do do that with VTSAX. There's a little bit of a cult following around VTSAX that you don't get with, even VTI, which is the ETF wrapper for the same thing. I know. Try saying it's sloppy out loud like I have.

And then watch the reaction people give you, but what are you talking about? Yeah. But as an example, I mentioned that this Fidelity Low Price Stock Fund, if me and I were sitting across the table from each other and I let her know that this is a five-star fun, Morning stars a scale one to five stars. It's a five star fun, well managed fun, great management team, been a rock star for a long, long time. And then I say we need to get rid of it. It's like, but that's a great fund. It's a fantastic. The individual stocks, Paul, are harder, right? Do you know how long I've owned General Electric? We can't get rid of General Electric. So hard. Or God forbid, it's like Nvidia. You know what that stock is done? done. How can I sell it? Yeah. I'm with you. I think we just rework this from the bottom up, beginning with the timeline. Right. And that was why we started this exercise by mapping out

the four corners and the timeline, because everything flows from that. I have one last piece on my end before we say goodbye to Mia, which is the question that I would get when I'd walk through the strategy, with clients that were in Mia's situation. Because sometimes we would add risk to a portfolio. We would add in risk. We talked about unintended consequences, Paula. People would tell me, I'm afraid of the stock market. That's why I keep all my money, my 401k in cash.

The unintended consequence is I'm very safely never going to reach any of my goals. Inflation is going to eat my money alive, all these unintended consequences. So in this community, we can see that. We get that, right? Unintended consequence for a lot of people that are doing a lot of the tax work. I mean, Mia, to some extent, already has tax diversification. She already has a great start there. She has great emergency funds.

She has a good to great savings habit. She has the pension, which is fantastic. So she's got all these things going on. the question Mia may wonder, which is why at this point in the discussion, I take on the role of Sun Su from the art of war that the best battle is the one we don't fight. And I'm going to tell her what the battle. I'm going to anticipate the battle. Mia, if you do what we're telling you to do, will you make more money? The answer is no. You won't. We're actually telling you that based on the number of short-term things, it looks like you'll probably want to de-risk your

portfolio, which means we're getting rid of some of the upside. So if the market goes up, you won't go up as quickly. What we're doing, though, is we're also getting rid of the volatility on the other side. With your short-term goals being the way that they are, we're going to make sure that you have money in the place where you need it, when you need it, which I think is far more important. Now, knowing that, this is the cool thing, knowing that we're not going to make as much money, but we're going to get rid of some of the risk. You know what we can do now in that lower right quadrant, Paula? What's that?

She didn't get into the asset allocation in her long-term goals. We can now notch that up. We can actually take more risk there because we're confident with the short-term stuff's covered. now we can press on the gas in the lower right quadrant because I'm not as worried about these short-term goals like I was in the past. Right. That makes sense. And in fact, many people often ask, you know, they look at lower returns in the short-term bucket and then they'll say, hey, wait a second, why am I getting these lower returns when they're zeroed down on the short-term bucket? Why am I accepting these lower returns if I could be making more money elsewhere? But sometimes by virtue of having lower returns in that short-term bucket, you set yourself up to be able to be aggressive in the long-term bucket. And if you're aggressive and, as we talked about earlier, it's in a tax-exempt account.

It's in Roth accounts. Cool. Bam. Now you are aggressively going after high growth in a bucket where all of that growth is tax-exempt, tax-free. beautiful thing. One more random thing as I look over Mia stuff one more time that I'd like to comment on. When Mia said she had an annuity, she has a 403B as well. So for people that don't understand the difference between a 403B and a 401K, it's just the type of entity that you work for. But many 403Bs have annuities as the structure inside of the 403B. So,

I would have said the annuities misplaced. The annuity probably is misplaced still. My question is, is the annuity inside of a 403B? Is it actually just the device of choice that the administrator uses for their 403B? So is it a 403B annuity or is it just an outside annuity? The reason I ask that is, if it's inside of a 403B, if she no longer works for the employer or she has other options that are non-annuity, she needs to look at what the cost. is going to be a lot of annuities at back-end fees to get out. What's the cost? And then is it worth it

to get out of that annuity? Because she's probably paying fees through the nose inside of that annuity. And even if she takes a short-term hit, it's going to be easy for her to see the crossover point between the fee she pays with index funds versus the fee she's paying for the annuity. It might only take her a couple of years to get back any surrender charge she would have. if it's on the outside, she has a bigger problem, which is if you pull money out of annuity before you're 59 and a half, then you run into some tax issues. You're going to run into some tax issues anyway because annuities are what are called LIFO last in first out, meaning any money the annuity has made is going to get tax before you get to the principal

that got paid in. So annuities are a tax trap. I may set up a strategy. after 59 and a half to eliminate the annuity, but I might wait until then to do it if it's outside of the 403B. But either way, with that pension in place, she has lifetime income coming in there. She doesn't have to worry about Paula. So an annuity really can be turned into a pension. She already has a pension. So that leg of the stool, so to speak, is already taken care of. So I think the annuity can safely go. Just when you do it and how to do it safely depends on whether it's 403B or not. Well, Mia, I hope that gives you a deep dive into what to do next.

Thank you for providing so much detail. Best of luck with your surgery. And I hope you use the downtime to set up the structures, the systems that will allow you to glide into this early retirement. We're going to take one final break to hear from the sponsors who make the show possible. When we return, we're going to hear from an anonymous caller who says that their biggest financial regret is buying into an HOA. We're going to hear why right after this. Welcome back.

Our final call today comes from Anonymous. Hi there, Paula. Love your podcast. I was recently listening to one of your older episodes on financial mistakes. So I wanted to share a big regret financially that I have, which is that I bought into an HOA. Just as a means of sharing these mistakes with others so that they don't end up making the same mistake,

I lived in the property for about a year and then ended up having to move, so I rented it out. At one point in time, the HOA assessed made a special assessment of $15,000, no payment plan. And this was not even for an emergency. The board just decided that the siding on all the units had to be changed. And it had to be done all at once. We found out about the assessment sometime in the spring, and all the money was due by fall of that year.

I even email the board asking for a payment plan, and it was denied. I'm in Texas, and the HOAs here are completely unregulated, as are the property management companies that the HOAs end up hiring. So just a word of warning that if you do end up buying in an HOA, down the line,

there may be a hefty special assessment that comes your way. It can knock you off your feet because one of the other homeowners had lost her job and she was SOL because she still owed that $15,000. And it's not like these properties are worth millions of dollars. There's somewhere in the, I would say, 200 to 300K range. So, you know, anybody who purchases in that range, $15,000 is a lot of money. Just a word of warning, your podcast episode brought to mind the biggest financial regret that I have. Just be wary when you buy into an HOA.

And I think this is a topic that's not discussed enough in the financial world. So again, thank you for your time. Anonymous. Thank you for the comment. Thank you for sharing that story. I'm sorry to hear about the stress that that caused. Oh, that's horrible. Yeah.

And the lack of a payment plan is really bothersome. That, to me, that is the, you know, special assessments happen. But the lack of a payment plan, that in particular is just incredibly insensitive. Most people don't have $15,000 just sitting around. We had a $15,000 assessment during the two years that I lived in Michigan. The road hadn't been paved in our neighborhood for 40 years. I lived there for two years. And right at the end, they decided to pave it.

Just so I could be on the hook. Yikes. It's great. But to your point, Paula, they didn't have an inside payment plan, but they did list out a bunch of resources for people to create payment plans. So they listed out all the options. They went through exactly why it happened. I agreed it had to happen.

I just thought it was bad timing for me. but the road definitely need to be redone. I understood ahead of time that there could be an assessment, but I felt like RHOA was far kinder and gentler than this poor woman's. Yeah, yeah. My dad actually, he owns a condo. They also had a big special assessment. But in that particular case, they allowed a payment plan.

I believe it was a monthly payment over the span of a year. So it was a fairly, they gave everyone a fairly long runway. Yeah, that's great. What's particularly frustrating, you know, when you're a homeowner in an area that is not governed by an HOA, you sometimes get hit with these huge, unexpected bills, but you have full control, full agency, full authority to decide what's an emergency and what's not. I mean, there are certain things if a tree falls and crashes into your roof that is an obvious emergency. But then, homeowners insurance steps in and you pay the deductible.

But maybe it's a high deductible. If a tree falls into your roof, it's a true emergency, it's an act of God, and you're on the hook for the deductible or for anything that insurance won't cover. By contrast, if there's some form of deferred maintenance, like the siding needs to be replaced or the windows need to be replaced, as a homeowner, you have the control, the authority, the agency, to say, all right, I see that the siding needs to be replaced, and I'm going to do it this year or next year or in two years, right? I see that this has to happen, but I as the homeowner get to set that timeline. And we were just talking about timelines, right? Like, timelining your goals, timelining your big ticket expenses, timelining that home maintenance, as we just talked about with Mia, that's part of financial planning. And when you get, you get.

to exercise agency over that. Yes, you might still end up spending the same $15,000, but it feels very different because you were in the driver's seat the whole time. And you get to set that timeline and plan for it. It's a very different feeling than that being imposed onto you by some outside authority. I do some questions for you, Paula, as somebody that knows far more about that than I do. My first thought is she and other people just happen to, you're not without recourse, I feel. I mean, should she contact an attorney and maybe have a strongly written letter to her HOA? Because if there's an issue with, I mean, knowing what the covenants and the contract, before you go into a community with an HSA, I think that's really important.

HOA. Did I say H.O.A? Did I say HSA? You said HSA. I said HSA. Well, it's important on both fronts then. That's funny because obviously I met HOA. But I think it's important to know that before you go into the neighborhood, when I found out our neighborhood had an HOA, I wanted that document before I bought the house. I don't know exactly what I was getting into and how that worked. But it also seems to me that you may be able to, I don't know. Is there an opportunity here? No. In most cases, no, there's not. Great. Because the thing is that, and this is what I tell all of my students. is if you're going to buy into a building or a community that is HOA governed, you have to carefully read all of the documents and understand what the risks are. And actually, AI can really help with this because AI can read a lot of the fine print and can help highlight some of those risks. You yourself should also do an old-fashioned read, but you can double-checked it with AI. Well, especially if there's areas that seem very much written like an attorney and you're not

sure how to parse it. I've done that before where I read it myself and I'm like, hey, I don't know what this means. Can you can you spell this out for me? Right. What are the potential pitfalls of this section of the agreement? Exactly. Yeah. What are the risks? What are the unknown unknowns? You know, if that's the agreement, then that's the agreement. You know, the law is contract enforcement. Okay. Next question. It seems to me, we hear these horror stories about HOAs, but at the end, an HOA is an association made up of people. And you might end up with people that are power hungry or just jerks or want to rule the neighborhood.

But I also feel like finding a way to make a connection with people that are part of the HOA and then appeal to people's humanity. Is that worth your time? I think that's definitely worth your time. I think running for a position on the HOA. you know, running for a seat, if you want to influence the decisions that the HOA make, run for one of those seats. Not a lot of people vote. A very, very small minority of homeowners vote for their HOA members.

So you just need to drum up a little bit of support. And given the low voter turnout, a small amount of support can give you a seat. This reminds me of one of my favorite documentaries is called Join or Die. And it's about how we increasingly no longer know our neighbors and we don't participate in our local governments. And we scream at each other about what's going on in Washington. Right. And what is happening in your backyard? You can have a much more direct effect on.

And in terms of happiness, if we're solving for happiness, there have been the scientific studies that show you are generally happier. if you are involved in your local community. Right. And HOA in particular is one of those, it's one of those areas where you become aware of what it takes to run a community, the power washing, the landscaping, the snow removal, the variety of contractors who don't perform or who raise their prices, or who go out of business or who sell to, you know, there's a lot to manage.

And frankly, that's the reason a lot of people don't run for their HOA board. It is a lot of work. It's a lot of administration. It is truly the rolling up your sleeves, low glamour, high effort, day-to-day grind of running a community. but if you want to be influential in decisions such as do we give our residents more advance notice prior to a special assessment, do we offer some type of a payment plan? I mean, a payment plan, like sufficient advance notice, with enough sufficient advance notice,

you can set up a payment plan because you've just given them so much advance notice that you give them notice in the spring, you start accepting payments in the fall, and then you accept those payments from fall through the following spring. And then the following spring, you begin to work. Boom. There's your payment plan right there. Yeah, we didn't have a payment plan, but we had plenty of advance notice and resources so that people could set up their own payment plan or they could prepay ahead of time themselves, try to. They were invited to prepay the assessment on their own accord if they wanted to. But that's what I'm saying.

So a prepay mechanism. So if you give sufficient advance notice, it's a de facto payment plan. So let's say that you make the announcement in the spring, but the money isn't due until the following spring, well, then you can just start paying early. Yeah, you can just decide to allow people to start paying in the fall. Yeah. And then that de facto sets up a six-month payment plan, right? Yeah.

So if you give sufficient advance notice, that does the work of. of essentially setting up a payment plan. And you actually benefit as the HOA because you, by virtue of setting that up, collect the money early. Are HOA meetings open? They are open to homeowners. So they are not open to the general public, but they are open to the members. Yeah, they're open to all of the members.

Gotcha. For some people, they think, join the board. I don't even go to the meetings. Maybe it starts off with just going to the meetings. Yeah. I am on a board of a group that builds walking trails. And we will just have people, Paula, that are interested in trails that just come to our meeting. And what's cool is they end up participating in the meeting.

Like they end up, we recognize them because they're sitting right in front of us. And they tell us, oh, I really like that project. I want more trails over here. And when you hear this from real people, it's super. And I think in this case, maybe that would have helped the board to do. something that was a little more human. Right, right. To recognize that there are going to be some homeowners who are unemployed,

who've just lost their jobs, right? So yes, if you are a member of the HOA, if you're paying dues to the HOA, you can go to any of their open sessions. Now, they do have some closed door sessions as well, just executive meetings, but they've got plenty of open sessions and those are open to all members. Okay. Thank you. Anonymous, should we give anonymous a name?

Is it too late? Oh, it's never too late to give. I mean, imagine calling in and being anonymous, but not receiving a name. Like, what is, what is going on? Right. What else do we have going on? I know something else on the calendar this week, Paula. It is Merrill Streep's birthday.

What? This week. Wow. Wait, you just happened to know that? I'm part of the Merrill Street fan club, Paula. Her birthday was yesterday. Yesterday, June 22nd. All right.

Well, in honor of Merrill Streep, Anonymous from Texas, you will be Merrill. Big fan of the show, by the way, both Merrill's, this Merrill and Merrill Street. Well, thanks to all of you for being part of the Afford- Anything community. If you have a question, please go to afford-anything.com slash voicemail and leave your question there. That's afford-anything.com slash voicemail. Again, remember, you can download our four-cornerstone exercise for free. at afford anything.com slash cornerstone. Oh, wait, Joe, I haven't asked you what's going on in your, I'm running ahead of myself. She's getting all excited. Joe, what's going on in your world?

I think I mentioned it earlier, but yesterday we went over the SpaceX IPO. I like going through and taking that apart, mostly for the same reason we talked about it today. But if you want to know more, A, how IPOs work, B, why you shouldn't have FOMO around. the SpaceX IPO. Also, why major media talked about how the stock went up 20% on day one, you did not get 20% unless you were an insider. You didn't get 21%. How does that work? How can they say that people got 20% and I didn't or individual investors didn't? We talk about that. We also talk about how this may be changing the game with indexes because the NASDAQ index is a lot of people. No, change the rules. Change the rules. Fast tracked it. 15 days. And what's cool is we have

two more of these coming up. Soon we're going to have an open AI IPO coming and we'll also have an um, panthropy, claude, anthropic. Yeah, thank you. I know the name. Yeah. So we have those coming. So it's a good primer. So that's yesterday on stacking benchmarks. Amazing. Well, Joe, thank you for joining us. Thank you for being part of the afforder community. Thanks for the great. questions. And by the way, thanks to Merrill for us being able to talk about HOAs and being a part of your local community. And it really stinks. And I love the cautionary tale. But it's huge thanks to Mia for sharing so much data that we were able to dive into her question. Absolutely. And thanks to all of you for being afforders. I'm Paula Pan. I'm Joe Selcihai. And we'll meet you in the next

episode.