Afford Anything - Q&A: Should Your Emergency Fund Be Invested?

Episode Date: March 10, 2026

#696: (01:50) Jeremy has been a careful budgeter for years, but a surprise car repair has him tapping his emergency fund. With rates falling, he’s wondering if cash is enough or if he should try bonds or a CD ladder to keep up with inflation. (22:22) A listener in Canada has a DIY portfolio but is tempted by Dimensional Funds, which requires a pricey advisor. At the same time, she’s thinking about leaving work and returning to school, but also wants to keep financially supporting her parents. (41:27) Anonymous is navigating the tricky waters of buying a new home while still living in their current one. He is considering a bridge loan to avoid a contingent offer, but he’s worried about the strict timeline and potential financial pitfalls. Is a bridge loan a smart move, or does the risk of being stuck outweigh the convenience? Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hey, Joe, you know what's been great about being a saver for the past few years? That you have more money in the bank. And that money over the past couple of years has made a pretty good yield. Yes, it has. And we all remember pre-pandemic when money was making zero or near zero. Now it's actually making something, but that's starting to go down, down. By the way, I love how we can play the fact that inflation's been really high as a positive. But if you're a saver, you know what?

that means, cha-ching. Silver lining, Joe, silver lining. Well, we're going to talk about that today. We're also going to talk about bridge loans when you're buying and selling a home. Oh, I thought it was a loan on a bridge. Oh, okay, okay.

And we're going to walk through the question of, do I stay in my job so I can support my family financially or do I do something that gives me more life, but that has some monetary drawbacks? All in one episode. All in one episode. 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. It's double-eye fire.

I'm your host, Paula Pant. I trained in economic reporting at Columbia. Every other episode-ish, we answer questions from you, and I do so with my buddy, the former financial planner, Joe Sal C-high. What's up, Joe? Well, I'm a little bit sad today, Paula. Well, why's that? Well, because, you know, you look at the news and you hear about different people passing away, and I found out the guy that invented the wind chill died.

The wind chill? Yeah, you know, the wind chill factor. Right. Yeah, he was 98 years old, but the good news is he only felt like he was 87, so. Oh. Come on. With that, we go to our first question, which comes from Jeremy. Hi, Paul and Joe.

My name is Jeremy, and I'm calling with a question regarding emergency funds. I've been a budgeter for the last five and a half years and I'm just using my fund for the first time due to unexpected car expenses just in time for the holiday season. Yay! On top of that, with the Fed decreasing the interest rate, that means that the high yield savings account where my emergency fund is stored will also have a decrease in its interest rate. So emergency funds are kind of front of mind for me right now. Would it be worth it to store my emergency fund in a trade? asset like a bond fund or do a cd ladder plan to try and eke out an extra percent or two that would help my money keep up with inflation or is that just not a good use of emergency funds and

it should really stay in cash side note you also had a guest speaker recently who said that we should be storing up to 12 months of expenses i'm only at three months and so that seems kind of like a high number to me to try and save so i wanted to get your guys his thoughts on that. Thanks in advance. Jeremy, I love the question. And it is, it's a fantastic and very relevant question given that we've gotten used to the new normal of emergency funds making some yield. And that is, as you point out, starting to be less and less the case. So I want to tackle both of your questions, but I actually want to start with the second question that you asked, which is, how big should your emergency fund be? Because I am very

much of the opinion, that this is going to depend on two things. One is your risk tolerance, and the other is your risk capacity. Tolerance is psychological. Capacity is logistical. Psychologically, that's pretty self-explanatory. What's going to help you sleep easiest at night? No further explanation needed there. Capacity, and I think this is something a lot of people overlook, your capacity is going to differ depending on what type of work you do and how how much support you have. A dual income married couple, I would argue, needs less of an emergency fund or can get away with a smaller emergency fund as compared to a single person or a single income couple because of the fact that if you're a dual income couple and one

person loses their job, you still have the income from the other partner. I think you have to still look at the amount of money that you spend if you're spending every dollar from both of those paychecks, then you probably need a larger emergency fund. But if you're saving a healthy amount, then yeah, you could have a lot less. Yeah. The other piece of it is the type of work that you do because some jobs are just easier to replace than others. There are some fields like healthcare. Most of the jobs we've seen consistently in the jobs report over the past year that almost all new jobs that are getting added, month over, month, over month are consistently in the healthcare sector. That's an arena that's hiring, whereas there are other

sectors in the economy that are either having job freezes or actively having layoffs. So depending on what type of work you do and what sector you're in, it's a clue as to how long you might be unemployed, which is a clue as to how big that emergency fund should be. my entire career as a financial planner every person I met with you know had the pulse of their career choice like if I lost my job today I could get a new job in X months probably and I would make significantly less the same or maybe significantly more than I make now most people had a really really good pulse of their prospects right right and other factors like the size of the town that you live in is going to have an impact on job availability, your willingness and or ability to move to

a new location, if that's what's required in order to relocate for a job. And I realize in the answer I've given up to this point, I've talked about an emergency fund largely in the context of job loss, because that is one of the biggest threats. Then there's also risk associated with do you rent versus do you own a home? And if you own a home, how old are the components? How old is your water heater? How old is your age fact system? I think there's also the threat of a disability, depending on the work that you do and the lifestyle that you have. There are things like Jeremy talked about just how old your car. He had some car repairs and those things never happen on a schedule. all of a sudden you've got surprise.

So I think you've got to take those into account as well. Right. When it comes to risk capacity, and that's just a sampling of the factors. Yeah, and if all those are sketchy, if I lost my job, it would take me forever to get a new one, or I would get a new one, but it would be a significant pay cut.

I'd have to move. My vehicles are old. My house is really old. I have an old furnace system. I have a very old roof, whatever it might be, all of those factors are what play into. The person that he's talking about, Paula, saying up to 12 months. Right. And that up to most people that I worked with when I was an advisor and still today, Jeremy, I think three months for a lot of people is plenty of money.

But for other people, that would be walking a high wire act without a net and very scary because of the type of work they're in and their prospects for the future. I know a woman who has seven dogs. I mean, she has a big emergency fund just for the inevitable veterinary bills that are going to emerge when you've got seven dogs. And I often use your story, Paula, that you talk about publicly, which is you have your own emergency fund and as an entrepreneur, you keep a decent size emergency fund because who knows what's going to happen next week with our network or our show or whatever, you know, whatever might happen. anything could come at you out of the blue. So you've got that, but then you also have another one for your properties. Right. In fact, the one that I have for my properties, I don't even call it a quote unquote an emergency fund. I refer to it as cash reserves just so that mentally I can distinguish between

the two. But yeah, cash reserves for the properties, which is separate from emergency fund for the business. This is another hill, but you already know this, but I don't like the term emergency fund at all. I like cash reserve for everything, but that's a whole other day. When it gets to investing this money, though, Paula, let's tackle his main question. I don't like it. I don't like it at all. I don't like putting the money in bonds. Let's say, Jeremy, this car repair happened right now and your money was in a tradable asset,

like bonds and bonds happen to be down today. How would you feel about taking money out of this spot that's supposedly safe and you have it in this variable place? even low risk bonds like I like, you know, Paul, I've talked about Ginny Mays a lot. A couple of years ago, Ginny Mays had double digit loss. It can be ugly. And so for that reason, I don't like really paying attention to the return of the actual place that I'm. Certainly, I want to get a competitive return.

But the return on an emergency fund, let's be clear, is not the crappy return you get at your bank. It's the fact that I can raise my deductibles on my insurances, like my homeowners or my runners coverage and my car insurance. If I choose. Now, obviously, those deductibles are money. I'm going to have to pay if something bad happens, but that's what the emergency fund is for. I don't have to buy short-term disability coverage because of the fact that that's what my emergency fund is for. So I have all of these costs that I would absorb that I can set off to the side. The other thing that I like about the emergency fund is a lot of people that don't have an emergency fund, when I would look at their investments, they would have their investments in

places where they're curbing the bet, so to speak. They back down the risk level of their investments. And I would ask why you don't need this money for 20 years. They say, well, what if I do? Well, what if, what if I do? So I've backed down the risk of my portfolio because of the fact that I don't have an emergency. If you have an emergency fund, I can. can go ahead and put my money in that 20 year, you know, 10 year spot, whatever the goal is, and have freedom from worry that I'm going to need that, which means over long periods of time, I'm going to get a much higher interest rate on that money. So I think we hyper focus on the interest rate of the institution where we have the money

invested. And we don't think about the true rate of return that we're getting from all these other places in our life because that money's sitting there. So, Joe, you're saying like the delta in what you would pay for, for example, your homeowner's insurance by virtue of having the delta between a policy with a high deductible versus a policy with a low deductible. That is part of the return that you're getting. Add that to your return. I'm curious, Joe, what you think about either a tip slatter or this is something that our previous podcast guest, Colin Roche, talked about, a strategy that he's, he calls T-Bill and Chill.

We all love financial strategies that rhyme. And that is so much catchier than VTSAX and chill. T-Bill and Chill. T-Bill and Chill. I actually like that better for people with large portfolios than VTSAX and chill. So I've got some caveats there. I think you have to buy the T-bills directly from Treasury Direct. And you have to ladder them so that you've got money coming due

at different time periods. To be clear, I don't like this as my first three months money. So I don't want any of my three month money in the T. Bill and Chill strategy. But money that's beyond three months. And the reason for that, Paula, is if I'm going to ladder these, so they come due at different points and I have liquidity happening at different events, I'm going to need some time to get to that first one. Right.

So I think the first three months in the high yield savings account, and then T Bill and Chill is a second tier reserve is a great strategy. The reason, by the way, that I want to buy them directly from Treasury Direct is if you buy bonds on the open market or you sell bonds on the open market, you're not getting what's called the par value, and that is the amount that you paid. So if it's a $10,000 bond, you're not going to get $10,000. Depending on what's going on in the open market, you might get $9,800. You might get $10,200.

people buy and sell between the date that you buy it and the maturity date. So I want to buy it for the specific amount of money. I want to hold it to the specific date that it matures. And if I do that, then I take the market risk completely out of that equation or mostly out of it, right? If I need the money ahead of time, what I like about T bills is T bills have even less fluctuation than the Giddy Mace that I like so much. I mean, this is incredibly boring. So, yeah, tips, T-bills.

And by the way, boring is good in this case, right? Right. That's exactly what we want. I am a fan of T-Bill and Chill. That makes a lot of sense. And I agree, Joe, for the money that's between three to 12 months, a T-Bill-and-Chill approach makes a ton of sense there. This replaces, by the way, the question that Jeremy asked, which was a CD-ladder.

Back when I was a practicing advisor, Paula, CD ladders were great. They were fantastic. But the problem now is banks just don't pay. They just don't pay for CDs. And so my question always is, why would I do a CD when I could get virtually the same, very, very similar rate on my high yield savings account? By the way, the reason banks don't pay is frustrating. On an investor call a few years ago, Bank of America said it out loud, which is that

we're not demanding it. People who put money in CDs, which is not a huge number of people, don't demand a higher rate. And because Bank of America is owned by shareholders, hey, if you're not going to demand it, then we're not going to pay it. So CDs have just become a smaller piece of the pie

for banks like Bank of America. And they don't care. They don't make any money on them. You don't demand a higher rate. So they've pretty much just taken it out of the equation. That made me really angry when I heard that, by the way. We don't pay it because the customer goes, I'm like, are you kidding me?

I think people would buy them more if you made it available. Maybe not. I mean, they've done the math. We haven't. Yeah, I mean, I would assume, if they did come to that conclusion, I would assume that they probably split tested it in different markets and found no appreciable difference in purchase rates. Yeah, as a business owner, why am I going to give more money

to the customer when people will buy it for less. Wow. Another reason why credit unions are a great way to go. 100%. Credit unions are member owned. Yep, you own the company. Yeah. Awesome.

Well, thank you, Jeremy, for the question. In conclusion, keep the first three months in high-yield savings and then anywhere between the amount between three to 12 months if you need it, depending on your life circumstances, T. Bill and Chill. Can we say one more thing about this too before we say goodbye to Jeremy? Yeah, yeah. I also heard Jeremy say, you know, I only have three months and now you're saying 12 months and I just saving that.

Jeremy, the chance that something will happen where you need 12 months for most people is not great today. Over your lifetime, there's a big chance that you may need that much money. but tomorrow you're probably not going to need that money. So we would do two things. If you were my client back when I was an advisor, we would continue our strategy saving toward your long-term goals and we would work toward over time, whatever that number was, eight months, 10 months, 12 months, whatever that might be. So I would just put the wheels in motion to get toward the number that you think that you need based on Paula's previous guess that said 12 months and made you start to rethink this.

So if your number is more than three, it's okay that you're not there. The fact that you have three, you're ahead of 99.9% of people already. I would just be working toward it. I wouldn't stop your long-term savings plan and get to 12 months and then start it back up. Just do it on the side. Could you hear the fear in his voice, though? Like, oh, man. It is overwhelming to think about saving that amount of money in addition to contributing to your 401.

contributing to an IRA, putting money aside in your HSA, you know, in addition to all of those other goals and saving up to buy your next car in cash and maybe saving for the down payment on it's like pretty soon your entire check just gets gobbled up by all these different savings goals. Right. Jeremy moves into a tent. Yeah, yeah, exactly. Ask his friends if you can live in their backyard. So Jeremy, you are doing great. Three months is a fantastic foundation no matter who you are. We're going to take a moment to hear from the sponsors who make this show possible. And when we come back, an anonymous caller has two questions.

One is about dimensional funds. And the other is about a life decision around stay in current soul-sucking job and city or move and go to school even though that's going to have some negative financial ramifications. Where are my gloves? Come on, heat. Winter is hard, but your groceries don't have to be. This winter, stay warm. Tap the banner to order your groceries online at voila.ca.

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Learn more at aboutamazon.ca. Welcome back. Our next question comes from Anonymous. Dear Pulau, I hope you both well. I'm anonymous from Canada. Before I ask my questions, I wanted to share this testimony. I've been listening to the EFord Anything podcast since 2020. I'm proud to have binged and listened to all the episodes, which provided the knowledge and impetus to go from having no investments and leaving paycheck to paycheck to saving and investing over $100,000 in five years.

Merci infiniment for all, as we say in French. My first question concerns dimensional funds. I've been a diligent student of the Effort Anything School of Thought, and as a result, my investments are allocated in line with Joel's guidance on the efficient frontier. It looks a bit different in Canada, given that we don't have access to the same funds. But essentially, in my tax-free savings account, where I have almost all my money, my portfolio is allocated in 11% U.S. mid-cap, 11% U.S. small-cap, 18% U.S. large cap, 13% development. U.S. Funds, 15% emerging markets, 18% Canadian large and small caps, 7% wheat, and 5% precious metals. When you both mentioned dimensional funds in recent episodes, I was intrigued and I investigated how to integrate them into my portfolio. I found out that in Canada, I can only invest in them through financial advisors, which will entail really increasing my entire portfolio to them and letting them manage it for a yearly fee of 1.5% based on the assets under management.

I take great pride in bringing a DIY investor and I feel empowered and in charge of my financial life. Is it worth going that route to add dimensional funds to my portfolio? I would appreciate your input on this. My second question is more about hearing your perspective on the potential major life decision. I'm in a situation where work and the city where I've lived for the past six years. years no longer bring joy. By nature, I'm an intellectually curious person, and my current line of work doesn't provide many opportunities to fulfill this aspect of my personality. I've long thought about returning to school and pursuing a degree in an intellectual field that interests me. Still, I've delayed it to prioritize my financial stability, which in hindsight was the best decision to make.

However, I've reached a point where I'm no longer fulfilled at work and the me thought of staying in my current location for another year brings tears to my eyes. I've saved enough money to finance my return to school in a country and city that I'm excited to live in without taking any loans, but I'm torn because I would love to reach cost fire, which is $200,000 for me. Additionally, my siblings and I have recently started covering my parents' monthly expenses, and it brings me so much joy to be in that position. I would love to continue contributing, but the thought of staying at this job and in this city for another year feels me with sadness. In my heart, I know what to do, but I feel like I need to hear a neutral perspective on the subject before taking this leap of faith. Thank you, thank you so much for everything. I wish you both continued success, peace, health, and prosperity. Ah.

Anonymous, thank you so much. I am so honored. And I want to congratulate you for everything that you've done because you did the hard work of taking action, you know, for making the changes, for implementation. That's the hardest piece, and you've done that. So big, big congratulations to you. Steve, can we get a round of applause?

Congratulations. Before we begin answering your question, we've got to give you a name. She spoke in French, Paula, for a moment. So I think we have to look at most famous, successful, wealthy Canadian women. And I think you can't do any better than Celine Dion. I was wondering if you were about to say Celine Dion. I think that's where you got to go.

All right. Well, then your name will be Celine. Perfect. I think we can tackle the first question very quickly, Paula, if that's right. because I think the meat here really is the second question. Is that second question? I agree. You know, Celine, not only are dimensional funds,

only sold through advisors in Canada. That's the way 99.9% of people get them in the United States. This goes back to a previous episode, and I think it begins with know yourself. So the answer is going to be no. It isn't worth it to have dimensional funds. That said, I use dimensional funds. Just to tell you how serious this no is, I use dimensional funds.

I have dimensional funds in my portfolio. I have them with my financial advisor. So for me, it works great. It's fantastic. But if you already have a great asset allocation, I don't know what your goals are, but it sounds fantastic, just looking at the different positions that you purchased, you seem competitive. you seem to have your act together and most of your success is just having the right allocation toward your goals dimensional i like because of the scientific way that they beat indexes but to your point

you know there's the chance that the advisor will capture then that upside so if you're getting upside through dimensional and then the advisor captures it then you're right back with the same allocation you have now. Right. So if you're doing great, I don't think I'd change it. I don't think I would have FOMO over the fact that Joe has dimensional funds and Celine doesn't. Not a big deal. Right. I agree. If it ain't broke, don't fix it. And your portfolio is great. For people who are wondering what, you know, the draw of dimensional funds, with dimensional funds, the portfolios get rebalanced daily. And so they try to squeeze a little additional return as compared to an index fund. Dimensional funds also often target, you know, specific, specific factors such as small cap,

such as a value tilt, things like that. Well, here is really specifically where I think dimensional funds wins and why, you know, the Nobel Prize winners, because they have more Nobel Prize winners that are part of the dimensional team than any other company, they take the index, they start off with the index. the base assumption that they make is that we don't know who's going to win. We have no idea. We look at the SB 500. We have no idea, Paula, who's going to win in the SB 500.

But it's a ton easier. It's way easier to predict who is definitely not going to win. And so instead of trying to predict winners, they will sell and not buy most obvious losers. So those tilts are going to come from just getting rid of the companies that are probably going to be laggards. And they've proven over a number of years that it's far easier to know who's going to lose than it is to try to predict who's going to win. The interesting thing about that is that you and I may be able to do that in the near future. Already companies like Vanguard and Fidelity are offering these products through high-end platforms where you can take the S&P 500. and you can remove pieces yourself.

It's a pain in the butt. There's still a lot of work to be done. So I feel like this is the early days of exchange traded funds. I remember like in the early 90s talking about exchange traded funds, people going, oh, those, I don't know if those will ever be a thing. Like, and now it's a thing. I think in our future, the possibility for you and me and Celine, if we want to, to have the S&P 500 and take out some of the stocks that,

it clearly will not help us meet our goal is five years away, maybe, because different platforms are already using it with some clients. Yeah, but I agree. Selene, don't sign up for an advisor with a 1.5% fee. Any added return that you may get is going to be dwarfed by the size of that fee, and you don't need it. Let's turn to the second question, which is the more interesting one. And Celine, it sounds as though you already know what it is that you want to do. You already know where you're being called and what you're being called to do. And I would like to put forth the argument that if you move in the direction of that calling, in the short term, yes, there may be a financial hit. But I believe that in the long term, you will probably end up making more money

by doing the thing that lights you up, living in the place that lights you up, and studying the thing and then working in the thing that lights you up. Like, yes, there will be some short-term financial ramifications, which it sounds as though you are prepared to deal with those short-term adjustments. And yes, that means that your family also will be in the short-term negatively affected, but again, in the long term, I think everyone is going to do much better. You, your parents, your siblings, everyone. I think the question for me, Paula, is her approach.

This is my question, because I think it's going to be really important to approach the career change in a good way. And obviously, we don't have any of the details. You and I like questioning assumptions. And so the assumption that Celine shared. was that she would stop working and go to school. And I immediately thought, is that the first thing to do? And let me tell you why. It's because of the fact that we often think,

and this goes back to a previous episode that you and I did not long ago, Paula, where we immediately assumed to get the training, then I'm going to go to college to get it. And that may be where you head, but I think that might actually be later on. And the reason is every job has kind of a dirty underbelly. From the outside, it looks very sexy. It looks awesome. I remember in college, I was in some public relations classes and we were learning all the stuff about PR and the professor

left the room one day when we had a PR professional who came in and was telling us about her day-to-day stuff. And somebody asked a question and she goes, your professor is not going to want me to tell you this, but all the stuff you're learning right now, we don't do any of that. We don't use any of this stuff. Most of the time, I am cold calling businesses to try to get them to do some PR about my client, about trying to do partnerships. And most of the time, these people on the other end are hanging up on me. I'm going to podcasters. I'm going to bloggers. I'm going to radio and TV stations and I'm trying to get them to do stuff that without me, they're not going to want to do. And so my job's 100% this. And I thought, wow, you're really kind of a telemarketer, you know.

But I still think it would be a lot of fun to be in that business. But it wasn't at all what people think initially when they think about public relations. I remember when I went back to school to get my teaching degree, when I was doing my big pivot at age 40 and ended up on the Afford Anything show instead. But I immediately assumed I would go back to school and become a teacher. And you know what, Paula, I learned during my first semester, one of the requirements was I had to go and follow teachers around. And what I should have done was just because I had plenty of friends in town and I could have set this up just to follow teachers around ahead of time. Just tell my friend who is an elementary school principal, I could have just said to Kelly, who is who I could have just said to Kelly, who is who I

called later. I could have said, Kelly, can I just come and follow one of your teachers? Because I'm thinking about getting into teaching. Kelly would have said, yes, I would have got to sit in the back of the room and miss his hornblower's class like I did and learn very quickly really what happens in a classroom and what the issues were. And I remember one teacher, Ryan Murray telling me, and Ryan is an amazing teacher. Ryan told me, she goes, Joe, the problem with teaching is the emperor has no clothes. And you can't let the kids know that the emperor has no clothes. So when the kids would come into Ryan's room, she would be so not mean, but stern, incredibly stern. She goes, if I send anybody to the office, nothing good happens.

The people in the office don't do anything that I really would want to have happen. When parents get involved, it doesn't work the way that you would hope that it would. I just have to make sure that the buck stops with me. And that was all frustrating to hear, but it gave me a better idea for what teaching was truly going. to be than my theoretical classroom experience. Now, if I followed the teacher around or if I followed the PR person around, I still might want to do that job, but then I go into my college experience knowing a little bit more about the job. So I think what I might do first would be to see if there's either an internship program or a part-time way that I can sneak into this

and see a little bit more about how the wheels turn before I make the assumption. And maybe, Celine, you've already done that. Maybe you're already past that point. But I know a lot of people just jump into college. They get two years in like I did. I got two years into my post-Ba teaching program and I went, what am I doing? I don't want to teach. But I really want to teach in a different way.

I want to be on afford anything. So I'm going to start following Paula Pan around in instead. You decided to teach through the microphone and not through the school system. Exactly. Yes. Yes. Initially, went into blogging, which led to the podcast. And honestly, if I could do it over, I would have worked for a major content creator before trying to start my own platform. Of course, at the time, it was such a nascent industry that there just wasn't a lot of options out there to do something like that. But today, I mean, imagine. But today, yeah, today it's a much more established industry.

today, I think for anybody who wants to do something like what I do, yeah, I would 100% work for somebody in that capacity first so you could see it from the inside. And this would be a great employee for you or me too, because they're motivated. They understand what the mission is. You know what I mean? So both people end up getting something really great. You get the experience of seeing what it's like doing this on a daily basis. and your boss gets somebody who clearly is attracted to what the mission is and is on board with the mission.

And I'll tell you, you know, you and I employ people. Sometimes it's frustrating when your employee doesn't truly see what the end mission is. Celine, notice what neither Joe nor I are talking about. Neither of us are talking about the short-term financial ramifications of making this transition. I kind of am. I kind of am because I think you spend money on college. So I think there is a financial ramification that has a nebulous ROI. Right, right, right.

But I'm thinking in terms of maybe whether she quits her job or not. Yeah, yeah, whether she quits her job or not, whether she moves to a new city, there's going to be a cost to quitting her job. There's going to be a cost to moving to a new city. There's going to be a cost to switching to a new city. a new field where her entry into that field may be lower paying. Well, and here's what I wonder too. I mean, let's say that she's on the side, part-time, shadowing people, internship,

whatever, and she's able to keep her job. Now, I know she said that her job does not light her up and the thought of staying there another year is horrible. But if she's already on a different path, does some of that angst go away and she's able to continue making money? I don't know. It sounded pretty misery-making. And if something is that misery-making, I'd get out of it as soon as possible.

Yeah. I don't know. If her knowing that she is on an upward slope and this is a delivery vehicle to get her there safely to the next place, that may change her feelings about her job, knowing that she's not stuck in a place that she doesn't want to be forever and she's actively pursuing the new thing. I don't know. It's just a question I'd have.

ask. Yeah, it might. But if it doesn't, if it still makes her miserable, get out of the thing that makes you miserable. 100%. Never stay in a thing in a place, in a city, in a job, in a relationship, never stay in a thing that makes you miserable. I don't care what the financial ramifications are. Money is a tool. Yeah. I mean, let's put it this way. There can be jobs out there that you don't really care about, but they don't make you miserable. You know, You don't have to be super passionate about doing X thing. But you're working with people you like. You're showing up every day and it's a decent existence.

I don't think, let's put it this way, Paula. I think sometimes the idea of we've got to find something where we skip to work and, you know, we're overjoyed to be there every day is what we're looking for. It doesn't have to be that. Well, I believe everyone has a calling. And you know if you're in your calling or not. And if sometimes you're calling involves tedium, there's going to be a portion of it that involves rehearsing lines or sending emails or typing numbers on a spreadsheet, but you know that it's for a

greater purpose. But I think when we chase passion, we end up chasing certain careers that we think are light them up careers. And there can be aspects of the career that are super fun. I have spoken before about my very wealthy client who made stop signs for a living. But that's fascinating because that is growing a business. And growing a business is strategy. It's, you know, it's growth.

It's hiring. You have to widen your lens when you talk about passion, though. Well, hold on. I said calling. I didn't say passion. Okay. You're calling. Yes.

But I would say that this particular gentleman would never have said my calling is stop signs. Oh, but it might be. Was my point. It might be building a business. Building a business. Building and growing a business. Hiring people. Yeah.

A hundred percent. But I think we still have to have a little wider lens to make sure that that's a piece of it. Yeah, but I do want to distinguish between calling and passion because they're very different concepts. A calling. So I think the term passion is often overused. Passion is misinterpreted as some level of enthusiasm that is supposed to be a pre-curricular. to what you do. And Cal Newport, he really attacks this, what he calls the passion hypothesis. And he proposes this alternative hypothesis, which I very much agree with, which is that passion is

not the precursor, but rather the consequence. It's not the cause, it's the consequence. So assuming that you have a minimum viable interest in a given domain, the more you go into that domain, the more you realize how little you know, right, think of the Dunning Kruger effect. If you don't know very much about a particular field, you assume that you know a lot about it. And then the more that you dive into that field, the more you start to learn about a topic, the more you realize how little you know about that topic. And once you realize how little you know about that topic, that creates curiosity to learn more. there then becomes this self-reinforcing feedback mechanism, feedback loop, in which the more you learn about something, the more you realize how little you know, which makes you learn more about it, which makes you only realize further how little you know. And then that just keeps reinforcing on itself. And that wheel, that feedback mechanism loop, is how passion develops. So passion then becomes the consequence rather than the precursor,

of diving into a particular domain. I think that is true and that is interesting, but that is a separate concept from calling. Calling is what you are put on this earth to do in a very spiritual way. And that is something that only the most quiet parts of you can hear and something that it is your, I believe, moral duty not to ignore.

But I also empathize that there are many people who feel as though they cannot pursue their calling because they have to pay the bills. And when the situation, when the financial situation is so dire that you are ignoring your purpose on this earth because you've got bills to pay, that's a situation we really need to solve for. That's a big part of why this podcast exists. let's solve for that. It doesn't sound like Selina's in that position. It sounds as though she can handle the short-term ramifications. And so let's get her closer to her calling. 100%.

That's my soapbox, Joe. Wow. That was a good one. Thank you. But I like how that line needs to be drawn. I think that people need to hear that because, yeah, passion overplayed. And then we're talking about something much different. Well, thank you, Celine, for that question.

And congratulations. by the way. All right, we're going to take one final break to hear from the sponsors who make the show possible. And when we return, we're going to hear from another anonymous caller who has a question about bridge loans. Welcome back. Our final question today comes from Anonymous. Hi, Paul and Joe. I was hoping to get your thoughts about bridge loans for buying a new primary residence. I don't think I've ever heard these talked about on your podcast before. It seemed like a viable option for someone not wanting to move out of their current house. before buying their new one, or for someone that's trying to avoid an offer with a contingency for selling their current house. The biggest downside I see is that it's immediately putting a time frame on selling your current house with the possible foreclosure or other complications if you're unable to sell it by the due date for that bridge loan. But because I haven't ever really heard them discussed here or rarely in other places, I feel like I'm missing something. There has to be other

downsides on a bridge loan, or maybe this one downside I mentioned earlier, is so huge that it makes them rarely worth it. Thanks. Well, Paula, I think we can chat about bridge loans, but first, he's got to have a name. That's right. How did I almost forgot. He's also anonymous. Well, I kind of want to play off of your joke about bridge loans being used to buy a bridge. And I'm thinking about this beautiful, beautiful bridge that connects Cincinnati, Ohio to Covington, Kentucky. this bridge over the Ohio River. It was designed by John Robling.

It was actually very much designed by his wife, but it was at a time when that couldn't be publicly known. So John Robling, who's a civil engineer, is the namesake of that bridge. They also fictionalized this relationship a little bit on the Gilded Age. The Gilded Age, exactly, exactly, right? Because that bridge, the Bridge over the Ohio River River was the prototype for the Brooklyn Bridge, which is what they showed on the Gilded Age.

Okay, so he's John. Yeah. All right. John's building bridges. John, I think you nailed the first problem with bridge loans. The first problem is the fact that we don't know how far that bridge is going to have to stretch. And because of that, you get into a world of uncertainty that puts a lot of your future at risk. So I think it requires making a bet that you are going to secure the other end of the bridge and be able to tie that down.

For me, number one is that's the reason why bridge loans are used sparingly, but in a case where you have a high degree of certainty on what's at the other end of the bridge. Yeah. What I don't like about it is that it's so high pressure, right? I mean, first of all, it's an expensive loan. It's got... Yeah, the interest rate's going to be higher. Yeah, the interest rate's going to be higher. There are usually going to be some pretty hefty fees just to get into the loan itself,

like pretty hefty origination fees. It's an expensive loan to take out. And then on top of that, you've got the pressure of having to sell your home by a particular deadline. And that means that you might end up deeply, deeply, deeply, discounting your home in order to get it to move. Particularly right now at a time when the housing market is kind of stagnant. Average days on market is pretty long and a lot of properties are not moving as fast as sellers hope.

And, you know, sometimes you go under contract as a seller, you'll go under contract on a property and then something happens with your buyer. They don't like the inspection report. Their financing falls through. they as a couple end up getting a divorce midway through the process of purchasing. I mean, all kinds of things happened with the buyer. There was one property that I purchased. That particular property had gone under contract three times.

Three times. Yeah, yeah, I was the fourth. I ended up ultimately purchasing it, but I was the fourth buyer with whom they went under contract. I bet the people on the other side of that had a low degree of confidence. Yeah. were going to come through after three times to be like, oh, yeah, yeah, you're not lying to me at all. They had given up hope that the fourth time's the charm. Yeah. But, you know, that happens.

And you don't want to be in a position where you have to fire sale your home in order to meet the terms of this bridge loan. Yeah, I think that is the number one reason not to do it. And to put yourself under that type of pressure is is not an enviable position to be in. I think a time when it would have made sense, do you remember 2020 when in many markets, like homes were just boom, boom, boom. Like you could not. Just going.

They were flying off the shelves. Well, and here's where it's a competitive advantage, right? You can use a bridge loan and not have to have a contingency then on selling your house because you have a high degree of confidence that your house is going to sell very quickly. So you know what I mean? If you're in the market to purchase a house and you've sold your house yet in a fast-moving market and you just happen upon a great deal that you want to take advantage of today,

then you could use a bridge loan to make that happen. But still in the back of your mind, Paula, you're like, what if I'm the exception to the rule? Yeah. Well, and I'm thinking back to 2020. I mean, if you really have that high of a degree of confidence, you could still make an offer without a home sale contingency if you are truly that confident that you're going to get a buyer, pronto. Because worst case scenario is you lose your earnest money. You'd have to have closing very quickly, though. I mean, you'd have to sell your house and turn around and have closing on your property before the closing on the, so it would all on the prospective property you're purchasing.

I mean, yeah, yeah. You'd have to put the closing date in the contract. So you do it without a home sale contingency, but put the closing date out further. And then that ends up being not the contingency on selling the house, but still is another reason for the seller in a fast-moving market to go, I think I'd rather take another deal. So, John, just to put it succinctly, you largely nailed the reason why you don't hear us talk about it. You don't hear other channels talk about it is because it's in an enviable position generally to have to use a bridge loan. Thank you for the question, John. And if you are buying and selling a home, best of luck with that. Best of luck with that process. This is a great time to buy in most major metro markets across the

nation. It's a great time to buy a home. Tough time to sell one. We've got someone who called in previously. Oh, like an encore. We've got an encore. You thought we were done, didn't you? So this comes from Nick, who was featured on episode 637 when he asked some questions about how he could give money to his nephew. Hi, Paul and Joe. This is Nick, and I was calling with a follow-up from my question on episode 637 in reference to opening an investment account for my nephew. After a couple of discussions with my brother and his wife going over the advice you both gave, I went ahead with Joe's advice and opened a brokerage account in my name with my nephew, has said as the beneficiary.

Thank you for the tip about FAFSA. It was the deciding factor, and it led to a great discussion about when my brother and his wife would start teaching financial literacy and responsibility to my nephew. My long-term plan is to make monthly contributions to the account as I am able. I'm hopeful that as he grows up, I'll be able to show him the ropes of investing and saving with this account as an example. When he is older and his parents and I feel he is mature enough, I plan to make the shares available to him through in-kind transfers, depending on what the IRS gift limits are in 18 to 25 years.

Hopefully, he'll be able to use them to pay for school, a home, or emergencies. At least that's our plan. Thank you both so much for your wealth of knowledge and guidance on this topic and all the other many topics that you cover. That is so awesome. That is fantastic. You know, I like best about that, Paula? What's that?

It's the discussions about having a plan for college. Right. That is amazing. I think that, Nick, is the biggest gift because it's so hard for people to talk about these things and to talk money and the fact that you do it openly and it sounds like are really having some fun with the discussion. Like, that's great. That is so amazing. And I think the discussion will go every bit as far as the money that you're helping your nephew save. Yes, absolutely. as a note for anyone who's listening who has a baby in their life a child, niece, nephew, a friend's kid, a baby born between 2025 to 2028 who has a social security number. Remember that there is a new type of account. It's the 530A account, which is a tax advantaged account.

account that you can use, you can contribute up to $5,000 per year for that child. That is a new product. I highly encourage anyone who cares for the well-being of a baby born between 2025 to 2028 to make sure that they get one. The 530A account also goes by the name Trump account, and it also goes by the name Invest America account. So if you hear people talking about any of those names, all three of those refer to the same type of account. And depending on your zip code, those accounts could be preceded with money that you don't have to contribute, money that comes from the Treasury. And then there's also, there are a number of private donors, both individuals like Michael and Susan Dell and Ray and Barbara Dahlio,

as well as a handful of corporations, that four children in certain zip codes. those kids will receive even more money. So it's a great opportunity for newborns. And that money must be invested in low fee index funds. Which is really cool. Like imagine, imagine being able to have tax-advanted compounding starting from birth. Yeah, do the compounding math on that. Yeah, exactly.

Can you imagine if the kid keeps that money until their retirement? imagine the compounding effect of even a few thousand dollars starting at birth. A lot more people could go coastfi early. Yeah. Seriously. Nick, thank you for the follow-up. And to anybody else who has previously called in, I strongly encourage you to call with a follow-up, share your story, share what's happened.

We love hearing these. All right, Joe, we've done it again. Unbelievable. Believe it. Joe, where can people find you if they'd like to learn more? You can find me at the Stacking Benjamin show every Monday, Wednesday, Friday, a very relaxed. Almost sounds like morning drive radio. Lots of different segments.

Doug's trivia on Fridays. We have Paula in a roundtable discussion. One recent show that we did is on the different tax software options that you have for filing your tax. which are coming up. And so we had Robert Farrington on from the college investor who dives into all the different software that's out there. They did such a deep dive. So we help people figure out which one's right for you because it really depends on

your situation, which software would be the perfect fit for your taxes. And that's the Stacky Benjamin show. Woo! Tech Software episode! We get very excited about that here. That's how you know money nerds, right? there. Are you sitting down? Guess what we're doing? Well, Joe, thank you for making tax

software. Exciting again. With emphasis on the word again. Well, thanks to all of you for tuning in. If you enjoy today's episode, please share this with friends, family, neighbors, colleagues, share it with babies born between 2025 to 2028 and the people who care for them. Might be giving them an early start. Yeah, exactly. Share it with anyone who drives the Roebling Bridge between Cincinnati and Covington. Share it with the people you're buying your next house from. Yes, share it with your bridge loan officer.

And share it with the people at the credit union when you decide that you don't want to be at Bank of America anymore. That's perfect. Share it with your nephew. Share it with Celine Dion. I know she's a big fan of the show. She talks about finance all the time. That's her lyric. How do I get you alone?

Right. Right? She has a whole song about it. Wait a minute. Did you do a groan noise after my wind chill? And then you pull up that one. That's the lyric to her song. She must have been a loan officer.

How do I get you alone? Now that I think about it, that wasn't even her. That was heart. That was Celine Dion, wasn't it? She sang that song. No, it's my heart will go on. How do I get you alone was heart? Was heart?

What do you mean? That's a lyric. It's the band Heart. Their song is called How Do I Get You Alone? Wait, so she did a cover of it, you're saying? Because she definitely sang it. She definitely sang that lyric. The song alone is performed by the rock band Heart with Ann Wilson as the lead singer.

Oh. There is totally a video. circulating on social media where Celine Dion is singing that lyric and the caption says Celine Dion's first day is a lone officer. That's where the joke comes from. She does. I see it right here. 2.6 million views. Yeah. It's hilarious. All right. Well, share it with the band heart. As usual, we're both right. Ha ha. Share it with the band heart.

Dear Anne Wilson, I think you need to listen to Afford Anything. All right. Well, when you're done sharing the episode, open your favorite podcast playing app, hit the follow button, and leave us a review. Tell us what you enjoy about the show. We love reviews. Love them. They are incredibly helpful in allowing us to book fantastic guests who share advice like T-Bill and Chill.

Also, subscribe to our newsletter, afford-anything.com slash newsletter. Thanks again for being an afforder. I'm Paula Pan. I'm Joe Sal Siye. And we'll meet you in the next episode.