Afford Anything - Q&A: When Being Good With Money … Isn't Good Enough

Episode Date: July 22, 2025

#627: Jlyn and her husband are 20 years from retirement, but they’ve got their eye on a second home they’ll live in when the time comes. Should they make the purchase now, or keep saving? Reese was recently laid off, and she’s struggling to choose between two financially responsible paths. Should she continue her long-term disability insurance? Or is it wiser to save money? Kip’s youngest has finally graduated from college, and he’s looking forward to an early retirement. But, with the eyewatering costs of long-term healthcare, is this still a viable path?  Former financial planner Joe Saul-Sehy and I tackle these three questions in today’s episode. Enjoy! P.S. Got a question? Leave it here. Resource mentioned: Reese's original question in Episode 417 Learn more about your ad choices. Visit podcastchoices.com/adchoices

Joe, when you were a financial planner, did you have clients who came to you and said, you know what, I'm doing well, but I want to be doing better. A hundred percent of them, like everybody. Well, why are you going to hire a financial planner? You're like, yeah, I think I'm doing okay, but I think with your help, I can supersize it. But sometimes people hire financial planners because they're in a moment of financial distress, right? Agreed. You know what's funny?

I think it was a combination of the two. It was, I have this inflection, which was generally, I'm, thinking about retirement and not thinking about it 10 years from now. I'm thinking about it like in six months. We just had a baby. We're getting married. We're thinking about buying a new house. There was totally this inflection moment. But also they thought, I think I need help because I think I can do better. Well, we're going to talk to someone who has that question and is not so much in an inflection moment, but right at that midpoint of life where you're old enough to be established, but still young enough that you've got decades ahead of you and you've got the opportunity to make big changes ahead.

Awesome. We're going to tackle that as well as a question about health insurance, Cobra, and a question about long-term care. 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.

I answer questions from you, and I do so with my buddy, the former financial planner, Joe Sal C-Hi. What's up, Joe? I like the ish. It's like the asterisk. Well, you know, it's a loose every other episode. It gives us some flexibility. Yes, and we always want to build in flexibility, no matter what you do, right? We talk about having a cash cushion. The is Paula's cash cushion on this podcast.

Right, you know, because sometimes someone goes on vacation. Who would do that? Joe, you just got back from 18 days in Greece. Yeah, that sucked. It was horrible. I cried the whole time. You missed the show so much. If I could only be hanging out with the Afford Anything community, but I'm here on the beach in a Greek island. So we recorded a two-part episode with J.L. Collins to occupy one of the Tuesdays.

That bum? You had to work with that bum instead of me? Yeah. To fill in for one of the episodes that we couldn't record together. I'm glad it took J.L. Collins to fill these shoes. It makes me very proud. Well, let's get to our first question, which comes from Jalen. Hi, Paula. My husband and I are both 41 years old. We have three children, ages 8, 11, and 13. I'm a physician, and he works as a commercial project manager. annually, we bring in about $350,000. We tithes 10%, invest 18%, and after all of our savings and expenses come out, we still have a surplus of around $3,000 a month. Our primary residence holds a $550,000 mortgage,

which should be paid off by the time we reach retirement age. It's currently worth over a million dollars. We have paid off $300,000 in med school debt, so other than our house, we are completely debt-free, and we now have around $500,000 invested toward retirement. Additionally, our kids' $529s are being funded by a short-term rental that's on our primary residence, our primary property, that we rent out to a college student on a monthly basis for $980. Our goal is to retire around 60 to 62 years old, and that's what our financial plan currently funding our retirement counts has us on track for. Given that we'd like to to retire in our early 60s, is it wise to prioritize buying a second property now, knowing that we

plan to use it in retirement extensively, and potentially could cash flow a short-term rental now, or to use the extra surplus and keep investing in our current retirement accounts? Secondly, how do you recommend balancing sort of competing goals? We have college savings to consider, as well as savings for things like children's cars and weddings, versus a second property versus retirement investing when we have a consistent monthly surplus, but we want to optimize long-term value. As you're aware, real estate is just getting more expensive. And lastly, what are the biggest financial pitfalls to watch for when considering a lifestyle-based second property that will eventually become a good home during retirement that we would spend a portion of the year in? Paula, I so enjoy your

podcast and I'm looking forward to your answer. Thanks. Jalen, thank you so much for your question. And congratulations on everything that you've built. Congrats on paying off that med school debt. That is huge on being debt-free with the exception of a reasonable mortgage on a primary residence that you have 50% equity in. Congratulations on building out the retirement funds on managing your money so well. So let's talk about what to do next because you're in a spot where you're doing great, but let's see how you can do even better. First, you talk about this second home that you'd like to use in retirement, but retirement is still 20 years away. And it strikes me that what you want to do-win retirement, where you want to live, those things can change in the next 20 years.

So I would be cautious around making decisions now in your early 40s about what you're going to want 20 years into the future. And how that plays out when it comes to decision-making today is that I would not commit to the house that you're going to spend your time in in retirement. I would instead buy the investment that is going to make the best returns so that 20 years in the future, you can spend. those returns however you choose. So don't buy the house that you think you're going to live in when you're 62. If you do buy a rental property, buy the rental property that gives you the best reward commensurate with the level of risk of that property. And then over the next 20 years,

you'll make great returns on that home relative to the level of risk that you take on. And you can use those returns to buy any property that you want. And widely, even though Jalen is 100% correct that the price of real estate is going up, so. is the stock market. If you look at long periods of time, the North American reed index, which looks at large swaths of real estate across the nation, you have a very similar return. And I love keeping your money flexible because 100%. If I look back 20 years ago, because she's looking 20 years in the future, to Joe at 37, the house I would have bought then would not interest me today at all. It wouldn't interest me at all. So I would end up then renovating it, making big changes.

I love the idea of let's look at what's going to get you there the most flexibly and the most reliably so that when she gets to the point that she wants that house, that she can pick the one that really fits her then. The other thing that strikes me is the house that I would buy back when I was doing real estate investing, Paula, the house that I would buy is a great real estate investment is 100% a different property using different metrics than a property that I would buy for my own personal consumption. Exactly. You know, the beauty of money is its fungibility. The beauty of money is that any $1 can be exchanged for any other $1. And when you're committing to a property, you are trading away that fungibility. Real estate is unique in that it is an asset that is infungible. One house cannot be traded for any other house. Jalen, I think what your objective should be for the next 20 years is to amass dollars because then those dollars can be spent on any home that you want.

And I definitely wouldn't be afraid, assuming that you're going to use 20-year time frame investments of falling behind on the real estate front. If you invest in stocks, historically, you haven't fallen behind. Right. Well, and she can also invest in rental properties. So to your point, Joe, the home that you personally prefer for personal consumption is very rarely the home that has a great cap rate relative to its risk profile. I know I keep talking about rewards commensurate with risk when it comes to rental properties. Let me unpack just at a basic level of what I mean when I say this. And Jail and you, you may already know this from having listened to previous episodes, but I'm saying this for the broader audience. When you're looking at a property that would be used as an investment,

broadly speaking, these properties have a variety of risk characteristics. The neighborhood that the property is located in, there's a level of risk associated with that neighborhood. The age of the property has a level of risk. The condition of the property has a level of risk. The amount of leverage that you use on that property has a level of risk. And broadly speaking, properties that are higher risk tend to have a better price-to-rent ratios, more landlord-friendly price-to-rent ratios, and the potential for much bigger returns, but also the potential for much bigger losses.

And by contrast, properties that have lower, you know, lower levels of risk in all dimensions. So newer in age, better in condition, better in neighborhood, class A neighborhood, right? Those properties tend to have lower risk, lower rewards. Their price rent ratios tend to not be as great. Their cap rates tend to be lower. Just like when you're picking any asset, you can choose the property that fits your ideal risk profile, but you want to make sure that whatever it is that you're buying has the best rewards for that risk category, right? If you're going to buy a relatively new Class A property in good condition, you want to take a look at other comparable offerings that share that same risk category and make sure that you're getting a great cap rate and a great price to rent ratio for properties within that category.

And likewise, if you're buying a Class C property that's in a fixer-upper condition, you want to take a look at what the other comparable offerings are and get something with a great price-to-rent ratio and a great cap rate relative to that class of property. As you're looking at different properties across these different categories or classes of properties, you know, you want the one that has the great cap rate. And that's rarely the one that you love. Because you're not the only one that loves it. Well, just because what a person wants in terms of personal consumption has no relevance to the investment characteristics of the property. I'd also like to address, she asked about priorities and with the possibility of cars coming up in the future, weddings maybe in the future, helping out kids and this property investment.

I love this question, Paula. That's why it was chapter one of my book. Look at that product placement drop. Look at that, huh? Yeah, Ninja. I thought I'd sneak that in there. But frankly, it's less about product placement. It's chapter one because I think this is really important.

And I think people get this wrong all the time. I like thinking about my priorities like it's an MMA cage match and asking which one would disappoint me more. So I would ask clients back in the day, let's say, Jalen, that you couldn't retire at 62, but your child would, would get the car at 16. You had to decide between those two. How would you look at those two? Would the child have to pay for part of their own car? Would you buy more of a used car beater that might not be as safe, but might be more affordable? Or would you retire a little bit later and the child gets the car that you think would be appropriate? If you couldn't pay for as much of the child's wedding, Would you downsize the wedding?

Would you have them pay for part of the wedding and still retire at 62? So I like doing this if, let's say there's not money for all the above, which one wins. And then you'll get a clear list of your own priorities because I think Paula, it's impossible for us to answer this question because it was always different depending on the person that I was talking to. No, no, no, no, no. I really want to make sure they have the wedding that they want. I want the money there and available, so I will definitely retire later. That tells me a lot about your feeling about your job. It tells me a lot about your feeling about family and the kids.

It always depended on the person. Everybody had a, no, no, no. I mean, this is a no-brainer. I would definitely do. X. Yes, and it was a no-brainer for you, but it was different for everybody. Everybody's X is different. That is what I would do.

The pitfall, I think, is. in trying to over optimize toward one of those goals. I love the fact that you recognize there's going to be these competing needs for my money in the future. So I would try not to 100% optimize toward one of them. I would lean toward the one that's the biggest priority. But if those priorities change in the future, much like we talked about saving that house decision for 20 years from now, I would put the money in a place where if my time horizon changes, which is one of the risks that certified financial planners talk about all the time is that the time horizon look like it was 10 years and now all of a sudden it's two years right that is a risk so if the time horizon changes that the

money is available and i can quickly change priorities toward that money joe fundamentally what you're talking about is that you can afford anything but not everything wow look at that product placement and then if it's done tournament style where the winner then goes on to compete against the next thing between a and b a one i'll take a which is the winner and a spars against C between A and C who is the winner. Let's say C. Now C competes with G, which one is the winner? Still C. I love it. But then by going tournament style between all of these, you get to place the priorities in a hierarchy. And what's great about that exercise too is that because we listen to podcasts, we read books and we get this kind of an ethic of what everybody else thinks is important. By you going through this yourself, you discern between what I hear everybody else talk about that's important and what truly is important.

to me, which is really what matters. You and I, Joe, we were talking about this behind the scenes last week when the cameras were off because I recently made a spending decision that came under a lot of public criticism. My cat has large cell lymphoma, and I have decided in consultation with my veterinarian to give her chemotherapy, which is going to cost between $16,000 to $18,000. I'm doing so because the veterinarian believes that there's a chance that my cat could go into remission. And if there's a possibility for her cancer to go into remission, I'm going to see if we can make that happen. I talked about that, Joe, on your show, on stacking Benjamins,

and it came under a lot of public criticism because some people could not wrap their heads around the notion of spending between $16,000 to $18,000 on chemotherapy for a pet. But here's the thing. Joe, you and I were talking about this. Separately, I also buy groceries from a supplier that sells what quote unquote ugly produce. It's that misshapen, overstock, the selection is different every week, the shopping window was very narrow, they only deliver on Wednesdays. It's an inconvenient way to buy groceries, but it's overstock, quote unquote, ugly produce. By virtue of buying those discount groceries, I save, I'd say on average about $50 a week relative to what my grocery bill would be if I were to buy groceries at the regular grocery store.

I've been buying quote unquote ugly produce discount groceries for about six years. So let's do the math here. $50 a week times 52 weeks a year times six years. There's your cost of cat chemo right there. And it's not based on anybody else's priorities. It's based on your priorities. And you spent the same amount of money based on something that's incredibly important to you. Yeah, exactly.

And I address this on an episode later on Stacking Benjamin's, just people that had left these reviews of the show. show is that we're all chasing this. We're chasing financial independence. So how do people get negative about the fact that somebody is able to spend money on the things that's a priority for them? And we get all judgy about that, really? Yeah, well, I think that when people hear that you've spent such a large amount of money on something that is so discretionary, people often assume that that means that you've just got like tons of money, which if you do, there's nothing wrong with that. But the judgment can often come out because people don't necessarily see how you have cut back in

other ways in order to be able to create the space for that. So the three biggest line items in a person spending are housing, transportation, and food. And the grocery example that I just highlighted shows how by cutting back in the food category paved the roads so that I could spend more money on veterinary bills. And your cat Tassie is like, thank goodness I won the MMA cage match. Yeah. When people spend money on things that are socially sanctioned, such as slightly nicer groceries, the judgment doesn't come out, but when people spend money in a way that is unusual, that's when the judgment from others tends to come out. Look at the broader world, to give us even more context, the broader world when we talk about

an expensive wedding, Paula, is like, good for them. Don't get me wrong, in the personal finance community, we're like, damn, you kidding me? It's funny how the judgment swings both ways, depending on what community you're in. Right. If you're in the broader world, they're like, oh, Jeff Bezos, rents out Venice. Didn't know that was the thing, but sounds pretty cool. The Venetians didn't like it, but the rest of us go, man, if I could do that. And except the personal finance community, who goes, man, what a waste of money?

All of that is to say that when you're thinking through your spending priorities, keep at the forefront of your awareness that things on their face might sound expensive because they're not socially sanctioned. They're not normalized by broader society are absolutely okay to spend money on if that's something that you value. And likewise, expenses that are. normalized, like a nicer car, if that's not something that you value, you don't have to spend your money there. And by virtue of not spending your money in these ways that are quote unquote normal,

you free up these elements in your budget to be able to spend in ways that are weird if that's what you want to do. I live in New York City. I easily could afford a car if I wanted one, but I don't want one. I took the bus to work today. Joe, you know this. I was texting you from the bus, right? I took the city bus to work, but I'll spend $18,000 giving chemotherapy to my cat while riding the city bus. And on that note, Paula, even if you hadn't made sacrifices in one area to afford this in another area, you and I are both about to talk to our friend and a phenomenal financial commentator of dollars in data fame, Nick Majuli. And he talks about the wealth ladder. And I think this is definitely an interview that Ford Anything community is going to want to listen to,

Nick makes a great point of talking about something that is super important for somebody to pay attention to who's on what he calls level one of the latter. Somebody just starting off is irrelevant to somebody who's on level five. And so where a budget for somebody who's just starting out is a very important thing, Paula, you, and we've talked about this on the Stack & Benjamin show, for you at a different level, the budget's not as important. It's still important to pay attention to does my money reflect my values, but does a dollar by dollar line item make sense anymore? No, it can be a rounding error. You can go to a restaurant and you can order an alcoholic beverage, which is overpriced,

but because it increases your enjoyment of the deal of the experience, you'll order it anyway. Where somebody who's on level one, that's a crucial decision for them. And I think this is really important because you'll see a Lamborghini pull up next to you at a red light. And you may go, oh my goodness, the amount of money that the person spending on a car, Elon Musk in one year had his net worth go up by so much money. His net worth improvement in less than a year between, I believe, 2020 and 2021 would have put him in the top 10 net worth of all time. Just the improvement on his net worth would have put him in the top 10.

If Elon Musk is driving a Lamborghini, it means nothing to him. I'd be very surprised if he wasn't driving a Tesla. I would too. But I'm just talking expensive. car. If he's driving an incredibly expensive car, it means nothing to him. To somebody who is level one starting out, making the decision to buy a Lamborghini, incredibly stupid. So I also think just being judgy about what's going on under the hood, you don't know what's going on to the hood. You have no idea about their entire financial game plan and where they're at on this ladder that Nick's

going to talk about, which is fascinating. And I think really an important interview for people to listen to. So I can't wait until you interview him and I'm interviewing him as well on stacking Benjamin's as people that have listened to both our shows know you listen to those two interviews together. We're always after different stuff. So I can't wait to hear the differences also in what we talked to Nick about here in just a couple weeks. I believe when this comes out. And this is another reason why also, Jalen, getting back to your direct question, it's another reason why I wouldn't make that house purchase today. Because 20 years from now, you may be in a different spot on the ladder as well, where the importance of this house today may be completely different as your net worth changes

as well. You'll find as you're not worth changes, your priorities change and what you look at changes. So for that reason as well, I also like holding off. I would encourage you to buy an income producing rental property, if that's something that interests you. But I would encourage you to make that decision purely on the basis of what is the price for rent ratio, what is the cap rate, what is the potential for appreciation, right? Make that decision purely on the basis of the numbers associated with that property and not on the basis of do I want to live in said property in 20 years into the future. There's another exercise show. You talked about the MMA cage match between A versus B, B versus C, C versus D. The other way that I like to frame these prioritization decisions is make a long list

of just brainstorm every single thing that you might want to spend money on. So kids' college expenses, kids' weddings, your own retirement, just make a very, very long list, freestyle brainstorm. right, every possible expense. Then in the next column, write down a rough estimate, doesn't have to be precise, but a rough estimate of ballpark what you think that might cost. Then in the next column, write down the time frame of how many years into the future you want to make that expense. And then in the following column, you divide time frame by cost so you know precisely how much money per year you would need to save in order to achieve that expense. And often when people do this exercise, they get to that column of how much do they need to save

per year in order to be able to pay for that expense. And the amount of money that they would have to save per year per month, you could do it either by month or by year, the amount that they would have to save in order to cover every expense at the amount that they estimate those expenses will cost is completely unrealistic or untenable, right? That's typically what happens when most people do the second. exercise. And that's a great thing because now that you have crunched those numbers and you know that total amount of what the savings would need to be, you can now go back and do one of three

things. Lengthen the timeline, reduce the amount, or eliminate a few of those line items altogether. So that's the exercise that helps you decide how you're going to shift through all of these priorities. Which timelines do you extend, which amounts do you reduce, and which categories of spending do you eliminate entirely? And what I love about this, exercise, Jalen, which you truly bring up in your question, is you realizing that how you say for A is going to have an impact on B, C, and D is something that people, Paula, don't think about enough when we start off with, what's your risk tolerance, which drives me crazy. Well, what type of risk do I want to take in this investment? Well, what type of risk do you need to take? How much money do I

need this to produce? And then can I withstand the risk that it's going to take to do that? And if I miss on this goal, what impact does this have on my other goals? Too much financial planning happens in a vacuum. And truly, Jalen, I love the fact that you're not looking at this as a vacuum. You're looking at this as one lever impacts the other level, which is a kick-ass rubric to work from. Right. But my biggest tip, Jalen, based on the question that you asked, is separate your lifestyle from your investment choices. Don't make lifestyle-based investment choices. Invest in ways that make sense on a spreadsheet and then use that money to live how you choose to live. But don't co-mingle the two. Paul, I think your answer to this question, put the fun and fungible.

Oh. Come on. That was so good. Fungible might be my favorite word. Fungible is a great word. And that is the takeaway from our answer. Money is fungible. So don't negate that benefit by trying to make it infungible. More fungible is more fun in this case. Yes. So thank you, Jalen, for the question. The holidays are right around the corner. And if you're hosting, you're going to need to get prepared. Maybe you need bedding. sheets, linens, maybe you need serveware and cookware, and of course, holiday decor, all the stuff to make your home a great place to host during the holidays. You can get up to 70% off during Wayfair's Black Friday sale. Wayfair has Can't Miss Black Friday deals all month long. I use Wayfair to get lots of storage type of items for my home, so I got tons of shelving that's in the

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They're also powered by the latest in-payments technology, built to evolve with your business. Fifth Third Bank has the big bank muscle to handle payments for businesses of any size. But they also have the FinTech hustle that got them named one of America's most innovative companies by Fortune magazine. That's what being a fifth third better is all about. It's about not being just one thing, but many things for our customers. Big Bank Muscle, FinTech Hustle. That's your commercial payments of fifth third better. Our next question comes from Reese. Hey, Paula and Joe, this is Reese from episode 417. You guys give me some great advice about long-term disability insurance because I have depression. That was a couple years ago. I'm now 28, still young, to be disabled long term.

But I was calling it to see what your opinion is now that my situation has changed. I was recently laid off from my job. Big bummer. And I enrolled in COBRA coverage, which was painfully expensive. But I already have met my $7,000 out of pocket max because I tore my ACL earlier this year. And I was like, there's no point in a marketplace plan with a new deductible. And I might not be able to keep my physical therapist. So anyway, I enrolled in COBRA.

that was a little bit of an easier decision because I knew that I needed medical insurance now. I've actually, before I understood that COBRA is retroactive, I was afraid to leave my house because I was like, what if I get hit by a car? It was terrible. Anyway, yo girls, no insured. My question is, should I continue my, it was an employee paid long-term disability insurance through my former employer. I just got the letter. I'm wondering if you guys have any perspective on this. On one hand, I obviously am looking for another job. Realistically, that could take six months to a year, but the risk of me becoming disabled long term in that time feels a lot lower than the risk of me needing health care, mostly because I'm still recovering from the

ACL repair and I know I'll need health care or I'll get sick or something, you know, something will go wrong. But the chances of me being disabled for a long time and running out of money and needing to draw on that are much lower. Should I wait and not continue the coverage and just get another employer provided plan? And if my next employer just doesn't offer that benefit, get long-term disability insurance on the private marketplace. In my brain, continuing COBRA made sense because I'd already met the year's deductible in February. So switching plans would be silly to pay almost the same premium but have a new deductible, but that isn't the same with long-term disability insurance. Does it make sense to keep the same plan and provider over a long-term, or can I just

kind of switch with impunity and not have an issue? We'd love your perspective. If you have any, I have decision fatigue. I have figured out way too many things that I never thought I'd have to figure out in the last couple weeks. So I would really love some things to think about and any advice you might have. Thank you guys so much. You guys always give such great advice. Oh, Reese, first of all, I'm so sorry to hear that you got laid off. And second, I can hear the decision fatigue in your voice. So the first thing that I would recommend is take a breath because I can hear that you're overthinking this. I don't want to downplay the importance of what you're thinking through.

But sometimes it's so easy to get in your head about all of the multitude of possibilities and to see how the roads can fork in an infinite number of directions. and then that can quickly spiral. And when that happens, you can sometimes lose sight of the fact that you're already on a good track. You're handling things really well. And there are some more decisions to make. But in the grand scheme of things and in the 80, 20 of it, you're on the right course already.

And I think, Reese, to give yourself a little grace, that this is a difficult decision. And as you can see, because of your thorough analysis of this, there frankly is no right decision. And we'll walk through it in a second, but whatever decision you make here, just knowing what the Achilles heel is of that decision is far, far, far more important. Accepting the decision you make is far more important than putting a lot of pressure on yourself to make, quote, the right decision. Because Paula, I don't think there is a right decision here, but we can certainly help her with her thinking. Yeah. So, Reese, I agree with the assessment of keep the cobra. You've already met the deductible. No need to pay deductible twice in the same calendar year. So keep that. But when it

comes to long-term disability insurance, Paula, before you get to long-term disability insurance, can I just have one thing on the COBRA? Oh, yeah, totally. What I would like to know, Reese, is because I 100% agree with Paula. I think you made the right move there. But I always want to know the cost benefit of my decision. So if you haven't priced out on the open market, what coverages are going to be and what your cost you're paying now is versus the cost on the open market. I always want to know that because often we make assumptions and then we find out on the open market based on where we live and the things going on in our life that those aren't true. And even if they are true, we get more information about when that might change and when the

decision making might change as we become more comfortable with the different options that are available. So you don't want to be an expert, but I would certainly go to your state's health care exchange, and I would just price out very quickly. This is a one-hour thing to do. I would price that out. But that said, I'm with Paula. Over the short run, you've already met the deductible. No downside to sticking with the COBRA coverage. When it comes to long-term disability, there's no reason for you to necessarily stay with the same provider. If you're looking for your own plan when you're pricing out those options. The big discount that you can obtain comes from having the longest possible elimination period. So from the time that a

disability begins, what is the window of time for which you are ineligible for any type of benefit after which a benefit would kick in? So if you have, let's say, a two-year elimination period, that's going to be far less expensive than a shorter period of time. What that means is that you would need enough savings to be able to float yourself if that were to be the case. You would need enough savings to be able to cover yourself for those two years. But I'd encourage you to start shopping out those plans right now because I think there's a decent chance that your next employer might not offer long-term disability. It's going to depend on the size of the employer. That tends to be a benefit that larger companies offer, but not a benefit that many small to mid-sized

companies are able to offer. So I wouldn't necessarily count on being able to get it, depending on who you end up working for next. And even large companies sometimes go really cheap. They will tell you that you're going to get X percentage of your income, let's say 60% of your income, but they will also cap that number to a number like $3,000 or $4,000 a month, which could be for some people, 60% of their income. But for others, as you get raises and promotions, may not even come close to covering it. There was often when I was a financial planner and even lately answering questions where people will send me their coverage because they think they have a number like 60%.

And in that fine print, Paula, it shows that no, they're not covering what they think that they are. So looking at specifically what percentage of her income that the disability coverage covers is a good part of prudent planning. Let me cover that as well. while I'm on the topic of it being a percentage of her income, the fact that it's a percentage of income and right now your income is zero, you're paying for a benefit that you can't receive because it's a percentage of what you make. That would imply that eliminating that coverage over the short term makes a bunch of sense until you get the new job because you're paying

for something that you can't get. Some people will hold on to it though. And the reason why you hold on to this is you may have to prove insurability again in the future. And I can't guarantee and you can't guarantee that you'll be eligible for a long-term care policy in the future. Now, if it's a group policy, they can't discriminate against you as a piece of the group. So if your employer does offer it, you can easily latch on to their policy. But again, if they decide to go cheap, you're going to be at the whim of whatever they do. So clearly, in the hierarchy of needs, if I'm looking at two policies, a health care policy and a long-term disability policy where you don't get the benefit, health care comes first because that's not based on a percentage

of your income. That's based on if I get sick and or if I need the coverage for whatever reason, I can use that coverage. The disability question, I think for that reason, Paula, is a little more nuanced because we can't predict the future and we don't know. So that's the reason I go back to, knowing what the Achilles heel is, if I eliminate that on the short run, that seems like a good move because I'm saving this money in premium. The Achilles heel, what if I don't qualify in the future? What if my new employer goes cheap? I can't predict the future. I don't know what that is. But if you're willing to say okay to that Achilles heel and you know that going in when you eliminate the coverage, then I think you're making a decision with your eyes wide open if you decide to eliminate it.

also just want to ask the question, how much does the long-term disability insurance offered through your previous employer? How much does that cost? I mean, how onerous is that bill? And I understand when you're unemployed, every bill feels like a burden, but how burdensome is that bill? Because especially if it's not overly burdensome, if it is a deal-withable amount, then I see an even stronger case for keeping it. And of course, you can shop individual plans as well, but generally speaking, anything offered through an employer's typically going to be cheaper than anything you find on your own. Because the employer is subsidizing that premium. But Reese, broadly speaking, you're doing great.

You're taking care of your health. You're watching out for your future. You're managing your money well. You're thinking about how to take care of yourself in the short term, as well as how to take care of yourself in the long term. I think you're doing a wonderful, wonderful job. So give yourself some grace and give yourself a round of applause. So best of luck with your job search and best of luck with that ACL.

on a related topic, because we've just been talking about long-term disability. So our next question is not exactly about that, but it is about another financial planning element. It's long-term care. Long-term disability for older people. Yeah, exactly. So we're going to discuss that next. Our final question today comes from Kip. Hi, Paula and Joe.

My name is Kip, and I want you guys to know that I really appreciate the nuanced conversations that you guys provide on the show. I'm 47 and my wife is 48. and we live in a western suburb of Atlanta. Our youngest child, he just finished college, and now personally I'm ready to retire, mainly because I hate my job, but it provides a good living, so I keep doing it. I know my expenses today because we live very frugally

and I can afford my current expenses if I quit. The issue is that I have no way of knowing of what my future long-term care expenses may be. School and nursing facilities in my area cost about 10K per month, and you would multiply that by two because one for me and one for my wife. Based on the current 4% rule, I definitely cannot afford that. I've checked into long-term care insurance policies and the cost, the caveat's written into the policy, and the unknown escalating premiums make the policy seems less than ideal, maybe even outright

crazy in some opinions. but I'll leave that for other people to decide. It seems to me that the most prudent option is for me to just suck it up, keep working until I can save enough money to fund my own long-term care expenses if I need them in the future. And if not, you know, that can just be an inheritance for my kids down the law. Am I crazy or do you guys have a better option? Thanks in advance.

And I appreciate all the insights you guys provide. Paula Kipps phrasing long-term care premium price is quote, outright crazy, 100% accurate. This is the biggest conundra for certified financial planning. This is 100% the biggest issue in financial planning where CFPs ring their hands and go, this is tough. I want to start with some, well, first of all, I want to applaud you for not just for thinking about this, but for everything that you've done, right? You are working a job that you don't like, but you're doing it because it pays well. and you've set yourself and your family up for a really, really strong financial present and financial future. You know, going to a job that you don't like, that's a big sacrifice. And you've

made that sacrifice in order to provide for your family. So I want to applaud you for doing that. And I also want to help you leave that job because you're 47 years old. I want you to enjoy your late 40s and your 50s. So if you don't like your job, I want to create a path through which you can leave that job. And that you mentioned that you want to retire. That doesn't necessarily mean that you will stop doing absolutely any work that makes any money, but maybe there's something else, something different, maybe something lower paying, but that's more enjoyable, more aligned with your call. I want to create a pathway through which you can do work that's more, leave the job that you dislike and do work that's more rewarding, more fulfilling, more, something

that you're excited to wake up in the morning and go to where you feel like you're making. making an impact and you're making a difference and you're working with great people. And maybe it doesn't pay as well, but you're happy to do it and it lights you up and it's fulfilling. Yeah, exactly. It may be solving this long term care question, Paula, will help him move into that. At least feel comfortable with it because you can hear his discomfort in how do I negotiate this and leave my job at the same time. So I want to start with some stats. First, the likelihood of both houses needing expensive long term care simultaneously. Statistic the likelihood of that is low about the average stay in a skilled nursing facility is between two to three years. So it is true that about 70% of people who are over the age of 65 are going to need some type of long-term care at some point in their senior years. But the average stay is two to three years rather than decades and decades. So it's also the case that many people receive either home care or assisted living rather than skilled nursing. And that is specific. And that is Specifically, what a long-term care policy pays is not the skilled portion. Your health insurance will pay for that part or not. But it's that custodial care that those activities of daily living, they call it, that are really what the long-term care policy dives in. So activities of daily living, if you need assistance buttoning a shirt, going to the bathroom, those types of activities, there are riders on certain policies that are specific to that. But that's where the costs really do go up quite a bit when it comes to that.

insurance. Yeah, every policy will specify how many daily activities of daily living you can't do before you qualify for it. So you want to know exactly what those are because the way to look at long-term care insurance is in the details of the policy. Kipps already looked at this. It sounds like you can't just look at the top line number. What's this going to cost? You have to see what it actually covers because you could pay on the surface, Paula, less money and never use that coverage. Or if you pay a higher premium and the chance of you actually using it goes up. That may end up being a, quote, better deal and a better financial option than going with the budget insurance policy. But the idea of using insurance at all, I think the issue is a lot of people start with insurance and

whether I should buy the insurance or not. I don't even think that's the place to start. I think there's two places to start. Number one is what's the quality of care that you would expect for you, and really even more than you, I would phrase that because he's married, the quality of care for your spouse that you would want. So what's the quality of care that you are looking for? If late in your life, that doesn't matter a ton, that is going to open up a lot of options. If you want a high quality of care, that's going to point you toward more spending in that area and the insurance options become greater. The second piece is, what would you do? with your money if you and your spouse didn't spend it on yourselves. And for someone that's single, this becomes a little easier, hopefully at that point in your life when this would happen to you, in the vast majority of situations, there's nobody else living in your house besides you. And so for a single person, you're just worried about you. For married people, there's the complication and you pointed to this earlier, Paula. If one of you goes into a long-term care facility or you need

help at home. The other person, if they're still alive and they're healthy, you're draining the bank account very quickly, while the other person still needs to live. So this is much more often a married conundrum than a single person conundrum. With the exception of, what do you want to do with your money afterwards? Single people and married people have very definite answers to that question, almost like we talked about with the MMA cage match earlier for Jalen. Everyone goes, well, duh, I want to make sure of XYZ. They feel very strongly about it, but I'll tell you, it's different for everyone. If you're not worried about it inheritance, right, which he mentioned inheritance. So I don't know, but Kip's not worried about inheritance. And he thinks he has enough money saved for one person

to go through a long-term care experience, which generally last, if you, again, looking at statistics, about 36 months. Now, there's the exception, right? Grandma was in a long-term, care facility for 12 years. Yes, that can happen. But if we just play the vast probability, which is what insurance is all about anyway, you're going to come up with a number that if you can afford one of you, 36 months, you've vastly covered the majority of situations. So Kip, if you can retire and cover that, then I think that makes this easier. So then we get to do I insure it or do I not insure it? Once I get to pass quality of care and my thoughts around inheritances and money beyond my lifetime. Most people then look at this as one of two ways that they're going to go. And Kipp,

it sounds like you may be in this case yourself, which is I either insure it myself, a shoulder the burden myself, or I hand it to an insurance company. I think, Paula, there's a third one, which is I take a portion of it and I give a portion of the responsibility to a long-term care insurance policy that I know doesn't cover the full thing, but it makes my burden lighter, right? And as you can see, there's very, various degrees of that middle ground. And I think that's where the truth is, if you talk to most certified financial planners, is going to be for most of us in that middle ground. But if you don't have a lot of money to protect, let's say you started late and you're not worried about inheritance,

well, after you spend your assets, Medicaid will will pick up long-term care costs by and large. And that's a whole longer discussion, but you can leave it to Medicaid. And again, this also gets to quality of care because Medicaid facilities may not be what you want quality of care wise, which is why we start there. But if you're not worried about quality of care, you're not worried about inheritance and you started late, well then focus on financial security for you and quote, roll the dice on long-term care. Kipp, it sounds like as something he wants to protect. And so for Kip, he's in that, this middle ground of I don't have enough for both of us in long-term care, but I also have enough that I want to protect.

But still for you, Kip, I think there may be a middle ground of maybe I self-insure partly and then I give a little bit to insurance, but not as much as it would cost if you're looking into covering all of it and these huge out-of-pocket situations of 10, 12 years. If we look at maybe 36 months at a portion of that versus partial covering it out-of-pocket, I think you might be able to leave work earlier than you think. And then, Paula, there's the other part of that discussion, which is, can you take on meaningful employment that pays a lot less, which is, I think, the whole other side of this equation. That's one of the biggest pieces that stood out when I heard his question. Kip, what I heard

you say is that you dislike your job, you'd like to retire. I'm 100% a supporter of you leaving the job that you dislike. It is terrible to have to go to a job that doesn't light you up, but that doesn't necessarily lead to needing to retire in the sense of never working for money again in a sense of the cessation of income, it might mean it's time to find not just a different job, maybe even a different industry, a whole new different field. And I don't know what that would be for you, but I do believe that everybody has a calling and that often if you dislike your job, it may be because you're not following your calling. This is interesting, Paula, because I just spent time talking about how the long-term care argument isn't binary by the insurance or self-fund. And you're also saying

employment is not binary. It isn't, I leave the job I hate equals retirement. It doesn't have to be that binary either. So on both ends of this argument, Kip, there's a continuum. I want to talk through, Joe, you've talked about buying, offsetting a portion of the burden through long-term care insurance, but there are ways to make that long-term care insurance a little cheaper. As you talked about, Joe, reducing the benefit period. So getting a policy that's three to five years rather than lifetime coverage, that's going to make a huge difference. We talked about this with Reese, extending the elimination period, right? Choosing the longest possible elimination period and then having enough money to cover that elimination period yourself, that really significantly reduces the premiums

because you're self-funding that initial period. And by extending the elimination period in that coverage, you choosing 180 days before benefits kick in rather than 30 days before benefits kick in, that's going to make a huge difference when it comes to the cost of that policy. I think there's a third piece there, Paula, which is that also if you don't try to, cover the entire daily cost. You could even slice it that way. Cover a portion of the daily cost and not all the daily cost. And you can shoulder part of the burden that way as well. Right. Exactly. Lowering that daily benefit amount. So yeah, if you view the insurance as sort of a way to split the costs, you can simultaneously lower the premium as well as take on a portion of the burden.

But I think beginning this with the approach that it's highly unlikely that both spouses are going to need lifetime care. Statistically speaking, it's possible that you might be very, very unlucky, but probabilistically, it's very, very unusual for both spouses to need lifetime coverage. And it's much more likely that one or both of you, but at different times, will need two or three years worth of coverage. And if we start with planning for that or maybe planning for a little bit beyond that, like let's say you're planning for five years of coverage for both of you, that by itself really reduces the burden as compared to if you're looking at the possibility of lifetime. There are policies that cover first to go back to another way to

slice this where it won't cover both of you, but it will cover the first person to use it. And so you can have a joint coverage option on some policies that are out there. And that also, Paula, because if we look at the likelihood again of both in you needing the coverage, like, okay, I'm going to cover the first person, but not both of us. That can also reduce the amount that you need to pay for in premiums. But Kip, I want to applaud you for thinking through this. This is a critically important piece of financial planning, especially as you're planning for your senior years.

And it's a piece that a lot of people overlook. So I want to applaud you for everything, for living frugally, for providing for your family, even though that has meant working a job that you don't like, for making that sacrifice for the sake of the greater good. I want to applaud you for doing that. And I also really hope sooner than later, later, you leave that job and do something that lights you up. There is a job out there that's going to make you smile. And I want you to find that job. Job's not even the right word for it. That career,

that field, that calling, that space. Jobs not the right word because when you find it, it's not going to feel like a job. It's going to feel like this fun thing that you do that you also get a paycheck for. In the day to day of it, sure, it's going to have some elements that are a little bit annoying, but those elements are going to be tolerable because you like the broader scope of what you do. So it's kind of like when you go on vacation, nobody likes going to the airport, waiting at the gate, boarding the plane. No one enjoys that, but people still go on vacations because even though you've got a little bit of those annoying bits here and there, you enjoy the overall experience. That's what the right job feels like. Sure, there are the annoying bits, but you're happy to tolerate those annoying bits because the overall experience is so worth it.

That's funny. I like boarding the plane. I do. I like being on the plane. So fun. Something for everyone, apparently. So thank you, Kip, for the question. Best of luck. And call us back. Give us an update. I'd love to know what you end up deciding. Well, Joe, we've done it again. And two out of three questions about insurances. But the questions weren't even about insurance per se. It was about how do I eliminate these risks that loom in my potential future?

Which is 100% what the insurance discussion should be. It shouldn't be buying the insurance. it should be, is it a risk for me to eliminate this coverage? Should I have this coverage? How do I cover the fact that I'm disabled or that I need a long-term care? I have a catastrophic illness in retirement. Right. And then with Jalen, the MMA cage match, prioritizing all these different goals. Great stuff. Putting the fungible. As you do. Or listing out a goal, amount, timeline and then doing one of three things, extending the timeline, lowering the amount, or a eliminating the line item. You have far more options than people think, I think, at first blush. Yeah, exactly. Well, Joe, where can people find you if they'd like to hear more? We just did a great week, Paula, on goal setting because of the fact that we're past the halfway point of

this year. And if you're like a lot of people, you wake up and you go, it's July? Where the first half of my year go? And so we have a wonderful man, Gary McDermott, who was a naval officer, who breaks down this idea we've heard a ton. What's funny? the Navy uses this very simplified approach to goal setting to cut away all the fat, right? Multinational companies, billion-dollar companies will use these very simple approaches to goal setting. We hear the same approach as individuals. We go, yeah, I don't think so. It's fine in my head.

So he truly breaks down goal setting. That is on Wednesday. And before that, on Monday, we walk back through the amazing guest lineup that we had the first half of the year. Because we know, Paula, it's fun to listen to podcast. It's great to hear all these incredible people mentor us on what we could be doing to get further ahead. But we ask the question as we walk back through some of the big themes from the first half of 2025. OG and I, have you done anything about it? So that's on the Stacky Benjamin show.

And on Friday, the amazing Paula Pant, also talking with our friends, Doc G and OG, the G's, Paula and the G's talking through, again, a goal setting from a round. table discussion. How do you set great goals? How do you make sure that you follow through on stuff? So that's goal setting week last week at stacking benchmarks. Amazing. Well, thank you, Joe, for spending this time with us. And thanks to all of you for being part of the afforder community. If you want to talk to other people in this community, and I highly encourage you to do so, go to afford anything.com slash community. You can talk to people about fungibility, about long-term risks, about retirement, about debt, about college savings, about rental properties, about the stock market, you can talk to people about anything that's on your mind. That's afford anything.com slash community. Totally free.

Remember to sign up for our newsletter, afford anything.com slash newsletter where I share thoughts, ideas, stories that I don't share anywhere else. You'll find unique things there. Affordanithing dot com slash newsletter. If you enjoy today's episode, please share this with the people in your life. Share it with the people who sell you long-term care insurance and long-term disability insurance. Your HR director. Oh, yeah, share it with your HR director. Particularly when you go and resign from the job that you have only tolerated for the paycheck. Share it with the colleagues that you're about to say goodbye to.

And share it with the people at your new job, the one that lights you up. Share it with your real estate agent when you go to buy a property because it makes sense on a spreadsheet, but not because you want to live there in 20 years. Share it with that real estate agent and the property manager and the contractors. Share it with the pest control guy and people who come and clean the gutters, the HVAC people, the electrician, the plumber. Share this with all the people in your life because that's how you spread the message of great financial health. Thank you again for tuning in. I'm Paula Pant.

I'm Joe Sal C-high. And we'll meet you in the next episode.