Afford Anything - Should I Choose a Roth vs. Traditional IRA and 401k for Early Retirement?

Episode Date: May 7, 2018

#128: Antonia, 27, wants to retire in 15 years. She's trying to figure out whether to contribute to pre-tax or after-tax retirement accounts. Most financial advice for 20-somethings that she's encountered says to contribute to after-tax (Roth) retirement accounts. These articles assume that a 27-year-old will continue earning money for the next 30+ years, presumably escalating into higher tax brackets along the way. By paying taxes upfront, these articles say, you'll enjoy 30+ years of compounding gains, which you'll be able to withdraw tax-exempt. But what if, like Antonia, you're only 15 years from retirement? Should you stick with Roth tax treatment? Or is there wisdom in making retirement contributions with pre-tax money? _____ Marisa is young, high-income, and highly risk-tolerant. She'd like to know: what asset allocation would I suggest for a young, risk-tolerant person? And is rebalancing her portfolio necessary, or just a distraction? _____ Dylan owns his home outright. When he sells it, he'll collect about $100,000 after fees. He also has an additional $100,000 saved in cash. He'd like to buy a home free-and-clear. What's the best way to approach this? Should he take out a home equity line of credit? A bridge loan? Something else? _____ Pal lives in the San Francisco Bay Area. He recently bought his first rental property, and he's interested in building passive income and reach financial independence. He's curious about credit card piggybacking, a side hustle by which a person with a high credit score adds another person with a low credit score as an authorized user to their card. It seems like a legitimate way to earn extra money. Why aren't more people talking about this? Is there a problem he's overlooking? _____ Anonymous, 24, says she knows next-to-nothing about investing. She has $6,500 in her Roth IRA, invested in a Washington Mutual Class A mutual fund, which is an actively-managed mutual fund with a front load. Should she keep her money there? Or should she move it? Her second question is about her 401k. She contributes 5 percent of her paycheck into a Roth 401k account, from which she invests in a Target Date retirement fund. Her employer doesn't match any contributions. Her total contributions to both accounts (her Roth 401k and Roth IRA) equal $5,500 per year. Should she stop contributing to her Roth 401k, so that she can focus her contributions on her Roth IRA? ____ Jeff and his wife are both 64. When he reads about retirement, the information is ambiguous about Social Security. Let's say that he has $1 million saved towards retirement, which generates $40,000 annually at the 4 percent rule of thumb. Let's also say that he is eligible for Social Security income of $40,000 per year. Doesn't this mean he could retire on $80,000 per year? If so, then why do "4 percent rule" projections only talk about the portfolio portion? ____ Former financial advisor Joe Saul-Sehy and I discuss these questions on today's episode. Enjoy!   For links to resources mentioned in this episode, go to http://affordanything.com/episode128 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else. And that's true, not just for your money, but also your time, focus, energy, attention, anything in your life that is a scarce or limited resource. And so the questions become twofold. Number one, what's most important to you? And number two, how do you align your day-to-day behaviors to reflect that? Answering these two questions is a lifetime practice. And that is what this podcast is here to explore.

My name is Paula Pant. I'm the host of the Afford Anything podcast. Every other week, we answer questions that come from you, the community. And today, I have my buddy Joe Sal Cahy, a former financial advisor with me to tackle some of these questions. Hey, Joe. Paula, how are you? I'm excellent. How are you doing? I am ready to greet the challenge of your listener's questions. Dun, done, done. All right. Well, we will start off with a question from Antonia, age 27. Hi, Paula. I really appreciate your podcast. You take on questions in a really analytic way that I really appreciate. So I'm 27 and have set my mind to reaching financial independence in the next 15 years or so. I'm wondering if you can explain the benefits and drawbacks to pre and post tax retirement contributions, understanding my ultimate goal. I'm a little confused because once I reach financial independence

or just would retire in general, my income would be lower than what I make now. However, a lot of what I've heard from kind of mainstream financial advice is that paying taxes up front seems to be kind of more recommended considering that later in life you'll make more money. However, understanding that I hope to pull on this money while I don't really have an income or while I'm making less than what I'm making now, is there any reason that I should consider contributing to my work's retirement plan on a post-tax basis? Thanks so much. Really enjoy your podcast. Antonio, fantastic question. Now, first and foremost, for the sake of everyone listening, I want to distinguish between financial independence versus retiring early. Financial independence, as I define it, is the point at which your investments or other sources of passive income earn enough money that you have a comfortable safety net under your feet. Essentially, and I realize this is a bit of a subjective definition, because enough is a benchmark that always keeps changing. But, but I realize this is a bit of a subjective definition. But I realize this is a bit of a subjective definition. But, financial independence is the point at which you feel as though you no longer have to work in order to keep the lights on or put food on the table.

And as a result, you are able to make decisions from a place of what do I want to do rather than what do I have to do. Now, retiring early is exactly what it sounds like. It is taking a break from the workforce, either temporary or permanent, in which you are not receiving any time for money income. I guess another shorter way of saying that is that financial index. Dependence gives you the option to retire, whereas retiring early is actually retiring. So the two are often linked to each other. People sometimes use those two terms interchangeably, but I see them as very different. Now, in your case, and Antony, I say that for the sake of everyone listening, in your case, it sounds as though you genuinely want to retire early. You want to stop receiving a paycheck from the traditional workforce. And if that's the case, And if you anticipate not earning an earned income during those years, then there is actually a strong argument for contributing to traditional accounts. There's an argument for getting the tax right off now so that when you retire, you can then convert money from a traditional account into a Roth account after you're retired when your income is significantly lower. And when you make that conversion, you will pay that tax bill at a much lower rate than what you would pay today.

Joe, take it away. Well, I think we're stepping across one concept. I'm not sure that she gets, which is she said, is there ever reason to put money into my 401k plan at work or my workplace retirement plan post tax? And the answer is no, unless, unless. you're choosing the Roth option. And those often, and it's funny, I only say this, Paula, because both of my kids, I have twins that are 22, almost 23, and they both had this struggle with their workplace retirement plan where they were choosing the Roth option versus the after tax, tax deferred, just post tax option. So do not choose the post tax option ever, ever, ever, ever, ever. I think that's, is that five ever's, Paula?

I think that's enough Evers, unless you're choosing the Roth option because the post-tax option outside the Roth is just a mess. You're not getting any tax break today. You're not getting any tax break later. And if you roll it over to an IRA, then you've got to keep track of what piece is post-tax versus which piece was pre-tax or was Roth. And yeah, don't do that. So, Joe, to clarify, you're talking about a non-deductible traditional account, correct? That's exactly what we're talking about. So to clarify that for the sake of anybody listening who's wondering what that is, so a traditional account is one in which you contribute money and defer taxes on it in the year that you make that money. So let's say that this year you make $70,000 and you contribute $5,000 towards a traditional 401K. You take a tax deduction this year on that money that you put into a traditional 401K, right? So that's option number one. That's a traditional 401K.

1K. Option number two is a Roth 401k in which you make $70,000, you contribute $5,000 and you pay taxes on the full $70,000. So you don't get that tax deduction this year. But you do get to claim your capital gains and dividends completely tax exempt at the time that you withdraw that money. So that's option number two. That's the Roth option. Now what Joe is just talking about, he's talking about a third option, which is called a non-deductible traditional account, which means that, It's a traditional account. It's not a Roth, but you still do not get to write that money off of your income this year. So you make $70,000. You put $5,000 into the non-deductible traditional account. You still pay taxes on the full $70,000 just as you would if you were making a Roth contribution, except that it's not a Roth account. It's a traditional account. So it's kind of the worst of both worlds. And the reason that you would do that in the example of an IRA is if you make so much money that you, you're not a Roth account, it's a traditional account. So it's kind of the worst of both worlds. And the reason that you would do that, is if you make so much money that you make so much money, you you don't qualify to contribute to either a Roth or a traditional IRA, then the option that you're left with is a non-reductable traditional IRA. Yeah, it is a workplace retirement account. It isn't even listed as a third option. It's listed like option 1A, where it asks pre-tax or post-tax, and then do you want it Roth or not? And it's really confusing, especially for people like my kids, just starting out in the workforce, which one do I choose? And we had to do some navigating just to make sure that they chose the Roth option and not the after-tax option.

So the answer for Antonia is if you plan on actually retiring and not earning an income, and if you think that your income in the future will be significantly lower than it is today, then it makes sense to make a deductible traditional contribution right now so that you can get the tax right off today. and then after you retire, when you're in a much lower tax bracket, convert that into a Roth. Yeah, can I address another thing that she brought up saying that traditional media often says, and I'm going to change her wording a little bit from after tax to Roth option, where the traditional media says, hey, if you're young, and she sounded like she didn't understand why that was the case. The reason that's the case is because of the fact that with long periods of time,

if we can get that money out without having a rule that's a big rule that we have to take money out after 70 and a half, if we can get around that rule, which is the case we have that rule with pre-tax money. If we can get around that, we also can leave it in there for a long time. The math works out really well if you're young to put money in the Roth option versus the pre-tax option. And that's why, you know, when she said, she doesn't understand why traditional media says, that it's just purely a math equation that says that the Roth is generally a better way to go for a lot of people. Yeah, absolutely. I mean, so if you're in your 20s and you have the opportunity to make an investment that's going to compound for the next 40 or 50 years and accumulate all of the growth,

the dividends, the capital gains, all of that growth that's going to happen over the course of the next 40 or 50 years, and you can enjoy all of that growth completely tax-free. at the time that you withdraw it? I mean, why wouldn't you? Right? Like, those, that's decades of tax-free compounding growth. As mom says, cha-ching. Exactly. So Roth accounts are fantastic for people, particularly for people in their 20s or 30s, who anticipate decades and decades of growth. But, Antonia, in your case, you're anticipating maybe 10 or 15 years of growth before you withdraw that money and you're anticipating being in a much lower tax bracket at that time. And this is why financial planning is so personal, right?

Is that we have these rules of thumb. If Antonia had just listed the rules of thumb, she'd do something that was suboptimal for her own situation. Yeah, exactly. Well, because the thing is in traditional media, a lot of people use the terms in your 20s or in your 30s as synonymous with, therefore you have 40 years of growth ahead of you. But in Antonia's case, you can, because she's planning on withdrawing this money in, let's say, the next 15 years, you can almost conceptualize it as though she's a 50-year-old who's asking what to do. See, but I could still, even with a 50-year-old, Paula, I could make a case for both. Yeah, absolutely. I could as well.

Yeah, because what's the chance, even as a 50-year-old, that you're going to use all that money right away? Exactly, right? Certainly with a 50-year-old, it'll be 90% pre-tax, 10% Roth or even, you know, 95-5. But any money that's going to be there for 35 or 40 years, you know, push the Roth button on that money. So if she can do both, that's probably a better option for her than one or the other. Yeah, I mean, that's a good point in that there's a, you're not going to withdraw all of your money on the day of retirement, right? Once you're in retirement, that money is going to last in your portfolio for decades to come. So if she does withdraw that money right away, invite me to that party.

But the thing is, she can convert that money after she retires when she's in a lower tax bracket. That is, so rather than making the full equation based on how much are you going to withdraw once you're in retirement, you could, Antonia, make that equation based on, will you be willing to convert that money in retirement, knowing that you will pay a tax bill in the year that you make that conversion? And given that you'll be young when you retire and you'll be planning for this, it sounds as though that's an ideal opportunity for you to make that conversion, which is why I encourage you to go to the traditionally structured accounts now. There you go. Our next question comes from Marissa. Hey, Paula. I love listening to your podcast. It's really changed my life. So thanks so much for all you do. I have two questions. So I'm relatively young and getting involved in investing. And I also have a pretty high salary for my age. I'm wondering, do you think rebalancing is necessary if you're highly risk tolerant? Given my age, I think I can absorb a good amount of risk.

And also, what is a good allocation for index fund investing that you would suggest for a highly risk-tolerant person? Thanks so much for considering my question. Marissa, thank you so much for asking that question. First of all, do I think rebalancing is necessary? No. In fact, I don't necessarily think, depending on your level of risk tolerance, and I'm going to put a lot of asterisk around this, I don't necessarily even think that asset allocation in the traditional sense of the word is. necessary. If you're extremely risk-tolerant, you could go to a 100-percent equities portfolio.

As long as you also, that would be more of a barbell approach, you would have a heavy cash allocation as well, and then 100% equities in the money that you have invested. That's an absolutely feasible option that I wouldn't encourage most people to do that, but that is something that you could do, particularly if you are young and highly risk-tolerant. Now, that being said, A few weeks ago, we interviewed Morgan Houssel on this podcast, and one of the comments that he made is that when you're asking somebody about their risk tolerance in a questionnaire or in a vacuum, it's easy for a person in the present day to feel what you're feeling in the present day, which is right now we're all feeling what a human feels after nine years of a bull run. We're feeling that confidence. And it's easy in this moment to think, oh, you know what? Yeah, I'm risk tolerant. But. When push comes to shove and the markets actually tank 30%, are you actually as risk-tolerant as you believe you are? That is quite literally the million-dollar question. The advice that Morgan gave in that podcast interview that we did a couple weeks back is that the best predictor of how risk-tolerant you will be in the future is how risk-tolerant you were in the past.

The best predictor of how you will react to the next recession is how you reacted to the last recession. But if you're young, you may not have been involved in the last recession. That recession might have happened when you were still in college or before you had anything invested. So that is where the question mark happens. I was having a conversation about this with Gene Shatsky, the Today Show Money Editor. Yeah. And it really bothers her. And it bothers me too.

I think it probably bothers you, Paula, that even there are advisors out there now with going on 10 years of experience. They can look you in the eye and say, I have 10 years of experience. in the market and they haven't experienced the bottom of the bottom. Now, they're at nine right now, but we're closing in on 10 quickly. And that's frustrating. As a guy that I was a financial planner going through two, I totally agree with what Houssel says because you do think differently in a down market. You think a lot differently.

And the frustrating thing is you think you know what's going to happen next until everything's going wrong and there's no place to hide. And in that type of a market, then you start questioning your basic beliefs, which is frustrating, especially. And even if you hold on to your beliefs, which I did during both of those downturns, I still, your question on them so much because you keep hearing, this time's different. Everything's changed. Things are, you know, I remember in 2000 with the tech wreck. It's the new economy, right? I remember leading up to, and you do too, leading up to the 2007, eight nine debacle.

that, you know, real estate doesn't go down. I remember somebody telling me that, real estate doesn't go down. What are you talking about real estate doesn't go down? Every time we hear this time's different, and then when the bottom falls out, you wonder what happened next. I also think about acid allocation differently. I think about acid allocation as being more aggressive. And maybe I'm, I'm, I don't rebalance for safety.

I rebalance so that when the market goes down, I get to put more stuff into my more aggressive positions. That's why I like rebalancing. So I think that, listen, if she's got a high risk tolerance, then let's pour more stuff into your more aggressive positions more often. Right. So one of the arguments for rebalancing is that by virtue of rebalancing, you will always have some level of a bond allocation so that that way when stocks fall, you have more money in bonds that you can use to purchase stocks. Yeah, no, no, no, no, it doesn't have to be bonds at all. No, certainly not, because I'm not a big fan of bonds either. But if I have a portfolio that has large case, so instead of going with just the total stock market index, if I have a large cap index is the hull of my ship, and then I have the sale of my ship, which maybe is a, is a, is a, small cap. And let's say that I've got this to keep my sailing analogy, there's this little sale called a Spinnaker sale that when the wind's really blowing, we get even more. You know, maybe that's going to be emerging markets. And I just pick three, but there's lots of

different stock allocations. And by rebalancing between different stock allocations, I can really pump up my ability to put more into those positions when things are down. I don't need bonds to reallocate. Okay, I see what you're saying. And I would agree with you there. So I I was interpreting her question in terms of the allocation between equities and bonds. And for people who are listening, who equities is basically just a fancy way of saying stocks or stock funds. My interpretation of her question was, does she need to rebalance, given that she's highly risk-tolerant and young? Does she need a rebalance between equities versus bonds? And I say, no, you can be 100% equities.

I totally agree with that. I think, and I think you should be 100% equities if you have a longer time horizon. And the only reason I wouldn't is more about you. To your point earlier, it's much more about you than it is about the markets. Because if it just comes to the market without your emotions involved, stick with equities. Yeah. Now, all of that being said, to the other aspect of the question is rebalancing necessary. And Marissa, this might not apply to you.

But there are certainly going to be some people who are listening to this who are throwing up their hands going, wow, this sounds really complicated. I don't want to have to log into my accounts and rebalance between emerging markets and frontier markets and large cap and small cap and midcap and growth and value and blah. And if that's how you're feeling, you know what, done is better than perfect. So the advice that J.L. Collins gives, which is if you want to make it simple, just go into VTSAX and call it a day, I don't think there's anything wrong with that. And if you're picking only one fund for the sake of simplicity, because you know that complexity will just cause you to procrastinate, then it's better to just pick one fund, make it simple, and do it, rather than

endlessly procrastinate because you think that it needs to be more complex than it has to be. I also think, though, that while I also love Jill Collins's point on that, rebalancing isn't hard. If you can change your smoke alarm batteries twice a year, you can rebalance your portfolio. It is not difficult. You know, if you start off with two positions at 50% each, one's fall into 45. the other one's up to 55, and then you sell off the 5% of the one that's higher and fill in the 5% of the one that's down. It's all you got to do. And the cool thing is now, Paula, there are portfolios out there that do that for you, where you just press a button.

You start off with an allocation, you press a button, and then it rebalances at quite a few different brokerage firms now. So it isn't hard. But can you also effectively rebalance by virtue of making contributions into the lower account? Yeah, well, and I really like doing that too. Yeah. Now, the problem, see, I think that's more complicated. You know why? Because if I have to go into my workplace retirement plan and I'm switching up where I'm putting the money all the time to smooth out my rebalancing, I think that's more difficult. I like relying on my lazy self. And my lazy self, if I set up an allocation at the beginning, I have the ability to press the easy button two times a year the same day that I change the smoke alarm batteries. I'm good. You change your smoke alarm batteries twice a year? The cool thing is, is I don't have to anymore because mine are hardwired into my house. So if that analogy doesn't make sense, it's because I haven't had smoke alarm batteries in a long time. It's going to say that's a lot of changing out batteries, man.

If my house is on fire, I don't want to have dead batteries be the reason why my house burned down, Paula. Oh, good point. Better safe than starry. Well, that and we have canaries in every room. So I guess the takeaway is whatever approaches. is simpler. Do that. So based on the structure of your retirement account and the way that you make your contributions, if it's simpler to literally rebalance in the way that traditional media says you should, awesome. That's cool. If it's simpler to rebalance by virtue of making contributions

into the account that has the lower balance, awesome. Do that. For myself, as a self-employed person, I have to manually log into my brokerage account whenever I make a contribution anyway. And I have to pick out which account that contribution goes to. So for me, rebalancing by virtue of making a contribution is easier than going through the buy and sell. So whatever approach is easier, go for that one. And the reason, by the way, where everyone knows Paul is super analytical about everything and seems to not be as analytical about this is because studies have also shown that rebalancing four times a year versus two times a year, no big difference. Yeah, exactly. At the of the day, your contributions are going to make the biggest difference. So if you're wondering,

what can I do to improve my retirement? Put more money into your retirement accounts. That's the number one thing that you can do. Right. And buy a canary. Awesome. Thank you, Marissa, for asking that question. We'll come back to this episode after this word from our sponsors. Hey, guess what? The average national interest rate on a savings account is 0.07%. That's not a lot. Would you like to earn more on your savings while investing in local communities? Check out C-Note, a socially conscious savings alternative that pays you up to 35 times more than the national average. With C-note, you can earn up to 2.5% on your savings. There are no fees, no minimums, and no earning caps.

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That's right, free. Just go to ZipRecruiter.com slash afford. That's Zip-Z-I-P-Recruiter.com slash afford, A-F-F-O-R-D. Again, that's ZipRecruiter.com slash afford to try ZipRecruiter for free. ZipRecruiter, the smartest way to hire. Our next question comes from Dylan. Hi, Paula. This is Dylan.

Love the podcast. Love the website. Love the blog. Have a great question for you. I've not heard this question asked before, but what's the best way to pay cash for a new home without entering into a mortgage? So currently we own our home outright. We'd like to buy our dream home with cash. So we're planning to sell our current home at a net about $100,000 after fees and so forth,

and then pair this up with $100,000 we've saved in cash to buy the new one. In essence, we want to avoid any contingency. So how can we accomplish this? And will we do this with a helock or a bridge loan? Thank you. Appreciate your insight. Dylan, congratulations on being in a position where you can Number one, where you already own your home outright, and number two, where you can buy your next home in cash as well.

How great is that? That's fantastic. You're winning the game. So good for you. Congratulations. In terms of the logistics of how to buy that next house in cash. Now, as you said, you will have $100,000 that gets freed up net after you sell your current home. And you also have an additional $100,000. So you can buy a home that costs approximately $200,000 in cash, which is a lot. amazing. There are a few different ways that you can execute this. The simplest, least complicated approach would be to sell your house first, rent something just as month-to-month lease, sub-let something as an interim stopgat measure. You'll put all your stuff in storage, sublet something for two or three months. While you are subletting or while you're renting month-to-month,

at that point, search for your next house. That way, number one, you don't have to deal with the paperwork and hassle of getting a helock or a bridge loan or anything else. And number two, you'll know exactly how much money you've netted from the sale of your current home. So that is the, in my view, simplest, easiest way to do this. And the benefit to that is that you just don't have to fill out any loan paperwork, which is great. I hate filling out loan paperwork. Well, if it's going to be a 30-year loan, that's fine. But on a two-month loan, yeah, exactly. That said, Paula, if he does end up having to take out some sort of a bridge loan, I'll tell you, it's still going to be super easy. It isn't going to be very complicated at all. It's very easy for the underwriting process to be done. They know the value of the house that you're taking the loan out from. So it is, yeah, not difficult.

If he gets a bridge loan, there are just more steps involved. You'll have to get an appraisal. He'll have to have his credit score looked at. He'll have to submit documents. Yeah, everything's very easily identifiable, though, right? I mean... Well, it depends on his situation. So what if he is the owner of multiple other businesses that have loans associated with them? And then underwriting comes after him and says, wait a minute, what are all these other businesses? Are you actually using the bridge loan to improve some cash flow situation that you have in your business? Or are you, you know, what are you using this for?

Like, it can get really complicated depending on what other factors are happening in his life. Now, if he's a W-2 employee with no other businesses, no other properties, that would be very simple, but we don't know that situation. Good point. He could be in the mafia. Or he could be the owner of multiple other rental properties. Like, the more properties you own, the more of a nightmare underwriting becomes. That's the reason that I prefer to buy houses and cash these days. It's not necessarily because it's a wise financial decision. it's because at the number of properties that I own, plus owning a business and being self-employed, underwriting is such a nightmare that I would just rather pay cash. It just makes my life a lot easier.

And I think there's nothing wrong when you're making a purchase decision as big as the one that Dylan's making to slow down that process a little bit. I think that sometimes when it's a very fast process, that's when mistakes get made. So the idea of completing one transaction before you pull the trigger on the second one, your solution, I really like it for that reason, too. Our next question comes from Paul. Hi, Paula. This is Paul from San Francisco Bay Area. Got introduced to you by Matt Feintest. I've listened to almost all of your episodes.

I'm a big fan of your podcast because of your simple and clear way of explaining things so that anyone can understand the topics you and your guest discuss. Thanks to your encouragement and motivation, I finally bought my favorite. first country property in Texas a couple of months ago, and it's my first step towards financial independence. After listening to Matt Fine Tist and your podcasts, I started reading and listening to other bloggers and podcasters about financial independence and passive income. There are several ways to generate side incomes, and I can find many blogs with a list of passive income streams. I don't see credit card piggybacking in any of the lists I came across. For the audience who might not know about credit card piggyback, it is a way in which we can add

low credit score people as authorized users in our credit cards for a month or two and use these cards for our normal day-to-day spending. They don't get any of our details or credit cards. After say two months, their credit score and report will be better because they had a higher credit limit for a couple of months. In return, we get some cash from the company who is providing this service. I think there is no risk involved because we are not giving away any of our information. The authorized card is also with us, so they can't use it. From a understanding it is not illegal too. This is how credit repair services make money and people who have high credit score like most of your audience and the FI community can get a share of this.

I heard we can earn anywhere between $400 and $2,000 per month by doing this correctly and consistently. This seems way better than credit card travel hacking. My question is, if this is legal, risk-free and easy, why is no one talking about this? Am I missing something here? Thanks. Bye. So leave it to Paul. We almost, Paula, we almost made it through without being thrown a wrench. And we finally, Paul, make sure that we get to get a little esoteric. How about this? I suppose. Yeah. So credit card piggybacking. Credit card piggybacking works like this. You take a person who you don't know. There are companies that do this. You don't know this person. You can add authorized users to a credit card. And you add an authorized user. You don't actually give them.

a copy of your credit card, so there's no chance for them to use the actual credit card, and all they want is their credit score to be better. So if I've got a great credit score, I make a little bit of money by helping somebody else get their credit score better without really, to Paul's point, without having much risk. FICO tried to shut this down at one point because they thought it was kind of scammy and clearly disingenuous in the gray area of being ethical or not. And then they realized that they've gone too far. So now what they do is if they see authorized users who aren't related to each other,

the authorized user gets a smaller bump up than they used to. But there are still companies giving people money to do this. And to Paul's point, your risk is fairly low. You know, so my issue with credit card piggybacking has nothing to do with actually making money, which is his question. My issue with credit card piggybacking, and by the way, I have no love of banks. I have no love for credit card companies.

I'm not trying to help them at all. There's just a lot of ways to make money. And this one, yeah, this one still is too deceptive for me, Paula. It just, we're trying to do something in a non-straightforward way to help somebody, quote, clean up their credit when they really haven't done anything themselves to clean up their credit. Like, I like the fact that I have a good credit score because I paid my dues to get there. And if I can help somebody else get kind of a free lunch, I don't know. I'm interested in helping people. I'm interested mentoring people.

I'm not interested in shortcutting. And I just don't want any part of it myself. So I can't find anything wrong with Paul's logic. But for me personally, no, thank you. So I first heard of credit card piggybacking a couple of years ago at a financial independence meetup. And this seems to be, I don't want to say a popular activity within the FI community, but there's certainly a contingent of people who do this as a side hustle, who make extra money based on the strength of their credit score through this.

The risks are minimal, but they are there. I mean, once you have an authorized user on your credit card, technically that person is authorized to use your credit card. Now, will they be able to do so? probably not because you're not going to give them your card information, but you are technically authorizing them to do so. So there is an inherent risk associated with that. And that being said, I've never heard personally of anybody who's authorized users somehow gained access to their account information. But again, the risk is present. So I guess my two hesitations around credit

card piggybacking, or number one, is that inherent risk that I just named. And number two, I think more broadly, if you want to develop some type of a side hustle, again, knowing that you can do anything but not everything, and knowing that every hour that you spend on X is an hour that you're not spending on Y, my question to you, Paul, is, is this the best use of your time? Is this the side hustle that you think will net you the largest gains in exchange for the output of time and energy and attention that it requires? And the answer might be yes. The answer might be, you know what?

The time and energy is minimal and the gains are a couple hundred extra bucks a month. So why not? And if that is your answer, if you've thought about it in terms of framing it in the opportunity cost and you've decided within that framework that this is still a good opportunity for you, then excellent. I would just encourage you to frame the decision not alone in a vacuum but within the opportunity cost context. Yeah, I like that too. That would be 1A. There's one in 1A. One is, I wouldn't do it. One A is Paula's answer. We'll return to the show in just a moment. So let me tell you about how I've been getting some of my household staples,

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The national average, according to the FDIC as of February 7th, is 0.04% APY. So you get 12 times higher than the national average and no monthly fees. And free ATMs worldwide. If you would like to open an account with them, head to radiusbank.com slash Paula. That's Radius Bank, R-A-D-I-U-S, Bank.com slash Paula. Again, that website is radiusbank.com slash Paula. Our next question comes from Anonymous, age 24. Hi, Paula. I just started listening to your podcast, and I have two questions about retirement

savings accounts. I am 24 years old and no next to nothing about investing. I opened a Roth IRA at Steeful a couple of years ago, set up a automatic deposits and haven't thought about it since. After listening to one of your podcasts about actively managed mutual funds, I tried to look up Cefell's fees for this mutual fund. It is a Washington Mutual Investors Class A mutual fund, and I believe if I have the correct information that I am paying a front-end sales load or charge of either 4.5 or 5.75%. I currently only have $6,500 in my Roth IRA. Should I remove the money from this IRA and invest elsewhere? I know that you are a fan of

Vanguard, so if I opened an account there, what would you recommend I invest in specifically? My second question is along the same lines, but is about my employer's 401k options. I am currently investing 5% of my paycheck into my employer's Roth 401k set up with American funds. It is the American Fund's 2015 Target Date Retirement Fund, too. I am not sure. what fees I am paying for this fund, and my employer doesn't match contributions. I should also add at this point that the total contributions between my Roth 401k and Roth IRA in the past years have not exceeded $5,500, which I know is the Roth IRA limit. Should I stop investing in the Roth 401k and invest all of my savings in a Roth IRA instead? Thank you so much. Thank you for asking that

question and welcome to the world of learning about investing. I'm glad you're here and I'm glad you're learning about investing now in your 20s. This is a perfect time. So you're on the right track. It's so great. Now, first of all, for the sake of everybody who's listening, I want to define what a front end load is. So when you buy a mutual fund, if there is a commission or a sales charge that is deducted from the contribution that you make up front at the time that you purchase the shares of that mutual fund, that is what's known as a front end load. Now, by contrast, if you pay the commission at the time that you withdraw money from the fund, that's known as a back-end load. And the third option, which I prefer, is that there's no commission at the time that you make the purchase or at the time that you withdraw, and that's referred to as a no-load fund. So when I talk about Vanguard index funds,

these are no-load mutual funds. Now, with that definition established, Joe, I know you have some comments that you want to make about her situation. Yeah, when she said, should I remove the money from the Washington Mutual Fund, whenever somebody's paid a front-unload already, the commission person has already received their commission. So at this point... The damage is done. Yeah, yeah, let's not think about sunk cost. Let's take a look at where we're at right now.

And here's the deal about the American Fund's Washington Mutual Fund. It's a five-star fund on a scale of one to five-stars. It's been a five-star fund for a long time. This fund competes very, very well with the S&P 500. So even though I might have done things a little differently, the person that recommended this fund recommended a very good fund and they got paid for their recommendation. And that's generally speaking, Paula, if you're going to have somebody help you with your situation, that's kind of the way we wanted to work, right?

But what's the expense ratio on the fund? The expense ratio is just over half a percent, 0.58. But this fund, and when you look at American funds in general, American funds over long periods of time have been, if not the number one, fund family for actively managed mutual funds, they've always been in the top two or three. Like they, you know, I look at, I look at a 0.58% expense ratio. And I think, yeah, for an actively managed fund, that's a fine place to be. I also look at the growth of $10,000 over the last 10 years. The fund looking at versus the S&P 500, it generally, is either right on it, right above, right below.

In fact, if I look at a, if I look at a one-year track record, it's barely beating it, three-year track record, it's barely below it. In terms of its category, it's always in the top 10% of funds that it competes against. So this is a well, well-managed, large-cap blend fund. So to take this fund that she already bought and to move it, Okay. I mean, if it's the purpose of having your dashboard all in one place, yeah, you can't drive five cars on a road trip. So if she wants to have everything in one place, then yes, if she's going to from here on out do things differently, then move it. In terms of this fun, if history is any guide, this fun is not going to be a drag on your portfolio. See, and Joe, this is where you and I disagree. And that's why I have you on the show, because I think it's helpful to hear two dissenting viewpoints. I cannot support an actively managed mutual fund knowing that you can have large cap, U.S. large cap stock exposure in a Vanguard total stock market fund that has an expense ratio of 0.04.

Now, that is for the Admiral Share class, which requires a $10,000 minimum investment. But even the more expensive Vanguard fund, which is the investor share class, has an expense ratio of 0.15, which is significant. significantly lower than the 0.5 expense ratio. And for people who aren't sure what I'm talking about right now, an expense ratio is a fee that you pay for every fund that you hold. And now you don't literally write a check for this so you don't quote unquote feel it. This is just money that is quietly deducted from your account. And because of the fact that you don't write a check, you don't feel it, you don't see it on your credit card statement. It's easy to overlook this fee. But the difference between an expense ratio that charges half a percent versus an expense ratio that charges one-tenth of a percent means that that gap is compounding gains that you're not getting, which overtime add up. And so for that reason, I just can't support being in an actively managed mutual fund when you could be in a passive index fund with an expense ratio of one-tenth of one percent or less. You said earlier in the show not to let Good be the enemy of

great or perfect or something like that. Done be the enemy of perfect. This is, a perfect be the enemy of done. This is so the wrong dragon and it's so sexy to talk about lower fees. I've never, ever, ever, 17 years working with people, I never once met someone, well, I take that back one time. I met someone where the fee monster was a reason they didn't reach their goal.

The main reason they didn't reach their goal, frankly, the only reason they didn't reach their goal is because they didn't know what the plan was. they didn't save enough money. When I'm splitting hairs between a 0.58, which by the way, when you look at the mutual fund industry, I'm at morningstar.com where you look at funds, this fee level of 0.58 is low. And that's not according to me. That's according to Morningstar. Morningstar, it's not their idea that it's low.

It's low compared to most places. So if I was up in the, even the 1.2, 1.3, I'd say, you know what? Yeah, that's a high fee compared to what everyone else is doing. And I understand that if, you know, mom says it, if everybody else is jumping off a bridge, right? So I get the whole everybody else thing. 0.58 is a low expense. I don't think that changing from a 0.58 to a 0.04 is going to change your ability to retire. If you want to make the move to have it all in one dashboard, I think that's absolutely fantastic.

But I don't think this is the type of life and death decision where you should suffer. decision fatigue. Well, yeah, I say don't suffer decision fatigue. Just move it to Vanguard and be done. I mean, because she's, she's 24 years old. She's got decades and decades for that gap, the gap between a 10th of a percent versus half a percent to compound. If it's to put it in one place, I get it. Do it right. Get it there. Do it. If she's going to do it that way for the rest of time, fantastic. Get it on one dashboard. Besides that, I don't get it. Yeah. All right. So you said that you feel as though she's slaying the wrong dragon. What dragon should she slay? What should her focus be at this point? Let's find ways to save money. I think even the tax treatment questions we've had earlier, far, far more important, right? Far bigger, bigger questions about the tax treatment of your money. And a lot of people don't pay attention to that. So I'm loving all those questions. Tax treatment of your money, taking care of your budget so that you're focused on the things that make a difference in your life and not spending money on things. that don't make a difference in your life, finding automatic ways to save.

And when you stumble across something that's really cool in your life, being able to automate that and take control of that, I think those are far, far more important. And so my, uh, when it comes to this question is not, is not because I disagree, Paula. It's because my, uh, is at 24 years old, I don't want her to look at every single expense and go, well, low versus super duper, duper low. Okay. That's that that's not where she, where she should be spending her time. So you're saying that she should focus on increasing her contributions to her retirement accounts? Yeah. And that's an interesting question that she made, which is should she still continue to put money into her retirement account versus putting money into, you know, stop putting

money there and instead go with an IRA. If she's eligible for an IRA and she can put it up to that limit, that's great. You have to be under a certain income level to be able to do that, to be eligible for those. But generally speaking, the cool thing about your workplace Roth is that you can put a lot more money in that if you choose to than you can into just a Roth IRA. So Anonymous, what I would say to you is, as you mentioned, your total contributions to both of your accounts, your 401k and your IRA, is $5,500 per year. So given that those are your total contributions, and given the fact that your employer does not match your retirement contributions, I would open up a Roth IRA at Vanguard and put all $5,500 per year into that Vanguard Roth IRA.

That way, you're getting rock-bottom fees, and you're still getting Roth tax treatment. And given that your employer doesn't match contributions anyway, you're not missing out on anything from your 401K. And this is where I am not, you know, generally speaking, I'm not a fan of Target Date funds. Most Target Date funds are not built like the Vanguard product. There are a few that are very low cost and responsible funds. The American Fund's Target Date Fund has an expense ratio of 1.52. And now I'm going to change my tune because even though that's a little below average.

And by the way, I still don't think it's going to change whether she's able to financial independence or not, but when I stare down a 1.52 fee on this Target Day fund doing something you can easily do on your own, I don't understand why so many people are in love with Target Day funds. When you can do it on your own, you can go with a third party that will do it for a fraction of that cost, like a bloom if you really need that, you can do all kinds of different things and not pay this 1.52. And Joe, to clarify, what you're talking about right now is that in her employer-sponsored Roth 401k, she's invested in a Target Date retirement fund that has a 1.5 to expense ratio. That's right. Yeah. And Target Day funds are an asset class that employers often will tell you

to put your money in and fund providers will tell you to put your money in. Hey, listen, Paula, if you don't feel comfortable with this, let us do it for you. It's called a Target Date fund. We talked about rebalancing earlier. They'll rebalance it for you. They'll swap funds in and out for you. a lot of these funds are not built on best in class. They're built on the funds that make them the most money, knowing that the people that use them generally don't know what's going on. And so you'll see the expenses are very high. You'll find that, well, and not only are the expenses high,

you've expenses on top of expenses. So here's one target date fund that shall remain nameless that drives me crazy. You have a fun family that has high expense ratio investments inside of each individual fund, they put all of those funds together into a target date fund, and then they charge you another fee on top of their own management fee to pick which ones they have inside of the fund. So you have a fee for the individual funds in the target date fund, and then you have a fee to manage the target date fund. And I see that far too often in this asset class. And there's so many better ways to do it. So many. So target date funds for the most part. And everybody's going to write to you,

Paula and say, but Vanguard, I get it. Vanguard has good funds. Yeah, Vanguard is a very good target date fund. Most target date funds are not like the Vanguard product. They stink. And this American funds one, the fee level here says not low like it did for Washington Mutual. This one says below average. It's a couple rungs up.

And when below average is 1.52% and it's below average, you should have a bell ring in your brain that says somebody's ripping me off. Right. Absolutely. So the takeaway from this anonymous is that right now, the money that you have in your employer-sponsored Roth 401K, which is money that you have invested in a target date fund, that money is being subject to a massive fee, 1.52%. But there might be a middle ground, Paula, that I was thinking about. We don't know, you know, you caution me on Dylan, but we don't know what else is going on in his situation. I don't know what other funds are available in her 401K.

Usually target date funds are not the only thing. So if she has some good Vanguard or BlackRock, a lot of companies have also used iShares inside of their 401K. I shares are a nice choice inside of your 401k if you have those. I like using this site and the site that I use to answer this question is I use Morningstar.com and I look up my funds on Morningstar.com and it will tell me the expense ratio that I'm paying right there. And Morningstar, Morningstar tries to get you to subscribe. You don't need to subscribe. Just click off that button when it says, when it wants you to log in, you don't need to do that. Everything that you need is free on Morning Star.

It's a really nice analytical site about what the fees are that you're paying. So absolutely, you can always check Morning Star for information about specific funds. My short answer is take the money that's in your Roth 401k, roll it over into a rollover. If you're allowed to, roll it over into a rollover IRA at Vanguard, and then open that. a Roth IRA at Vanguard as well, and that way you can consolidate all of your retirement accounts at Vanguard where you will get index funds with rock bottom expense ratios. And since your total contributions to both accounts, both your 401K and IRA, are $5,500 a year, from this point forward, I would make all of your contributions into your Roth IRA until you hit that $5,500 mark. And I would

also try to find ways to increase your contribution level, if possible. And of course, then once you do that, if you can put in more than $5,500 a year, then that additional money would have to go into your 401K. But first and foremost, max out your Roth IRA because you can put that into a Vanguard Roth IRA, which will give you access to lower fee funds. Well, thank you, Anonymous, for asking that question. Our next question comes from Jeff. Hi, Paula. I love your show.

my wife and I are both 64. We're planning retirement. And the question I have is that when I read about whether a million dollars is enough for retirement, it's very ambiguous about whether or not Social Security should be counted in that. If I have a million dollars towards retirement, and I expect perhaps $40,000 a year from Social Security for my wife and I, times 20 years, that's another million. Shouldn't we consider that we actually have $2 million towards retirement, thanks for your response. Jeff, that's a fantastic question. People often talk about retirement as a three-legged stool. You've got the money that's in your portfolio. You've got Social Security. And then you've got

other sources of income as well, such as perhaps a pension or rental property income. And so when we're talking about planning for your retirement based on the money in your portfolio, we're only discussing one leg of that stool. When people talk about the 4% rule of thumb, which states that you can withdraw 4% of your portfolio per year, 4% in year one and 4% adjusted for inflation every subsequent year. What they're discussing is purely the portfolio leg of the stool. So if you have a million dollars in your portfolio, then at the 4% withdrawal rate, that means that in year one, you'll be able to withdraw and live on $40,000 per year. If on a different leg of the stool, you also have $40,000 coming in from social social

security, then excellent. That's the income that's coming in from that other leg of the stool. So now you have $40,000 coming from your portfolio and $40,000 coming from Social Security. And then that third leg of the stool, if you also have X amount of dollars coming from rental properties or from a pension or from royalties on a book that you've written or on a piece of software that you've developed, that's awesome. That's the money that's coming in from that third leg of the stool. And all of those put together are the total picture of your retirement income. So the rules of thumb around that 4% withdrawal rate that is only specifically looking at your portfolio. Yeah. And I actually look at this, Paula, completely differently. I don't even know that I would, I understand his question.

I think I might just reframe things. And that is from a financial planner standpoint, it was always how much money does my client need to live and then back all of those legs into that equation. So I think it makes it a lot easier and it gets rid of a lot of the need for the rule of thumb in the first place. And especially at 64, right? You can't do this at 24. But at 64, you've a fairly decent idea of about what your expenses might be over the next, certainly over the next several years. And then generally, you're probably not going to change expenses wildly beyond that. And health care costs especially may go up.

So we may have to plan for that. But I think there's a decent level of planning that you can do to back into that number, which is I need X amount of money times Y return to equal that income stream. The reason I like the three-legged stool that you're talking about is to protect my downside, which means each of those three legs have problems, right? If I have a royalty coming in and the company that I'm getting the royalty from goes bankrupt or I'm getting a pension, and the entity goes bankrupt, well, then I have a problem there. With my portfolio, we talked earlier about when the market has problems, what's my downside protection there? So depending on the leg of the stool, I know that I have some risk management that I need to do.

So I still need to be cognizant of those three legs that you're talking about and how I'm taking those distributions. And also, depending on how much money I need to live, I can also, getting back to the tax game, maximize my tax planning situation by interchanging those pieces of the stool. So if I have money in a Roth account and money in a pre-tax account or let's say someplace where I'm going to be heavily taxed, I can mix the two of those together so that I can live in a higher tax bracket and the government is taxing me at a lower one. And that's why I also like looking at the legs of the stool.

But I would begin, like Stephen Covey said, with the end of mine. Start with the end of mine and then work backwards. and then we don't have to rule as much about the rule of thumb. Stephen Covey, by the way, is the author of Seven Habits of Highly Effective People, and Begin with the End in Mind as one of those habits. It's a great habit. So in Jeff's situation, let's pretend that Jeff was a client of yours, and he says, hey, I have a portfolio of $1 million.

I also have Social Security. And let's assume for the sake of example that he has no other sources of income, no pension, no rental properties, no royalties, et cetera. We don't know how much money he needs in order to live. what would you do from that point forward? We can just make up a number for how much he needs to live. We'll say 60,000 a year or 80,000 a year. Right, and that would be question one.

We'd have two different questions. We'd have how much does he need to live? And then we also put together a plan of what are all those things that you really want to do, right? Because we can put it together, the budget about what he's doing today. But if he's really looking at retirement, you know, retirement means retreat. And I think that retreat is something that we don't really do, especially when at 65. there's a good chance you're going to live another 30, 35, even 40, 45 years at this point, looking at modern statistics on aging. Based on that, I would have two numbers. I'd have the number

on what is he living on now and what does that look like if he takes his million dollars. This is the first thing I do. Based on the way he's investing now and based on the amount of money he has, will his money last the rest of his life? That's the first string. If that's good, then the second thing I would do is say, let's not retreat. Let's talk about this next period of your life. And what do you want to do that's different than what you used to be, what you used to do before. I think traditional retirement planning was I work for X number of years and then I retire. Now I think if we look at the world almost in increments, right? We look at these. I read this article recently that talked about looking at your life in 25 year increments instead of traditional retirement

planning. I think it's much, much better. So if he looks at this next period of his life and said, I want to do these things I'm not doing now and adds to that, well, can he still do all those things based on the way that he's investing? If not, then we have a few choices. Choice number one is increase the expected return in his portfolio. And by that, I mean, you then have to increase the risk of the portfolio. If you do that, of course, that brings up a lot of issues about volatility and you're withdrawing and being volatile.

So there's conversations there. and can we really do that? The second thing is, are there other sources of income? Maybe Jeff wants to work part-time and where we didn't show that in the plan at first because he wanted the ability to not have to do that. Maybe we put some of that in the plan that he's going to work part-time for the next five, six, seven years and save that money. Or maybe he's going to change the way that he changes his expenses. But see, when we do it that way, Paula, now we're starting off with his lifestyle. And that's where I think a good financial plan starts. isn't, I've got this stuff and how do I duct tape it together to make it work. It's I have these

plans and how then do I maximize the stuff to fit this awesome life that I want to live the rest of my life. So what you're saying then is that Jeff needs two numbers. He needs a number for how much is bare bones enough, you know, how much is enough to just satisfy my needs? And that's the floor. And then he needs a second number and that number is how much do I actually want based on the lifestyle that I'd like to enjoy in my retirement. As we look at how to achieve that second number, more options come into play. So you might increase your risk in a section of your portfolio in order to get towards that second number or you might take on part-time work in order to get towards that second number. But all the conversations that revolve around that second number happen

after your first sure that at a minimum you have the first number, the needs, the foundation. Right. And the cool thing is, there are plenty of online calculators to help you do those. Do you have any that you recommend? No, but I have a site that I like. You know, you and I both, I believe, know, Darrell Kirkpatrick. Darrow has a site called Can I Retire Yet. And on his site, he did a wonderful, a wonderful review of lots of different calculators. and the upsides and downsides of all of the different calculators. So I would point people there. Okay. And we will link to that in the show notes,

which will be available at afford anything.com slash episode one to eight. Well, that is our show for today. Oh, we don't have to go, do we? I think it's time, Joe. Oh, man. Joe, where can people find you if they would like to know more about you? Wow. Can I talk about my new podcast, Paula?

Yeah, absolutely. Cool. I have this new show called Money in the Morning, and we do it live without a net in front of a Facebook audience. which scares the hell out of me. But different than the Stacking Benjamin show, which is really a circus and features the awesome pull of pant every Friday, I just take two financial headlines. And we talk about those two headlines.

It's a 15 minute show usually, sometimes goes 20 minutes. But we take two headlines. We talk about why those are important for your money. And then we try to get one big lesson that combines both headlines together. So anything coming up in the news, we take it and run with it. And that's money in the morning. Monday through Friday, and you can either watch us do it live on Facebook, but most people listen to the podcast that comes out a couple days later from that.

Nice. I can't believe you do a daily morning show slash podcast. That sounds like a lot of work. The good thing is that because it's live, there is no editing. So you will hear when I make some mistakes. And I'm not, as Paula, who's, we've worked together for a long time now. You know that I don't always say things the right way the first time. So being able to not being able to edit is quite a challenge, but it also makes it more fun.

Gives me that little thrill in my stomach as we're doing the thing live. I think that thrill in your stomach is known as anxiety. Terror, right? Adjecture terror. Yeah, but it is fun. Excellent. Well, Joe, we will, do you have a website for money in the morning? No.

And in fact, we don't have a page for money in the morning. We don't. It's like this undercover thing, Paula. So money in the morning, you'll just find wherever you're listening here to afford anything. But no. You mean you'll find it on your favorite major podcast player? Your favorite major podcast player. Hopefully at some point at stackybedjements.com will have a page for it where you can listen to it there too.

But we don't have that yet. Okay, cool. So look for it in your favorite podcast player. That's it. Awesome. Well, thank you again, Joe, for joining me on today's show. That was fantastic fun as always. I love your listeners.

They have such great questions. Yeah, it's a very sophisticated audience. And I'm impressed by the number of people of any age who want to improve their financial situation. I mean, there are a lot of people who are listening to podcasts, and there's nothing wrong with this, but who are listening to podcasts that don't in any way improve or enhance their life. Podcasts that are sheer entertainment. And that's great. I love entertainment. But it's also nice to know that there are tens of thousands of people who are so committed to improving their money.

and improving their relationship with money, that they are spending time to listen to something like this and to learn how to invest and to learn how to reach financial independence. I especially love it when we get questions from 24-year-olds. I think that's amazing. And just taking control of your financial life early is so commendable. Absolutely. Absolutely. And by the way, for anybody who wants to call in with a question, we have, I mentioned this in the most recent Ask Paul episode. in episode 126, when it comes to real estate investing related questions, we have quite a long wait list. We get a lot of questions related to real estate investing. So we have about a three to four month lead time on those questions.

On these questions, the general personal finance, retirement, investing related questions, anything that is not real estate related, there's a much, much shorter wait time. So if you have any questions related to your general financial situation, please head to Afford Anything.com slash questions where you can leave your question. Thank you so much for listening. Just a reminder to head to Affordanithing.com slash store. We have officially launched our T-shirt store and every single penny from the sale of these shirts, every penny of profit, will be given charity water. our goal is to raise enough money to sponsor a water project, such as drilling a well, somewhere in the world. And my goal is to do this by the end of 2018. Now we need a minimum of $10,000 raised to sponsor a water project. If we can get a bit more than that, if we can get about $12,000, that would be ideal. That would be enough to, because it costs, of course, vary depending on what nation you're building this water project in.

But about $12,000, which is my goal for the year 2018, will be enough that we can build a water project somewhere in the world entirely as the Afford Anything community. So somewhere on this planet, there will be people who do not have running tap water in their own home, who will be able to go to a well or get biosand filters or have the solution that they need so that they can access safe, clean drinking water. That's my goal and that is what this store is meant for. So afford anything.com slash store that will take you to a selection of t-shirts that you can buy from Amazon that show your support for this podcast and every single penny of profit, which is $5.38 per shirt, is a donation to charity water. Coming up on next week's episode, we have an interview with Laura Adams, the host of the Money Girl podcast on transforming your relationship with money.

She talks about her own experience with debt and how she was able to steer herself from someone who knew nothing about money to somebody who's on the right track. If you enjoyed today's episode, please do three things. Number one, tell your friends. Number two, hit the subscribe button within your favorite podcast player. And number three, leave us a review on Apple or Stitcher or whatever podcast player you use. Thanks so much for tuning in. My name is Paula Pant. I am the host of the Afford Anything podcast.

I'll catch you next week. Thank you.