Afford Anything - We Want to Save Senior Dogs … But Should We Sell Our Rental to Do It?

Episode Date: January 6, 2026

#678: Anonymous (02:36) -  "Victoria" (Anonymous) is 51, single, and still enjoying their W2 job while building a side business from a passion hobby. They’re thinking about heavy Roth conversions, planning for retirement, and wondering how much traditional money to leave untouched. Should Alex prioritize tax efficiency, or focus on growth and flexibility? Anonymous (37:18): Anonymous "Gwyneth" and her husband moved to the U.S. to start a sanctuary for senior dogs and cats. With $100,000 in debt soon paid off, two properties in hand, and a dream to buy land for their sanctuary, they’re torn: sell, refinance, or keep their rental property? What’s the best way to fund a long-term dream while building wealth? Soyman (48:17): Soyman is 25, saving aggressively, and planning to take all of 2027 off to go backpacking. They see a rare tax opportunity to convert nearly $30,000 to a Roth at a negative tax rate—but is the strategy worth the small cash buffer and other risks? Learn more about your ad choices. Visit podcastchoices.com/adchoices

Joe, so I've been looking up famous dogs. This show's going to the dogs. I didn't know this, but there was a dog, a sled dog who ran diphtheria medication, life-saving diphtheria medication to this remote village out in the Arctic. Wow. Yeah. I know there's this dog that I heard of who's huge and red. Clifford?

Yes. You've heard of them too. Yeah. Well, I was thinking, okay, there's cartoon dogs who are most. mostly boy dogs, right? You've got Clifford, Snoopy, Pluto, Goofy, Scooby-Doo. You've got like that class of dogs. It's Goofy a dog. I mean, I don't want to get to sidetrack, but it's goofy a dog. He's got the dog ears. I don't know what he is, but he and Pluto are like, anyway. Well, and then there's real dog. So, Balto, Balto is the dog who ran the diphtheria medication.

Okay, cool. Rintin' tin, real dog. Ooh, TV dog, Lassie. Yeah. I guess that's technically a real dog, even though playing a fiction character. Anyway, the reason that we're going through this is because the first question that we're going to answer today is from a woman who wants to start a sanctuary that saves senior dogs and give senior dogs their best life. Sweet. I heard that dream and I'm like, this is why we do what we do.

I want people to get good at money so that they can go into the world and do stuff like that. Whatever they want. Yeah, exactly. Yeah, yeah, but it doesn't have to be dogs. It could be birds, hamsters, turtles. It doesn't you have to be animals. Just go do what you want to do. Chinchillas. I run a chinchilla rescue. I've rescued both of them. With that, welcome to the Afford Anything podcast, the show that knows you can afford anything, but not everything. And the show that's here to help you with your money so that you can do what it is that you really dream of doing, not what it is that you have to do in order to pay the bills. this show covers five pillars financial psychology increasing your income investing real estate

and entrepreneurship it's double-eye fire and every other episode ish i answer questions from you i do so with my buddy the former financial planner joe sal see hi what's up joe you know i was thinking paula if i got a dog i don't have a dog i have of course cooper the cat who rules this house but if i had a dog i think i would name it 5k so i could brag to everybody that i walk 5k this morning. Oh. Man, I just walked a 5K in 10 minutes. It's incredible. And with that, we turn to our first question, which comes from Anonymous. Hi, Paula and Joe. This is Anonymous, mainly because I'd love for you two to give me a name. First, I want to thank you both for the podcast and the Q&A episodes. I've learned so much from you.

And honestly, almost everything I know about money and personal finance comes from the two of you. My husband and I moved to the U.S. three and a half years ago to make our dream come true, opening a sanctuary for senior dogs and cats so that in their remaining time on this planet, they'll have the best days they've ever had. Our plan is to buy land and build a few Airbnbs on it so the sanctuary can be self-sustaining. A little background before I ask my question. My husband and I are 39 years old. In about two months, we'll finally pay off $100,000 of debt that we've carried for the past five years.

Because of this debt, we don't have retirement accounts beyond our work-sponsored ones, with almost no money there. Once the debt is gone, here's our plan. Build an emergency fund, open and max out both of our Roth IRAs, max out the existing HSA, and open a solo 401K for my husband. Right now, we're saving about $3,500 each month. Now, for my question, we currently own two properties. One is a rental, and the other is our primary residence, which will become a rental property once we'll move out. We have lived in the rental property for two years so we can avoid paying capital gains. taxes. We have about $100,000 in equity in it. Right now, it loses about $200 a month, which we can

afford. There's a possibility we'll rent to voucher tenants in the future, which would flip it into positive cash flow of about $600 a month. I ran the numbers on the cap rate, and if I calculated correctly, it comes out to about 9% with appreciation included. Here are the options we're debating. One, sell the house and take advantage of the capital gains exclusion. We'd use that money for the down payment and startup costs for the sanctuary. Joe always says, start with the end in mind. And this sanctuary is our end. On the other hand, I believe the property could be lucrative long term if we keep it. And since we plan to buy more rentals in the future, selling this one might not make sense. Two, refinance the property. We currently have a very high interest rate of 10%, and refinancing

would let us pull out about $30,000 to use as our starting sanctuary fund. It would also lower our monthly payments and improve our equity position. If we refinance, it will also give us around $100 in cash flow, depending on the interest rate. Three, sell the property and use the proceeds both as a down payment for two cheaper rental properties and to max out both Roth IRAs and the HSA for that year. Four, sell and split the proceeds 50-50. Use half to buy an established cash-flowing business that generates income from day one and the other half as a down payment or startup fund for the sanctuary.

We won't have an emergency fund yet, so I'm a little hesitant about going the route of buying a business or picking up another rental property right away, even though those options could generate income sooner. The challenge is, if we don't sell, I'm not sure how quickly we can save enough to pursue our dream. And we're not getting any younger. Our plan is to buy the land and start the sanctuary within three to five years. One more note, I'm a real estate sales agent. So if we sell, we won't need to pay two agents' commissions.

So what do you think we should do? Anonymous, thank you for the question. I love the dream. Let's start by giving you a name. Joe and I, before we started recording, had a debate as to whether we should give you the name of a dog, a famous dog in history, or the name of a human. Believe it or not, we went with human. I know you'll find that shocking. Well, there's some great dogs. Hachiko, the Akita, who would go to the train station in Japan to

wait for their deceased owner. I mean, beautiful names of famous dogs in history. Lyca, who is still floating somewhere in space, first dog in space. We decided instead, though, to not send you to space by yourself, we decided to make you a star. Somebody who helps rescue a bunch of dogs and also help with behavior. And she is a woman who is a TV star and a dog trainer. Of course, I'm talking about Victoria Stillwell, who's maybe one of the foremost pet behavior experts and a woman who set up a foundation to help people rescue dogs. So, in honor of her we will name you Victoria so what should we do with this property a couple of things struck me right away and there's two separate conversations to have one is about how to fund this dream and then the other

is about how to fund your old age because the two big things at a personal level that we need to take care of are your emergency fund and your retirement planning and then at a professional level, there is how do we fund this dream sanctuary that you have. So I want to tackle both of those separately. I fear that the two may get conflated. And let's begin with talking about this dog sanctuary. A few things strike me right away. One is that you don't necessarily need to self-fund the entire project. If it's operated as a nonprofit, people in the nonprofit industry will be the first to be able to tell you how difficult grant applications are and grant writing and, you know, how tough that space is. But there are a lot of funds that are out there

for organizations like the one that you're going to create that can provide some seed funding, particularly if you can show a great plan on how you're going to make this self-sustaining over time and you only need initial seed funding and you have a plan to bring the organization to a place in which it can sustain itself. There may be some amount of money that you yourself might need to put in, but looking to endowments and philanthropic organizations for grants, looking to individual donors, small donor donations, there's a lot of assistance out there for people who want to start nonprofits. And it's certainly an enormous workload. We had the founder of Charity Water on our podcast several years

ago, and he talked about all of the challenges that he faced when he was starting Charity Water. And he was reminiscing on the days when they would high-five each other over $10,000 donations. Because in the beginning, something like that is a very, very big deal. It's a huge amount of money when you're just getting started. And now he looks back on that fondly, now that he's running an organization that has a budget in the millions. For how difficult it is, there's certainly a lot of resources, training, help for people who want to learn how to organize something, tell a good story, raise the funds. I don't want you to go into this thinking that most of that money is going to have to come

from you. I'm glad you began there because, frankly, I hadn't considered any of that. I didn't consider the nonprofit nature at all. I just considered the timeline, which... That is what you were best known for, which Victoria already alluded to, that you begin with the end of mind. And I also thought about expertise and not having expertise. And I think, I think from my perspective, Paula, you can use a process of elimination here

as much as what do you want to do can a little bit be replaced. We can make the decision easier by making it a realistic decision. So let me start with the one that I would not do. Can we start there? Yeah. I would not begin a separate business. I would not begin a different business. It could be a huge opportunity.

It could be fantastic. You ostensibly have, because you didn't talk about this at all, I'm assuming you have none of the skills around the business that you would purchase. You would purchase a stream of income. You may understand, I'm just going to go with the basic e-myth. the basic email story you may understand how to make cakes but that doesn't mean that you understand making a business around making cakes. Joe, when you talk about purchasing a stream of income, are you talking about her plan to have Airbnbs set up on the property or are you talking about

the service that they would be providing for dogs? No, when she said option three, we would start another business which would create cash flow, which would help us work through that. I would not do that. Number one for that reason. Also, whether it's a startup or you purchase a business, there's all kinds of stuff that happens. You know, you and I know a lot of people who renovate houses and every person who renovates houses will tell you the second you open up a wall, there's surprises that you did not consider. And I think it's the same when you begin a new business. There's all kinds of surprises. And to get the business running the way that you want it to run is going to take lots of time and effort. There's no way around the time and effort

unless you have somebody who will work for next to nothing who you can trust to do the time and effort thing. And I don't know that I would even do that. So I don't like the idea of owning a separate business. I don't like it for another reason, which is even though it's a nonprofit, going out and finding funds, finding donors, finding money, doing the mission, doing all that work, and having this business on the side. Yeah, exactly. If you begin this nonprofit, this is going to be a more than full-time job. This will be two full-time jobs.

I would also encourage you to talk to people who have either started or who have run at the, you know, executive level, some type of an organization that is that is, that is, based around serving animals or helping animals. There are classic brick-and-mortar rescues, but there are also a variety of the quote-unquote traditional rescue. There are a variety of nonprofits that work with some niche element related to the interests of cats and dogs. And so to give you two examples,

there's an organization in the state of Georgia that specifically fosters primarily dogs but pets that are owned by survivors of domestic violence. And so if someone is going to a domestic violence shelter and they have an animal with them, they can't bring the animal into a shelter. So there's a particular nonprofit that specifically fosters pets that come from those situations. It's a very specific focus, and I think that if you were to have conversations with people who run the traditional shelter that we normally think of, and, you know, a local branch of an ASPCA, if you were to talk to people who run those, and then also talk to people who run more specific organizations like the one that I just described. Another example, there's an organization in North Georgia called Freedom for FIDO. They build free fences for low-income housing so that the dogs that are on chains can then run free in the yard.

Freedom for Fido. That's in North Georgia, and it was inspired by a different organization called Fences for Fido in Oregon. The reason I'm going through all of these examples is there are all sorts of different scales and scopes and operations of animal rescue organizations. And what I want you to do, the first piece of homework that I would like you to fulfill, is talk to 10 people from 10 different organizations who are either founders, co-creators, or who run it at the executive level. If you were a founder or if you were part of the founding team, what are some of the things that you know now that you would have wanted to know then? if you weren't a founder, if this is a pre-existing organization and you got brought in at the exec level, all right, what are some of the challenges that you have faced in scaling this, in growing this, in keeping the revenues consistent every year?

And if you came from a private sector background, what are some of the differences that you see in running this nonprofit organization at the executive level versus running a for-profit company if you did that in the past? I want you to have 10 conversations with 10 different people who are all involved in this world, but in different capacities. I think at the very least, what that will do will show you how much you don't want to own a different business. Because it's going to show you how much time and energy this is going to take and running two of those. I don't think you can do both successfully.

And if your goal is to have more money, I think even in this case, you'll have less money because these are, two pursuits that demand time and attention. Neither of these is a passive investment, Paula. This is not a passive thing. So I don't think you could do that. The second thing then obviously is I wouldn't take your money and pour it into additional real estate right now. I like the idea of doing it later, but you need money, you've said yourself, to begin this project. So anything that gets rid of liquidity, I would also knock out. So options three, three and four, I really don't like, which means it really, to me, comes down to option one and option two. Option one to remind people was selling the property and then using that as

your seed money. Option number two, refinance the property, create cash flow. Maybe you can pull some money out. Of those two options, I like option one the best. Interesting. I agree. I eliminate number three and four, and that leaves one and two. Between one and two, I like option two the best. Yeah, I think it's got to be one or two. The reason I like option one the best is because it's the more conservative option because of the fact that you now have a bigger sum of money. Whenever I have coach people on purchasing businesses, on starting businesses, in fact, I was talking to a guy today about an hour and a half ago about this and about how he started his business and his 20s. And it was amazing, Paula. He started this business with a million dollar loan and absolutely

no idea what hell he was doing. Imagine starting being a million dollars in debt and having zero idea what you were doing. Now, he very luckily was able to make that work. But the fact that he had a million dollars to work with really helped him. He goes, because all my projections were wildly wrong, which every entrepreneur that listens to this show will tell you, every projection that you have is going to be wrong. It's going to be so incredibly wrong. It doesn't mean you shouldn't have them because I think that, you know, almost like financial planning is called financial planning, not financial plan. Stop. You want to plan and then tweak and tweak and plan and tweak. So you do want to have projections. But I think this additional

cash cushion of having the money available is where I would start. Here's the thing about option. two. This is not as far away from option two as I thought initially because my first thought Paula was option two was the way to go. But then I thought, what's the real win here? The real win with real estate. And I could hear in your question how much you're like, this could be a great property and it could make us a lot of money. So why would I sell it if it could end up being this great thing? You know what's cool? You, even based on your number, that you shared in your question, I believe that unlike this idea of a new business that you would go into that you don't know anything about, you clearly, if you're looking at things like

cap rate and you're looking at cash flow on your properties, you clearly have an understanding of what you're doing and you've proven it because you already own a property. I believe that that knowledge is far more important to you succeeding than keeping this property. I don't think it has to be this property. I think the fact that you know how to evaluate properties is the win. So if you let this property go to get the goal and make sure that you're able to lock it in by having adequate funding, and then you reenter the market to purchase a property, I believe that that education that you've given yourself by having been in real estate already is going to help you succeed in the future. So that's why for me I thought option one was better than

option two. Interesting. Interesting. Okay. Well, so the reason that I like option two is because well, you said something that confused me a little bit. You said cap rate nine percent, but you said that includes appreciation. So I'm assuming that what you mean is cap rate plus appreciation equals unleveraged total return of 9%. That's funny. I assume that too. Yeah. That's a great unleveraged total return.

But I mean, that's a fantastic one. And if this is a property that has a solid risk profile, which it sounds like it is, a 9% total return is, I mean, I don't think you could realistically hope for a property that produces better than that. And so the thing that struck me, when you talked about having Airbnbs on the same parcel of property as this senior dog rescue,

the first thought that entered my mind is, why do they have to be co-located? If the idea is that property is a source of funding for this organization, well, that property could be anywhere. It's not geographically constrained. And there's no reason that the Airbnb necessarily have to be co-located in the same place where the dog rescue exists. It's funny how when you step back for a second, like that, aha, that they don't have to be in the same place, was right in front of them the entire time.

Right. And I think often when we talk about property or land, because real estate is not fungible, we tend to anchor to a specific location. But if real estate is being used as a source of income, what matters is the income, and that income is completely fungible. Different state, different city, different country. Yeah. Irrelevant. Right. Exactly. So you could have Airbnbs or any other income producing properties. You could have them in whatever location produces the best risk-adjusted returns, and then that stream of income can help fund the dream organization that you want to start, the dog rescue that you want to start.

And given that and given that you already own a property that's producing 9% returns, I mean, I would hang on to that 9%. There's one other thing that I want you to do as well. I talked about your homework is to talk to 10 people who run rescues in various capacities of various sizes. and in various capacities. The other thing that I want you to do is go to the IRS website and look up the 990 form of a huge list of rescues that operate in the same way as the model that you are trying to achieve.

So look up the IRS 990 form of rescues where you've got land that are retirement homes for senior dogs. those documents, which are free and available to the public, will give you a lot of insight into the financials of these groups. And again, that's the beautiful thing about doing due diligence when you're thinking about starting a non-profit, or even as a donor, when you're thinking about donating to a nonprofit, the beauty is that their tax returns are public record. You know, that's not something that you get in any other situation.

So make abundant use of the fact that those tax returns are free and available to the public. At the end of 2025, I needed to distribute some charitable donation money prior to the end of the year. And Freedom for Fido is one of the groups that I decided to donate to. One of the first things that I did was I looked up their 9-9.9. form. And then I called the founder and director, Jackie, and I had a conversation with her on the phone. And I told her, I was like, hey, I looked up your 990. And based on that, I have a couple of questions. And then we had a whole conversation. That's great. Yeah. I actually I was like, hey, I don't know how to say this without being creepy, but I've looked at your tax returns.

And I'm not calling from the IRS. Because that would freak me out. If you called me and said, you looked at my tax return, I'd be like, well, it was close. I tried. She had that same reaction. She laughed. And then we had a whole conversation about it because the return showed me what their revenue is, how much money they've spent on fundraising, how much the executives earn, which for that particular organization, it's all volunteer. Nobody, not even the director, earns a dime. But of course, that's because they're a smaller organization.

So, yeah, I mean, you see all of that reflected in the forums. The group in Georgia that fosters pets who come from domestic violence situations, the executive, I can tell you, makes between $50,000 to $60,000 a year full time. How do I know that? I read it on the tax return. This is all of the due diligence that I was doing at the end of 2025, which is why I can rattle this off the top of my head. You shouldn't have said that.

you should have just rattled it off. Just like, oh, well, I follow all of them. I'm just reading 9-94 on a Friday night. Good glass of chardonnay. But, I mean, when I saw that, when I saw, because you can see looking back how much that particular group has grown over the years. And I know as a business owner, how much work it takes to have consistent year-over-year growth. And so when I saw how they've grown, and then I saw that the director

really doesn't make very much, I was like, ooh, wow, that tells me a lot. That tells me a lot about the talent on the team. It is just a skill, I think, that investors and givers should learn. If you're investing in individual companies, which of course, for the vast majority of people, you and I don't recommend. But if you're going to, learn to read those 10Ks, learn to read how the company makes money, how much debt they have, how well finance the company is, who else is invested in the company, the backgrounds of the people running it, like get to know the heartbeat. And I think it's the same if you're going to do what you did and put money with a charity. Right. With any 501 C3 organization. Find out how they're run so you know what's going on with your cash. Yeah. I have a friend.

She's a chief medical officer at a nonprofit veterinary facility. And we were literally sitting at a bar. And I like went online and I pulled up their balance sheet and I showed it to her. And she had never seen a balance sheet before. So she was like, wait a minute. Why are those two numbers exactly the same? Which was really cool. I got to explain to her like, well, oh no. So these are designed to be the same, right? That's why it's called a balance sheet, because they're designed to be exactly the same. And kind of got to break that down. And by the end of that conversation, she had a much better understanding of the organization that she herself works for. You can learn a lot about animal rescue groups first by looking up the numbers and then by

contacting the people who run these groups and having a conversation with them based on the homework that you've already done. Like when I called Jackie from Freedom for Fido, it was a more productive conversation because of the fact that I wasn't coming in blind. I had already done my homework in advance of the call. And so when I came to the call, I could say, hey, I noticed this. I was wondering why. I noticed that I was wondering why. You know, like here's a picture, a mental map that I have been able to piece together based on all of the online research that I've done, but here are the missing jigsaw pieces. Can you help me fill those in? Or can you identify any gaps in the mental map that I have already mapped out in my head? I'm glad you said that,

but also from another point of view, which is that I don't want to just get the canned pitch for the 501c3. I want to be able to ask those pointed questions because then I avoid the canned approach and then we get something. We can have a much more important discussion about the piece of whatever their mission is that's important to me, where my intention intersects with what they do. All that said, if we get back to the money, I get where you're coming from, Paula. I still like my way better. All right. So Joe's vote is option one. My vote is option two. But the goodness is we got rid of three and four. Yeah, we both agree. Get rid of three and four. Option three and four. Do we want to address emergency fund slash retirement planning?

Yeah, let's do it. First of all, Victoria, I am very. very excited about the fact that by the time this airs, you will most likely have that $100,000 paid off, that $100,000 debt paid off. So congratulations. Second, I am wanting you to prioritize retirement savings. You're 39 years old. You and your husband are both 39, if you get aggressive about retirement savings now, you've got enough time to be okay. But I don't want you to delay any further. And it sounds like you're totally on board with that plan. You talked about maxing out both Roth IRAs.

You talked about opening a solo 401K for your husband. You talked about maxing out the HSA, which of course can also be a. Supplemental Retirement Fund. But I absolutely think, and this is part of the reason that I led with encouraging you to see if you can pull outside funding rather than self-sourced funding for this animal rescue. I really want the emphasis of your personal financial planning to be in retirement savings once you have an emergency fund, a reasonable emergency fund, at least three months of expenses. Well, clearly I think there needs to be this one.

wall that a lot of entrepreneurs have trouble keeping between your personal investments and your your personal financial situation and those of the business. So many entrepreneurs violate that consistently. It makes it very difficult for a lot of entrepreneurs to save for retirement because, quote, the business just needs a little more. Just needs a little more. Just needs a little more. It just needs a little more. And it becomes this furnace. It's insatiable. Right. Being able to have the business work for you, versus you work for the business is a skill, just like any other skill, that people work on a muscle they build as they're building their business. I just realized I'm reading back through a transcript of her question right now.

She said senior dogs and cats. I missed that on the first time. How did I just that? I love cats. Because she's a cool cat. Senior dogs and cats. I love that. love this even more. My entire Instagram algorithm just feeds me videos from cat rescues.

And I have definitely seen, it's true, like the algorithm knows me. You might as well just own it. Just on it. And I have definitely seen some Instagram videos from people who run specifically retirement home for cats because so much of the time it's the senior cats that get euthanized in crowded shelters and if they can just get moved to a retirement home a forever home the big expense of course with animals like with humans your biggest medical bills happen at the end of your life but if there can be a great partnership with veterinary care yeah I I would 100% go on Instagram, find the people who run those, and offer them a hundred bucks to have a Zoom call with you. Pay them for their time, but learn as much as you can from the people who have

already done it. Or heck, if you could go there and help out. Yeah, be a volunteer there. Especially for some of these volunteer organizations, if you can spend a little bit of time volunteering, see it from the inside. Well, Victoria, I hope that was helpful. I am so excited. for the stream to come to fruition. I love this idea. I love this question. So, best of luck. And please call us back and let us know

which option you decide to go with. And I do think both option one and two are good. All right. We're going to take a moment to hear from the sponsors who make the show possible. When we return, we're going to hear from a 51-year-old

who has questions about Roth conversions, and we're going to hear from a 25-year-old who wants to take a year off to go backpacking. Both of those are coming up right after this. Welcome back. Our next caller is also anonymous. Hello, Paula and Joe. I'm anonymous and would love to hear what name you pick.

A quick shout out to Paula for the diligence, details, and commitment you have to your offerings as these are top-notch. I was able to make the concrete decision that I do not want. to be a landlord in your first rental property, and I signed my niece up for your next raise, as I know she's in good hands with you. My question is regarding Roth conversions. My background. I have a very conservative target to retire of $3.3 million, but I like my job and my team, so I plan to use the extra time working for heavier Roth conversions, even if it wasn't

the most tax-efficient. I see tax-efficient conversions as a way to keep the base until RMDs, as I would be converting mostly gains. I also like the idea of being done or very low, just as my house is done and mine. I recently started a side business from a passion hobby. I wanted to obtain my certifications and gain years of experience while working my W-2 job so that I would have more expertise for this on-court career when I step away. The side business is intended to provide supplemental income, an area to have community, keep me mentally challenged, and an avenue to explored new technologies in this field. This is a service business that I can see offering clinics

one day, but I'm not interested in scaling to the masses at this point. Due to some job changes, I may no longer be with my W-2 job mid-2020s. I'm looking for a framework to work through Roth conversions. I've heard a lot about the discussions regarding conversion implications with taxes, health insurance, Irma, and such. Please include all of this in the framework too. But I want to want to look at this from the flip side. What if I didn't have money to convert? What are those pitfalls? How can I determine the ideal amount of traditional money to leave? After what age would money left to convert not be important? My numbers. I'm single, 51, and healthy, so plan for Social Security at 70. I have $1.2 million in taxable, which includes my emergency. I have $1 million

in traditional, $1 million in Roth, $60,000 in an HSA, and projected to net another $150,000 from salary and retention bonus. My side business generated a whopping $500, so this is very early stages here. My certification targeted in December of 2025. From a long time afforder, I want to say thank you for the wisdom you and Joe share to answer our questions. Thank you for your classes. And thank you for your journalism style that is hard. to capture into words. Insightful, probing, or in-depth only scratch the surface. We all get to benefit from your gift to bring clarity from complexities. Even at times your interviewee gets this benefit. We appreciate you. Anonymous, thank you for the question. And before we start to answer,

you need a name. She needs a name. You know, I love the way that we help people on this show, Paula. And by the way, thank you for all of the kind words. yes absolutely i'm honored it was very very nice i saw a movie that has gotten huge praise absolutely huge praise and i thought it sucked is it the sponge bob movie it's not i think i'd love to see the sponge bob movie and it sucked yeah i saw marty supreme timothy shalome Gwyneth Paltrow. Oh, yeah, I've seen the ads for that. And he plays table tennis, and she is an actor.

Also, by the way, Kevin O'Leary in this movie from Shark Tank, who isn't an actor. I mean, he's a businessman. And he plays a shark in this film. So the actors, I really liked and I thought they did a great job. I hated the script. I like empathetic characters. I like people that I want to. be around. I didn't want to be around Timothy Shalameh's character. In fact, one of the reviews I read

said it's a feel good movie. There is no feel good whatsoever in this movie except the last three minutes. The last three minutes of the movie is feel good. The rest of it is a train wreck that I didn't want anything to do with. It's frenetic. It is so well done. It's just not something that I ever want to watch. But that said, the acting in this movie was amazing. Timothy Chalemay, fantastic. Gwyneth Paltrow. Incredibly good. So I think we call her Gwyneth. Gwyneth. Beautiful. All right. Well, Gwyneth, the first question that I want to tackle, you said something that stood out and it was, what if you don't have money available to convert? and I'm interpreting that to mean, what if you don't have money available to pay the tax bill

associated with conversion? So you're not able to convert anymore? Right. What does that ugliness look like? And what that means to me is it backs into a bigger question about cash flow planning. Because if you are no longer with your current employer as of mid-20206, then I think the first thing to address, even before we talk Roth conversions, is overall cash flow planning, particularly because you have a side project that you hope will grow. And I have no doubt

that it will, but we can't bank on that money just yet. Given that it's made all of $500 so far, we can't bank on any of that just yet. And so the first thing that comes to my mind is how do we manage your cash flow once you depart from this job in mid-20206, and in the scope of that cash flow planning, there should be a very, very specific amount that you set aside for paying the tax bill associated with the conversions. And I think that any conversion strategy that you have will have to stem from that first and foremost. I love what Quinnis said about the idea of just having it behind me. It might not be the most efficient thing, but the fact that I got the tax behind me, Paula, you know, I've got that behind me. I don't have to worry about it ever

again. That's why I'm focusing on this. I don't think that's a bad move, especially since, you know, so many people want to optimize and yet we all lack the same piece of significant information, which is we don't know what tax rates are going to be in the future. We have no idea. So playing that optimization game too much, I think is more frustrating than just saying, And listen, I want to pay the tax and never have to worry about it again. That is an awesome goal. But I look at what we call, Gwyneth, right now, your tax triangle. And the two pieces that we really want to make sure that we have, if we don't have the cash flow side that Paul, you addressed, is I want to have as much money in the Roth side as I have in the pre-tax side.

And she has that. So she has this ability to flex whatever the situation might be at the time. She doesn't want to use all her Roth money all at once. But she could draw from both of these places and essentially live on half of what she was living on if she was in the pre-tax position. And actually, even a little more because of the fact that the million dollars that's in after tax, meaning the million dollars that's sitting in. Roth money. She's going to get to use 100% of that. She's not going to get to use 100% of the money that's sitting in the pre-tax. So she's already in such a good place, really. I think, Gwyneth, you're in an awesome place because of the fact that you already have so much money

sitting in the Roth position. Now, you can worry about Irma. You can worry about healthcare subsidies. You can worry about all those things. And you asked the question, when does it no longer matter. These things, they're going to matter from the time that you are dependent on this income stream until you're not, which means forever. It's going to always matter. So in this case, being able to do more, if you can do more, is great. But I frankly would not be upset that if you began retirement with this 50-50 split that you're sitting with right now. Yeah. Well, I mean, what strikes me, okay, so 1.2 in taxable, 1 million in traditional and 1 million in Roth,

that is a perfectly balanced tax triangle. It's beautiful. That is an equilateral triangle right there. And, Gwyneth, you mentioned that your conservative retirement target is 3.3 million. you have it you have 3.26 million you outlined 1.2 plus 1 plus 1 plus another 60,000 you're there like you've reached your retirement target 19 years early so your goal at this point is maintaining in nominal dollars and here's the thing because she has that significant portion already in the taxable part where she can get at that. Those are liquid funds. Even if she didn't have any income stream,

which I think is what she's worried about it, what if I don't have the income stream to be able to afford the tax later? I think she can pull from the after-tax money, Paula, to pay that tax. I think if she wanted to do that, number one, what's making me pause, I'm thinking about, the fact that her income is going to go down significantly, most probably. So I think really putting together a robust strategy for those years where she set some money aside from the brokerage account to move money over to the Roth position from the pre-tax even more would be diligent, much more diligent than worrying about it in 2026 in a year when she's going to have higher income streams. Right, because she'll be working for half of 2026. She'll be with her W2.

I'd be much more worried about 2027. She can look at what the tax bracket line is in 2026 and play with that number. But I think that's going to be a smaller number. I think the big hurrah is going to be in 27 when her income is down even more, depending on how the side hustle slash new on core career goes. So I'm thinking planning-wise, this strategy would be focus this year on planning and next year on really rocking those Roth conversions. Well, when if you asked about pitfalls of leaving too much money in traditional, I mean, the biggest thing is RMD. Having to take RMDs when you don't want to really sucks. And the nature of RMDs means that, you're a bit handcuffed when it comes to planning because because like the the ideal amount that

you would want to have is you want to be able to fill the lower tax brackets in retirement with money from traditional funds. The ideal unconverted amount is enough that you can fill those lower tax bracket buckets, but not so much that your RMDs push you into substantially higher brackets or push you into Irma surcharges. And I think if it all possible, and I would do some planning on this, don't just take my word for it, it may be a diligent strategy to stop putting money in pre-tax altogether beginning now. Because with the money that you're going to gain over the next 10 years, you're already

sitting at a much higher number than you're at today. and so you're going to compound the problem, if there ends up being a problem, you're going to compound the problem by putting more money into pre-tax. Yeah, I'm really excited about where she is. I think to your point as well, Paula, about RMDs, because RMDs aren't going to start until into her 70s, many people will delay taking money from pre-tax accounts early. to control those RMDs, she's going to want to create a stream of income from the pre-tax money at the beginning of her retirement years. When she's eligible to take that money, I would be

siphoning money off so that at the very least, they don't grow a lot more so that she's not creating a problem that she can't control. So don't save the money in the pre-tax account until you have to take it out. Let's try to keep a lid on how large, your pre-tax problem would be by using that money first, maybe using it to the top of the lowest tax bracket at the time, and then use your money from other positions after that. The final thing I would say, Gwyneth, is that what I'm excited about with regard to this next chapter, you're 51, you plan on work until you're 70. You've got 19 years ahead of you to do something that is purpose-driven, mission-driven, that is, I think, reflective of your calling,

that is a good fit with your lifestyle, that creates the impact that you want to create. So I'm incredibly excited for what's going to unfold over these next two decades, because it's clear that you have a lot of passion around this new venture. And I love being able to see people do the things that they want to do and not the things that they have to do. I think that is a big purpose of this podcast and a big part of why we devote so much of our time to helping people get good with money. So thank you, Gwyneth, for the question.

Best of luck with that next chapter. We're going to take one final break to hear from the sponsors who make the show possible. And when we return, we're going to hear from a 25-year-old who also has questions about Roth conversions. Welcome back. Our final question today comes from Soyman. Hi, Paul and Joe. My trial name's Soimand, and I love listening to your thoughtful answers on Q&A episodes. And I have a bit of a fun situation for you, I think.

The high level is that I'm planning on not working for an entire year in 2027 to go backpacking, an attempt what's known as a calendar year triple crown. This is my dream to attempt and probably fail, and I would do it regardless of any tax implications. But it does seem to me to be an incredible opportunity. By my math, I can get nearly $30,000 into Roth accounts at a negative tax rate. Here's my current numbers. I'm 25, and I'm making 70K gross in a high cost of living city, but I'm keeping my expenses under $2,000 a month. So I'm saving $38,000 a year by maxing out my traditional 401k and Roth IRA and putting $7,500 into a brokerage.

I currently have $60k invested and no debt. So by the time I leave from my hike, I project $100K invested in total market index funds, with 60% being a 401k. Here's my 2027 plan. I want to earn exactly enough to max out a Roth IRA through side hustles, then convert 21K from traditional to Roth, and then max out an HSA. My state would not tax Roth conversions, and with the standard deduction and savers credit,

I would have no tax liability. With a premium tax credit, I project actually receiving $3,000 for an effective tax rate of negative 10% on Roth contributions. I know Joe would ask, So I think that my Achilles heel is that I keep very little cash on hand. Besides a two-month emergency fund, I'm just planning to build up a $3,000 hiking fund. My budget for the year would be $10,000, so to cover the difference, I would have to sell $7,000 from a brokerage of under $20,000.

My logic here is that if the market goes up, any capital gains are at a 0% tax rate. If the market goes down, my conversions are even more valuable. And I can tax loss harvest for even more Roth conversions at a 0% tax rate. So it seems to me to be a win-win. I know you guys talk about only having money and equities if it's for a longer-term time horizon, but I want to have enough to buy farmland in about 10 years, and I'm worried about missing out on some growth. Is it okay to have such a small buffer with my small spending? Should I not be investing in a brokerage at all and instead just put 10,000 in a one-year CD or maybe buy bonds? Should I not be playing these tax games at all

and just max out a Roth 401k at 12% instead of trying for some elusive 0% tax rate. Is there some other Achilles heel that I'm not seeing here because I'm just letting the tax tail wag the dog? Thanks for your insight as always, Paul and Joe, and happy trails. This is such an awesome question. This is so much fun. Oh, my God. I love this question.

This is such an awesome, awesome question. Thanks for calling this one. Yeah. That was fun just to listen to. on the surface the numbers i mean i'd run it through some tax software or talk to some tax professionals but like on the surface those numbers sound solid sure i think the big question here is investing in equities when you're going to do this a short time from now do i invest in equities knowing that i'm going to i'm going to be converting this money over over a short time frame

that's the key question is how do i invest the money well i guess i hear too quick because there's the question of the immediate short-term question of this one year spent hiking. And then there's the 10-year question of the farmland. Well, and this is the thing, Paula. The goal with this particular money is around the 10-year issue. And if that's the case, even though you're going to convert the money, what you're going to do, Simon, is you're going to buy a 10-year investment. you're going to sell it to meet the goal. And like you said, with your income being zero, you're going to have minimal to no.

I'll give you minimal to no. Just me saying zero, me getting behind that, you are going to need a tax professional to tell you that. But minimal to no tax issue. And then you're just going to buy it back in the Roth. So it truly 100% is a 10 year goal. It's not a one year goal. So I don't think you need to buy a CD for that.

I am concerned, like you are, Paula, about going hiking and not having that much money liquid. But here's the thing. You're 27 years old. 25. Your bonus, you went back two years. Paula just gave you two years that I didn't give you. I apparently prematurely aged you.

But you're 25 years old. If you do the rule of 72 on the money that you've already saved toward a normal retirement vision, you're looking great. Yeah. You're looking fantastic. So even if you back that down a little bit over the short run to get more cash in case your spending is higher when you're on your hiking trip than it is now for whatever reason, I would do that in a heartbeat. I think the hiking goal, not waiting until you're older to do the fun stuff makes sense to me. Yeah, I love that. I think the fact, though, that you saved and probably worked your ass off to get to this point makes sense to me. It's like you picked your shot. You didn't try to have fun every single day

of every single year. You picked a moment and now you're going to experience that moment. And then I'm guessing, then you'll go back to work. Right. You know, the one thing, stepping out of tax strategy and tax planning and more broadly into 10 years from now when he looks back on this, what will he either be glad he did and or regret? I love the strategy, but broadly, big picture speaking, don't be so hung up on doing everything in the financially optimized way that you undercut or undersell this year that you spend hiking. If you've got to earn a little bit more or realize a little bit more gains in order to adequately live?

Yeah, just have the year that you want to have because so much of the time, and I did this in my 20s. I spent a little over two years backpacking. There were decisions that I made at the time. They were the decisions that saved a little bit of money. Like, for example, when I was in Egypt, it would have cost me probably about a hundred to go to Petra in Jordan. And I didn't do it because I didn't want to spend the extra hundred bucks. And to this day, I have never been to Petra in Jordan. And I so regret that.

At the time, it would have been $100. You know, riding the cheapest buses and staying in hostels, it would have been $100. That's the thing that I want to warn you again. Don't make that mistake. If for an amount of money that your future self will regard as a rounding error, you can do something that is going to be a core life memory. Do it. I love that everyone who called in today has big goals. Yeah. I'm trying to think of anything more that we can tell you. I mean, everything that you've outlined tax-wise, on the surface from where Joe and I are sitting, it sounds solid. Again, neither of us are tax professionals, so we don't have the authority to rubber stamp it. Yeah, I think investing that money, like it's 10-year money, I don't think you need a CD.

Yeah, yeah, I agree. You don't need a CD. You've got so much flexibility with your plans that when the timeline on a particular goal is hard and fixed, like the way that many people regard going to college, for example, they want their kid to go to college at 18. Not that you have to, but some families feel that way. And so because that timeline is so fixed into one very specific year, it forces a more conservative investment approach because, there's no flexibility around the timeline. But for you, with buying this farmland, it sounds to me, in 10 years as a rough ballpark, you might buy it 9, 11. In the relatively near midterm future you want to buy this land, you've got flexibility in the timeline, and that means you can be more aggressive in your investments. And maybe we should define for a minute why we think you don't need a CD, even though these are going to be too different accounts because a lot of people don't understand this. This is a question I've gotten throughout my career, Paula, which is when you get ready to sell the investment that you put the

money into before it's going to go into the Roth, you're basing it on the time that you're actually going to spend the dollar. And so if that's a 10 year goal to buy farmland, then invest it as if there's 10 years. Now, when you sell it, let's say that that investment is high, you're going to sell it and immediately within hopefully hours, maybe let's say two days, you're going to buy the same exact investment inside of the tech shelter. So unless something huge happens in the little bit of time between those two investments, you're still on the same swing that you were on before. if the swing is high, the swing was high for the first investment. It was also high for the second. It's so funny. I would have people sometimes Paula doing this and they would sell and they go, wait a minute, the investment's high right now. Well, you're still in the same investment you were in before. We're not taking the money. We're just changing the tax strategy. Same thing. If it's low, they're like, well, should I sell it? It's low. Well, yeah, you want to do this Roth thing. Guess what we're going to do? We're going to buy it back when it's low. So you're selling it and buying it again for the same exact price, which is the danger is that you don't follow through with that. Because you start

second guessing your strategy. You go, well, it's low right now or well, it's high right now. Well, it's in the middle. We can make up some reason not to do the right thing, whether it's high, low, anywhere. Our brain will come up with 50 reasons why we shouldn't follow through. Don't think about it. Just sell it. Buy it. Stay in the same investment. Give it 10 years. And you know what? the 10-year time frame, I think you're historically, you're looking good, which is funny because I had to talk myself into that answer, Paula. Because my initial gut reaction was, oh, God, it's funny. Everybody else is worried about all the things going on in the market right now and the chance

that we might have problems in 2026 and will there be an AI bubble and fidelity now a couple weeks ago coming out saying, no, we think we're going to be able to smooth out the AI bubble and you're not going to see stocks retreat. And is it good, our stock's going to retreat. Are they not going to retreat? What's going on? And Soyman, Mr. Badass here is like, I'm going to miss out on some gains. And I'm like, whoa, easy, buddy. You're the one person who's not worried about what everybody else is worried about. And then I had to remind myself, this is a 10 year goal. Who cares about an AI bubble? Who cares about what's going on in 2026, January 2026. We want to think about what's happening in January of 2036.

You know, he also asks, should he skip the tax strategies and just focus on maxing out his Roth 401K? No. I mean, Roth 401ks are great. I love them. But you've got a blend of short term, medium term, and long term goals. 100%. Don't rob from your short term or medium term. in order to fund the long term, especially when you've set yourself up so well already. This is, at a behavioral level, the Achilles heel of being a super saver in your 20s, being quote unquote good with money when you're in your 20s. The Achilles heel is that sometimes instead of planning for the future, there's a tendency to live in the future, you know, live in the future at the expense of the present.

That's something that I just want you to be mindful of. of plan for the future, yes, but don't live in it. Can I ask a question? Yeah. If people now phrase things, if they kind of like something, you know, the phrase is, a low-key kind of like it, right? Mm-hmm. A low-key kind of like it.

Low-key, yeah. What's the opposite of that? Because I don't low-key kind of like this. You high-key? Do I high-key? You high-key like hiking? I don't know what the opposite is. but I want to know because I want to be one of the cool people.

So whatever the opposite is, somebody could tell us what the opposite of is, of a low-key kind of like it would be in this. I want photos of the hiking. Yeah. And if you've got time, make it over to Nepal. There's incredible hiking there. Just bring really, really warm boots. I've done it.

That's right. I've done it. Yeah, you were there just recently, like a year ago. Yes. Did the Marty Hamal hike. We got to see Anna Perna up close. Oh, nice. Pretty awesome.

The last time I was there, I went, no, two times ago that I was there. I did the Annapurna Base Camp hike. Sweet. Yeah. That's higher elevation than we went. Yeah, yeah. That is crazy. To be at 14,000 feet looking up another 14,000 to the summit.

I was about to tell you that my friend Todd, who went on the trip with us, Paula, said the same thing. He goes, I've been at 14,000 feet a number of times. He feels lucky that he's done. that. Right. But to be looking up. Yeah, to be looking up an additional extra 14,000 of vertical ascent while you're already standing at 14. I think to go to Annapur Base Camp, I think you took a similar, maybe even part of it was the same trek I took and you went another day. I think there's one more day. Yeah, yeah. It was 10 days starting in Pokerad, then you go to Poon Hill and then up to ABC from there. Yeah. Mm-hmm. That's really cool.

Cool. It's funny because friends of mine have done Everest Base Camp, which I heard is pretty. It's beautiful. But I've also heard from everyone I know from Nepal that if you're going to go to Nepal, don't do the Everest hikes, do the, do the Annapurna National Park Hikes. Yeah. I agree. My dad hiked Everest Base Camp when he was in his younger. I say when he was in his younger years, when he was in his 60s, when he was in his 60s. When he was in his 60s. He hiked Everest Base Camp. That's pretty cool. Ma'am, when we went, the rhododendrons were out, and they were so beautiful. Oh, that's the national flower of Nepal. Everything was red. Everything. You go through these groves of flowers, of flowering bushes, or flowering trees.

I don't know if they're bushes or trees, but they were beautiful. And you get up on these ridges and everything, the whole countryside would be red. Anyway, so as you can see from this conversation, we're really excited about the goal. I love the tax strategies. I don't think that you should set aside the tax strategies for the sake of investing in your Roth 401k because that is setting aside this really cool opportunity to optimize. When else will you have an opportunity to do a triple crown? I would go for that. When it comes to the money that you want in 10 years, if you have flexibility around the date, you don't need CDs or bonds, especially not at this stage. Maybe when we're

three years out from the date, four years out from the date, we can revisit the bond conversation. But 10 years out, you don't need it. You can stick with equities. And then for the money, my biggest concern for you is that I don't want you to shortchange this hiking trip. Give yourself the cash that you need in order to do it the way that you want to do it. Don't do it the way that makes sense. Do it the way that you want to do it, which is another way of saying, let the heart lead and the mind follow. Let the heart lead and the mind execute, not vice versa, which is what so many people have a tendency to do. People who are good with money in their 20s have a tendency to do the opposite, have a tendency to do what makes sense

at the cost of doing what they want. So I encourage you not to do the thing that makes sense. avoid that. All right. Well, thank you for the question. Thanks to everyone who called in today. I think these are three amazing questions. What a powerful financial planning day. Right.

We're saving senior dogs and cats. We're traveling the world. We are leaving a W-2 job at the age of 51 in order to pursue something that is much more purposeful. I love her phrase, the encore career. Yeah. This is incredible.

Like the stories from the afforder community are so inspiring. So, Joe, where can people find you if they'd like to learn more? You know what? Something I don't talk about because the Afford Anything show, obviously a very well-produced, thoughtful show. Stacky Benjamin's the same. I have a side project that is something that, frankly, Soyman, after you go on your hike, we'd love to maybe have you as a guest.

It's called Stacking Adventures, our mutual friend, Crystal Hammond and I. We have a weekly show that comes out whenever I get to it each week. We hear stories about travel from regular people. We have maybe three or four big-time travel expert guests a year, but the rest of the time are stories about your travel and my travel. And so we talk about going to the Christmas markets or Crystal's trip to Barbados or listeners, Nathan and Catherine's trip to France. We have been around the world.

Cosette went to Japan, and we talked to her about her amazing adventure to Japan. So once a week, you can find me, when I'm not stacking Benjamin's, at stacking adventures, which is a fun little show that we do because, Paula, I can't stop thinking about travel. It's just super fun. Do you have any trips you're looking? forward to in 2026, Joe? I am headed to Alaska this year. Oh, when? In September, I will be on a float plane landing in Lake Clark National Park. We have this group tent site

on this remote lake, and then we're kayaking and hiking for several days. So, yeah, up getting another national park, Lake Clark National Park, should be a great time. I can't wait to go to Alaska again. The last time I was there was just so beautiful. We went to Denali that time. So getting some of these other parks, it was going to be a great time. How about you? Wow. So I, you know, I've been to 46 out of the 50 states, but Alaska is one of the four that I have never been to. It was incredible. I would have never gone if my son, Nick, who you know, Nick hadn't done a charity ride from Austin, Texas to Anchorage with a group of University of Texas students. It's called the Texas 4,000, another great, by the way, 501C3 organization doing phenomenal work.

They're not just raising money for cancer research, but also teaching leadership to a bunch of college students, really worthwhile organization. That's incredible. I'm heading to Singapore at the end of February. That's fantastic. I'll be gone for two weeks. I've only been to the airport, but oh my God, I'd love to go to Singapore. And the food, I can't wait to hear about the food. I've been there once before, but it was 12 years ago. So I am looking forward to going back. And the last time I was there, I didn't know anyone there. This time, I've got two really good friends who both live there. Sweet. And I think that makes a huge difference. Huge difference. If I have one request, and you'll have to be on stacking

adventures telling us about your Singapore adventure. That'll be a super time. The only place that I know of that has Michelin Star food stands. Oh, is Singapore. Is Singapore. Wow. All right. I'll have to find some of those food stands. You have to eat Michelin Star Street food. Wow. All right. Done and done. Thanks to all of you for being part of this community. This is like family. I love the afforded community. Happy 2026 to every. everyone. As you think through the year ahead, as you set your financial goals for the year ahead, we have a free handout, afford anything.com slash financial goals that can help you get there. So check that out. Affordanything.com slash financial goals. It sort of walks you through

the 52 weeks of the year and helps you make some tweaks to your budget so that you can free up a little bit here and there. It's very tactical. It's our beginning of the year 52 week challenge. So again, afford anything.com slash financial goals. Thank you so much for being an afforder. I'm Paula Pat. I'm Joe Sal C-high. And we'll meet you in the next episode.