Afford Anything

#137: Today's episode is an annuity sandwich: we answer one question about family and relationships, three questions about annuities, and one question about time management. My friend and former financial planner Joe Saul-Sehy joins me to answer questions in what, I hope, is the most entertaining episode about annuities you'll hear. Here are the five questions that we'll tackle today. Anonymous asks: I didn't grow up with much money, and my father recently went into bankruptcy. I've worked hard to become financially stable. Unfortunately, my parents expect a handout. How do you handle parents and other family members who look for handouts when they see you're doing well? Zoey asks: I'd like to retire in the next 10-15 years. I'd like to understand the difference between an investment with a lump-sum payout vs. an annuity fund. What are the benefits and drawbacks of these options? How do annuities work? What are their benefits? How do I know what's right for me? Charlene asks: Let's say you're looking at your retirement portfolio, and you realize you're behind. You still have 10-15 years left. You have 10 percent of your portfolio in an annuity. Should you move this money into a stock fund? Or should you keep the annuity? Magy asks: My husband and I are both 32, and save 25% of their income for retirement. He has a 401(k) and maxes out a Roth IRA. I'm a teacher and make a pension contribution. I also max out my Roth IRA and contribute a small amount to a 403(b). My 403(b), however, has a variable annuity with no surrender charge, with a 1.5 percent account fee. Should I keep putting money in this 403(b)? I also have a side hustle; would it be better for me to open a retirement account through my side business? Also, since we're already saving 25% towards retirement, I'm curious if we should invest more for other goals. We're putting 3 percent of our income in non-retirement investment accounts and 1.5 percent of our income in our sons' 529 plans. How should we divide our savings between retirement vs. other long-term goals? Laura asks: You've often written about the importance of an emergency fund and cash reserves. Do you have any ideas in thinking about this way with regard to your time or focus? If you're spending at capacity -- whether you're spending money, time or focus -- you have no space for either emergencies or opportunities. How do you conceptualize this? How do you balance busy-ness with the importance of creating free time and space? We answer these five questions in today's episode. Enjoy! ______ Resources Mentioned: - Afford Anything podcast episode with Laura Vanderkam - Laura Vanderkam's book, 168 Hours - David Allen's book, Getting Things Done - Austin Kleon's book, Steal Like an Artist - RoseMarie Garner interview on the FinCon podcast - Afford Anything blog post, "I tracked my time in 15 min increments"   Visit the website at https://affordanything.com/episode137 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#136: Rich Carey is a military millionaire. He's spent his career in the U.S. Air Force; he's currently stationed in Seoul, South Korea. He was stationed in Germany before this. He'll retire after this. Most of his fellow servicemembers, upon taking a military retirement, start a second career. But Rich doesn't need to. He's financially independent, thanks to his 20 rental properties. He bought most of these properties while stationed overseas. He's renovated them from afar. And he's bought everything with cash. To say his story is impressive is an understatement. Every week, I get emails and messages from readers who say things like: *"I'd like to buy a rental property, but everything in my city is expensive!"* *"I'd like to buy a rental property, but I'm not handy. I can't do any of the work myself."* *"I'd like to buy a rental property, but I only make a middle-class income."* *"I'd like to buy a rental property, but we're a one-income household."* *"I'd like to buy a rental property, but we have two kids, and they're expensive."* Rich's story illustrates how someone with a middle-class income can invest in rental properties from out-of-state. He earns a military salary. He lives in Korea. He's the sole breadwinner in his family. He supports a wife and two children. He's definitely not taking 2 a.m. toilet-fixing phone calls. In fact, he hasn't even seen several of his properties. As you'll hear in the interview, my friend Emma and I visited Montgomery, Alabama about a year ago. Rich's properties are located there. During our visit, I sent Rich an email, saying "Hey, I'm in Montgomery!," and he replied with, "Cool, I just bought another house there! You're welcome to drive by and see it from the outside." This means I've seen houses that he hasn't. *His* houses. ____ How did Rich start investing in rental properties? How did he grow a portfolio of 20 rentals? How could he build this free-and-clear, without taking out any loans? And how does he manage this from Germany and Korea? Find out in this interview. ______________________________ For more information, visit the show notes at http://affordanything.com/episode136 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#135: Time to talk about houses! I answer your questions about rental property investing in this week's episode. Our first question comes from James, age 25. He lives in Florida, where he bought a $130,000, 3-bedroom, 2-bath condominium in the Class B range as his primary residence. He'd like to buy a second home and rent out his current home. He has $4,000 in cash and is eligible to take out $5,000 as a home equity line of credit. He makes $41,000 per year, after taxes. He'd like to buy one property a year. What funding options can he look into? If he had good credit, can he bypass the downpayment wall? What general advice would I offer to someone in his situation? Here's a short summary of what I tell James: 1. Keep a personal emergency fund. 2. Keep cash reserves for your rental. If your condo rents for $1,300 per month, you'll want at least 3 months' gross rent in reserves, or $3,900. 3. Look into FHA loans, which require only 3.5 percent down. 4. Wait until the HELOC can get you at least $10,000 to $15,000. Ideally you'll also want a little extra on the side for  closing costs and other unexpected costs. 5. Think of 'one house a year' as general guideline rather than diehard order. The more properties you purchase, the faster you can buy properties, because you can reinvest the cash flow from your existing properties. Your growth will be slowest in beginning and gets faster as you move along.   The next question comes from Berlinda. She works in a job she loves, with a great company, chill manager and fantastic team. She's signed a two-year contract, and she's six months into that term. She lives in metropolitan Chicago, but her boyfriend lives in New York. She's concerned that if she moves there, she might not find a job that she loves quite as much. She bought a duplex, and now owns a total of three rental units. She needs to upgrade these units. She projects that she'll need 14 rental units before she can live on the income. How can she scale her rental properties to the point at which she can live on their income? The third question comes from Katie from Mississippi. She started reading the Afford Anything blog in 2015, after she bought her first rental property. She now owns two rentals. She bought the first for $77,000 (purchase + initial repairs) and it rents for $975, and the other for $80,000 (purchase + initial repairs) and it rents for $900. After the PITI mortgage, they collect $603 per month, or $7,236 per year. Their operating expenses have consumed this amount, and in some years their operating costs exceed their income. What's going wrong? The final question comes from Ben. He and a business partner owns a multi-unit rental property, which they purchased two years ago. His business partner lives in one of the three units; the total income is $2200 from two of the three units (plus the partner lives in one unit for free). Their mortgage is $1475, plus $120 for insurance. Ben would like to get out of the deal, but he's not sure how. He'd like to refinance the property to get his name off the mortgage, either by selling his share to his business partner or by finding another partner to replace him within the deal. What should be do? ____ I answer these four questions in today's episode. Enjoy! For more information, visit the show notes at http://affordanything.com/episode135 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#134: We often peek inside the world of business to look for lessons about how to simplify, optimize and innovate. But what can we learn when we examine world-class people who are hacking the system in any field -- including sports, politics and music? What can we learn when we're radically curious about everything? And how can we apply this knowledge to helping us lead more deliberate, curated lives? Today, we tap Shane Snow's brain for answers. Shane Snow is a co-founder of Contently, a company that matches freelancers with publishers. But we're not going to talk about that today. We're going to explore bigger themes. Because Shane isn't just a tech entrepreneur. He's also an award-winning journalist, which is another way of saying that he's an inquisitive person who lives in the world of storytelling and big ideas. His first book, SmartCuts, explores how people avoid climbing the normative career ladder. It showcases people across a variety of industries who hack the ladder, often by making unconventional lateral moves. And that is exactly the kind of thinking that appeals to anyone building financial independence, and trying to design a meaningful, autonomous and unconventional living. His latest book, Dream Teams, explores what it takes for a group of people to come together to create something amazing. How can the whole be greater than the sum of its parts. And he looks across industries, at everything from hockey teams to businesses and beyond, to find the universal threads inside these stories. A few accolades before we begin: GQ Magazine described Shane's work as "insanely addicting," and The New York Times refers to Shane as a "wunderkind." (I had to Google that term -- apparently, it refers to someone who achieves great success at a young age.) He has also, somehow, appeared on Gossip Girl and beat Super Mario 3. Let's find out what Shane has to say about innovation, curiosity, teamwork, and hacking the system. Oh yes, and kangaroos. For more information, visit the show notes at http://affordanything.com/episode134 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#133: Andy from Michigan loved the episode with charity:water founder Scott Harrison. After the episode, he and his 6-year-old daughter started watching videos about charity:water, and now they're both inspired to give. Andy's question is on the topic of giving. His is to reach financial independence within 5 to 10 years. He and his wife are debt-free, including mortgage-free, and their retirement accounts are well-fueled. Now they're working on building passive income. In the meantime, though, they'd like to add a bigger charitable slice to their budget. He's not an overly religious guy, but he feels a calling to make more charitable donations than he does. What advice could we offer about how to boost his giving? JR's wife, before they got married, purchased two timeshares at a 17.9 percent interest rate. When the couple met, and she confessed, they immediately paid off the debt. They're now paying $160 per month in timeshare fees. JR is trying to figure out how to get rid of their timeshare, but he can't find any good options. How can he get rid of this? Angela's husband is turning 50, and she is 43. They're on-track to have $1 million in investments within 7 years. They have two rental properties plus a primary residence, all of which will be paid off in around 7 years, as well. They're active and healthy, but they know this can change quickly. What type of long-term care insurance do they need? Joelle works in the public sector. She has a 457(b) retirement account. How does this differ from a 401(k)? She plans to career-change in the next few years, and she's considering whether to keep her funds inside of her 457(b) or rollover her funds into an IRA. What are the pro's and con's of both? Ines from Portugal wants to start a podcast about financial independence, early retirement and real estate investing, specifically for people who live in Europe. The issues that affect people in Europe are different than those that impact people in the U.S., and she sees a need within the marketplace. What advice would I offer to anyone who wants to start a podcast in this niche? For more information, visit the show notes at http://affordanything.com/episode133 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#132: BONUS EPISODE!! On the first Friday of the month for the remainder of the year, I'm rolling out an additional bonus episode. As you know, this podcast airs weekly on Mondays. I'm thinking about maybe -- MAYBE -- expanding the podcast to twice-a-week. Maybe. But before I make such a big commitment, I figured I'd test the waters by producing *one* extra episode per month. I'll release this on the first Friday of every month for the rest of 2018. Today's episode is the June 2018 First Friday Bonus Episode, in which I answer three questions from the Afford Anything community. Enjoy! ____ Cameron accepted a job in the Middle East, where he earns 60 percent more than he could make at a comparable job in the U.S. He also gets free health care and 30 vacation days annually, which gives him time to travel with his wife and four kids. And thanks to his income and benefits, he and his family are on-track to reach financial independence in six years. The problem? He's just not that into his job. He'd like to pursue something more interesting ... he's just not sure what. And since he doesn't know what's next, he's worried that he might be running *away* from something rather than running *into* something else. Should he tough out the next six years? Or should he quit, even if that will delay his journey to financial independence? __ Hailey is 22, and she bought her first home last year. She bought a condo for $103,000 with a 3 percent downpayment and a 30-year, fixed-rate mortgage at 4.5 percent. Her condo was in mediocre shape at the time, so she's spent the past year renovating the space -- such as replacing the flooring and getting rid of the popcorn ceilings. Her neighbor recently sold his condo for $120,000, so Hailey is reasonably sure that -- between the comparable sale and the improvements that she's made -- her condo could appraise for at least that much. She'd like to get an appraisal, so that she can get rid of her $60 monthly PMI payment. But an appraisal costs between $660 to $850, and she's only planning to live in the condo for another year. She thinks she'll keep the condo for around three more years. Should she get an appraisal? Are there any red flags or drawbacks to doing this? ________ Danica called to say "congratulations!" on the 10-year anniversary of quitting my job. She's curious: how did I reach financial independence? I answer these three questions in today's First Friday Bonus Episode. Enjoy! For links to resources mentioned in this episode, visit http://affordanything.com/episode132  Learn more about your ad choices. Visit podcastchoices.com/adchoices

#131: Scott Rieckens and his wife Taylor enjoyed a classic Southern California lifestyle. They lived near a gorgeous beach in sunny San Diego. They frequently dined at sushi restaurants. They drove a BMW. But after the birth of their daughter, everything changed. Taylor, an intelligent, career-driven, independent woman, suddenly didn't want to spend any time away from her new baby girl. And Scott had no idea what to do. Their luxury lifestyle depended on dual incomes. At first, he tried to come up with a million-dollar idea. If he could just create a wildly successful business, he thought, he could fix this problem. He started binge-listening to podcasts, trying to figure out how to pull in seven figures, fast. Then he discovered the financial independence movement. And suddenly everything made a lot more sense. Scott realized that if they gave up their consumption habits -- if they moved to an area with a lower cost-of-living, drove less expensive vehicles, or maybe even lived in an RV for awhile -- they could enjoy the life they wanted. They could trade luxury labels for time-freedom. He crunched a few numbers and realized that they could reduce their spending by 70 percent. But it would require HUGE changes, including an out-of-state move. He wondered how to suggest this idea to his wife. ______ What did Scott say? How did Taylor come on-board? And (spoiler alert!) ... how did they get so enthusiastic about financial independence that they decided to create a documentary about their journey into this lifestyle? Find out in today's episode. Learn more about your ad choices. Visit podcastchoices.com/adchoices

#130: Anna and Dave want to get married … eventually. But they want to buy a rental property together first. How should they approach this from a paperwork/legal structure standpoint? Note: They’re thinking about having one partner purchase the home, with the other partner acting as a lender (with proper paperwork in place). Would this be a wise approach? Fred lives in Saskatchewan, Canada and owns two duplexes. He’s thinking of buying rental properties in the U.S., and he has 4 questions: What requirements or criteria do you establish ahead of time? For example, do you look for a minimum cap rate? Or a specific type of property? When you’re looking out-of-state, what steps do you take to identify a community? How about the type of property? What market research do you undertake? How would you caution an international investor who wants to start investing in U.S. properties? Jordana wants to build financial independence. She’s thinking about selling off stocks and index funds in order to buy her first rental property. Is this a good idea? Cheryl lives in Texas, where property taxes are astronomical. How should she factor this into her rental property decisions? Rachel is worried about bed begs. (Yuck!) Have I dealt with these in any of my rental properties? How do I protect against pests, termites and roaches? I tackle these five questions in today’s episode, which is dedicated to rental property investing. Enjoy! P.S. Need software to manage your rental properties? Collect applications, screen tenants, and collect rent online with Cozy.co/Paula. (And P.P.S. — If you’re not interested in rental investing, don’t worry! Check out last week’s episode about debt payoff with Laura Adams, or the previous week’s episode, in which Joe Saul-Sehy and I answer a smattering of general personal finance questions. Have fun!) For more information, visit the show notes at http://affordanything.com/episode130 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#129: Laura Adams grew up in an upper-middle-class family in South Carolina, and her parents supported her through college. She attended her top-choice school, met her husband while they were still students, and enjoyed a charmed life. When she graduated, she continued to live at a lifestyle to which she felt accustomed. She rented a beautiful apartment. She took vacations. When she felt lonely, she comforted herself with shopping sprees. Unfortunately, her spending habits weren't aligned with her meager post-collegiate, entry-level income. Laura quickly found herself buried under thousands of dollars of credit card debt. She began feeling anxious about the debt. Fortunately, Laura channeled that anxiety into action. She cut back on discretionary spending. She watched her monthly mortgage payments fall. She focused on ways to earn more. Every time she'd free a small chunk of money -- a hundred here, a hundred there -- she made an extra payment on her credit card balance. Eventually, Laura wiped out her debts. She decided to become a "serious student" of finance. She returned to school for an MBA, where she noticed that many of her classmates were intelligent, hardworking students who were superb at managing corporate balance sheets, but terrible at managing their own personal finances. She decided to spend her life solving this problem. In 2006, she began writing about personal finance; in 2007, she started a personal finance podcast; by 2008, she was invited to join the Quick and Dirty Tips Network as the host of the Money Girl Podcast. Her podcast on personal finance has been downloaded more than 40 million times. Laura has also authored several books on money management and appeared on more than 1,000 media interviews on NBC, FOX, Bloomberg and more. How did Laura transition from wearing "financial blinders" to a renowned financial expert? What advice would she give to anyone who's trying to overcome the "ostrich," head-in-the-sand mindset around their money? What important money issues are we not talking about enough? Find out in today's episode. For resources mentioned in today's episode, go to http://affordanything.com/episode129 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#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