Afford Anything

#149: Welcome to the September 2018 First Friday bonus episode! We recorded this episode at Camp FI, which stands for Camp Financial Independence. It's a gathering of people who are pursuing financial independence; we spend a few days eating, drinking, and having late-night poolside conversations about money. There are several Camp FI's throughout the year; I recorded this bonus episode at the Camp FI at Joshua Tree National Park in Southern California in early August.    I invited several of the people at Camp FI to come to the microphone and share one thing: “Tell me a story about something you did that scared you."   Justin shared a story about getting invited by a corporate sponsor to take part in a mountainous 75-mile cycling ride, despite the fact that he wasn't trained or ready. Tim told the story of the first time he met his future father-in-law, and, to phrase it mildly, the meeting didn't go well. GingerFI shared a story about something she ate while traveling that ... well, I won't give away the ending, but let's just say that it's something she'll never forget.    Anna described moving from New Zealand to the U.S. to attend school, while Johanna talked about getting laid off from work and deciding to use her newfound joblessness as an opportunity to road trip from Maryland to Los Angeles. Jennifer described the resilience she discovered after surviving a disability, layoff and divorce. Wakefield talked about investing in real estate before he felt ready, and Vickie shared a childhood story of overcoming the intimidation she felt when she wanted to meet someone.    Listen to hear the stories they shared, and the life lessons they learned along the way.   Enjoy!   For more information, visit the show notes at http://podcast.affordanything.com/episode149 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#148: Welcome to a special episode of Ask Paula! Today I’m answering questions about real estate investing, and I’ve brought a special guest on the show to join me. His name is Lucas Hall, and he’s a landlord with 5 properties in three locations (D.C., Virginia and Colorado). He’s also the founder of Landlordology and head of investor relations with Cozy. We met about five or six years ago through blogging about rental properties, and I invited him on the show today to answer questions alongside me. Anonymous asks: If you have significant equity in a home due to market appreciation, what’s the best way to leverage the value of this equity? Should you sell? Refinance? Something else? Here’s a quick snapshot of the answer: You have three options: sell, cash-out refinance, or take out a HELOC. If you’re unhappy with the property, sell it. There’s no reason to hang onto an undesirable or underperforming property. If you choose to sell, use a 1031 exchange to defer taxes on the capital gains and use the proceeds to purchase another property. Be aware, however, that the rules regarding a 1031 exchange are onerous, and there’s a chance that you might either miss the cutoff or you may be forced into trading one mediocre property for another. That said, wanting to tap equity is not a sufficient reason to sell. If you’re happy with the property, keep it and either use a cash-out refi or HELOC to tap the equity. On today’s episode, Lucas and I discuss the pro’s and con’s of both of these strategies, and explain which one is our favorite. (Lucas prefers the HELOC and I prefer the cash-out refi; on the episode you’ll hear each of us explain why.) Richard from Massachusetts asks: I’ve been listening to this podcast regularly, and thanks to this podcast I’ve opened a Roth IRA. I’ve saved $54,000 and I’m interested in investing in a Class B or Class C neighborhood in an out-of-state location. How can I find out if a neighborhood is Class B/C without visiting it? Catherine asks: I’m 27 and need investing advice. I make $75,000 per year and I have $60,000 in retirement savings. I max out an HSA. I have $12,000 in an emergency fund. I live in Los Angeles and I’d like to invest in real estate, but I don’t want to travel to another state. I’ve been thinking about Roofstock; what are your thoughts? Anonymous in Atlanta asks: My wife and I have $500,000 in savings, in addition to our 401k. We keep $130,000 of this in the market. We had an advisor that was charging a 1.6% fee, and we recently fired him. What should we do with the remainder of the cash in our savings accounts? Should we put this in Vanguard funds? I’d also like to get into real estate, but many homes in Atlanta don’t meet the one percent rule. Should we look at foreclosure auctions? Should we look further outside the city? We’re in our early 30’s and would like to retire in around 15 years. We answer these questions in today’s episode. Enjoy! Learn more about your ad choices. Visit podcastchoices.com/adchoices

#147: Which of the following two attitudes describes you? "I'm crunched for time." -- or -- "I have all the time in the world." I'm guessing your answer is the first, rather than the second. But what if you could feel like your time is expansive and abundant, without drastic changes to your schedule? Most of us want to feel "off the clock," enjoying an existence in which we can linger, without feeling pressure from the demands and stresses on our schedules. According to Laura Vanderkam, even the busiest, most-scheduled people can achieve this feeling. We can live off-the-clock. Laura is a time management expert, but her latest book isn't about *management* in the traditional sense of the word. Rather, it focuses on *time perception* -- getting into the headspace of believing time is abundant, regardless of the demands imposed upon it. The brain stores memories efficiently, which means it vividly recalls novel experiences -- such as the one-week trip to Belize -- while compressing repetitive experiences, like a commute, into a single memory. For that reason, time feels like it passes more quickly when we encounter situations that are routine and familiar, and slows when we experience new situations. That's how a one-week conference feels long, but a routine week at the office flies by. Of course, we can't eschew familiarity; there are many benefits to adopting a routine. But we can slow time by savoring our everyday experiences. The more we engage mindfully in everyday activities -- from savoring each bite of food to noticing the flowers during our commute to work -- the more we're likely to feel relaxed about our time. We create happy memories, rather than compressing our experiences in our minds. Treating our hours with intention can also lengthen our experience of time. We plan and structure our workdays, deciding how to spend our hours between 8 am and 6 pm. But often, we aren't deliberate about how we'll craft the hours from 6 pm to 11 pm, and therefore can feel like we rarely see family, even if we're with them for three to four hours each evening. Deliberately crafting hours doesn't mean jam-packing our schedule in 30-minute increments. Scheduling a two-hour block of time to linger over a long dinner can blend intentionality with the art of savoring. In fact, Laura notes, those who are the most disciplined about their time are also more likely to feel that they enjoy plenty of free time. Structure creates freedom. Today on the podcast, Laura and I talk about how to make time feel abundant. For more information, visit the show notes at https://affordanything.com/episode147 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#146: My friend and former financial advisor, Joe Saul-Sehy, joins me to answer a multitude of questions on retirement savings and investing, so let's dive in. Elyse has two questions: 
#1: Through her job, Elyse has a 401(a) hybrid. Right now, she contributes 0.5% as her employer will contribute 2.5% only when she contributes 4%. Should she contribute the full 4%, or keep her contribution as low as possible, save it, and invest it on her own (which is what she's been doing)? #2: Elyse also has $18,600 invested in a mutual fund through her bank. Everything that she has read says to invest in index funds. So, should she pull her money out of the mutual fund and into Vanguard to avoid high fees? Anonymous also has a few questions:
 She has a 9-year job history with the state and local government, during which she has been enrolled in the Florida pension plan. Her new job offers a 457 Plan and/or a 403(b) Plan to supplement the pension earning. Her first question is: is a 403(b) better than a 457 Plan? Or should she enroll in both? Second, in her most recent job, she had a 457 deferred compensation Vanguard account which has $22,000 in it. Should she roll the Vanguard account over into one of the above plans, or leave it alone? Lastly, she has a 3-month old and wants to put a lump sum of $10,000 toward an account she can make contributions to, but she isn't sure which account would be best. Florida has a pre-paid program, but are there better options? Rachel has a question on retirement accounts as well!: 
Rachel recently left a government job where she had a TSP. In addition to that, she also has two IRAs - a small traditional IRA and slightly larger Roth IRA. She's actively contributing to the Roth IRA. When she left her job, she started an S-corp, and as she looks forward to business picking up, she wants to know how to best organize her retirement savings moving forward to make it easier to manage. She's also interested in tax optimization. What actions do we recommend she take? Stephen, a new listener, asks: 
If we're following the 4% rule route, does it make sense to fund an HSA, Roth IRA, Traditional IRA, or 401(k) at work? Or should we put all of the money in a Vanguard fund? Essentially, if you're planning to retire in 10 years or less, which is more beneficial: splitting up your money, or focusing on one account? P.S. If you have a question you want me to answer on an upcoming Ask Paula episode, leave it here! Learn more about your ad choices. Visit podcastchoices.com/adchoices

#145: When Rand Fishkin was 25 years old, he carried $500,000 in credit card debt. Less than a decade later, Rand was the Founder and CEO of a company that grossed $35 million in annual revenue. In this podcast episode, Rand shares the story of hitting his financial rock-bottom and making the ultimate comeback. _______ The saga began in 2001, when then-22-year-old Rand dropped out of his senior year of college to grow a business with his mom. His mom Gillian owned a small marketing company that helped local businesses with tasks like placing ads in Yellow Pages. (If you don't know what that is, ask someone over 30.) Rand had an early entrepreneurial streak, and had spent the late 1990's and early 2000's working part-time for his mom's business. By his senior year, he was ready to dive in full-time. Gillian and Rand both realized the internet was more than a passing fad. Households were switching from dial-up modems to broadband connections. Clients were more interested in websites than Yellow Pages ads. The mother-son duo decided to start designing websites for local businesses. From 2001 to 2004, they hired contractors, rented office space, hosted booths at conferences, and purchased advertising. They paid for most of this with personal credit cards in Rand's name. By 2004, they'd accumulated $150,000 in credit card debt. Then they defaulted. They couldn't make the minimum payments anymore. The interest and late fees grew this balance to an astronomical $500,000. They decided not to declare bankruptcy. Instead, they took a two-pronged approach: Rand's mom spent the next three years negotiating with creditors, getting big chunks of the interest and late fees waived in exchange for making payments on the principle balance. Meanwhile, Rand focused on growing the business. Several of his clients needed help with a specific aspect of internet marketing called search engine optimization, or SEO. Rand began researching SEO tactics and started a blog to share his findings. This blog attracted new clients, and soon Rand developed a reputation as an SEO expert. He created a company called SEOMoz, later rebranded as Moz, to offer consulting services for businesses. After a few years, his company started developing and selling subscriptions to SEO software tools, as well. By the time Rand stepped down from his role as CEO, the company had raised multiple rounds of funding and was collecting $35 million in annual revenue. But there's a difference between a company's earnings and the personal income of its founders. Today, Rand and his wife still have a liquid net worth that's less than one million. How did Rand transition from carrying $500,000 in debt to becoming the founder and CEO of a successful eight-figure company? Why isn't he a millionaire yet? And what lessons about entrepreneurship and finance can he share with the world? Find out in this podcast episode. ___ P.S. Rand's wife, Geraldine DeRuiter, is a hilarious travel writer and an alumni guest of this podcast. You can listen to her interview in Episode 77. http://podcast.affordanything.com/9-years-nonstop-travel-geraldine-deruiter-everywhereist/ P.P.S. If you'd like to learn more about starting a blog, check out this free tutorial. Learn more about your ad choices. Visit podcastchoices.com/adchoices

#144: Today I’m answering your real estate questions! First up, Rich asks: What are your thoughts on real estate crowdfunding versus investing in a traditional REIT and non-retirement account? He doesn’t want to give up the time it takes to manage a rental property. He wants to spend more time with family and friends, and his eventual goal is to generate enough passive income to transition into becoming a social worker. Rob asks: As a real estate investor who also invests in index funds, how do I decide what percentage of my net worth to allocate towards the stock market versus real estate? Anonymous asks: How do you maximize value in real estate? Is real estate worth the sum of its parts? Should you strip out some of that before you sell a property to maximize its value? Laura asks: How did you develop your real estate course? How do you market a course? I answer these questions on today’s episode of the podcast. Enjoy! For more information, visit the show notes at http://affordanything.com/episode144 For more details, visit the show notes at http://affordanything.com/episode144 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#143: Emma Pattee became a millionaire at age 26. But she hates it when I describe her like that. Here are other ways that Emma would prefer to be known: She's thoughtful. She's hilarious. She's kind. Emma is the child of hippies. She grew up in a tent in Oregon, at least for a portion of her childhood. She has a BFA in writing from Emerson College. She bought her first house at age 21. At the time, Emma was juggling a demanding full-time job with her ambitions of becoming a writer. This balancing act felt too tough. She felt motivated to quit her job as quickly as possible, so that she could devote her time to writing. She moved in with her boyfriend's parents, saved 70 percent of her income, and contemplated what to do next. She decided to "buy a small house in a not-so-nice neighborhood, and live for free by renting out enough rooms to cover my mortgage and make a little money on the side." But then she developed an addiction to real estate. She kept buying houses and converting them into rental properties. She DIY'ed some projects and hired contractors for other projects. She improved the homes and raised the rents. She reinvested the cash flow into buying more houses. She borrowed against the equity and bought even more houses. And that's how Emma, by age 26, became a millionaire. Her seven-figure net worth -- and more importantly, the cash flow that accompanied it -- allowed Emma to reach financial independence. She could stop trading her time for a paycheck. Emma quit her job at age 26 and dove into the world of self-employment, starting a lucrative one-woman enterprise as a professional ghostwriter. She writes books and articles, for which her clients receive authorship credit. In exchange for this effort, Emma makes a substantial amount of money. So who is Emma Pattee? She's a financially independent millionaire real estate investor who started a lucrative self-employment business as a writer. (Sound familiar?) Among the many words in that sentence, the most important word, to Emma, is the word "writer." That's why she started down this path. She wasn't trying to become wealthy. She wanted to become a self-funded artist. She wanted, simply, to write. __ Emma is a close friend. She was my guest of honor, my Plus One, when I delivered my keynote speech at the World Domination Summit last month. She's my travel buddy and real estate investing companion; we visited Alabama last year to check out potential investments in Birmingham and Montgomery. She and I have talked about meeting occasionally for writing retreats. In today's episode, Emma and I sit down at her dining room table, plug in a microphone, and hit "record." In the 30-minute conversation that follows, we talk about how and why we reached financial independence -- and what comes next. Enjoy. Learn more about your ad choices. Visit podcastchoices.com/adchoices

#142: How can a family of four shift from earning two incomes to one, while still pursuing financial independence? How would a 55-year-old couple with $2 million saved know if they're ready to retire? Can parents use leftover money in their 529 plan to help their daughter with her college loans? If you start a job with an employer who doesn't offer high-deductible, HSA-compatible health insurance plans, could you use a plan from your old boss? And where should a father keep his daughter's Bat Mitzvah money? My friend and former financial advisor Joe Saul-Sehy and I tackle these five questions in today's episode. Here's a close-up look at each situation. Tyler asks: My wife and I both work 9-to-5 jobs. She's an elementary school teacher, and I work in sales. We've recently welcomed our first child into the world, and we're expecting our second. We'd like to transition to a one-income household, at least until the children are between three to five. We've maxed out my Roth IRA and 401k, funded a pension through my wife's work, funded a small Roth IRA for her, and started a 529 for our son. We have no credit card debt, but we have a mortgage, a car loan, and a student loan from my wife's graduate work. We're thinking about gradually phasing out her income, by reducing her "income" in 25 percent increments over time, and using that money to repay our debts. We hope to have the car loan and student loan paid off by the time our second child is born. What other recommendations would you offer as we transition into a single-income household? Heidi asks: We saved money in a 529 plan for our daughter's college education. We took out some loans for her freshman and sophomore years, thinking that we'd spend the rest of the 529 money during her junior and senior year. Then a wonderful thing happened: my daughter received $40,000 in scholarship money, covering her junior and senior years. Now my daughter has $13,000 in student loans from her first two years, and also $13,000 sitting in her 529 fund. Can we use the money in the 529 plan to repay her student loans? Or are our hands tied? Andrew asks: My 13-year-old daughter just had her Bat Mitzvah, and now holds $5,000 in a Schwab custodial account. Where should I put this money to preserve the capital, but also allow it to grow? She'll probably want to use a portion of this within the next five years. It's currently in a Schwab money market account, but I'm thinking about putting it in VFTSX, the Vanguard Social Index Fund. Anonymous asks: My husband just started a new job, and his employer doesn't offer HSA-compatible plans. His new employer only offers plans with low deductibles. I know that this isn't idea. Could he enroll in plan from his old job, so that he can still contribute to an HSA? Laura asks: Am I ready to retire? I'm 55 and my husband and I have $2 million, but we recognize that the market is volatile. How do we maintain our $2 million principal when we're no longer making contributions? My second question is about real estate. If the returns from both index funds and rental properties comes to around 8 percent, then why would you bother with the additional hassle of real estate? Enjoy! Learn more about your ad choices. Visit podcastchoices.com/adchoices

Dr. Stephen Wendel, a behavioral economist and head of behavioral science at Morningstar, dives into why we often delay financial actions despite knowing better. He discusses the psychological barriers to decision-making and shares transformative strategies to bridge the gap between intention and action. Wendel emphasizes the power of automating tasks, creating mental accounts, and visualizing vivid scenarios to enhance financial behaviors. His insights aim to empower listeners to overcome procrastination and align their actions with their financial goals.

#140: Should you buy a rental property that mandates HOA payments? How do you adjust for cap rate over the years, as the property's rent increases with inflation? Should you buy an $88,500 house that rents for $1,250 a month? And can you dive into detail about how you work with contractors and property managers? I answer these four questions in today's Ask Paula episode, themed around real estate investing. Daria asks: My husband and I live in Charlotte, North Carolina. I've been looking at local properties and I notice that a lot of these properties, Class C+ or higher, come with HOAs. For example, I've found properties that cost $80,000, rent for $1,000 per month, and have HOA fees of around $150. What do you think about HOA fees in general, and how do these affect factors like cap rate? I'd love to hear your thoughts. Sabrina asks: How does the cap rate on a property change over time, as the rent increases with inflation and other operating costs shift around? Jasmin asks: I'm looking at a rental property that costs $88,500 and needs $2,000 in initial repairs and other fees. My gross rent would be $1,250 per month, with estimated 8 percent vacancy. I estimate $555 monthly in expenses ($6,660 annually), including setting aside one percent of the purchase price for repairs and maintenance and another one percent of the purchase price for capital expenditures. What do you think of this deal? Rob asks: Can you please explain how you work with your contractors and property managers? On your blog, you describe texting with your contractor, but shouldn't the manager handle that? I'd appreciate any insight into how you handle these relationships. Learn more about your ad choices. Visit podcastchoices.com/adchoices