Afford Anything | Make Smart Choices About Your Money, Time And Productivity

#154: Want to retire early? You'll need at least $5 million, more likely $10 million, says famous financial personality Suze Orman. I should know. She said that to me, directly, on my podcast. I asked Suze for her opinion about a frugal, flexible person who wants to retire early with a $2 million portfolio. She warned that retiring would be a massive mistake. "Two million dollars is nothing," Suze said. "It's nothing. It's pennies in today's world, to tell you the truth." Wait, what? "Listen," she said. "If you have $20 [million], $40 [million], $50 [million] or $100 million dollars, be like me, okay. If you have that kind of money ... and you want to retire, fine." "But if you only have a few hundred thousand dollars, or a million, or $2 million, I'm here to tell you ... if a catastrophe happens ... what are you going to do? You are going to burn up alive." But what's wrong with retiring early on $2 million? Assuming it's invested 50/50 in equities and bonds and harvested at a 4 percent withdrawal rat

#153: A few weeks ago, Suze Orman's team reached out to me and asked if I'd be interested in chatting with Suze on my podcast. "Um, duh," I replied. Sure Orman is one of the most famous voices in the world of personal finance. From 2002 to 2015, she hosted The Suze Orman Show on CNBC. She's the author of 10 mega-bestselling books, she wrote a financial column for O, The Oprah Magazine, and she's made multiple appearances on The Oprah Winfrey Show. I turned to Twitter and Facebook and asked this community, "What would you like me to ask Suze?" One question stood out far ahead of all others in popularity: What does Suze Orman think about the FIRE movement? I opened with that question. And Suze's response shocked me. "I hate it," she replied. "I hate it. I hate it. I hate it. And let me tell you why." That's a direct quote. (Really.) She spent the next 30 minutes explaining why she thinks pursuing FIRE could be the biggest mistake of a person's life. Well, then. Why does Suze Orman hate the FIRE moveme

#152: Dr. Brian Portnoy is an expert in making decisions. He holds a Ph.D. from the University of Chicago, he's a Chartered Financial Analyst, and he's the Director of Investment Education at Virtus Investment Partners. Dr. Portnoy joins me on the podcast to discuss how to make smarter decisions -- not only about investments, but also generally in life. How do we sharpen our decision-making skills? How do we improve our critical thinking processes? Here are some of the takeaways from our conversation. 1. Beware of resulting. Great results can come from poorly-planned decisions. And wise decisions can lead to good results on occasion. Don't judge a decision based on its results; judge a decision based on the soundness of the thinking process through which you made that choice. 2. Manage your expectations. Your happiness with an outcome will depend on the gap between your expectations and reality. If you can't control reality (at least, not completely), then manage your expectations. It's the happiness va

#151: We’re back with another “Ask Paula” episode of the show! As usual, my friend and former financial advisor, Joe Saul-Sehy joins me in answering your questions! Let’s dive right in. Hailey: I just graduated from college with a major in Computer Science and minor in graphic design. The whole time - it was rough. I come from a family that didn’t have a lot to give me going into this journey of getting a college degree. So I did it basically on my own - they gave me things here and there - but college is expensive. I wound up getting scholarships and taking on student loans to get through. It was a lot of hard work. Some days, I wanted to quit. I felt like I was never ever going to see the benefits of what I was doing. Well, I am now at a point in my life where I was able to secure a job (I started a week after graduation) making $80k a year. Obviously, this is great - this is what you’re supposed to do when you graduate with a Comp Sci degree. But for some reason, I don’t know if it’s guilt or shame, but

#150: Chad Carson's friends called him a "nerdjock." When former college football linebacker Chad Carson graduated from Clemson University, he decided to start a business. But he didn't have any money. He was a 235-pound athlete who attended college on a football scholarship. He graduated debt-free with $1,000 in savings from various odd jobs. He wanted to become an entrepreneur, and he knew he was starting from zero. As Chad viewed it, starting from zero meant he had nothing to lose. He started jogging around local neighborhoods near the university. Whenever he noticed a property in disrepair, he'd ask if it was for sale. If he noticed a 'For Sale by Owner' sign in the yard, for example, he'd dial the number. If he noticed a home with an overgrown lawn and no curtains in the windows, he'd leave a note on the door, or he'd knock on the neighbor's doors to get the owner's phone number. By doing this, Chad started a real estate wholesaling business. He'd find off-market properties, enter into a sales con

#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 e

#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 pro

#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,

#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? O

#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

#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/episode14

#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 pro

#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

#141: "I'll get around to rolling over my 401k ... next week." "Eventually I'll switch to a cheaper insurance plan." "I really should move my portfolio into lower-fee funds." "Yeah, yeah, I know I should create an estate plan. I'll do it later." ____ We know how to improve our financial lives. We know what steps we ought to take. I'm betting that everyone reading this can name at least one action, big or small, that you could take to improve your net worth. But we don't follow through. Why not? Why do we procrastinate? Why do we ignore the important, in favor of the urgent or the more-pleasant? Why do we act against our self-interests? Why is there a gap between our intentions and our actions? More importantly, how can we bridge this gap? How can we align our knowledge and intention with our behavior? Dr. Stephen Wendel is a behavioral economist and the head of behavioral science at Morningstar, an independent investment research firm. He joins us on the Afford Anything podcast to answer these ques

#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 prope

#139: Five years ago, at age 29, Kim E. started her first professional, salaried full-time job, working as a firefighter for the City of Austin, Texas. She received a starting salary of $42,000. Today, five years later, she has saved: - one year's salary ($40,000) in an emergency fund - one year's salary ($42,000) in a workplace retirement fund - more than half a year's salary ($27,500) in a Roth IRA She also paid off her student loans ($10,000), paid off her car loan (roughly around $16,000-ish), and contributed to an H.S.A. account ($6,000, half of which came from an employer match.) Oh yeah, and she also bought and renovated a rental property. Translation? Kim has saved (or repaid debt of) $141,500 within five years, as a firefighter with a starting salary of $42,000, excluding the additional money she's invested into her rental. **She's saved more than 3x her starting salary, within her first five years on the job.** And she's done this while earning a middle-class public service salary in an expensi

#138: There’s a famous quote that’s attributed to Henry Ford. The quote says, “If I had asked people what they wanted, they would have said faster horses.”⠀ ⠀ There’s no proof that Henry Ford actually said this. But whether or not that quote is historically accurate, the point remains. If Elon Musk had asked people what they wanted, they would have said a car with better gas mileage.⠀ ⠀ But Elon never bothered asking. Because he knows you cannot change history from the middle of the bell curve. And he knows that design by consensus, by definition, leads to average results.⠀ ⠀ He may ask for input on the details. But he will never ask the crowd to guide his vision.⠀ ⠀ True innovation comes from vision. We see this in technology. We see this an art, music, writing. But often, we fail to see this in ourselves. We allow the crowd to dictate who we are: what our dreams are, what our goals are, what our fears are. We crowdsource our vision and live a life of “should.”⠀ ⠀ Authenticity is the art of not giving a sh*t

#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

#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

#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