Afford Anything | Get Smarter With Money

Latest Episodes:

How Much Can I Spend in Retirement? - with Dr. Wade Pfau Mar 05, 2018

Show notes

#119: Once upon a time, in southern California in 1994, there lived a man named William Bengen.

He read many claims, widespread at the time, that said that since the markets return at least 7-9 percent compounding rates on average, retirees could withdraw and spend 7 percent of their portfolio.

William had a hunch that this was misguided. He decided to prove it.

He looked at 30-year timespans in U.S. history, starting from 1926. The first timespan ranged from 1926 to 1955. The second timespan ranged from 1927 to 1956. And so forth.

He assumed that the retiree held 50 percent stocks, in the form of an S&P 500 Index, and 50 percent bonds, in the form of intermediate-term government bonds.

Then he asked two questions:

First, what was the worst-case scenario? Retiring in 1966. The 16-year timespan from 1966 to 1982 was extra-rough, and experiencing this sequence of returns at the start of retirement made for one sad, sad puppy.

Second, how much could an investor sustainably withdraw from her portfolio during that worst-case scenario? The answer was 4.15 percent in the first year, and 4.15 percent, adjusted for inflation, every subsequent year.

And thus, the 4 percent rule-of-thumb was born.

And we all retired happily ever after.

____

Or did we? This week's episode features an interview with Dr. Wade Pfau, who offers counterintuitive ideas about retirement income.

Dr. Pfau is a Professor of Retirement Income at The American College of Financial Services.

He holds a Ph.D. in economics from Princeton. He's a chartered financial analyst. He won two awards for "most outstanding contribution" from the Journal of Financial Planning. He won another award for "best paper in retirement planning" from the Academy of Financial Services.

This guy knows his stuff.

And he's ... *cautious* ... about the 4 percent rule of thumb.

What are his concerns?

What can we expect?

And how much money can we spend in retirement -- whether we enjoy a traditional or early retirement?

Find out in today's episode.

____

For resources mentioned, visit https://affordanything.com/episode119

Learn more about your ad choices. Visit podcastchoices.com/adchoices

Ask Paula - How Do I Buy a Foreclosure? - and Other Real Estate Questions Feb 26, 2018

Show notes

#118: Questions -- I get questions! Today, I’m tackling four queries about real estate investing that come from the audience. Here are the details:

Sam says:
I work full-time and I’m not handy, so I definitely need a property manager. I’ve found an amazing property management company, but they only serve a small, specific neighborhood. Should I buy a property in this neighborhood so that I can use this fantastic property management company?

Terri asks:
I’ve heard that if you’re above a certain income level, you’re unable to carry-over losses from your income property. My accountant says it doesn’t make sense to buy a rental property if you can’t carry-over losses. Is this true?

Anonymous asks:
I’d like to buy my first rental property when I’m in graduate school. I’ll live in one room and rent out the other. What should I consider?

Noelle says:
We’d like to sell our home, and use the proceeds to pay cash for a foreclosure in the South. How do we find a foreclosure or short sale?

We cover these questions in today’s episode. Enjoy!

_____

Resources Mentioned:
Amazon - nolo every landlord's tax deduction guide
https://www.nar.realtor/rofindrealtor.nsf/pages/fs_sfrspec?OpenDocument

Learn more about your ad choices. Visit podcastchoices.com/adchoices

How to Avoid Killing Your Spouse (and Should You Get Married in the First Place?) - with Farnoosh Torabi Feb 19, 2018

Show notes

#117: My friend and financial expert Farnoosh Torabi joins me to answer a relationship & money question from a listener named Janice.⠀⠀
⠀⠀
Janice is engaged, and she calls to ask: Should she get married?⠀⠀
⠀⠀
She earns double what her fiancé makes. She has no debt except her mortgage. Her retirement accounts are well-funded.

He makes half of her salary. He’s carrying $20,000 in credit card and student loan debt. He has two children from a previous marriage and pays 25 percent of his income to child support. He has zero retirement savings other than his state-funded teachers pension.

They’ve been together for 8 years and engaged for three. But she’s unsure about whether or not she should walk down the aisle.

Should they get married? Is this a smart financial decision?⠀⠀
⠀⠀
Farnoosh and I both tackle this question together — and we disagree on some points, which makes this conversation better!!

Farnoosh is the bestselling author of When She Makes More, a book that takes an in-depth look at households in which the woman earns more than the man. She hosted a primetime show on CNBC, makes regular appearances on The Today Show and Good Morning America, and writes a monthly financial column for O, The Oprah Magazine. She’s a former reporter for Money Magazine.

She's the perfect guest for a conversation about relationships, marriage, money, debt, family.⠀

Enjoy!⠀

For more information, visit the show notes at http://affordanything.com/episode117

Learn more about your ad choices. Visit podcastchoices.com/adchoices

Ask Paula -- Help! I'm Underwater on My Car! Feb 12, 2018

Show notes

#116: Stacy and her boyfriend would like to downsize to one vehicle. But they're collectively $14,500 underwater on their car loans.
 
Stacy owes $11,000 on her car, but its trade-in value is $7,200. She's paying a 12.74% interest rate and her payoff date is 2021.
 
Her boyfriend is in worse shape. He owes $18,500 on his vehicle, but its trade-in value is $7,800. He's paying a 21.5% interest rate and his payoff date is 2022.
 
Theoretically, they could sell Stacy's car to a private party, and she could pay off the rest of her loan. But the boyfriend's car is not in great shape, and probably won't survive for the next couple of years. And neither of them have found better refinancing deals.
 
What should Stacy and her boyfriend do?
 
_____
 
Rachel earns $65,000 per year. She’s 27 years old, contributes 20 percent to her retirement account, and holds $5,000 in savings.
 
She owes $19,000 on a car loan, at a 4 percent interest rate, and $170,000 on student loans, all with different interest rates, but the highest at 7.9 percent.
 
She’s hesitant to consolidate her student loans, because she’s currently on a government plan that gives her flexibility, and she doesn’t want to switch into a plan that requires her to make a fixed monthly payment.
 
She’d like to know if she should use her savings to invest, or repay her loans.
 
_____
 
Misty is 40 and has no retirement savings. She lives overseas and is able to save about $20,000 per year. She plans on living overseas for a couple more years before returning to the United States.
 
Her employer doesn’t offer any retirement benefits or match, and her health insurance accounts are not HSA eligible.
 
She’d like to contribute to index funds. Is this a good strategy? Does the fact that she lives overseas change her considerations?
 
____
 
Nicole is from New York and is living in Abu Dhabi. She’s been living there for three-and-a-half years and makes good money. She’s repaid her student loans and has a lot of cash saved. She’s single.
 
She wants to become financially independent. What should she start doing now?
 
_____
 
Karen is 32 and lives in Los Angeles. Her take-home pay is $4,300 per month. She supports her parents financially, which costs $1,200 per month; she also lives with them.
 
She paid off $60,000 in student loans in 5 years. She’s has $100k in a high-yield savings account and $100k in 403b. She holds $12k in student loan debt from graduate school.
 
She wants to make 20 percent downpayment on a home with the cash that she’s saved. She’d like to live there, but also have the potential to rent out this home if, at any point, she decides she doesn’t want the burden of a mortgage anymore. She’d like to keep her mortgage to $2,000 per month.
 
Given that the housing market is so high, should she buy a home? Or should she wait for a market crash and keep saving in the meantime?
 
____
 
Former financial advisor Joe Saul-Sehy and I tackle these questions in this episode. Enjoy!

For more information, visit the show notes at http://affordanything.com/episode116

Learn more about your ad choices. Visit podcastchoices.com/adchoices

How Dave Ramsey Taught His Kids About Money -- with Rachel Cruze Feb 05, 2018

Show notes

#115: Rachel Cruze was born the year her father, Dave Ramsey, filed for bankruptcy.

During her childhood, she watched her parents transition from struggling and rebuilding from their bankruptcy, to becoming debt-free multimillionaires.

Her dad went on to become the host of The Dave Ramsey Show, a money management radio show and podcast that reaches more than 12 million people per week. It’s central message is to budget carefully and avoid debt.

Despite their success, the Ramseys committed to raising money-smart kids. They didn’t want their children to become lazy or entitled. Rachel paid for toys as a child. She partially paid for her car as a teenager. She worked throughout college.

Rachel, now in her late 20’s, grew up to become an accomplished speaker and New York Times bestselling author. She and her father co-authored the book Smart Money, Smart Kids, which reached the number one spot on the NYTimes bestseller list. Her latest book, Love Your Life, Not Theirs, is also a mega-bestseller.

In this episode, Rachel describes the lessons she learned about saving, spending, budgeting, debt and giving as the daughter of Dave Ramsey.

We discuss “Instagram envy” -- the act of comparing your life to someone elses’ -- and how to avoid the traps of consumerism and materialism.

Read the full show notes -- and download a FREE gratitude worksheet -- at http://affordanything.com/episode115

Learn more about your ad choices. Visit podcastchoices.com/adchoices

Ask Paula -- How Should I Invest $100K in Real Estate? Jan 29, 2018

Show notes

#114: This week, I answer four questions about real estate investing from the audience.

Joelle asks: I own a home outright on the West Coast. I’m thinking about taking out $100,000 from my home equity, and using this money to buy a rental property. I found a community out east where I can buy a property outright in cash for $100,000 in a good neighborhood. Should I pay cash for one house (via the home equity loan)? Or should I split this $100,000 into multiple down payments on many homes?

Yasin asks: My wife and I are living on one income and investing the other. We save $60,000 per year. We’re looking at duplexes in Minnesota that cost $160,000 to $180,000. Our plan is to purchase a duplex, move into one unit, rent out the other, and aggressively pay off the mortgage in about 1.5 years. We’d move out and repeat this process until we have $7,000 per month in passive income, at which point we’d be financially independent. Should we pursue this plan? Or should are we playing it too safe? Should we buy more properties upfront, rather than waiting for two years between each purchase?

Anonymous asks: I own four rental properties, each of which have an average rent of $1,350 per month. I purchased all of my properties within the past 24 months, and each one has been recently renovated. My goal is to own 20 rental properties. I’d like to make sure that I have adequate cash reserves, in case of emergencies. Each of my properties have insurance with a $5,000 deductible. How much money should I keep in cash reserves? What factors should I consider?

Kim asks: I own one rental property. I recently moved into a single-family home in Scottsdale, Arizona, with the intention to live here for one year and then make this my second rental property. My mortgage is $1,500 per month, and I could collect rent of $2,250 per month – or more, if I Airbnb it. The neighborhood is booming; the housing here is appreciating at an astronomical rate. However, I’m concerned about the longevity of the plumbing in my current home, which was built in 1960s. I may have an expensive repair on the horizon. Here’s my question: Should I hold onto this property, despite the looming repair bills, and turn this into my second rental property? Or should I live in this home for two years and then sell it, cash out, and repay all my student loan and consumer debt? I hold a $60,000 student loan, $7,000 in vehicle loans, and $5,000 on a credit card. My goal to own many cash-flowing properties.

Anonymous asks: A year ago, I relocated to Silicon Valley. I’m thinking about buying a townhouse-condo hybrid. I like the neighborhood and it suits my family’s needs. The property will become a rental in 5-7 years. It’s in a distressed area and could see a lot of potential appreciation. What loan should I consider, given that this property will become a rental within 5-7 years? I’m debating between a 7/1 ARM or a 30-year fixed rate mortgage. Also, should I redirect most of my income to paying off the principal as quickly as possible? There are two schools of thought on this: (1) build equity and use a HELOC to buy another property in 5-7 years, or (2) make only the minimum payments on your mortgage. What do you think?

Tune in for the answers!

Learn more about your ad choices. Visit podcastchoices.com/adchoices

How I Run a Six-Figure Business and Host an Airbnb while Traveling the World -- with Natalie Sisson Jan 22, 2018

Show notes

#113: Natalie Sisson was tired of the corporate world. She wanted freedom, adventure and fulfillment.

In 2008, she quit her job and co-founded a tech company -- but soon she discovered that running a company felt a lot like having a day job.

Two years later, she quit her own company in order to truly strike out on her own.

Since 2010, Natalie has run an online business from her laptop while traveling the globe. She's visited 70 countries, living out of a suitcase while running a lucrative six-figure business.

She also owns investment real estate in Portugal and New Zealand.

In this interview, Natalie and I discuss:
- The four phases of entrepreneurship: The Dreamer, The Hustler, The Superhero and The Freedomist.
- Why Natalie transitioned from a steady paycheck to the financially volatile life of an entrepreneur.
- How Natalie coped when her bank account dwindled to her last $17.
- The major family crisis that reinforced why freedom and flexibility matter more than any job.
- How she bought a property in a foreign country.
- How she manages an Airbnb rental property from halfway around the world.
- Why a minimalist attitude towards possessions is crucial for a traveler and entrepreneur.

Enjoy!

Visit http://affordanything.com/episode113 for more information

Learn more about your ad choices. Visit podcastchoices.com/adchoices

Ask Paula - How to Convince a Spouse to Invest in Low-fee Index Funds? Jan 15, 2018

Show notes

#112: How can I convince my spouse to invest in low-fee index funds? How should my fiancé and I combine our finances? If I'd like to invest in rental properties, should I also buy stocks?

Former financial planner Joe Saul-Sehy joins me to tackle these audience questions and more.

Thomas asks:
My wife is suspicious of Vanguard. She questions how they could stay in business while charging low fees -- isn't there a catch?

She's also reluctant about investing the majority of our money in a broad-market index fund like VTSAX. She'd prefer more diversification.

Recently, we met with a major brokerage firm that charges a 1.75 percent management fee. How can I get my wife to see the detrimental effects of choosing this high-fee broker?

Shy asks:
My fiancé and I are getting married soon. We both live with our families at the moment; we'll form a new household after our wedding.

Neither of us has ever lived independently before. How should we budget for this, given that we're not sure what expenses to expect?

Also, any tips on how to commingle finances?

Paris asks:
I'd like to invest in rental properties. Should I still make stock market investments? Should I contribute to a 401k?

Kristin asks:
I've been DIY'ing my household's finances and taxes. So far, our situation has been simple.

However, in a few years, my husband is going to retire. When this happens, we'd like to sell our home, perhaps invest in rental properties, and move either out-of-state or out-of-country.

Our financial and tax situation is about to become a lot more complicated.

I'd like to talk to a financial professional ... but whom should I choose? Should I hire a financial coach? a financial planner? an accountant? an investment advisor? someone else?

We tackle these four questions on today's show. Enjoy!

______

Resources Mentioned:

Thomas:
Calculator - How do expenses impact fund returns?
https://www.calcxml.com/do/inv12

Article - How a 1% fee could cost $590,000 in retirement savings
https://www.nerdwallet.com/blog/investing/millennial-retirement-fees-one-percent-half-million-savings-impact/

Article - The Impact of Investment Costs
https://investor.vanguard.com/investing/how-to-invest/impact-of-costs

Shy:
Article - The Anti-Budget
http://affordanything.com/2013/03/05/anti-budget-or-80-20-budge/

Article - Three Methods for Co-Mingling a Couple's Finances
https://www.thebalance.com/three-methods-for-co-mingling-a-couple-s-finances-453849

Kristin:
FINRA Broker Check website
CFP.net
Guidevine (website)
XY Planning Network

Learn more about your ad choices. Visit podcastchoices.com/adchoices

How We Retired at Age 38 and 41 -- with Tanja Hester & Mark Bunge Jan 08, 2018

Show notes

#111: Tanja Hester and Mark Bunge used to have demanding but fulfilling careers as political and social cause consultants.

While they loved the mission behind their work, they grew tired of the exhausting hours and grueling travel. Their home felt like a weekend crash pad. They had no time or energy to pursue outside passions like skiing, biking and volunteering.

Six years ago, they read a book that changed the course of their lives.

The book, How to Retire Early, set the couple on the path of financial independence. They moved from pricey Los Angeles to the more affordable North Lake Tahoe. They started automatically saving and investing huge chunks of their paycheck. They crafted detailed spreadsheets, plotting precisely how much they'd need to save before they could comfortably quit their jobs.

Today, Tanja and Mark are newly-retired ... at the ages of 38 and 41.

How did they progress towards early retirement so quickly? And what lessons would they share with anyone else who wants to escape the 9-to-5 grind?

Find out in today's episode.

For more information, visit the show notes at http://affordanything.com/episode111

Learn more about your ad choices. Visit podcastchoices.com/adchoices

Ask Paula -- Get Ready for the Next Recession Jan 01, 2018

Show notes

#110: Happy New Years! We're kicking off this year on a bright and cheerful note -- with a conversation about the impending recession! Yay!

The U.S. stock market is at a peak, continuing its 9-year bull run. The markets have been rising since March 2009 without any major corrections or pullbacks.

We are living in one of the longest periods of economic expansion in our nation's market history.

That's worrisome.

Speculators with short memories are popping champagne corks thinking the good times will last forever, while those of us who are students of history know that what goes up must come down.

Trying to guess WHEN the next recession will happen is a waste of time. A more efficient use of time is to prepare ourselves such that when it does happen -- whenever that may be -- we are ready.

How can we prepare for a recession? That's one of the four topics I cover in today's episode.

Specifically, here's what we chat about in this first episode of 2018:

Thayne asks:
1) Broadly -- What are the best investments overall if you're
going into a recession?

2) Specifically -- What's the most recession-proof type of real estate investment?

Aaron from Portland, Oregon asks:
In Episode 96, you discussed the benefits of real estate investing -- but you didn't mention the use of leverage, nor did you mention that real estate is an inefficient market. Why not?

Anna from the San Francisco Bay Area asks:
I've moved out of my condo, which I'm renting out. But the rent only covers the mortgage (PITI) and HOA. Should I sell the condo? If so, I could use $250,000 in equity for an alternate investment, such as buying rental properties out-of-state.

Enjoy!

_____
Resources Mentioned:
How to Calculate Cap Rate and Cash-on-Cash Return --
http://affordanything.com/2012/01/25/income-property

Learn more about your ad choices. Visit podcastchoices.com/adchoices

Our TOPPODCAST Picks

Follow Us

Stay Connected

Afford Anything | Get Smarter With Money

Related Podcasts

Links

Stay Connected