Afford Anything

Category: Personal Finance 101

By

#390: Ask Paula: Help! My Bills Are Too High

We start this episode with two anonymous callers who have opposite problems: one says her bills are too high, while the other is worried that she’s saving too much.

Anonymous (“Izzy”) saves A LOT. She wants to relax about her spending more, and start including more joy into her life. How should she approach the next 10 or 20 years, so that she can enjoy her financial security?

A different anonymous caller (“Starlight”) has the opposite problem: her expenses are mounting. Her bills make her uncomfortable. She wants to shake up her investments so that she can tap her assets in order to make her payments. Ideally, she’d also like to buy a house in Europe within the next 10 years. How should she do this?

John liked the episode with Bill Bengen, where we discussed the 4% rule.  However, he questions whether that rule should really be applied to the FIRE community.

Steve is a landlord who needs his property to cash flow, but doesn’t like to raise rents. What should he do?

Do you have a question on business, money, trade-offs, financial independence strategies, travel, or investing? Leave it here and we’ll answer them in a future episode.

Enjoy!

Keep reading...

By

#387: Ask Paula: Is A Crash Coming??

Lila is concerned about inflation and the risk of a recession. Should she invest in the stock market, despite the scary headlines? Or should she pay off her primary residence or her investment properties?

Linda invested in a 529 for her son’s college, and he’ll be starting in the fall. But, the value of the plan dropped right before she was planning on using it and she is wondering how to keep from losing more money.

Jen and her husband want to retire in 8 years. They’re hoping to have paid off their mortgage AND hit their net worth goals when they stop working. How should they prioritize between these two goals?

Do you have a question on business, money, trade-offs, financial independence strategies, travel, or investing? Leave it here and we’ll answer them in a future episode.

Enjoy!

Keep reading...

By

#385: Ask Paula: How to Invest When You’re Unsure of the Goal

Anonymous (“Jennifer”) keeps hearing us say that you should “start with the end in mind” – that your investments should match your goals and timeline. But what if you don’t have any specific financial goal? What if your risk tolerance is different than you once thought?

Rachel’s new employer won’t let her contribute to retirement for more than a year – what should she do??

Carri’s parents are in poor health and can’t work much – what should they do about their life insurance policy and their health insurance?

Do you have a question on business, money, trade-offs, financial independence strategies, travel, or investing? Leave it here and we’ll answer them in a future episode.

Enjoy!

Keep reading...

By

#382: Ask Paula: There’s No Such Thing as a FIRE Number

Sara wants to leave her job to spend time with her children, and she needs help in calculating her FIRE number. But is this possible?

Joe is buying his first house hack and would like to understand if the FHA loan or the doctor loan would be better for him.

Kat received a windfall and is wondering if she should invest it in stocks, real estate, or a combination of both.

Aisha is moving to the US and wants to start investing ASAP – how should she approach her goal to reach FIRE?

Former financial planner Joe Saul-Sehy and I tackle these questions in today’s episode.

Enjoy!

P.S. Got a question? Leave it here.

Keep reading...

By

#380: Ask Paula: How to Optimize Your Investments Along the Efficient Frontier (If You Dare!)

Anonymous and her spouse are both in the military and about to reach retirement. They have an expensive whole life insurance policy, costing $550 per month, and wonder if they should switch to term life insurance.

Ionnie just rolled over her Roth IRA and would like to understand how to withdraw her contributions without getting penalized

Matt wants to optimize his portfolio and wants to know if he should invest along the Efficient Frontier – despite the fact that the asset allocation it recommends is absolutely bonkers; it’s wild and risky and tilted like nothing he’s ever seen before.

Former financial planner Joe Saul-Sehy and I tackle these three questions in today’s episode.

Enjoy!

P.S. Also – we’re launching a book club!! Each month, we’ll read and discuss a book written by an Afford Anything podcast guest, starting with Morgan Housel, James Clear, Ken Honda, and Dr. Susan David.

Keep reading...

By

#378: Ask Paula: Should I Take a Higher-Paying Job if I Can’t Save As Much for Retirement?

Anonymous is 25. She has a job offer that comes with a substantial raise. Hooray!

Buuut … there’s a problem. If she accepts this job offer, her new employer won’t allow her to contribute as much money to her company retirement accounts.

How should she think about the trade-off between increasing income and funding her retirement?

Meanwhile, Dan from California is retiring soon and wants to know what he and his wife should do with the loan they took out against their 401(k).

Finally, an anonymous caller who goes by “Daughter” has a whole life policy that only costs her less than $50 per month. Since her policy is so cheap, should she keep it?

Keep reading...

By

#377: How I Discovered The 4 Percent Retirement Rule, with Bill Bengen

Today’s episode is sheer retirement nerd bliss.

We talk to the creator of the 4 percent retirement safe withdrawal rule, Bill Bengen.

If you’re new to retirement planning, you might not yet grasp the gravity of this. Let’s cut to the chase: the 4 percent rule is one of the most revolutionary, groundbreaking insights in the field of retirement research in the past 30 years.

To understand why, let’s climb in our time machines and return to 1994.

Back then, many financial advisors were telling their clients that they could safely withdraw 7 percent of their retirement portfolio each year.

After all, the simplistic logic went, the stock market has historically yielded between 7 to 9 percent returns, so that type of withdrawal rate shouldn’t dwindle the principle … right? ⠀
⠀
Bill Bengen, an MIT graduate and former rocket scientist, decided to build a better model. He looked at the performance of investment portfolios across 30-year time horizons, beginning in 1926.

Under the assumption that the portfolio is invested 50 percent in an S&P 500 Index and 50 percent in intermediate-term bonds, in a tax deferred account, he found that retirees could only withdraw 4.2 percent of their portfolio in the first year of retirement, and that amount adjusted for inflation each subsequent year.

He called this the “safe withdrawal rate” that gave people a reasonable chance of not outliving their money, based on historic performance.

He published the results in the Journal of Financial Planning and caused a stir. This was revolutionary. It upended the assumptions that dominated the field at the time.

And it remains a cornerstone of retirement planning to this day.

We talk to Bill Bengen about his discovery – and his latest research – in today’s episode.

Keep reading...

By

#376: Ask Paula: How Should My 64-Year-Old Mom Handle a Toxic Boss?

Meghan’s mom is 64 years old and suffering under a toxic boss. It’s tough to switch jobs at her age. How should she think through the next steps?

Ellen has a 20-year-old son with physical and developmental disabilities. Her other child, age 21, will need to look after him for the rest of their lives. How should she handle their inheritance? 

Joe wants to start working part-time in four years, and fully retire four years after that. He worries he’s investing too aggressively for his retirement date.

In today’s episode, former financial planner Joe Saul-Sehy and I tackle these tough situations.

Enjoy!

Keep reading...

By

#374: Ask Paula: Watch Out! Here’s How Lowering Your Investment Tax Bill…Might Increase Your Risk

Jake wants investment cash flow until he’s eligible for his military pension in 10 years.  Should he buy small multifamily properties right now, wait a few years and invest in syndications or should he invest in index funds through taxable accounts?

Andy in Palm Springs is shoveling money into a taxable brokerage account. He wants to use these investments to create another stream of income. But there’s a problem: his tax bill is going to be high. What should he do?

Anonymous is a U.S. citizen, lives in London, and can’t invest in index funds. Can he emulate the index fund experience by directly buying a huge number of individual stocks?

Former financial planner Joe Saul-Sehy and I tackle these questions in today’s episode.

Enjoy!

Keep reading...

By

#372: Ask Paula: I’m 33 and Want to Retire at 45 – What Should I Do?

Eve has been investing in her brokerage account and the tax liabilities are starting to add up.  She wants to retire in 12 years and is wondering if she should invest in after-tax contributions and plan on a Roth conversion.

Anonymous has rental properties and wants to start building his kids credit histories.  Is it a good idea to add them as co-borrowers on the mortgage?

Lily is really excited about investing in real estate, but househacking wasn’t the right fit.  She’s looking for advice on investing in opportunity zones through crowdfunding platforms.

Keep reading...

Afford Anything