WCI #254: Afford Anything with Paula Pant

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011. Here is your host, Dr. Jim Dali. This is White Coat Investor podcast 254 afford anything with Paula Pant. Studentloanadvice.com is a White coat investor company created to help doctors, dentists and other high earners tackle and defeat their student debt. Letting a professional guide you through the best options to manage your loans will save you hours of research and stress and potentially save hundreds to thousands of dollars with your custom student loan plan. Book a consult with a student loan consultant@studentloanadvice.com today. Also, if you're looking for an easy side gig, check out our surveys. Whitecoatinvestor.com mdsurveys you can turn time that you're not using for anything else into money by doing some pretty quick, easy surveys. Your opinion is valuable. Companies are willing to pay for it, so check that out. Bytecodeinvestor.com mdsurveys all right, our quote of the day today, which we should do right here up front since we're going to have a really great guest, comes from Henry David Thoreau. He said, our life is frittered away by detail. Simplify, simplify. And boy, there's a lot of wisdom there. All right, you're going to love our guest. Let's get her on the line. My special guest today on the White Coat Investor podcast is Paula Pant, who, who you may know from her work in the fire community. She's a prominent personal finance blogger and podcaster, et cetera. In fact, she has been blogging longer than I have, longer than Mr. Money Mustache has. Paula, welcome to the White Coat Investor podcast.

Thank you. Thank you so much for inviting me on. I'm happy to be here.

I don't know how many people in our audience know about you and your work, so let's start at the beginning. Tell us about your upbringing and maybe what it taught you about money.

Absolutely. So in terms of my upbringing, I, I come from an immigrant family. I am technically a first generation immigrant. I was born in Kathmandu, Nepal, but I came to the United States as a baby. And so growing up my, my family and I, my parents and I were getting settled in the United States for, for the first time and going through, you know, my parents at a later age in life, in their 40s and in their 50s, were going through a lot of the experiences that people sometimes go through in their teens and 20s, you know, they were buying their very first car, they rented their very first apartment, then they bought their very first starter home. You know, they were. They were hitting all of those milestones in their 40s and 50s. My dad, in fact, did not open a retirement account until he was 50 years old. And so they were very frugal out of necessity. And we lived actually a very comfortable life. But it was. The reason that it was comfortable was because we were so frugal and so attentive to money. And so I learned a lot of money scarcity. I learned, you know, even though we had a very good upbringing, I learned the lesson that money is something that needs to be very, very well managed. And it gave me this sense of wanting to. It sort of gave me a sense of anxiety, right? Like, I wanted to make sure that I always had enough. I always had a little bit of. Even though I was comfortable, I always had a fear of never having enough. And it was that sense of anxiety, frankly, that got me into this space, because I. In my 20s, you know, after I graduated from college, I got my first job out of school, I found more joy or more satisfaction in saving and investing than I did in spending on discretionary items. And it was largely because if I knew that I was building up my investments, that reduced my anxiety a little bit. If I was spending on discretionary items, if I was going out to the bars or whatever, buying clothes, that did nothing to quell this. That sense of, oh, my goodness, things might fall apart.

You know, it's interesting how we all have these. These different beliefs working in the background that affect what we do. You know, a lot of people do retail therapy. They feel better when they spend, right? Those of us who are maybe more natural savers, you know, it gives us anxiety to spend, it's easier for us to save, and we actually find joy in saving and investing. And both groups of people probably need to figure out a way to moderate themselves in their lives. So you mentioned after college, what did you study? What was your plan when you left home? And how did that change?

So I went to the University of Colorado at Boulder. And after graduating. Okay, so take this back a little bit. While I was in school, I really wanted to study abroad, but I couldn't. Like, the study abroad programs were prohibitively expensive. 15 to $20,000 for a single semester. And I wanted to get through school debt free. And so I gave it some thought, and I realized I don't actually want to study I just want to go abroad. And so my thinking as a college student was that I would graduate, work for a few years, save up some money, and then just travel overseas. And that's exactly what I did. I graduated, I took a job out of school as a newspaper reporter for a small local paper in Colorado. My starting salary was $21,000 per year. This was in 2005.

Rolling in the big bucks now, huh?

Right, Exactly. Whenever I say that they're like $21,000 a year, they're like, is that like $1960?

Just by comparison, I was a resident that year. I was making 37,000 as a resident physician. So it's 21 was not a lot of money at that time, for sure.

Exactly, exactly. So, yeah, so my starting salary was 21,000 at the time that I quit that job, which was in 2008. My ending salary was 31,000. And so that was the most that I ever made as somebody else's W2 employee. While I was at that newspaper, I started freelancing. So I would write freelance articles for magazines and websites. And I saved on average around $800 a month. Over the span of three years, that accumulated to $25,000. So basically, over the span of three years, I'd saved essentially one year's worth of income. And once I did that, I had enough that I felt confident, you know, I felt confident enough to be able to quit that job and buy a one way plane ticket to Cairo, Egypt. And then at that point, I spent the next two years living out of a backpack, traveling around. So I mostly stuck to countries where the dollar exchange rate really worked in my favorite so that I could geo arbitrage. And I traveled through the middle east, through southeast Asia. I spent a little bit of time in Australia, New Zealand, just, I lived out of a car and camped that whole time. So. So I spent two years just backpacking, you know, living on around $1,000 a month, largely by going to one place and parking myself there and then just staying there. You know, that expense comes in transit. But you know, I found that if you go to Lao and then just find your little spot, stay there, you know, you cost of living is not that high. So as I was doing this, my friends kept saying, like, I would love to do that, but I can't afford it. That was the number one thing that I heard over and over and over. And this, that remark was coming from the same friends who lived in nice apartments with stainless steel appliances. They would buy $14 martinis when they went out they drove nice cars. And the message that I wanted to convey to them was, you can afford it. You know, you just can't afford everything. Like, life is not an endless series of ands. And choosing one thing comes at the opportunity cost of choosing others. And that was really where the idea came from of creating this brand, Afford anything that is really based around this notion of opportunity cost. That every decision that we make, every spending decision comes at some type of a trade off, whether we're conscious of it or not. And oftentimes we sacrifice what we want most for what we want now.

Yeah. And that's not only just trading off one thing you can buy for another thing you can buy. It's also trading off some service or good that you can buy for the time.

Exactly.

That you would spend earning the money to purchase that thing.

Exactly, exactly. Essentially, it's the allocation of limited resources. And so when we think of any limited resource, time, money, effort, attention, there's only so much cognition that we can give to something. Right. And so I see people, you know, fast forward to today in this space. I'm sure you see it too. See people who spend a lot of time mileage hacking. Like they're obsessed with credit card churning, or they're obsessed with over optimizing couponing deals or whatever it is. That's great. But sometimes that comes at the cost. All of that hacking comes at the cost of building something, whether it's a business or an. Or a nonprofit or whatever it is that you want to build, like creating some type of legacy project that you could leave in the world. There's only so much that we can do. And oftentimes the notion that we can endlessly be additive is, I think, a flawed notion. You know, so the philosophy that I really try to impress upon people is that we may think we're being additive, but we're actually, whether we're aware of it or not, substituting.

You sure you got a degree in journalism and not economics?

Well, thank you. Actually, my degree is in sociology.

Sociology, okay.

Yeah, yeah, I weaseled my way into that newspaper reporting job.

Well, certainly you learned some important writing habits from it. I'm sure you started as a blogger. Like I said, you started three months before I did, two months before Mr. Money Mustache started blogging. But it seems over the last few years you've mostly transitioned to podcast. Tell us about that transition of the brand Afford anything. How has that been over the years?

You know, it wasn't a conscious decision to kind of transition from blogging to podcasting. Largely, I followed my enthusiasm and I followed my curiosity, and I love the broadcast mediums. And so it felt like a very natural progression to go from, I mean, newspaper reporter to freelance writer to. To blogger to podcaster. Like, that was a very natural progression, but none of it was strategic or intentional. It largely stemmed from I knew that I would have the highest quality output in whatever medium attracted me the most. You know, people often say, follow your passion, and I think that passion is a loaded term. It's a little bit of a. It's an intense word, right? Like, how do you know what you're passionate about? Particularly given the fact that passion often is the consequence rather than the cause of doing the work every day. You know, oftentimes, if a person has minimum viable interest in a given field or a given activity, they go into that activity, and once they're in it, they become aware of how much they don't know. They transcend from unconscious incompetence to conscious incompetence. And once you. Once you make that transition and you. You know how much you don't know, if it sparks curiosity, that makes you more interested in it and therefore makes you more passionate about it. And so to answer your question about the transition from blogging to podcasting. Podcasting. I was curious about it, so I began doing it. And then once I started doing it, I realized how much there is to this field that I didn't yet know how many skills I could develop that. That I didn't even know existed prior to me trying it. And once I discovered that, once I discovered how much more there is to learn, that made me even more enthusiastic about it.

Yeah, that's awesome that it's driven by your enthusiasm. What I found is I try to go wherever the audience is. I'm trying to take this message to my audience. And what I found over the years is fewer people were reading blogs and more people were listening to podcasts. And so, although I consider myself a blogger, the truth is more people listen to my podcast than read my blog posts. So it's interesting that I feel like it's almost been a forced transition a little bit. Even though I probably feel more passionately about writing than I do about producing podcasts or speaking or doing video or any of that stuff. But such is life, I suppose.

Exactly.

All right, let's talk a little bit about investing. One of the memorable phrases you've used is that your 401 is like your face. Don't touch it.

Yes. That came about right at the beginning of the pandemic when everyone was saying, don't touch your face, don't touch your face.

What's the problem with messing with our investments, with messing with our face?

Well, so as you, particularly at the beginning of the pandemic, as you recall, the stock market, everyone got used to this 11 year bull run that we had had right prior to when the pandemic began. And the problem with an 11 year bull run is that people become so comfortable with this idea that the market is just going to continually go up, that people begin to see the market as a high yield savings account, right? People, people forget that the market does go down. And March 2020 was a rude awakening in a lot of different ways. And so I saw a lot of people, a lot of people in my audience panic, particularly people, I mean, especially the younger generation, like the, the people who were too young to have experienced the market decline of 2008, 2009, and this was their first test. They were really panicking. But everyone was right. And everyone, you know, no one had ever lived through a global pandemic before. And so there was very much this notion of this time it's different, right? Which people say every time, every time, this time it's different. So the issue, of course, and it's obvious in hindsight now, the issue with panicking in March 2020 and turning paper losses into real losses is that if, if a person had done that, they would have missed the rebound. Every recession differs in terms of three factors. There's severity, there's duration, and then there's, in terms of multiple recessions, there's frequency. Right? So March 2020 was a recession that had high severity but short duration.

Yeah, we basically, none of us went to work for six weeks.

But, you know, the market rebounded quickly, right? So you think of March 2020, the market dropped precipitously and then it immediately rebounded and within a couple of months it was back to where it was. And that stands in Stark Contrast to 2007, 2008, which was high severity, long duration, Right. And then you look at frequency also, right? So you look at the amount of time between recessions and those that frequency is declining like that the duration between recessions is getting longer and longer when you look at the historic averages, which means that people start losing their memory about what the last few recessions were like. And so to answer the question about, like, what's wrong with touching your 401k, every recession differs when it comes to severity and duration. And there's no way to predict what the next One is going to be like, how long it's going to last, how bad it's going to be. And there's also no way to predict when it's going to happen. And so given that all of those are outside of our locus of control, the thing that we have to do is stay inside of our locus of control. And that means commit to a strategy, you know, commit to a particular strategy around your asset allocation and your contributions and stick to that regardless of what is happening in the market. Which means do not be reactive to market conditions.

Yeah, I think that's great advice. Even when it's not a terrible bear market. It seems like every time we think about adding an asset class to the portfolio, every time we think about changing our investment strategy in some way, we are almost surely adding something that's recently done well. And that recency bias leads us to performance chase. And of course everything's cyclical. After it's done well, it tends to not do so well for a little while. I think the classic example for me was when I added REITS Real Estate Investment Trust to my portfolio in 2007, subsequently had a 78% loss in the asset class. Now I've held on and obviously added to it over the years, but I really did. I lost 78% of that initial investment because. Why? Well, I was probably performance chasing. Now I've held onto it and added to it and my long term returns in the asset class have been just fine. But you gotta be careful, anytime you make a change, it's usually best not to touch it. And if you're doing it all the time, you're gonna have that effect all the time in your portfolio. So I think you have to be really careful.

Right.

Let's talk about your portfolio. Tell us a little bit about what you invest in.

Sure. So I stick primarily with index funds, broad market index funds. I have what's known as a barbell allocation. So I have all equities and then a heavy cash allocation. I don't invest in bonds. That's not something that I would recommend for the average person. I'm personally comfortable doing that. But I, I know that, you know, there's risk tolerance and then there's risk capacity. Right. Risk tolerance is psychological. Risk capacity is logistical. And so I know that for me, having tested this in the real world for many years now, that I have both the risk tolerance and the risk capacity to be able to have that barbell allocation. The majority of people probably do not. So for me, I'm very comfortable having an all equities allocation. Most of my equities are index funds tilted towards small cap, small cap index funds, large cap index funds, you know, sort of the vtsax, like broad market, total stock market index fund, plus an allocation in an international allocation and a small cap allocation. I also have probably around 10, 10 to 12% of my portfolio in individual stock picking. And that's just sort of the, the fund part of my portfolio. And I have a crypto allocation as well. Cryptocurrency allocation, Large crypto allocation or a.

Small play money kind of allocation?

Small play money allocation.

And I understand you had some real estate investments as well, or was I mistaken about that?

I do. I have seven rental units. They are all free and clear. So a mortgage completely paid down, totally free and clear. That's actually a big part of the reason that I'm so comfortable having a barbell allocation in my market investments is that I view the income stream that comes from those fully paid off rental properties as the income component of my portfolio. And so if you think about the, you know, any asset gains value in one of two ways. There's the capital appreciation on the asset itself and then there's the dividend or income stream that it generates. And when I think about my seven fully paid off rental properties, those generate a very significant income stream. And so while they have appreciated, you know, they are not capital appreciation plays, they are income plays. And so given that I have that as in my overall portfolio as an income play, I'm then able to tilt my market investments towards capital appreciation plays.

So how have you found that balance? This is something my audience struggles with a lot. I get lots of questions about this, right? How much should I invest in index funds? How much should I get into real estate investing? And if I do real estate, how active should I be? Should I be flipping homes? Should I be running a short term rental? Should I be directly managing my properties? Should I just get into syndications and private real estate funds and kind of be more hands off? How did you find that balance for you?

Well, to the second question, how active should I be? My question back to anyone who is asking it is what are your career ambitions? How do you want to spend your time? Because if you are going to be active, that's going to come at the cost of any other career or business activity or life activity that you could undertake, right? If you're going to be flipping houses or, or even going into syndication deals which require a heavy amount of due diligence, that is going to come at the Cost of being able to do anything else with that time. Whether you want to, you know, open, start your own nonprofit, open your own business, join the circus. I don't know, but I don't know what you want to do. Become a certified scuba diver. It's your life, you know, Like.

I have a partner from residency. They took a year off and they went and they were scuba diving instructors, essentially.

Oh, yeah, that's fantastic.

Two emergency docs. They spent a year teaching scuba in Roatan, actually. So it's completely possible.

Exactly, exactly. And that is a fun and fantastic thing to do. And if you're flipping houses, you can't be doing that. So that's the first question that I would ask back. Given all of the things that you could possibly be doing with your time, with your life, is that what you want it to be? And if the answer is no, if you want to set up a system that is as passive as possible, and let me make an asterisk here, when I say passive, I want to be clear. Passive is not a euphemism for free. Right? Passive income is not a euphemism for free money. Passive is a synonym for residual. So if you want to set up a system that is as residual as possible so that you don't have to think about it, then direct ownership of properties that are managed by a property management company is probably the most, in my opinion, the most residual structure that you can set up. If you take on any other strategy, whether that's wholesaling, flipping, syndication deals, even turnkey investing, like people. People are attracted to it because it seems on the surface like it would be less work. But what they're really thinking is that it seems on the surface like it's a get out of due diligence free card. And it is not. In fact, if you're doing it right, turnkey investing or syndication deals require even more due diligence than direct ownership of a property that you bought yourself through a real estate agent.

Because you also have to vet the manager and all the people involved.

Right, exactly. So if you want the most hands off residual passive, like, I don't want this to, you know, take up a whole lot of my time or energy or effort. Buy your own property from the MLS using a real estate agent, put a property manager on it, boom, you're done. That's the easiest way to go about it. And then anything else from that is an iteration of difficulty.

At least up front.

Yes, up front there's an added iteration of difficulty.

Yeah, for sure. So what would your balance be if you had to include your real estate properties in your asset allocation? Are you like half your money in index funds and half in real estate investing or how does it work out for you?

I mean, given market fluctuations, there's never a perfect answer. But if I had to guess right now, I'd say, yeah, I would say probably between 40 to 50% of my net worth is in real estate. And the other what, 50 to 60% is in market investments, including crypto.

Why did you choose not to leverage the properties?

I initially leveraged them and then I paid them all off. And I completely understand that that is not the most mathematically sound approach. I completely understand that I am foregoing the opportunity to, you know, to arbitrage the difference between, you know, the mortgage payment and the way to grow it. But when I think about risk, I look at risk across all activities that I'm undertaking. And so those activities include my market investments, my real estate, and also my career, my entrepreneurial activities. Right. The single biggest risk that I'm undertaking is the ownership and growth of Afford Anything. Right. It's a company, it has employees, it's. I mean, you know the statistics around small business. Most small businesses fail and Afford anything. We just celebrated our 11 year anniversary, you know, from the founding of Afford Anything. It is the single riskiest thing that I'm doing. It has the single biggest payoff of anything that I'm doing. But I am every month committing more dollars and other people's livelihoods, my, the livelihoods of my employees, like I'm putting all of that at risk. And so if I am going to take on that level of risk in this arena of my life, then I want the other arenas of my life to be as de risked as possible.

Fair enough. The other benefit, of course, is a paid off property has a lot better cash flow. Right. Because none of it's going to a mortgage payment.

Yep.

And you basically completely eliminated leverage risk from your life. You know, the interesting thing about bankruptcy is you basically can't go bankrupt without debt. You know, if you don't owe anybody anything, you can't go bankrupt. At worst, you're a zero, you know.

Right.

So there's definitely some benefits either way. And I know a lot of people struggle with that question how much, how leveraged they want to be and whether they want to have the debt free life. I just gave a talk at our conference this month about debt. You know, it was a very nuanced, comprehensive talk looking at all sides of it, looking at it from all angles. And the truth is, there's no right answer for everybody about how to use it in your life. But I think the important thing is to go in and be intentional about how you're using it and have it as part of your overall plan.

Exactly. And one thing that I often tell people when it comes to real estate is think about the different forms of risk in real estate. Right. So you have leverage risk, and that's if you imagine a bunch of horizontal lines, each representing a spectrum. Right. You've got the spectrum of leverage risk. You've got the spectrum of neighborhood risk depending on the type of neighborhood that the property is located in. You have the spectrum of risk that relates to the age of the property, and then you have another spectrum of risk that relates to the condition of the property. Right. So you have all of these separate spectrums of risk that are independent of one another. And then so you just sort of, if you imagine a slider along the spectrum, if there's going to be a lot of risk along one or more of those spectrums, it makes sense to then kind of put the slider on the. More on the de risk side of some of those other spectrums so that overall the whole. The whole picture can balance out. So in other words, if you were to buy a property that was maybe in a neighborhood that was not so nice, then you might want that to be a property that's in good condition, or you might want to at least have the funds to improve that property as soon as you buy it so that you don't have the risk of both neighborhood risk and risk associated with the condition of the property. Right. Those are the ways that I think about risk, that I teach my. My audience to think about risk when it comes to thinking through how much, you know, what are the different forms of risk that I'm taking on when I'm purchasing a property.

Yeah, I think that's a great way to think about it. And I think it's exactly right that you don't want to be maximizing risk in every aspect of not just a property, but of your entire life, you know, every time you can justify taking on more risk here and more risk here and more risk here. But if you step back and look at it all comprehensively, you know, it doesn't take much for a doll to blow up. And really, in investing in particular, that's the name of the game, is to not blow up, you know?

Right.

And if you can just stay in the game long enough, you're gonna win it.

Right, Exactly.

You know, you have written about seven mistakes in real estate investing that cost you $100,000. Can you share some of those with us?

Yeah, absolutely. Absolutely, yes. So this is a free download that's on my website. I think it's what affordanything.com mistakes is where we keep it mistakes.

All right, affordanything.com mistakes. Give us a teaser. Give us a couple of them.

So these are some of the rookie mistakes that I made as a real estate investor. Not knowing the formulas, not understanding the math behind what I was doing, using basic back of the envelope calculations, assuming that if the mortgage covered the rent, then I'd be fine. That was, you know, certainly a rookie mistake. Not having the judgment to understand when people were giving me good advice versus bad advice. You know, there, there are a lot of people with opinions out there, and.

Opinions aren't the same thing as good advice, huh?

Exactly. Exactly. I recall once touring this triplex with a real estate agent. And at the end of the tour, I asked her, I was like, hey, you know, what's, what's the water bill? What's a typical water bill for this triplex? And, you know, this was in an, in an area where it's very customary for the landlord to pay for the water and sewer bill for the, for the building. And she didn't. If she had simply said, oh, I don't have that information on hand, I can look it up when I get back to my office and somebody will email you within, you know, 48 hours, that would have been fine. But instead what she said was, well, you know, I don't know what it is, but if it's high, just raise the rent to cover it. Fortunately, even though, even though that was early in my real estate investing days, like, fortunately, I at least had the common sense to recognize, you know, that the rent is set by market prices. I can't just infinitely set the rent higher because my operating costs have risen. But had I been a little bit more naive, I might not have known that. And that's an example of people, agents, managers, like, people will often tell you things. I can't tell you how many times people, you know, agents, managers, lenders have said, like, hey, this neighborhood, I mean, the values are going to go up. And you know what, when they say that they don't have any skin in the game if they're wrong, if they're wrong, there's no accountability for them being wrong. They can tell you that they think that the value of this condo is going to rise rapidly in the next three years. But once you close the deal, they're not accountable to, to what they've said. So having the, you know, having the judgment to understand when people are giving you good versus bad advice, that's something that, that takes some time to hone. Another mistake that I made and that a lot of real estate investors make early on is buying based on market appreciation versus buying based on factors that are within your locus of control. So if you're buying because you know that you yourself can add value to a property through what's known as forced appreciation, which are, you know, improvements that you make, you yourself, you and your contracting team make, right? That's an example of something that is within your direct control. The value of the property rises based on actions that you and your team have taken. That's great, and I fully support that. But if you're buying based on broad macroeconomic factors that are outside of your control, that is, I think, a mistaken way to approach this field. So those are some of the more common mistakes.

Let's turn the page a little bit. You're probably best known in the FIRE community financial independence. Retire early. And fire, of course, requires a healthy dose of delayed gratification. How can one find a balance between this yolo, you live only once life, and fire?

I'd say there are a few different answers to that. First, as I sort of alluded to in the beginning, financial psychology, right? Either you're the type of person who engages in retail therapy and finds joy through spending, or you're the opposite. You're the type of person who has a lot of money anxiety and finds joy through saving. So the first thing that a person needs to do is figure out which problem do they need to solve, right? Because the people who naturally are spenders are probably already a little bit more tipped towards the YOLO side of the lifestyle and need to work on how to find joy in watching your investments go up, right? Work on how to find joy in taking your enthusiasm for, for buying stuff and channeling that into, like, check out this really cool index fund that I just bought, right? Or check out this great rental property I just bought. Or, oh, cool, I just bought this, this coin, this crypto coin that I really believe in, right? You just, you channel that enthusiasm for, for making a purchase into purchasing assets. You know, the people who are on the, they love spending side. That's the way to do it. It's not that you're. I don't believe in delayed gratification, right? It's that you are still Fully gratified. But the source of that gratification is the joy and the gratification that comes from buying assets. And that is just as emotionally gratifying as buying big screen TV or a shirt or whatever else it is that you otherwise would have bought. So that's how I would answer it. For the people who love spending. Now, for the other side of the coin, for the people who suffer from money anxiety and who have a hard time parting with their money, a lot of that stems from this really deeply internalized sense of scarcity. This. This fear that there's never going to be enough. And so overcoming that fear by embracing the sense of abundance actually oftentimes requires, you know, more spending and also more giving. Because when you have the courage to spend and the courage to give, that's a way that you can remind yourself that you do have abundance and you do have the capacity to earn more. And it's okay to. To part with money. And sometimes, sometimes giving can be a check to a charitable organization, and sometimes it can be as simple as picking up the tab when you go for drinks with your friends. Right. For a person who really suffers from a lot of money anxiety, doing something like that is scary because there's a sense of, like, man, if I grab this tab, this bar tab for my friends, like, this is a lot of money, and what if I never see it again? But if you make a practice of that, then you. You learn that money will be there for you, and you learn sort of to internalize this idea of abundance. And so the approach that you need to take depends on what side of the. Which of the two sides of the spectrum you're struggling with. And most people never really, you know, it's rare to be in that happy center medium. Most people have a tendency to one side or the other.

Yeah, I love your idea of giving as an antidote to this anxiety that you can't lose the money. It sends a message to your psyche saying you have enough and to spare. And I think that's a wonderful, wonderful thing to tell your psyche because it's giving you all these negative messages all the time, and that's one great way to push back against it. Now, it seems to me in the fire community, and maybe this is a misconception, but I think it's true with enough people that we can talk about it. There are a lot of people that want to fire. They're reading fire blogs, listening to fire podcasts, going to fire conferences, and they, they. They hate their job. They're not yet in a position that they can retire, but they don't like what they're doing. They're bored with it, or it's not fun, or they hate their boss or whatever. What advice do you have for those people?

I think life, life is too short to hate what you're doing. In addition to that, those of us who are frankly educated enough and fortunate enough to be, you know, in the fire movement to, to be listening to a podcast like this, we have the unique opportunity to make some significant contributions to our world, right? In whatever field you want to do it in and in through whatever capacity you want to do it. And so to take the opportunity, you know, to take all of your, your gifts, your talents, your skills, your knowledge, your energy, your, your, Your health, your ability to do something right now, to take all of that and throw it away, throw away this opportunity that you have to make a contribution, I find that to be very, and I don't want to sound judgmental, but I find that to be very sad, very unfortunate. So I would urge people not to wait it out for the next 10 to 15 to 20 years. Like, what a waste of the most valuable years of your life, right? There's a very short and unique window in a person's life where they are healthy enough to be able to go out there and do something amazing. And so don't squander that window. And if that means that you need to make a career change right now, even if that's going to delay your eventual quote, unquote, retirement in the traditional sense of the word, that's worth it because you're going to enjoy the journey along the way. You're going to enjoy that process. And life is far too short and your skills are far too valuable to waste it in something that you hate.

Now, this is particularly difficult with my audience. My audience is almost entirely high income professionals, mostly Doctors. They spent 10, 15 years learning their craft, sometimes taking on a massive amount of debt. They may not have another set of skills that necessarily can be turned into that sort of an income, at least anytime soon. And a lot of people in the fire community, they talk about punching out at 35. I mean, a lot of my audience is coming out of their training at 35. They're not even back to broke yet by 35. Do you think those folks should still be interested in relatively early financial independence? Is it worthwhile still trying to be financially independent by 35 or 45? Or is it okay to spread that out and really not hit financial independence until their 60s?

Well, first of all, so anytime that we talk about age, age needs to be contextualized in amount of time from the point at which your career began. As I mentioned, my, my dad didn't open his first retirement account until he was 50 because we were immigrants. And so he didn't come to the United States until he was, he was in his late 30s when he came to the US and he was 41 or 42. He was a, he was a college professor, he was a professor of civil engineering. He got his PhD at the age of 41 or 42. And so that was when he, he began his career in his early 40s. So there's no way to, you know, you can't compare yourself to people who start working in their twenties when you, you know, when you're in a position where due to career choice or due to circumstance, life circumstance, you don't begin your career until 30s or 40s. And so from the point at which you begin your career, sure, you, you can accelerate your timeline to retirement. I mean, you look at my dad like he started his career at 41 or 42. He necessarily had to accelerate his timeline just due to the fact that once he hit his mid-60s, I mean, that's a, that's a 25 year timeline to retirement. Right? That's just how it works. So the first thing I would say is contextualize, forget about age and contextualize it in terms of length of career. The second thing I would say is you mentioned many people in this audience have a very highly developed skill set that translates to a high income, but that they may not enjoy the way in which they're practicing it right now, but as a result of having such a highly developed skill set, I would challenge a person to, you know, what are the ways in which they can iterate? I'm not saying become a deep sea scuba diver, but what are the ways in which they can iterate so that they can take the skills that they've developed and put those into practice in a way that they enjoy more and in a way that continues to make some type of contribution, some type of meaningful contribution, Right? Like what are the attributes about what they're doing that they dislike and how can those specific attributes be addressed? Maybe it means going to a different city or to a different country. Maybe it means going, you know, like there may be some sort of iteration, some tweaking that can create a progression that would allow them to continue to use the skills that they've worked so hard to develop in a manner that is more sustainable for the long term.

I love it. Optimized for longevity.

Exactly.

Is a lot of times how I've framed that. Let's turn the page a little bit away from fire to an idea that you've discussed before of instead of punching out completely, taking multiple mini retirements throughout your life, perhaps like what you did, traveling the world for a couple of years, can you explain how that might work for. For a typical person and maybe even a high income professional where stopping practice means not coming back if you're gone too long?

Yes, yes, absolutely. So the notion of a mini retirement is to take. It's essentially a sabbatical. It's to take a pause that could be 3 months, 6 months, 12 months. Any duration of predetermined duration of time where you're just hitting pause and saying, hey, I need a break and I need to completely disengage and do something different for a while. And that's part of optimizing for longevity. Right. If a person wants to have a 40 year career with no breaks, I mean, that's a very long time to be grinding without any meaningful pauses. And sometimes it's during those pauses that you can take that time to refresh and to reflect and to figure out what's going to come next. And of course, there's a lot of logistical setup that precedes that pause. Sometimes it means you'll have to hire a team and put into place members of that team who can handle some of your workload while you're gone. For each person, there's going to be a heavy degree of logistics that would be required and there might be a lead time of a few years in order to plan it. But if you start today, within two years or within three years, could you put the pieces in place that would allow you to take a full year off?

Yeah. Step one is put it on the calendar for sure. You know, if you never put it on the calendar, it's never going to happen.

Exactly, exactly. And the other piece of it, I mean, I think it's generally sort of a good practice to challenge yourself. You know, ask yourself how, if I absolutely had to step away from work, how would I do it? Am I the bottleneck? Does everything overly rely on me? Or could this operate without me? Could this sustain without me? What would happen if I had such an extreme family emergency that I had to just absolutely stop working for four months? Right. It's generally a good practice to be able to put into place contingency plans so that if some Black Swan event were to happen, that, you know, that things could go on or, heck, what would happen if I got hit by a truck tomorrow and I couldn't work for the next six months? Right. What would happen? What would happen to the rest of my life? Like, it's generally a good practice to be able to to develop those plan B, plan C, plan D scenarios. And if you're doing it in the context of a mini retirement, that's a lot more fun than thinking about the Black Swan events.

Once you can do it, you just go ahead and do it.

Yeah, exactly.

That's exactly right. Now, one of the steps required there, though, is to get comfortable outsourcing things that you can do yourself. And for many of us in this space, we're natural savers, we're natural do it yourselfers. This is hard to hire somebody to do something you can do yourself. Whether it's mowing the lawn or whether it's editing your podcast or whatever. What advice do you have to people that will help them to get comfortable doing that?

So the best advice that I heard from this came from a podcast guest on my podcast called. Her name is Laura Vanderkam. And she said, we're all busy, right? First, fill your calendar with all of the things that you cannot outsource, like going to the gym. Right? You can't outsource your 30 minutes on the treadmill as much as we would love to, right? You can't outsource lifting weights, much as we would love to fill your calendar with all the things you can't outsource, like calling your mom. And once you have filled your calendar with all of the things that you can't outsource, then if you still have space remaining, then you can infill it with things that are outsourceable. But for all of us, if we're honestly filling our calendar with the things that we can't outsource, exercise, sleep, quality time with friends and family, calling your mom, right? Like, if we're truly filling our calendar with that, there's just not adequate time for the outsourceable things. And once you look at it from that framework, then you realize that the trade off that you're making is that you're mowing your lawn at the expense of calling your mom, you're painting your own living room at the cost of getting adequate sleep. And that just doesn't make any sense.

That's a great way to think about it. I think that's great advice. Now, we're running a little long here, but I try to give each guest the opportunity to fill in the blank. Something we didn't talk about. You've got the year of 30 or 40,000 high income professionals. Most of them are doctors. What have we not yet talked about today that you think they should know?

I would say good money management is behavioral, not mathematical. And so understanding your financial psychology, you know, your hidden scripts that you've learned about money, often stemming from childhood, your emotions around money and regulating and managing those. If you take the time and effort to understand that, and also you take the time and effort to understand your cognitive biases, your mental models, your frameworks, your, your heuristics. Once you've managed that, the head and the heart, then the math takes care of itself.

Good advice. We've been talking with Paula Pant. Her brand is Afford Anything. You can find that@affordanything.com. she has a podcast and a blog, courses, etc, all kinds of stuff. If you've enjoyed hearing from her, be sure to check that out. Paula, thank you so much for coming on the White Coat Investor podcast.

Thank you so much for having me on.

Wasn't that great? There was a depth there that I knew was there, but I was even more impressed with today. What a great person, what a great thing she's doing. Hopefully we'll be able to hear more from her in the future here in the White Coat Investor community. From studentloanadvice.com, you'll receive a customized student loan plan using the principles of the White Coat Investor, saving you hours of research and stress and potentially saving hundreds to thousands of dollars. Our student loan consultant can get you answers to all of your student loan questions, clarity about your financial future and start you down the right path towards financial independence, book a consult@studentloanadvice.com today. Hey, if you're looking for an easy, quick, low commitment side gig, check out surveys. Whitecoatinvestor.com mdsurveys is a list of companies that do surveys for doctors. Some specialties work out better than others, but for just about every specialty there are surveys available that you can basically use to turn your time into cash. And they're relatively easy to do while you're commuting, obviously not while you're driving, if you're on public transit, while you have downtime, while you're watching TV at night, whatever, that you can turn that time into money. So check that out. Whitecoatinvestor.com mdsurveys thanks for those of you leaving us a 5 star review and telling your friends about the podcast. Our most recent five star review said best financial podcast period. I've been listening to the podcast for years and can easily say this is the best financial podcast out there. Objective, carefully researched and accurate. Whether you're an md, an MBA like me, on the path to fi, or just trying to figure out whether the whole life insurance policy you were sold is right, this podcast is for you. Appreciate that review. Those of you who have not yet left us review, we would appreciate it if you would do so. It actually helps spread the message. People are more likely to find the podcast if there are more reviews on it, so we thank you for that. If you've done it, we ask you to do it. If you have not yet done it, if you have negative feedback, please don't put it in the review. Just send us an email and we'll try to fix whatever the issue is. If you haven't been thanked today, let me be the first. Okay, thanks for what you're doing. It's important work. Keep your head up, your shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor Podcast.

My dad, your host, Dr. Dahl, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor. So this podcast is for your entertainment and information only and should not be considered official personalized financial advice.