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Afford Anything | Make Smart Money Choices
Q&A: Rebuilding After Debt Overload and a Near-Miss Foreclosure
01:20:01
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- [00:00]
A
Joe, you know, I've been taking a break from social media for the past couple of months. I went back to Instagram recently, and the dominant thing that I kept seeing on my feed over and over and over was this question of our AI stocks in a bubble.
- [00:14]
B
Really?
- [00:14]
A
Like, the algorithm just keeps feeding me that.
- [00:17]
B
All the algorithm feeds me are cool videos that are made by AI.
- [00:24]
A
Oh, oh, you. You get to see the slop.
- [00:27]
B
I do.
- [00:28]
C
Wow.
- [00:30]
A
I don't get fed the slop.
- [00:33]
B
So one of us is picking up the scraps, apparently.
- [00:36]
A
No. But I keep seeing Bill Gates and Andrew Ross Sorkin and Jerome Powell. Like, all of them have different opinions about whether AI stocks are in a bubble. And my feed just keeps giving me different takes from different people on this question.
- [00:51]
B
Michael Burry. Michael BURRY Just bet $1.1 billion against AI with this.
- [00:56]
A
Wow. Wow.
- [00:57]
B
Wallet.
- [00:58]
A
Ooh. All right. And when you put your money where your mouth is, that's the real deal. We're going to talk about that at the end of today's episode because we have a caller who asks this exact question. We're going to dive into that at the end of the episode. But first we're going to discuss two real life scenarios. We're going to talk to Veronica, who is in a challenging place, and we're going to talk to Daniel, who is in a place of abundance. So we've got a big range of people in the afforder community with different experiences and we're going to address both before we talk about the future of.
- [01:35]
B
AI and leave it to you and I to determine the future of AI.
- [01:40]
A
Welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. The show covers five pillars. Financial psychology, increasing your income, investing, real estate, and entrepreneurship. It's double I fire. I'm your host, Paula Panta. I trained in economic reporting at Columbia. Every other episode ish, I answer questions from you and I do so with my buddy, the former financial planner, Joe Salsihai. What's up, Joe?
- [02:03]
B
Paula, I am buckled in and ready to go.
- [02:06]
A
Excellent. Well, our first question today comes from Veronica.
- [02:10]
C
Hi, Paula. I'm 29 year old female and I'm trying to become more financially educated. I am going to be honest and have got myself in a lot of debt and I'm just trying to find a solution to or a way to get myself out of all of this. About two years ago, right after graduating college in 2023, I bought a single family home and I flipped it. I took out a 15k loan to renovate the house and then I took out or I obtained an additional 8k in credit card debt for appliances, materials, and things like that. Unfortunately, a couple months after, there was an issue with my employer and I went from being a W2 employee to going freelance and getting a bit of a pay cut. Following that, there was a lot of unforeseen life expenses that I'll keep private. But all of that caused me to fall behind on payments and just struggle with staying on top of all my bills. I know saving is probably the first goal that I need to work on, and from what I've heard from you, three months is the safest bet. But I am now at a new W2 paying job and my net income comes out to 52k, which is consistent and it's a little bit better. And I think for where I am at, that is fair. Could it be higher? I do think that it can't be, but that's not the point of the, of the call. I want to just reach out to you. Like, how do I get my credit score up? It has definitely been hit hard. I earlier this year almost went into foreclosure and I am just feeling overwhelmed and I need a plan and advice. My tenants completely cover my mortgage payments for now and about half of the utilities that come with the property. It still leaves me with about $800 of additional home expenses, that being PSC and G bills and other stuff like the loan. Someone suggested a debt relief program. I have about 15k in credit card debt and I just wanted to get your thoughts and opinions on that and just hear your input on my current situation. My goal is to buy two more investment properties to rent. I'm going to start off from what I've heard from your podcast, is reducing the car expenses, which right now are $580 a month, to something that I can trade. My car is an expensive luxury car, so just reducing that to maybe a Toyota or something that's just more affordable or that has no payments. Thank you for listening. Love the show. I'm a longtime listener and you've given me so much great advice.
- [04:53]
A
Veronica, thank you for your call. And the first thing I want to say is, I know it feels incredibly stressful right now, but you will get through this and you are going to be so much better at managing money because you have experienced this, right? These are the types of life experiences that teach you how to be absolutely incredible at directing every dollar to where it needs to go. And once you hone that skill, you have that skill for life. So let's talk through the details of your situation. First, I'm a bit confused as to the house situation because you mentioned that you flipped the house, which to me implies that you renovated it and then sold it.
- [05:47]
B
Yeah, I don't think she did. I think she's using the term flipped when she really means she took a house that needed to be renovated and fixed it up and it appears that she's renting it out.
- [05:58]
A
Yeah, exactly. That's my interpretation of it as well. So. So generally flipped implies that you sold it, but I'm going to run with the interpretation that you fixed it up and then rented it out.
- [06:10]
B
Yeah, that's by the way, for people that don't know this because there's jargon all over the place. Right. What flipped means is that you only held it for a short time. I bought it, I fixed it, I sold it. And that's why it's called a flip, because you don't hold it for very long. You're just flipping it into your possession, then you're flipping it back away.
- [06:29]
A
Yeah, exactly. But Veronica, I like what you've done better because I'm a big, big fan of fix and hold.
- [06:36]
B
Me too.
- [06:37]
A
When you fix and hold, you then get the benefit, the rising equity, the cash flow, you get the long term wealth building benefit.
- [06:46]
B
And when we talk about passive income streams, Paula, being somebody that flips houses, that is a J O B. Yeah.
- [06:53]
A
It'S very full time.
- [06:54]
B
It's incredibly active, an active way to buy real estate. It can work, but I think it works much better for people that are in the industry consistently. And one of the advantages to doing that part time is you get to know all the subcontractors that you would work with. You can kind of get a team and over time that team rolls downhill. But what that also means is if you're a part timer just getting into real estate, in my opinion, my non versed opinion in real estate is it is the worst way for somebody just to get into real estate to buy a piece of property. Like I wouldn't get excited about flipping if I have a full time job doing something else.
- [07:33]
A
Yeah, I completely agree. I would never recommend that anybody begin as a flipper. I would recommend that people begin as a buy and hold rental property investor. Do a few fix and holds just like what you did, Veronica, do a handful of fix and holds and then once you have some experience doing that, then you can contemplate whether or not you want to go into flipping. But I would never recommend somebody start with it because when you flip, holding costs are paramount. And if you are not experienced enough to know how to accurately calculate holding costs, then those can eat up all your profits. In any event, pulling out of the jargon there, I wanted to clarify that because that was something that I was trying to figure out when I was listening to your question.
- [08:18]
B
Because had this been a flip, the money that you took out for the loan in the credit card debt, assuming that you'd done good math on that flip, you would have covered all that with the sale cost. Like that's the goal of a flipper, is to put money into it, which would have been, in this case, 20. What? $23,000. Put $23,000 into it, maybe sell it for 40,000 more, and then zero out all that debt and have extra money.
- [08:47]
A
Yeah. Honestly, even if she sold it for 40,000 more, once you take into account the transaction costs, the realtor commissions, staging costs, holding costs, you may or may not get that 23k back if the markup is only 40. That's why flipping is so challenging, because there are. There are a lot of costs that experienced investors know to calculate from the outset, but that beginners don't necessarily consider. That's why I believe that everybody should start with fix and hold rather than fix and flip.
- [09:23]
B
And that's a demonstration. Afforders of the difference between gross and net.
- [09:28]
A
Yes, exactly.
- [09:30]
B
If you can net 40, great. If you're gross 40, well, exactly.
- [09:36]
A
Exactly.
- [09:38]
B
Yeah. I want to say something to Veronica because it's so different than what my situation was, but it still. There's echoes of me feeling like I was in this hole, Veronica. Like you were in.
- [09:50]
A
This is when you were in your 20s.
- [09:52]
B
Yeah. This was called 1990s for Joe. Just the period of the 1990s where I was digging myself a financial hole and I wasn't. Veronica, as young as you were, when I figured out how to get out of it, I wasn't even looking for ways to get out of it. As young as you are. So I want to echo, Paula, what you're saying. I think it's fantastic that you're doing that. Just the fact that you're like, you know what? I want to get on top of this right now. It's fantastic. It isn't going to be easy. It isn't always going to be fun. But I will tell you this. I felt way more empowered once I put my plan in place. Nothing had changed, Paula, to my bottom line. But once I had a plan and I realized that I was in control and the Creditors weren't. And everybody was going to play by my game plan, not by everybody else's game plan, not by my creditors game plan, not by anybody else's. It was going to be the way I was going to do was like I could finally see the sun again. And it was this amazing place. And I remember even thinking to myself, nothing has changed. I'm still in the same hole I was in before. But when I realized that I could do this, man, everything changed. It was really cool. So I wanted to say that first. But the second thing that I wanted to say was not for you, Veronica, because like for me you are where you are. And now it's stepping out. But, but some key things are this buying a rental property without having that emergency fund in place. At first it catches not Veronica catches so many people. When I was a financial planner, I saw this all the time that somebody would make an illiquid purchase and then a bad thing happens right after that, which is exactly what happened to Veronica. Made this purchase this good investment. It looks on paper like it was a good investment. Right. Makes this great decision, but it's an illiquid decision. It's hard to sell that property. And now she has the loan, the debt, a whole different employment situation. And then it becomes this spiral after that that you just can't catch a break from. And it's so frustrating for everyone. So you know, Veronica, like for me it is where it is now. But this is why the emergency fund before you make the investment is so, so, so important.
- [12:15]
A
And I agree, Veronica, I think you know exactly what to do. The, the car that you mentioned I would drive the cheapest, ugliest, you know, as long as it's safe and reliable. Get the rock bottom. Safe and reliable. Bare minimum. Safe and reliable.
- [12:32]
B
Her instincts 100% on there, isn't it?
- [12:34]
A
Yeah, yeah, I absolutely agree. Get the most basic boring. As long as it can safely transport you from point A to point B. Get a car that is purely functional and nothing but nothing better.
- [12:47]
B
And this is where that emergency fund comes in. Again, Veronica, because as you do that, realize that while you're going from payments to no payments, which is kick ass, no payments does not equal no problems. When you look at the type of car that has no payments, you're actually increasing the likelihood that something bad may happen to that car because you're going to buy a little bit older car, you're probably buying one with more miles. So using initially the money that you get on a monthly basis from not paying out the 500 and something dollars a month that needs to go right into the emergency fund. Because the first emergency that I would predict is that something's going to happen to the car. I mean, something, something will. The cool thing is it probably won't equal 6,000 or $7,000 a year like you have going out now. It might only be a couple thousand, but we don't want that. A couple thousand to derail your, your plan to get the house in order. So I would immediately have that money go into the savings account.
- [13:51]
A
There's something that I like to do, which I call making a car payment to yourself, which is the moment that you no longer have a car payment. Continue making a car payment, but just make it to yourself and let it accumulate in a separate savings account. That is purely the making a car payment to myself account. And then you can use that for repairs and maintenance if needed. But really the bigger idea is that if. I won't even say if. When it comes time to replace that car. Right. When it comes time to replace that car, you can then pull money from that account and boom, you've got the money to buy a car in cash.
- [14:28]
B
It's so empowering. But even if you don't reach that point, you get to the point that your car has this unexpected. Or again, it's not if, it's when. Right. Something happens to the car where you're. You have to have maintenance on it. I've got the maintenance fund.
- [14:43]
A
Right.
- [14:44]
B
You know, she mentioned her credit score. Paula. I would say this, Veronica. Ignore your credit score right now.
- [14:51]
A
I agree. I a thousand percent agree. Ignore your credit score. You don't need it for now.
- [14:56]
B
You may need it later. But right now I had to be okay with my credit going through the valley of death to make better long term decisions. Getting better credit scores means that you're going to then start taking possibly. I'm not saying that you will do this, but for a lot of people, they begin thinking in terms of shortcuts. Maybe I can do these shortcuts where I feed into this whole industry of people that like, hey, if you just take out another other loan, we can solve your loan problems even more. Well, bank of America helped me with this. When my credit was in big trouble and my financial plan was in trouble, bank of America handed me a shovel so I could get myself in debt faster. So I could just do. And you know what?
- [15:46]
A
Yeah, keep digging.
- [15:48]
B
Very helpful people helping me screw myself even more. Thank you, bank of America.
- [15:53]
A
Yeah. The thing about a credit score is the only time you need a credit score is when you're applying for some type of a loan like a credit card or a mortgage or a car loan. Outside of those things, you don't need to be focusing on your credit score because you're not planning on taking out any more debt.
- [16:16]
B
It's a great time to practice an all cash lifestyle as much as possible. I want to address the idea of debt relief programs or credit counseling. I'm not adverse to this. I actually think this might be a good idea. But I'm going to have a crapload of caveats on what I just said because this is an industry that has a ton of bad actors who prey on people who are just hoping somebody can help them breathe better when it comes to their financial situation. So here's what we don't want. You mentioned that you almost foreclosed on the house. I would avoid that at all cost. I would not go into bankruptcy. Any debt relief program that talks about bankruptcy, I would avoid. What I like are some of these credit firms that will a negotiate with your creditors to maybe get better terms to pay your debt. They will advocate for you on your behalf. I even like some of the credit agencies that will then take your paycheck for a while, will give you an amount of money to spend every month and they will then pay your debt for you. I'm not against that because then you learn some of the keys by watching pros who are really good at this do something that I wasn't good at at the time and that you may need help with now. There's one company that I have a ton of faith in that I have worked with a lot. It's called Green Path Financial. They were my partners when I lived in Detroit. We would do events there for. We'd have speakers come in like Grant Sabadier or we would have these wonderful people in. They are a non profit organization. I have met with the CEO before. I know plenty of their employees. I've watched how they work with people. They are incredibly committed to a showing you who the bad actors are. Number one, whether you work with them or not. Number two is working with you in a way that you are always the person in control. You're not. The control is not taken away from you. They have financial counseling, they have housing services. They have a ton of resources. So it's greenpath.com gets you to Greenpath Financial Wellness. There's others. By the way, I have no affiliation with greenpath. They never sponsored my show. They've never, you know, I don't get any money from them. So just to let everybody know, it's just a place I know in this area of bad actors, do you generally.
- [19:08]
A
Recommend if people go down this road only to go with a nonprofit organization or are they. Yeah, I assumed that was what your recommendation was going to be. And that is also. I agree with you. That is also mine as well.
- [19:21]
B
And if they tell you, Paula, that they can make the debt go away, don't walk, run. I like it when they will help you negotiate the debt. I like it when they will help you figure out your budget to get the debt. As I mentioned earlier, I even like it sometimes when they take your paycheck and they give you the allowance and they pay your debt and they show you every month exactly where the money went. Love all that. But if it's a for profit or if it's a legal firm, which generally a lot of the for profits are tied into legal firms. Their goal is to make money by having you declare bankruptcy, which is not at all what we want.
- [20:01]
A
One last element that I want to discuss, Veronica, you mentioned that you are now in the last couple of months a W2 employee. Again, what's great about that is that you have predictability in your paychecks. So that can be the base from which the budget begins. But I'm wondering If there's additional 1099 freelance work that you can do, especially since now you have experience, having done some freelance work, is there any additional work that you can do outside of your W2 job to supplement that income?
- [20:35]
B
I'm a big fan of increasing income. A big fan. Especially now that she has the expense side on lockdown. Right. With the new car, the new to me car situation. And I'm sure her budget is already locked down going through all of this like her expenses are. So once you lock down those expenses, man, just finding other ways to make more money. Also, you know, at her primary job, are there opportunities either for advancement or to negotiate raises? Maybe not now because she's brand new, but thinking about what are the possibilities and putting herself on a trajectory to try to make more money at her main employer. I also like right. I heard there's someone who knows something about negotiation.
- [21:22]
A
In fact, I do indeed. Although as I tell every afforder, never enroll in any of my courses if it will create a financial hardship. So I would not recommend that for Veronica at this time since she's trying to get out of debt. So Veronica, I'll comp you entry into our course on how to negotiate. So we Have a course called you'd next raise. All about how to negotiate for a raise. Reach out to my team, just email supportfordanything.com and we'll comp you in.
- [21:54]
B
Sweet. For me, Veronica, the biggest thing is to set milestones where you're going to celebrate the little wins. Because I'll tell you from my story anyway, and maybe yours goes quicker, but from my story, it wasn't easy. It took a while. But there have to be times along the way where you just celebrate. You know, I think often, Paula, especially when we're in a spot where it feels so dark, we can climb a quarter of the way out and then go, I'm not out yet, and then climb right back in. Right. So we have to celebrate the fact that we made it a quarter of the way out, then halfway. Right. And then 3/4 the way out. So playing little celebrations, they don't want to be big, but I would give yourself these little mile markers and set up these little if.
- [22:47]
A
What?
- [22:47]
B
Not if. Listen to me. If. What the hell's that about? When I get to this point, I'm going to do X, which is a fun celebration that's not going to set back my financial situation horribly, but it's going to be for me to take a minute and look at the road behind me that I traveled. Most of us spend time chasing the sun and we chase the horizon and the horizon, the more we move, the more the horizon moves. Oh, when I get to here, I'll be happy. When I get to here, I'll be happy. And then you get there and you're like, oh, my goodness, I'm not happy. I think it's more fun to look back at the road we covered and go, oh my goodness, look at that. I just did this thing which was pretty damn cool. High five yourself and then step back out again.
- [23:37]
A
Beautiful. So thank you, Veronica, for the question and best of luck. And please call us back in six months and let us know how far you've come. Six months from now, let's celebrate the progress that I know that you have made. We're going to take a moment to hear from the sponsors who make the show possible. And up next, we're going to hear from Daniel, who started a side hustle, made some extra income and that has actually gone incredibly well.
- [24:05]
B
Sweet.
- [24:06]
A
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- [25:26]
B
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- [25:59]
A
Foreign. Welcome back. Our next question comes from Daniel.
- [26:08]
D
Hi Paula and Joe. This is Daniel in Salt Lake City. Longtime listener, second time caller. The last time I called in your advice helped me purchase my first home. So thank you so much for that. Here's my current situation. I'm an accidental landlord. After moving in with my partner, my tenant is great so far with my government income I max out my Roth IRA, HSA, Traditional 401 and $457,000. These are all invested in Paul Merriman's four fund portfolio. Then I cover my living expenses with side hustle income. However, even with a little lifestyle inflation, I'm starting to have surplus cash from the side hustles that I want to put to work. I'd love your advice on a few things. As my side hustle income grows, where should I park the extra cash? Should I pay down the mortgage on my rental home at 3.5% interest rate? Start a taxable brokerage account? Grow my 3 year cash bucket in a high yield savings account? Considering my goal is to retire early in approximately 10 years with some limited side hustle work in early retirement, some combination of these or something else entirely Since I'm maxing out my 457 at my HSA, do those accounts functionally cover the taxable part of the tax triangle, given their unique withdrawal advantages, or is there something I'm missing? I keep a Google folder with all of my receipts for medical expenses. Finally, would your answer change if the mortgage rate on my rental were 4%, 5%, 6%? Is there an interest rate where you'd recommend paying that down first over investing in the market at all? I'd love to hear some of your musings expanded out to the afforders community, considering things like peace of mind from having less debt and so on. Caveat I might hold this rental long term, but I think it's more likely that I'll sell it in four to five years and use the equity towards a home that my partner and I purchased together. Thanks so much for your guidance. I always learn so much from you both.
- [28:16]
A
Daniel, thank you for the question and first, congratulations on buying the home. I'm very happy to hear that the last time you called in, we gave you advice that helped you buy a home. Now, to address your question about what to do with your surplus cash, I want to talk about the aspect of your question in which you discuss the possibility of paying off the mortgage. And here are a handful of thoughts on that. Number one, as you point out, the mortgage is 3.5%. Inflation, as we all know, is right around 3%. Currently, the Fed is shooting for a target of 2%, but they've been struggling to get there given that the interest rate is pretty darn close to the rate of inflation. That is one data point. It's not a complete argument, but it is one data point in the don't pay off your mortgage early camp. But there are a few other things that we should consider. Number one, you mentioned that you want to retire early, in about 10 years. I am very much a proponent of the idea that, if possible, have a mortgage paid off before you've retired. If you were to hold on to this home, that would be an argument in favor of paying off the mortgage. On the other hand, you've also mentioned that you don't plan on holding onto this home, which means that if you're going to sell this home in four or five years, I'm not super excited about you paying off the home. You know, if you were going to hold on to this home forever, I'd say, hey, given that you want to hold onto it forever, given that you want to retire in 10 years, why not jump that amortization clock. But given that you're planning on selling this home and using the equity to buy a different home, the home that I want you to pay off is the home that you own when you go into retirement. And in order to facilitate that goal, putting this money in a taxable brokerage account or putting this money in a high yield savings account, we can talk through the pros and cons of those two options in a moment. But putting this money in some type of a liquid account and then using this money to buy the home that you are going to own at the time that you go into early retirement, that's what I'm far more interested in. Because the benefit that you get from jumping the amortization clock goes away once you sell the property. Now, you also asked, is there a certain interest rate at which my decision would change? You know, is that interest rate 5% or 6%? Six and a half. That would definitely influence my answer. You know, the wider the delta between the inflation rate and the interest rate, that certainly has an influence on the answer. But the bigger piece of my answer is not going to be based on the interest rate, but rather based on your specific career goals. Because if you had said, I am a tenured professor, meaning I have job security and I love what I do and I want to stay in this role until I'm a hundred, then I'd say hang on to that mortgage, because you can arbitrage that.
- [31:35]
B
But that's interesting, Paula, because I don't necessarily feel that way.
- [31:38]
A
Even if he. Imagine tenured professor, job security, wants to stay in the job to the age of 100.
- [31:44]
B
Yeah. Still may pay it off, but I can get to that.
- [31:46]
A
Yeah. Versus somebody who would call in and say, hey, I'm an entrepreneur or a small business owner, therefore I have very volatile income. And also I want to retire in 10 years. All right. That all paints a case for pay.
- [31:58]
B
It off security of cash flow is your rubric.
- [32:03]
A
Exactly. Exactly. Much more so than the interest rate.
- [32:06]
B
For me, it truly comes down to Daniel timelining his goals. You've never heard me say that before, Paula, because I don't know if he's ahead or behind for his retirement goals. And I think for me, that shades this whole question. If he's ahead of the game, if he's already ahead of the game, then why not secure the mortgage as well? If he can do whatever he wants to do and he'll be financially independent, then, you know what? Let's make it easier on him and just pay off the mortgage and Again, it's funny, but for a different reason. I also agree that the interest rate doesn't matter, doesn't matter as much because people that are happy during their retirement years just have no debt. And at that point, Paula, it's a little bit of a flex because it's not so much an interest rate decision or have more money decision as it is a happiness decision. I think I arbitrage the interest rate when I need to do that. If I don't need to arbitrage the interest rate and my goals are funded, then I just have less debt. Which is also why, looking at his three options here, brokerage account, pay off the mortgage, or cash bucket. I will eliminate a hundred percent. The cash bucket idea because it's 10 years away. Why am I going to build three years of cash when I'm 10 years away? Now I might put some money in a 10 year investment or a 7 year from now investment that I'm gonna change to a cash bucket later on. This is where the arbitrage to me makes sense. Why would I put money in cash that I'm. That you just told me I'm not going to use for 10 years? I would, right? I wouldn't do that. So cash bucket. No, putting money in investment. Almost like we told Veronica with a car fund, right, to buy the next car or for the car repairs. I might segregate some money that is my three year cash ten years from now. But put it an appropriate investment based on seven to ten years from now. I'm all about that. But again, it also depends on is he ahead or is he behind? Does he already have enough money to do that? So if he has enough money now that he can transfer some money, that's for financial independence and transfer that into that three year cash bucket that he's going to want later, then I wouldn't do that. I'd pay off the mortgage or I do the brokerage account, depending on which way he decides to go there. I don't know, what do you think? You've got this look of consternation on your face.
- [34:41]
A
Well, I'm thinking that his two biggest ticket goals coming up, one is to buy a home in the next four to five years and the other is early retirement in about 10 years. Now buying a home in the next four to five years is going to be partially or entirely funded by the sale of the current home. And then early retirement is of course, you know, funded by his portfolio and his investments.
- [35:05]
B
Yeah, 457. All the stuff he talked about. Exactly that would be a reason for the cash bucket, by the way, I could get behind that cash bucket if there's a shortfall in the house goal and it's four or five years from now.
- [35:18]
A
Even then it sounded like, and maybe this is my interpretation of his question, but it sounded like it was a soft four or five years.
- [35:29]
B
I had the same one, which is why in my head I immediately discounted it. Paula.
- [35:33]
A
Right. Exactly. Exactly. I really got the impression that when he said four or five years, it was, that's an ish. And it was a pretty soft and flexible date. And so for that reason, I would bias towards putting this money into a taxable brokerage account, into some type of investments that could grow. Because put the money in now in 2025, and if by 2029 or 2030 it has gained in value, cool. You can empty that out and use it towards that home purchase. But let's say that in 2029 or 2030 we have a recession. The impression that I got from his question, and, and Daniel, I want you to only you know if this is a correct impression or not, is that if we had a big market recession in 2029, 2030, I get the impression you'd be okay with delaying the home purchase by a year or two until the markets recover.
- [36:34]
B
And I like those goals that are flexible like that because you can be a little more aggressive with your investments.
- [36:41]
A
Right.
- [36:42]
B
You can go ahead then and wait for them. If it takes a little longer for the apple to mature, you can wait on the apple and you're going to be okay. So you get to five years, you're like, okay, my investments aren't doing that well. I'll just wait. I'll just wait it out. And if you can afford to wait, then you can definitely put your investments in a place which historically have had a higher rate of return.
- [37:04]
A
Yeah. A fixed timeline requires more conservative investing.
- [37:09]
B
Which is a nice segue, I think, into the brokerage account question. Because part of what I was confused by was when Daniel said, I'm putting money into my HSA and my 457. So is the.
- [37:20]
A
Does that cover the taxable brokerage portion? Yeah, I was confused by that too, because how would that be taxable?
- [37:26]
B
Yeah. If the 457 is a Roth, then the money you could put in you can take out flexibly. And certainly he talked about having receipts. So then he can reimburse himself for the hsa because there's no timeline on when you reimburse yourself for that money. So now he has some flexibility. Assuming that Daniel, is what you're talking about, that your 457 is a Roth and the HSA, that's why you mentioned that you keep receipts. I would still say no. And the reason I would say no, Paula, is because I really like that money, this tax free, potentially tax free money to offset tax brackets during your later years. So then, and as an example with the Roth, with a Roth, you know they have these rules that you can use the Roth for college expenses. And I've, I used to have clients would go, well, I'm going to save into the Roth for college expenses versus a 529 plan. And while you can do that, the Roth for me is such a great weapon to use during later years to offset pre tax money that you might have. So Daniel, what I'm talking about is this. Let's say in the future you're trying to live on $100,000 a year and the tax bracket line is at 80,000 bucks. You take out $80,000 from that pre tax position and then the other 20 you take out of that Roth. So if you leave the Roth there, you leave the HSA money there. You're now living in the bracket that's below 80,000. Well, excuse me, you're living in the bracket that's above 80,000 but the government thinks you're living in the bracket that's below 80,000. So you're getting the flexibility to play the tax bracket gain during retirement. Not as hard as it sounds. Really easy to set up for once a year you take a look what the new brackets are going to be and just adjust the amount coming out of your pre tax plan one time per year and then that changes everything. Not hard, but for me that's what the Roth and the HSA are for. Not for those early years.
- [39:33]
A
Right.
- [39:33]
B
I would use brokerage money for those early years.
- [39:36]
A
Right. I agree. The Roth is an incredible tool for retirement withdrawal strategies and I would not want to lose that capability.
- [39:46]
B
How often do you hear that, Daniel? Paul and I say we agree.
- [39:49]
A
I know, right?
- [39:51]
B
Scary, scary.
- [39:53]
A
Versus if you put some money in a taxable brokerage account and then you want to tap that money five years from now, assuming that the account has grown in value. It's pretty straightforward.
- [40:05]
B
Well, and here's the cool thing, and it's ugly, the first part of the sentence, Paul, is ugly. But let's say that it hasn't grown in value. Things have gone bad. But you've had some of life's kick in the gut like we just heard from Veronica.
- [40:19]
A
Yeah.
- [40:19]
B
Even if it's lost money, it's still available for you to go get. It's not what you want to do, but it still is in a place where, you know, what if I really, really need cash?
- [40:28]
A
Yeah. And the other thing is. Well, we're having this discussion with the cost basis of everything starting in 2025. But the reality is he, and not just you, Daniel, but everyone listening, most people likely have some investments that you've made in 2017-2018-2019-2020. Those investments have grown in value. And so let's say that you make an investment in 2025 and that by 2029, that investment has lost money. If you have to harvest that, harvesting that loss can offset some of the taxes from harvesting the gains from investments that you made earlier.
- [41:11]
B
Wow. Yeah. There are plenty of tax planning moves you can make inside that brokerage that'll minimize your tax burden. And I feel like, just in general, Paula, on that note, that we overthink the tax burden of the brokerage account anyway.
- [41:29]
A
Yeah.
- [41:30]
B
Like if you're in low cost index funds, the true tax friction isn't nearly as high as it is between our ears. When most of us think about it. I got to make sure I tax shelter this. The turnover in an S&P 500 fund, still not that high. The taxable portion, even in a great year, it's not going to be that high.
- [41:50]
A
Right. And if you're harvesting long term capital gains, I mean, heck, just think of that as additional side hustle income in terms of its tax treatment.
- [41:59]
B
Yeah. Cha ching.
- [42:01]
A
To summarize, Joe, it sounds like you and I are both on the Put the money in a taxable brokerage account, don't pay off the mortgage early train maybe. Oh, okay. Okay.
- [42:14]
B
Maybe again, if those goals are funded. If those goals are funded and do what he. What he wants to do. My next priority then is just pay off debt. Interest rate doesn't matter. Pay off the debt. And so much for the agreement.
- [42:28]
A
Okay, then we sort of agree, but sort of disagree, which makes for the best answers.
- [42:34]
B
But as you know, Daniel, I'm right and I'm left. I did not see that coming. What a change in direction that was.
- [42:48]
A
Thank you, Daniel, for the question. Please call back and let us know what you decide. So I've been using Gusto since about 2016 or 2017. That was when I hired my first full time employee, and it's been amazing. Payroll, hr, all of the stuff that would be administratively burdensome. Gusto just makes it easy. Gusto is online payroll and benefits software built for small businesses and it's all in one remote, friendly and incredibly easy to use. So you can pay, hire onboard and support your team from anywhere. We're talking automatic payroll tax filing, health benefits, commuter benefits, workers comp 401k, simple direct deposits, you name it. You can save time with automated tools built right in, offer letters, onboarding materials and you get direct access to certified HR experts. Try Gusto today@gusto.com Paula and get three months free when you run your first payroll. That's three months of free payroll@gusto.com Paula One more time Gusto.com Paula the holidays are right around the corner and if you're hosting you're going to need to get prepared. Maybe you need bedding, sheets, linens, maybe you need serveware and cookware and of course holiday decor. All the stuff to make your home a great place to host during the holidays. You can get up to 70% off during Wayfair's Black Friday sale. Wayfair has can't miss Black Friday deals all month long. I use Wayfair to get lots of storage type of items for my home. So I got tons of shelving that's in the entryway in the bathroom. Very space saving. I have a daybed from them that's multi purpose. You can use it as a couch but you can sleep on it as a bed. It's got shelving, it's got drawers underneath for storage. But you can get whatever it is you want no matter your style, no matter your budget. Wayfair has something for everyone. Plus they have a loyalty program. 5% back on every item across Wayfair's family of brands. Free shipping members only sales and more terms apply. Don't miss out on early Black Friday deals. Head to Wayfair.com now to shop Wayfair's Black Friday deals for up to 70% off. That's W A Y-F A I R.com sale ends December 7th. We recently hired two full time positions through Indeed.com but they needed very different skill sets. So one of the positions was an executive assistant. The other was a customer support and operations assistant. Those are different skill sets, different job requirements, different types of experience and so finding the right person with the right skills that really matters. And you can do that with Indeed Indeed Sponsored Jobs helps you stand out and hire quality candidates who can drive the results you need because Sponsored Jobs boosts your post for quality candidates so you can reach the exact people that you want faster Sponsored Jobs posted on indeed are 90% more likely to report a hire than non sponsored jobs and 1.6 million companies sponsor their jobs. With Indeed. We used Indeed sponsor jobs to hire for those two positions. We've filled both positions quickly and they are great members of our team. And with Indeed sponsored jobs, you only pay for results. No monthly subscriptions, no long term contracts. And in the minute I've been Talking to you, 27 hires were made on Indeed. Spend more time interviewing candidates who check all your boxes. Less stress, less time, more results now with Indeed Sponsored Jobs and listeners of this show will get a $75 sponsored job credit to help get your job the premium status it deserves@ Indeed.com Paula just go to Indeed.com Paula right now and support our show by saying you heard about Indeed on this podcast. Indeed.com Paula Terms and conditions apply. Hiring do it the Right Way with indeed. Our final question today comes from Anonymous.
- [46:51]
E
Hi Paul and Joe. Everything I'm reading in the news is saying that AI stocks are in a bubble, much like the dot com bubble in the 1990s. If the AI bubble is expected to burst at some point, is there a safe way to cash in on that? I know that selling short is a very risky and dangerous thing to do, so I don't want to try that. Are there other ways to make money when you expect a bubble to burst? I heard that another possibility is to buy a put option. What can you tell me about them? Are they a safe way to make money if the AI bubble bursts? I know that nothing is guaranteed, but I would like to hear your insights. Thank you very much.
- [47:33]
A
Anonymous thank you so much for the question. And before we begin the answer, we have to give you a name.
- [47:39]
B
Oh boy.
- [47:40]
A
Since your question relates to AI, I've never seen the movie her, but it was a 2013 film about a man who developed a relationship with an AI and that AI was played and voiced by Scarlett Johansson. So in honor of the movie her and your question about AI, we will name you Scarlet Awesome.
- [48:06]
B
So your initial thought, Paula first, any.
- [48:09]
A
Predictions made by the financial media should always be taken with a massive grain of salt, because the financial media is never held accountable for the predictions that they create. When people in the media don't have anything to talk about, they fill airtime by speculating, and they're never held accountable for whether or not that speculation comes to pass. And if you want to speculate on how a future might play out, there are an infinite number of possibilities that you can talk about, and many of Those you can build a reasonable case for. So given the need to fill airtime, given the fact that negativity sells and negativity generates more eyeballs and clicks, it is incredibly common for the financial media to prophesize doom and gloom, to prophesize negativity, because that's what grabs people's attention, which therefore grabs advertising dollars. That isn't to say that all predictions fail, but it is to say that there is a negativity bias and that pessimism is predicted more often than it comes to pass. If you predict a pessimistic outcome 100 times and that pessimistic outcome comes to pass 10 out of those 100 times, well, great, then you've called 10 out of the last one. Recession.
- [49:41]
B
Yeah, I think this is why some people still are in the news, even though you kind of wonder why they are. And I'll call out somebody. Robert Kiyosaki. You know, at the beginning I like a lot the book Rich Dad, Poor Dad. I like the meaning of it now. Investing all in micro cap stocks and, and some of his types of real estate ventures. I don't know about that. But the early parts of the book about saving money versus just living on a paycheck and the difference in taxation you have, it's a great way to get that through our heads about how important it is to be an investor and not just a worker. But Kiyosaki, since that book has just Mr. Negativity. And the sky is falling. The sky is falling. The sky is falling.
- [50:31]
A
Because he's totally off the deep end. Yeah.
- [50:34]
B
And he's endorsed products that are made based on fear. Right. So he profits from you being fearful. But this guy called it this February when the market went up. He called it again this summer when the market went up and now he's calling it again. And I saw a pretty decent size publication still giving him credence. And I'm like, why are we making Kiyosaki headlines when Kiyosaki is wrong non stop. All the market's done has gone up and up and up. And all Kiyosaki says is that the sky is falling tomorrow. It's going to fall tomorrow.
- [51:09]
A
You know, if you want to understand what people believe, don't listen to what they say. Look at how they invest. And unfortunately with a private investor like Robert Kiyosaki, his portfolio is private. So we don't actually know how he invests. People can say whatever they want. What they believe shows up in the way that they manage their portfolio, which.
- [51:30]
B
Is why the friction in, in this discussion and why this is, you know, is this quote different? Is that as we said at the top of the show, Paula, we've got Michael Burry now famous. The average person knows who Michael Burry is now because of the movie the Big Short. He's the investor who is played by Christian Bale, who bet that the housing collapse was coming. And by the way, what is interesting is that Burry has put money behind a lot of stuff that hasn't come true. And yet because of one really, really good call, I think Michael Burry putting well, and Paula, in this case, 1.1 billion with a B dollars on the downfall of AI is a lot of money, even by Burry standards.
- [52:18]
A
So we have a variety of perspectives and as I mentioned at the open, we've got Michael Burry who is to his credit putting his money where his mouth is. And I respect that because again, never listen to what people say, look at where they put their money. We also have Andrew Ross Sorkin. He just came out with a book called 1929. Yeah, it's a deep, deep study of of course, the Great Depression and all of the factors leading into it. And so as a scholar of the Great Depression, his take on AI is that AI itself as a technology is transformative and is, you know, history will be clearly defined as pre AI and post AI. It is that much of an inflection point in the history of the human species, the history of our civilization. Right. We will be remembered by future generations as those people that existed before AI in the same way that we look back and say, oh, those were the people that lived before electricity or those were the people that lived before airplanes. But truly, actually, in a way that's even much bigger than that because every technology that we have had up until this point point. And Yuval Noah Harari makes this point quite beautifully. Every technology that we have had prior to this is one that we ourselves have had to operate airplanes, nuclear warheads. Every piece of technology has the central decision maker and the central operator has been human. And now for the first time, we have created a technology that itself can think, that itself can make decisions, that itself can execute operations. That has never happened before. That is what makes this such a game changer. And we are on the verge of probably soon creating an AI that is more intelligent than us. Back away than you, then all of.
- [54:33]
B
Us, I mean, clearly me, but you come on.
- [54:38]
A
And when that happens, as several people have talked about, there is the risk that we become the equivalent of house Cats, in terms of our relative level of intelligence, you know, you think about a house cat, they are utterly dependent on external circumstances that they do not understand and that they could not understand.
- [54:59]
B
So you're saying the Pixar movie Wall E is now coming to life?
- [55:04]
A
I've never seen that. I've never seen Wally, of course.
- [55:08]
B
Why did I do it? Why did I even make the. Yeah. In Wall E, for people like Paula, who are Neanderthals and have not seen this beautiful film, people, humanity pretty much gets carted everywhere and AI kind of does everything for us. We just kind of sit in a chair and sip drinks and you have food brought to us and we pretty much do nothing while the robots of the world, AKA Wall E and other robots do all the heavy lifting. And that, that movie is a little bit of funny. It's a kids movie, but it's a little bit of a commentary about what we're talking about. There's a little bit of looking ahead. Maybe the future is not so far away. You know what, Paula, it strikes me, and I'm glad that you're making this point, that two things. Number one is I look back at the big downturns and I think about profiting during those downturns. And during both of these, I was a financial planner, not only guiding my money, but helping other people guide their money. And I'm thinking, if I'd had a different view from 2000 to 2002, was there some way I could have profited on this versus minimizing losses? And it strikes me that, you know, because Scarlett brings up that time frame, 2000 to 2002 and the dot com bubble and I think to myself, did the Internet go away? Was it something that was a fad and ended? No, it cleared out companies that truly weren't competitive or the people had invested too much money in. But the long term issue was it stayed around.
- [56:49]
A
Right.
- [56:50]
B
We look at the crisis of 2008 that fueled by real estate prices in the big short. Has real estate gone away? Has real estate investing not been a thing? Of course it's still a thing. So the problem that I have with this whole discussion is we get into this predicament where I'm betting against it until I have to bet for it again. There has to be a time when I change my viewpoint. If I think so, if I think AI is going away and it's ridiculous. Well, heck, I want to bet against that. Like there was a time that if I were smart and, and, and this could have been at the Very beginning. Because I remember saying this out loud as I was enrolled in Movie Pass. And I think most of us remember Movie Pass. By the same token, I was saying out loud, this is the dumbest thing of all time. I don't understand how they make money on this. I understand how me as a user comes out ahead on this deal, but I don't understand how MoviePass makes money. That was a single company that was built on a pretty fun idea. That was a house of cards. AI is not something that broadly, I don't know that I want to bet against.
- [58:07]
A
Right?
- [58:08]
B
Because now what I'm forced to do, which I would have been forced to do back in 1999 and in 2008, I would have had to bet in 1999 which web companies were going to succeed and which ones were going to fail.
- [58:22]
A
Right, Exactly. You'd have to distinguish between Amazon versus pets.com and think about this.
- [58:29]
B
Think about Google as an example, which succeeded, right? And Excite.com which did not succeed. Excite.com and Yahoo, which is still around, but is a ghost of what it used to be. Excite and Yahoo were brought by the founders of Google. They were brought before Google was even a big deal. Their plan, and their plan was let's get people a search engine where we very quickly remove them from the site. And Excite and Yahoo made money by keeping you on their site as long as possible. Aol, the AOL model, right? Keep people in the ecosystem. So back in 1999, if you would have told me that the winner of these three was going to be the company that gave away the most money and sent you away from their profit center as quickly as they possibly could. I would have said in 1999, there's no way in hell Google's going to be exciting. Yahoo. Because Excite and Yahoo are going to have so much more money because they get paid by keeping you on the site, reading their articles, doing their stuff. And Google won. Google clearly won. So can I bet who's going to win? I mean, the problem with AI right now, I believe, is that the field is so full of players. This is the bubble is there's five bajillion players now fighting for what's going to end up being, I don't know, look at Tech today. 10 big players, 20 big players, and then a bunch of medium sized players below that. You know, we could even maybe say four or five huge players, right? And then a bunch of medium sized players. Who's going to be the big players? Do we know? Do we know that Open AI is going to beat Claude. I don't know for me, I don't know that I want to play this game.
- [60:24]
A
Right. I mean, it would require you, you remember all the search engines, Dogpile, Ask Jeeves, Ask Jeeves, Ask Jeeves.
- [60:32]
B
Such a great idea.
- [60:33]
A
And in fact that company actually still clung to life. They eventually went on to buy About.com which led of course to the joke, what happens if you ask. Ask about. About.
- [60:47]
B
We're here all weekend, folks. Tip your weight, Steph.
- [60:50]
A
But right, in the days of Dogpile and Ask Jeeves and Google, with all of these being equally viable options, you would need an inordinate amount of talent to know which ones would crater, which ones would sort of bump along, but as shells of what they could have been and which ones would be the runaway winners. So it's not something that you'd want to bet on. And going back to the broader discussion about, you know, is AI overall in a bubble? I mean, so you've, you've got kind of a montage of various takes, right? So you've got the Andrew Ross Sorkin take where he says, look, this is a game changer for our society. But there, there may be over investment in specific companies. Right? So his is a little bit more of a tinged with pessimism, kind of leaning slightly more towards the maybe these companies are overvalued. That's his take again. He's the guy whose expertise is 1929 in terms of his latest work. But then you've got Jerome Powell, the Fed chair, who says this is absolutely not comparable to the dot com bust because during the dot com bust there was an inordinate amount of investment in companies that did not have earnings or profits. And so those weren't actually companies, they were ideas. Whereas today the investment is going into real companies that already have earnings, that already have profits, that already have a business model. It isn't that money is being flooded into ideas in a speculative manner. Money is being flooded into companies. And the only question is, is there too much money relative to an earnings multiple of these companies? But if you're asking that question, if you're asking is this earnings multiple too high, then necessarily you are talking about a company with earnings, which was not the case during the dot com run.
- [62:52]
B
Up to directly answer the question. If Paul and I cannot Scarlet, talk you out of speculating on this, I'm with you selling short, you can lose an infinite amount of money. So I would not sell short, meaning that you profit specifically when shares go down. So the way that selling short works for people that don't understand this, I, as an investor don't own shares in an AI company. I borrow shares from my broker and I sell them to Paula. So I borrow shares. Now, there is a cost of borrowing shares. Whatever the value is of the shares that I borrow, my broker charges me an interest rate on those, much like a credit card, right? So I'm gonna have an interest rate that I pay during the time that these shares that I borrow. So I borrow them, I sell them to Paula. What I'm hoping for is that, Paula, the value of those shares go down. During the time that they go down, I buy them back. Now, for purpose of illustration, I'm gonna say I buy them back from Paula. Well, you know, it's a huge market and there's lots of people, but I'm going to buy them back in the market so that I can repay the loan. So what happens is this. I borrow the shares, I sell them to Paula. I immediately get money in, right. So I get a bunch of cash today. And then later on, what I'm hoping is, is that as those shares go down in value, that then I buy those shares back and I get to profit the difference between the share price when I bought it lower than the share price when I sold them away. That's what selling short means. And people make money then. And the reason you can lose infinite amounts of money is if the shares are selling at $3 a share, and I believe it's going to go down to 2 and the shares go up to 100 every share. Now I owe another $97 on top of the $3 that I was given early on when I sold the shares that I didn't own. I don't have to repay a hundred, even though I only sold them for three. Oops, big problem. So you can lose infinite amounts of money. So that's why, Scarlett, we totally agree with you. You can lose tons of money.
- [65:14]
A
Yeah.
- [65:14]
B
Now, buying a put is an interesting option strategy here. And it is a finite amount of money that you can lose. So you can pick an AI company and you can also pick an amount of time. So if you're going to define this downturn is, I think six months from now, the price of AI company X or AI index X. Now that we have ETFs, you can do this with a lot of exchange traded funds as well. Pick an AI Index or an AI stock. I believe six months from now it's going to be lower than it is today. I will Buy a put. Now, a put is an option to sell. So let's say it's trading at $100 today. I will buy that option, which is going to cost me an amount of money. That adds to the amount of money I'm going to need that stock to lose for me to break even. So I want to sell it for 100 and I'm going to keep that option open for six months. At some point during that six month period, if it goes lower, I need to exercise my option. That means I need to pick a day, pick a time, I need to exercise the option, which means I am going to sell these shares for 100 that now are trading at 95. So it's trading at 95. I buy the shares at 95, I go and I buy the shares at 95. I exercise my option to sell at 100. Boom, I profit $5 per share. Well, not quite $5 per share because I also had to pay the premium to buy the option in the first place. But almost $5 a share. That is a much lower cost way. But it's still betting. This is not investing. This is a way to bet on AI going lower. Over, let's say a six month period or the next year, you could do two years, three years, two months, whatever time frame you want. You look at this thing in your brokerage account called the options chain. You pick the stock, you find a little window that said options chain and it will give you the different puts and different prices and you will notice that the pros and we talked about this, we talked about options recently, the pros have priced this really well. Really, really, really well. Because anything that on paper looks like it might make sense, once you see the price of doing this usually convinces you that you're not going to make any money.
- [67:45]
A
So I wouldn't do either of those. What I would do, if you are truly concerned that AI is overvalued, which is, you know, not necessarily a premise that I would agree with, but if that is your position, I would ask the question, assuming that the value of these major tech companies that have invested heavily in AI tank, assuming Nvidia tanks, assuming Google tanks, assuming the MAG7 plummet, what are the companies that will be least affected and what are the companies that would be best positioned to use that as an opportunity? And then I would, instead of betting against those companies, I would make bets on the sectors that I think would be least impacted. So for example, maybe I'd be directing more money towards a utilities sector or railroads.
- [68:45]
B
Png. Yeah, and don't get me wrong, PNG is using. And railroads are using AI, Right. But they're more on the customer end. They're the customers of these companies that are just focused on whether AI booms or not.
- [68:59]
A
Right, exactly.
- [69:00]
B
Which I think ultimately, Paula, is where. Which is why AI is not going away. Because during the first run up, everybody is thinking about the companies that are involved in the building of the web. As an example, Cisco Systems, right, was huge in the 1990s because they were kind of the plumbing for the entire web system. Cisco Systems has been a good company since then, but has not been nearly the darling like Nvidia that is kind of the first wave. Cisco was a first wave because they were building out the initial Internet then. But what ended up happening was a ton of companies that you don't associate with the Internet. We'll take Procter and Gamble as an example. The true money was in Procter and Gamble. Then got to have an Internet presence in all kinds of crazy ways. The Pop Tart website for a while was kind of the hottest thing online. I remember for a while.
- [69:53]
A
Pop Tart website.
- [69:53]
B
The Pop Tart website was badass. They had so many fun games and things you could do.
- [69:58]
A
Wow.
- [69:58]
B
And the Pop Tart marketing team was amazing. But it truly is. How are people using the web now in different ways, right. And all these companies, fashion companies, theme park companies, companies, you know, selling soup, whatever it might be. These companies that use the web then and that are going to use AI, Those companies are the companies I think you start looking under the hood at. Like, if you're really going to speculate that. That, to your point, Paula, is where I'd be speculating. What's a company that is going to profit from AI, but the market hasn't thought about it yet. Is the funeral home industry going to profit from AI? And are there companies in the funeral home industry? I'm grasping here, but you know what I mean? What are some of these areas?
- [70:49]
A
Well, yeah, you think about how much work goes into optimizing a cemetery grounds for burial plots, Right? Because you need plots of very specific sizes. And then the grounds have. Especially if there's a hill, there's all these slopes and there's a runoff. And it's actually an incredibly complicated thing to try to figure out how to maximize a piece of land with all of its terrain for the optimal number of burial plots. And AI could probably, at a minimum, review your work, but perhaps improve upon it, you know, and make that land use more efficient.
- [71:26]
B
Just in case you're wondering, this is not investment advice. We're making it up as we go right now. But there are a lot of people, Paula, dying to get into those places. So.
- [71:40]
A
That'S the second wah, wah of the episode in Fuego.
- [71:44]
B
My finest moment of orders. Finest moment. Like you, Paul, I think that's a much better bet.
- [71:52]
A
Right.
- [71:53]
B
And you know what? Then I'm not betting on when it ends. Then I'm not against it until I'm for it again.
- [71:59]
A
Right, right, right. Yeah. And if Nvidia collapses. The collapse of Nvidia. With the exception of the overall reverberations across the market, the collapse of Nvidia would not have huge impacts on the funeral home industry. And so hypothetically, yeah, probably, I'm guessing. And so rather than short selling, rather than puts, if I were to start making bets against AI, which I, I'm not endorsing that viewpoint, but if I were to do that, yeah. I would be making bets for the companies that would be least affected by a collapse or the industries. Rather than choosing specific companies, I would be going sector wide and choosing industries that would be least affected by the collapse. I would also, by the way, be looking at countries. If I'm going to invest in a country specific etf, I'd be looking at the countries that have so far been the laggards in the AI space.
- [72:59]
B
Oh, this is my favorite.
- [73:01]
A
Right?
- [73:01]
B
You shouldn't have a favorite. And you know my favorite. I've said it. Emerging markets. I mean, yum.
- [73:09]
A
Right. But what are the countries, what are the specific countries that have just really been behind the ball here?
- [73:15]
B
And again, not investment advice. When I say emerging markets, loving emerging markets the way I do it says more about me as a guy who likes to travel and a guy who likes to think about the future than about investment results. Because as you know, Paula, emerging markets from time to time has kicked my ass.
- [73:32]
A
Right. Well, there are a lot of issues with emerging markets. I mean, you take a look at Nepal, a perfect example. We just had a. Our whole government just collapsed.
- [73:41]
B
Big deal.
- [73:42]
A
You know, so. So sometimes that happens.
- [73:45]
B
Politicians helicoptering out.
- [73:47]
A
Yeah.
- [73:48]
B
Is. Is. Is not a.
- [73:49]
A
Right. Exactly. Yeah. It doesn't generate confidence. Or. Confidence.
- [73:54]
B
Yeah.
- [73:55]
A
But if you want to inoculate your portfolio from what you think might be an impending AI collapse, I would look there. And of course, I would also look to bonds.
- [74:08]
B
Clever reach for the inoculate, by the way. Nice job.
- [74:10]
A
Oh, thank you, thank you.
- [74:12]
B
That's a lot of points on the Scrabble board.
- [74:14]
A
Oh, oh, the board game industry. Board game industry would probably be relatively safe from an AI collapse.
- [74:25]
B
Yeah. But you look at the board game industry right now. Sorry, I'm going to nerd out for a second. We shouldn't have brought that up because tariffs are smoking the board game industry. I've seen so many companies collapse because the cost of building a board game in China, or actually even in Europe, where there's some infrastructure, versus in the US where there has never been any. Because US Made board games after Monopoly and Life. I mean, not a lot of people. And even those board games ultimately were made in China. Now that tariffs have come about, this beautiful cottage industry is kind of collateral damage to the tariff thing, which is interesting just from a different perspective. I mean, look at what we just did there. We were talking about AI. Yes. But, like, if we talk about funeral homes.
- [75:13]
A
Yeah.
- [75:14]
B
Or we talk the funeral industry, or we talk about the board game industry, it's very easy to get myopic and only look at one issue and go, ooh, AI hasn't hit that yet.
- [75:23]
C
Hmm.
- [75:23]
B
And yet I just gave you a whole different thing. I mean, when you look at an industry, you really got to look at all the different factors. Yeah.
- [75:31]
A
I mean, okay, so you think about caskets. Now, let's say that there is some type of infection that runs through a set of trees and it impacts forestry. Right. You can. Anything that impacts the lumber industry would likely impact casket production.
- [75:47]
B
Yeah.
- [75:48]
A
Which in turn would then have impacts on the funeral home and the cemetery industry.
- [75:55]
B
And this, I think your job is your job. If you're a sector investor, you're an individual stock investor. And the reason why we tell so many people not to do it is because of the fact that your goal is to figure out what your Achilles heel is. And every industry has an Achilles heel, just like every financial plan has an Achilles heel. And if you as an investor, investing in something, and you say to yourself, there is no Achilles heel. You haven't looked hard enough. There's no investment that doesn't have one. And the last thing you want as an investor is to have the big surprise when something comes out of the blue. And you think, I didn't see that coming. You want to try to eliminate that as much as possible when you make an investment so that when something bad happens, at the very least you go, okay, all right, I get it. I knew that could happen, and it happened. And then you can think ahead of time, too. How would I respond if this does happen? But that's so much more work than VTS X.
- [77:00]
A
Right? Yeah, exactly.
- [77:03]
B
And with how much more juice are you going to get if you do a fully diversified portfolio, are you going to get by doing all this legwork?
- [77:12]
A
Yeah.
- [77:13]
B
Versus go ask your boss for a raise and make more money.
- [77:17]
A
Yeah. Or if you are worried about the market, just have a slightly higher bond allocation. If the evaluation of equities is making you queasy, maybe just have a slightly higher bond allocation and call it a day. I'm sitting here wondering if cemeteries or funeral homes are publicly traded or if they're all. Well, because they're more likely held by private equity. Right.
- [77:39]
B
They are 100% private. I spoke to a friend of mine. He was actually a great resource for stacking Benjamins. Paula. Scott Mueller sold his funeral home to private equity. Minneapolis to private equity. And he had this horror story of all the bad stuff that happened and he ended up going back in and buying it back.
- [77:55]
A
Oh, good for him.
- [77:57]
B
He bought his funeral home back. By the way, he sent me a T shirt because Scott has a wonderful sense of humor that says I'd rather be seen than viewed. And if you know funeral home directors. And just a phenomenal joke. But I wear it from time to time because it's such an inside joke. I can see when people see that T shirt, they're like, I don't. What are you talking about? Apparently funeral home humor is dying.
- [78:27]
A
On that note.
- [78:29]
B
But wait, I'm just starting.
- [78:31]
A
Well, thank you, Scarlett, for the question. Thank you for the discussion it generated. These are my favorite questions because of these types of discussions.
- [78:38]
B
Paul's like, but we gotta go quick, Joe.
- [78:42]
A
Where can people who are on this side of the topsoil find you?
- [78:48]
B
Coming up is one of my favorite weeks. Thanksgiving week at the Stacky Benjamin show. We have a phenomenal lineup every year. On Monday, Regina Conway from Slick Deals comes on. And what I love about Slick Deals, and again, I have no affiliation with them. I don't get any money from them. But it's this community, Paula, of people who know how to stack these Black Friday deals. So if you take this credit card and you take this coupon and you take this store offering and you add those all together, you get half off this thing that you wanted in the first place. So we talk about responsible shopping and Black Friday on Monday. Then on Wednesday, Bridget Carey from CNET joins us. She's done this the last eight years, I think nine years, Regina, like the last five or six on Monday. On Wednesday, though, Bridget with CNET talks about there's always new hot tech for. For the holidays. And people go and they buy the hot door Buster TV and it turns out not to have enough HDMI ports or it turns out to not have any of the connectivity. And it was 3/4 off for a reason that you didn't know. So Bridget always gives us the good, the bad and the ugly of tech on Wednesday. But Friday, while everybody else is spending money I every year, because nobody was listening to Stacking Benjamin show, they were all spending money on Black Friday. So I said, all right, this one's for me. And now it's one of our most downloaded shows, most streamed shows every single year. It's our annual board game episode. I bring in somebody from the board game industry and they give me two top fives. The first one is top five games that have either money or an economic engine. They don't necessarily teach you money, but they appreciate it and get you involved and you love being in the money slash business culture. And then the second top five are most people that don't love board games the way that I do. This is the time of year they go to Target or Walmart and they pick a game based on the COVID art. And that game sucks. And it was a waste of money and a waste of time when you're with your friends and your family. So these board game insiders do a second top five top five games to play with friends and family over the holidays where you won't waste your money. And that episode every year is fantastic. And this year we have board game store owner Kylie Primus who has one of the top TikTok channels for board games. And he is a board game store owner in Pittsburgh, a store called Games Unlimited. And Kylie knows more by far about board games than most people that you know and is just such a warm, fun guy. He actually won Paula industry awards for innovation.
- [81:25]
C
Wow.
- [81:26]
B
In game stores because of the fact that he's on Tik Tok talking board games. And it's all. It's a fun channel.
- [81:32]
A
So anyway, incredible.
- [81:33]
B
Kylie's going to join us on Friday. So big, we got a big black Friday, Thanksgiving week coming up on Stacking Benjamin.
- [81:39]
A
That is incredible. Wow. I. I can't wait to hear that. Nice. Well, thank you, Joe, for all of that and thank you to everyone listening for being an afforder. If you enjoyed today's episode, please share. Share it with anyone you know who's pessimistic or optimistic about AI.
- [81:58]
B
To the.
- [81:59]
A
Funeral home directors in your community and the cemetery groundskeepers.
- [82:04]
B
Oh, and your friends at Greenpath Financial.
- [82:06]
A
Oh, yes. And anyone you know who makes a car payment to themselves.
- [82:12]
B
Yes. To the person at the bank when you're paying off your mortgage, because Joe's right on that one.
- [82:17]
A
To the people you know who have a side hustle. Oh, that's bringing in enough to lead to the question, hey, what do I do with my side hustle money?
- [82:24]
B
Great people to pass it on to, right?
- [82:26]
A
Yeah. Share this with all of them because that is the most important way you spread the message of fi r e.
- [82:32]
B
F double I R e. Find out what it means to me. I just made that up.
- [82:39]
A
Oh, share it with whoever created the wah wah sound effect, if you would. Please be so kind. Also, open your favorite podcast playing app and leave us a review. Write a few sentences about what you enjoy about this show because those are incredibly meaningful. I'll be reading them over the holidays with some turkey and some pumpkin pie. Make sure that you're following the show in your favorite podcast player and subscribe to our newsletter. Afford anything.com Newsletter thank you again for being an afforder. I'm Paula Pant. I'm Joe Salsihai and the words that I have said on this podcast many times, these are the words that I want written on my tombstone. I'll meet you in the next episode.