Q&A: We Have $1.5 Million. Can We Stop Now?

Summary

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Afford Anything Podcast | “Q&A: We Have $1.5 Million. Can We Stop Now?”

Host: Paula Pant, with guest/co-host Joe Salciccia
Date: July 7, 2026
Theme: How do you know when you have “enough”? Transitioning from accumulation to life enjoyment, and the personal, psychological, and financial decisions that come with it.

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Episode Overview

This episode digs into the elusive question: “When is enough, enough?” Paula Pant and Joe Salciccia answer community questions around crossing the threshold from relentless asset accumulation to intentional lifestyle design—touching on safe withdrawal rates, building your financial advisory team, security versus happiness, risk in concentrated stock positions, and smart estate planning. Concrete listener scenarios set the stage for deep dives into not just how to manage money, but why.

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Key Discussion Points & Insights

I. The Kurt Vonnegut Principle: “Enough”

• Opening Theme: The story of Kurt Vonnegut at a party, stating "I have something this rich person will never have. I have enough."
• Episode Purpose: Explore the deeply personal shift from maximizing wealth to maximizing quality of life—when do you stop “chasing” and start living?

II. Main Listener Question: Jax & Sabatical-Focused Financial Freedom

(01:57–29:43)

Jax’s Situation:

• Early 40s, both engineers, debt-free, living in Arizona, frequent sabbaticals, intention to optimize for time, health, and shared experiences.
• Portfolio: $1.3M invested, imminent $425K from home sale (majority into investments, $50K to emergency fund, $100K towards future rental property, the rest to brokerage).
• Annual investment: $60K+ into brokerage, maxing tax-advantaged accounts.
• Questions:
  1. Is our lump sum allocation wise?
  2. At what complexity do we need an advisory team?
  3. Have we reached “Coast FI”, and how do we know it’s truly “enough”?

Detailed Response & Analysis

A. Deploying the Home Sale Proceeds

• Emergency Fund Calculations:
  • “If that $50,000 represents somewhere between three to six months of personal living expenses, that’s great.” —Paula [08:01]
  • Ensure separate personal and rental property reserves (at least 3 months’ gross rent for rentals) [11:14].
• On Buying the Right Rental:
  • Avoid arbitrarily capping the down payment if a slightly larger investment would meaningfully upgrade property quality, return profile, or reduce risks.
  • “Don’t force yourself to buy a suboptimal property by saying ‘We can only allocate $100,000.’” —Paula [13:44]
  • The leftover funds not allocated to a rental are well-suited for taxable brokerage.

B. When to Build Your Advisory Team

• Financial Advisor: Key when transitioning from accumulation to planning nuanced withdrawals, cross-account strategy, and complex tax optimization.
  • “What drives me nuts with money nerds is we always worry we're missing a trick ... but I think when you’re optimizing for happiness, you make totally different choices.” —Joe [05:53]
• Accountant: Considering real estate and increasing complexity, a CPA can add value—especially with depreciation, expense tracking, and compliance.
• Insurance Specialist: As wealth grows, need for most insurances diminishes. Landlord/rental and umbrella policies may be necessary, but often manageable without a specialist.
• Estate Attorney: Important as assets grow, complexity increases, and/or real estate is owned in multiple jurisdictions.

C. Danger of Concentrated Stock Position

• Jax’s 401k has $700,000 in 100% company stock; huge risk (“Enron” story).
  • “Would you ever take $700,000 in cash and put it all in the company you work for, from whom you already get your income?” —Joe [22:00]
  • Both hosts urge diversifying to avoid single-company risk.
  • “If every dollar has a specific goal, and you’re targeting lifestyle, happiness requires diversification.” —Paula [27:25]

D. When Are You “Coast FI”?

• Quick Math:
  • Targeting $120K/year in retirement, 15 years out, with $1.5M investments, maxed tax-advantaged accounts, and $60K/yr brokerage contributions gets a big “yes” back-of-envelope—but review with a pro for full validation and adjust periodically.
  • “Coast FI is great, but it's based on the past. The future doesn’t always mirror the past. Have someone check every few years.” —Joe [30:13]

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Notable Quotes & Memorable Moments

• “What are you optimizing for? You put together health, time, and shared experiences, I call that happiness. And that’s when you make totally different decisions.” —Joe [05:53]
• “Don’t conflate precision with accuracy. Just because a spreadsheet spits out a precise number doesn’t mean it’s an accurate projection.” —Paula [43:19]
• On concentrated company stock:
  “It's not how good your company is, it's that you just don't know.” —Joe [22:29]
  “If it's outside your core retirement plan, it's okay to take a flyer. But your Coast FI baseline must be secure first.” —Paula [24:50]
• On “enough”:
  “You’ve done the right things for the right reason. You are role-modeling for the whole community.” —Paula [31:35]

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III. Listener Question: Megan – Flipping, Rentals, or Index Funds for Lifestyle Freedom?

(37:37–47:44)

Situation:

• Megan (58) and wife (71) are Baltimore realtors & house-flippers, ~$130K in retirement accounts, $100K cash, $70K HELOC, plus access to $500K in hard money.
• Recently sold a property for $100K profit rather than rental ($500/month potential cash flow).

Dilemma:

• Should they focus on flipping, building rental portfolio, or investing more in index funds? How to balance investing modes for financial security and maximizing health/vitality while they still can?

Key Insights & Advice:

• Life Stage Matters:
  • “If you want to travel, do it in your 60s and 70s; don’t put it off until your 80s.” —Paula [40:31]
• Flipping CAN Be Right—For Some:
  • “Flipping is a job, but for experienced pros, it can be ideal: work in sprints, travel between. It gives flexibility.” —Joe [41:37]
  • Their market expertise, teams, and contacts make flips feasible and profitable.
• Sell vs. Hold Example:
  • $100K cash from sale = ~$416/month at a 5% SWR vs. $500/month rental—difference is small, with the flip giving liquidity and simplicity, which can be worth minor cash flow hit [42:30].
  • “Given your desire to travel, control, and flexibility, selling was probably the best choice.”
• Framework for the Tradeoff:
  1. Quantify cash flows & potential appreciation
  2. Weigh income stability vs. time/mobility tradeoffs
  3. Know your “enough” and front-load fun & adventure while healthy

Quote:

• “The goal isn’t just to maximize net worth. Prioritize fun ASAP! The 60s are the youth of old age.” —Paula [47:17]

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IV. Listener Question: Rima (Anonymous) – Estate Planning, Family Homes & Renovations

(50:50–64:42)

Situation:

• Listener, her husband, and siblings live in family home in Texas (owned by mom). She and husband also purchased a one-story house nearby for mom (with a mortgage). Mom plans to split estate equally between all children. She wishes to renovate the original home for their use—asks how best to structure things fairly for all siblings, and what risks to watch for.

Main Discussion Points:

• Early/Earnest Family Conversations Are Key:
  • Clarity and written agreements now (before renovations!) are crucial to avoid resentment or legal trouble later.
• Appraisal Approach:
  • Suggests appraising the home pre- and post-renovation to distinguish market appreciation from forced appreciation (added value by upgrades) [55:28–57:42].
  • “Otherwise, you commingle the results of the upgrades with general market forces, and that's very hard to untangle.” —Paula
• Legal/Emotional Complexities:
  • Emotional ties to “mom’s house” when title is elsewhere are a “red flag;” risk of future disputes if wishes are not codified [62:02].
  • Texas-specific estate law and community property rules make it vital to get expert legal guidance.
• On Sibling Equity:
  • “Get a Texas estate attorney today—everyone’s on the same page while Mom is healthy. It’ll feel like overkill now, but everyone will thank themselves later.” —Paula [58:41]
• Consideration of Care Needs:
  • Plan for eventualities like long-term care, changes in health, etc., not just inheritance. Asset distribution should account for what may be needed for Mom herself, not just what’s left.

Quote:
- “If every dollar has a goal, and you’re targeting lifestyle, happiness requires diversification.” —Paula [27:25] - “The pitfall is NOT agreeing and getting it in writing today. Everything gets infinitely harder if you wait.” —Joe [58:56]

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Timestamps for Important Segments

• [01:57] — Jax's family financial scenario, sabbaticals, and allocations
• [07:13] — Emergency fund/re deployment of lump sum
• [14:46] — When to build advisory team
• [19:03] — Danger of concentrated company stock, the “Enron” story
• [29:21] — Assessing Coast FI, the role of periodic checkups
• [37:37] — Megan’s question: Flipping versus rentals for lifestyle/retirement
• [42:30] — The math of selling vs. renting, cash flow analysis
• [50:50] — Anonymous/Rima’s question: Estate, home renovation, sibling balance
• [55:01] — Price/appraisal mechanisms for fairness pre/post-renovation
• [58:41] — The necessity of written, legal agreements in family-owned property
• [62:02] — Emotional vs. legal realities in houses and inheritance

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Notable Quotes & Moments

On Wealth and Enough:

• “I have something that this rich person will never have. I have enough.” —A [00:06]
• “What drives me crazy with our deepest money nerds is we always worry that we're missing something ... But we often optimize for the wrong stuff.” —Joe [05:46]

On Diversification:

• “Having all of your money invested in your own company is a time bomb. You just don't know.” —Joe [20:23]
• “Start by diversifying to support happiness, not just return maximization.” —Paula [27:25]

On Flipping Houses Later in Life:

• “Flipping is usually a full-time job. But for people like Megan who are pros, it's a great way to work in sprints—earn, then travel.” —Joe [41:37]
• “The 60s are the youth of old age. Use your vitality while you can!” —Paula [47:17]

On Family and Estate Planning:

• “Nothing gets ugly faster than unspoken assumptions about inheritance. Make it clear, legal, and write it down now.” —Paula [58:41]
• “People get emotionally attached to homes, even if they don’t legally own them—that’s always a red flag.” —Paula [62:02]

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Summary Flow & Tone

The tone is thoughtful, collaborative, and nuanced, with Paula and Joe both bringing technical expertise and humility to common money dilemmas. There’s enthusiasm for “nerdy questions” and empathy for the complexity of emotions, values, and family ties woven throughout the financial decisions.

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Conclusions

• True wealth is knowing “enough”—clarity of purpose, not just financial numbers, lets you dial back accumulation and shift toward living fully.
• As your financial situation grows more complex, regularly revisit your allocation strategy, risk, and get the right kind of help (but don’t rush to over-professionalize).
• Diversification (especially away from employer stock) is key as portfolios grow; concentrated bets can undermine long-term happiness.
• Lifestyle design, especially in later years, should be front-loaded—work in sprints, take advantage of flexibility, and enjoy what you’ve built.
• Family property and inheritance issues? Get concrete, legal, and precise while everyone is healthy and relationships are strong.

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Listen to this episode if...

• You’re ready to shift from wealth accumulation to intentional enjoyment and aren’t sure when enough is enough.
• You want a deep, practical discussion on the non-obvious obstacles to financial independence.
• You’re navigating family, estate, or succession challenges and want to avoid landmines down the road.

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For resources discussed (including “7 Expensive Mistakes that Rental Property Investors Make”), see affordanything.com/mistakes.

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Transcript

[A]

Joe, have you heard that story of Kurt Vonnegut at a party?

[B]

Yes, but I don't remember the details. He was talking to some other author.

[A]

I think he was talking to someone who had a lot of money. The person was telling him, you know what, you're just a writer. You're never going to have all of this. And Kurt Vonnegut said, yes, but I have something that this rich person will never have. I have enough.

[B]

Apparently you're foreshadowing.

[A]

I. I am, because that is the theme of today's episode. It is when do you have enough? And when do you switch from asset accumulation to lifestyle enjoyment? That's a kind of a nerdy way of saying, when do you quit the rat race and start enjoying your life?

[B]

Yeah, that's a great time. That's a fantastic place to be.

[A]

Right? But the when of it is so individual. So we're going to answer three questions, especially the first two out of the three really deal with that topic. And then the third one is more also around inheritance, estate planning, real estate. Some of these more technical questions. Welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. This show covers five pillars. Financial psychology, increasing your income, investing, real estate, and entrepreneurship. It's double I fire. I'm your host, Paula Pant. 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?

[B]

I am so excited, Paula. You know why?

[A]

Why is that?

[B]

Because when people hear this, I will be on my way to New York City to hang out with you.

[A]

That's right, you'll be here next week. Or I mean by when people hear this. This week, by the time you're listening to this, Joe will be here this week.

[B]

I can't wait. It's going to be a bunch of fun and going to be great. So I'm really looking forward to it.

[A]

Well, let's jump in with our first question which comes from Jax.

[C]

Hi, Paula and Joe, longtime listener here. I'm Jax. My wife and I are both engineers in our early 40s living in Arizona. We're renting debt free and intentional about our financial journey. A few years ago, we took a three months sabbatical together. It changed everything. It shifted our mindset from pure accumulation to optimizing for time, health and shared experiences. We now plan to make sabbaticals a recurring part of our life with the next one in three to five years. That context shapes everything. We're doing financially. After hearing episode 723 on the six levels of wealth, we believe we're solidly in level four. We have about 1.3 million invested today. Next month we receive 425k from the sale of our home, with 275k going into our taxable brokerage, bringing us roughly to 1.5 million invested. We max our Roth 401ks, Roth IRAs and HSA every year and now committing at least 60k annually to our brokerage account. Portfolio breakdown. 700k in profit sharing, 100% company stack. 460k in 401k is nearly 100% large. Cap us 127k across our HSA and Roth IRAs invested in VTI and VTSAX, a small joint taxable brokerage account soon to be 275k, which we want to grow aggressively. Three questions. First, we are about to receive 425k from the sale of our home. My wife is driving our real estate research and is currently enrolled in your rental property course. So we expect to buy within three to six months. 50k goes back into our emergency fund and the remaining 275k goes straight into our taxable brokerage. Does that deployment make sense given where we are? Second, we are VPSAX and Chill following JL Collins and it has served us well. But Joe, after hearing your efficient frontier work and given our complexity is growing. Episode 725 made us realize we have no coordinated financial team. No advisor, accountant, attorney or insurance specialist. It is now the right time to assemble that team. And what should we prioritize? First, third, and last and most important, given our sabbatical philosophy, can you confirm we are cos fi we're targeting 120k a year in retirement in about 15 years, given our balances, maxing all Tax Advantage accounts annually, and now 60k committed to brokerage accounts. Are we truly there? Because if we are, we want to dial back the obsession with accumulation and start investing more intention in the life we want to live right now. Thank you so much for everything you do, boy.

[B]

No, Paula, you don't like this question at all.

[A]

I love this question. I love this question. Oh, and Joe, I know you do too. Joe is cracking a joke because before we started recording, we listened to these questions and Joe and I both talked about how much we love this question for a wide variety of reasons, largely. First of all, for the example, Jax, that you're providing to the community of like, amazing asset management. Amazing. Just what an amazing example. That you can share with the world of how to manage your money beautifully.

[B]

Well, I can boil down exactly what it is for me. And it's not specifically that, Paula. Specifically for me, it is, what are you optimizing for? What drives me crazy with our deepest money nerds is that we always worry that we're missing something. We always worry that maybe there's some trick, there's some loophole, there's something where we can optimize just a little more. And I very firmly believe that we often optimize for the wrong stuff. When Jack said optimize for time, bam. Yeah, but optimize for health, great. Optimize for shared experience, fantastic. But when you put all three of those together, Paula, I, I call that optimizing for happiness. And I think when you're optimizing for happiness, you make a ton of decisions that are completely different. As an example, I'll give you a great example. The idea of the safe withdrawal rate. If I'm optimizing for happiness, I want to know what the safe withdrawal rate is. But I don't want to take all that money because I believe it's impossible to be happy when I'm spending every dime, every single on stuff. Because I'm watching the news and every single negative thing that happens is going to drive me crazy. So when I start optimizing for the type of stuff that, that Jax is optimizing for, which I call happiness, that's when I get excited. I think he's optimizing for the right stuff.

[A]

So Jax, let's answer your question. First of all, the 425,000 that you'll get from the sale of the home. Now, as I understand it, and please correct me if I'm wrong, as I understand it, the plan is to put 275,000 into a taxable brokerage account, 50,000 into the emergency fund and that leaves 100,000 left over to put towards a rental property.

[B]

And we're assuming that because he didn't explicitly.

[A]

Yeah, yeah, exactly. He didn't explicitly say 100,000 to a rental property, but that would be the amount remaining if to 75 goes into brokerage and then 50,000 goes into the emergency fund. And so if the question Jacks is with a lump sum of 425, does it make sense to split that lump sum into 275 and 50 and 100? In theory, yes, that makes complete sense. But I also have a couple of follow up questions for you. Question number one. The $50,000 emergency fund, how many months of living does that represent? Because I, I don't know if you have an existing emergency fund. I don't, I don't know if that brings the emergency fund from 0 up to 50,000 or if that gets added to another layer. You didn't mention another emergency fund. So I'm going to assume that that means the 50,000 becomes the emergency fund. If that 50,000 represents somewhere between three to six months of personal living expenses, that's great, fantastic. That's a great emergency fund to have. So I'll put a check mark on that right away. Assuming that that means that you will have an emergency fund of a total of $50,000 and that that money represents between three to six months of personal, not rental, but personal living costs. All right, so that's part one and then to the other part, the allocation between how much goes into taxable brokerage and how much goes towards the rental property. The 275 versus 100 split, that's really going to depend on what kind of property you're looking at. You know, when it comes to the universe of properties that you might buy, there's wide variety in terms of condition of property, age of property, number of units in the property, location of property, and there are going to be various risks associated. So if you think about risk along the dimension of location, geography, condition, age, each of those separately is a risk variable. And then level of amount of leverage. Right. Is also a risk variable. And the way that I like to think about risk across rental properties is if you are dialing up risk along any of those variables, then you dial down risk on some of the other variables in order to counterbalance those weights. For example, if I were to buy a property that was relatively new in age and good condition in a great location, in a desirable geography. And by the way, distinction between location and geography, location, I mean neighborhood, geography, I mean city or state. If all of those were on the low risk side of the spectrum, then I'd be willing to take out greater debt in order to do that. Which is a long way of saying I'd be willing to take out more debt on a class A property in a desirable location. By contrast, if I were buying a class B minus or C plus property, I would want that to be more cash heavy. So in terms of what that allocation is, totally depends on what kind of property you're buying.

[B]

There are so many variables that are so personal and yet so universal that comes into how much money do we need to leave in cash.

[A]

Do you mean for the emergency Fund or for the property?

[B]

For the emergency fund and for the property. For both. On both sides. I mean, if you're somebody that needs a personal emergency fund and you need, you know, to look at what the property needs are, I mean, double whammy.

[A]

Right. And that was the part that I didn't mention. So personal emergency fund, three to six months for the rental property, you will want cash reserves that represent a minimum of three months of gross rent.

[B]

Because invariably you're going to have a time when, for one reason or another, somebody doesn't rent the place.

[A]

Yeah, yeah, exactly.

[B]

They stop paying the mortgage.

[A]

Well, even if you get a property manager, property managers charge one month's rent as their fee, and they take that off the top. So if it takes a month to place a tenant and then they charge a month's rent, that's two months right there.

[B]

And how many times have we had people go, I'm in a hot region. I can't figure out why my house isn't renting? We've had that several times on the show.

[A]

Yeah. Sometimes you're experimenting with price. There's always this fundamental tension between pricing and occupancy. To use an exaggerated example for the sake of illustration, if you price your property at $10, it's going to have 100% occupancy. And if you price your property at $10 million, it's going to have 0% occupancy. There's always a tension between pricing and occupancy. You, obviously, you research comps in order to try to make an educated best guess when you are initially pricing that property. But sometimes it does take a little bit of iteration and experimentation to get that right.

[B]

So your, your first question then is, is 50,000 the right number? Where do we go from there?

[A]

You mean right number in terms of emergency fund?

[B]

In terms of emergency fund. That was your first thing. So then the rest you like, then the rest going into the brokerage account.

[A]

Well, again, it depends on the cost of the property that they want to purchase, the cost of the rental property, and that 100,000. Are we talking about a single family home purchased in cash? Yeah, I know there are people yelling at their device right now, but you can, in many parts of the country still buy a single family home in cash for 100,000 doll.

[B]

You may be able to. Where I live.

[A]

Okay, Texarkana, Texas, here we go.

[B]

Yeah, you may be able to.

[A]

All right. Do you want to buy a single family home in Texarkana, Texas, in cash, or do you want to use a Hundred thousand as a 25% down payment with an investor loan on a $400,000 triplex.

[B]

Yeah, okay, so actually that was not. Because I heard that stuff. So assuming that the down payment is right, the amount of money is right, and you've done that math then. We've done the math on that. I guess my specific question is, do you agree that with whatever is left over that the brokerage account is the place to go?

[A]

Oh, yes, yes. Yeah, yeah. So I would start with not curtailing, not forcing yourself to buy a suboptimal property. Like, given that you have the benefit of this lump sum of cash. I would not force yourself to buy a suboptimal property by saying, well, we can only allocate a hundred thousand towards this if 120,000 will get you a significantly better property because that down payment is going to be a little bit higher, but the property is going to have a much better cap rate and a better risk adjusted return. Do it. So I wouldn't like arbitrarily force yourself to stick with only a hundred thousand when it comes to the money that you earmark for the rental. But I do agree, Joe, that whatever you don't spend on the rental, a taxable brokerage is a good destination.

[B]

And my answer was going to be me too. That's. That's my whole point there on that particular question.

[A]

Awesome. So, Joe, what do you think about your. Because you're Mr. Efficient Frontier? His second question was the VTSAX and Chill approach.

[B]

Well, he actually didn't even ask about that. He goes, you know, after I heard your fishing Frontier, I realized we don't have advisors. So, number one, let's start with a question he asked and then we'll get to the ones that he didn't ask. Here's the way I look at your advisor team. A lot of people ask the question, Jax, that you're asking. I'm at a certain point in my life, should I get advisors? Which kind of is a little bit of a. Not intentionally, but it's a little bit of a FOMO question. You know, is there something I'm missing out on? Because I don't have advisors. So let's look at specifically what you might need an advisor for. Or better yet, Paula, let's take the opposite approach. What don't you need advisors for? So he said, number one. He said financial adviser. We'll get back to that one. Accountant. Does he need an accountant now before the house purchase? If he didn't own real estate and have that in a In, you know, separate. And he's got now this income stream coming and depreciation and expenses related to upkeep of the house. I would have said he probably doesn't need an accountant. I don't, I don't see a reason for an accountant now with the house purchase potentially, possibly, I think so. Accountant. Yes, insurance specialist. You know, there's this crossover point which is the greater your pile of assets, the less you need insurance. Because if your goal is to just cover what you don't have. If we look at risk management. Let's not talk about buying insurance. Talk about risk management. My first goal is to not buy any insurance. If I can cover it all without buying any insurance, that's great. I mean, let's do it that way. But if there's a chance that I may need this money for something else and a catastrophe hits, well, then I want insurance to fill in those holes. I want a company to take that. And I look at where he's at in life and I'm like, what insurances does he really need? Is his need for insurance, Paula, is decreasing, which means it's getting easier. His insurance stuff is getting less complicated.

[A]

I mean, once he becomes a landlord, some umbrella insurance. But yeah, you know, other. But that, that's, that's cheap. That's very cheap.

[B]

And by the way, I don't think I need an advisor to tell me that. Yeah, that I need that.

[A]

I just told you that. Yeah, exactly.

[B]

So I look at that and I'm not saying insurance advisors and CPAs aren't, but they're incredibly valuable. But for the right person, you don't want to waste your time or money. You don't want to waste their time. And then I look at financial advisor and if he were still in accumulation phase, I would still probably say maybe not. Because what is he doing? He's adding to the amount of money that he's saving. But now he's trying to transition into the accumulation phase and he wants to build out a little more complicated timeline of how he takes money. I also like our friend Dana Anspot, has a new book out about how she approaches what I mentioned earlier, the. That razor's edge of a safe withdrawal rate. She doesn't do it by backing away from the safe withdrawal rate. She does it by resolving every couple years. So as markets change and things change, how much money can I spend in the next couple years? By the way, given everything together, I love her approach better than mine. My approach of just stay away from the safe withdrawal rate number Give yourself a little bit of room is for somebody doing it yourself. But if I've got somebody that does this every day in my corner can redo it, and I know that number is probably right, and I can work with them on, okay, fixed expenses versus discretionary expenses. And what do we spend? I got a third party who is not emotionally invested in my life, but knows all of the. All the steps to accumulation. I think financial advisor, for that reason is a great thing. So, financial advisor? Yes. Coordinating then with CPA because of the rental house. Solid. Probably. Insurance person? I don't think so.

[A]

I'm curious. Joe. So he's got 700,000 in profit sharing, 100% company stock.

[B]

Horrible.

[A]

Yeah, Horrible. Yeah. This is my cue for Joe to go on his. His Joe rant about that one.

[B]

VTSAX is sloppy. It just is. Well, it just is sloppy. And it's okay to be sloppy when you're accumulating money, because it doesn't matter whether you're sloppy or not early on. You just want to get money invested, and buying a little bit of everything is a great way to start. So you're not worried about X individual stock exploding. Who cares about having a phenomenal allocation? It's doesn't matter. What matters is getting the money invested, having it widely invested. So you're not worried about the Black Swan events and then shovel in as much money in as you possibly can.

[A]

Yeah. Contributions are your single biggest determinant of portfolio success.

[B]

Yes. So when I say sloppy, and I've had people push back, I mean, it doesn't mean it's bad for everybody. It does mean Jax is bad for you. But, but, but we will get there. Because what's far worse is you have this time bomb of one company and $700,000 invested in that one company. There is a story, and it now is a story that's much, much, much older. And maybe a lot of our afforders were not in the market when this happened. There was a company in Houston called Enron.

[A]

I knew you were going to say Enron.

[B]

Enron was this monster company. Huge company. Huge, huge company. And it turned out that. That there was a lot of stuff going on at Enron that kind of resembled a Ponzi scheme. And in this entire huge company that employed tons and tons and tons of people, there were maybe four people. Four people who knew how much of a Ponzi scheme this actually was. What a house of cards. Let's not call it a Ponzi scheme.

[A]

Fun fact. One of those people was named Jeffrey. Skilling and my accountant professor. My accounting professor was. Was the same professor who taught him accounting.

[B]

Oh, boy.

[A]

Yeah. Claim to fame.

[D]

What?

[A]

I mean, bragging about that claim to fame. I learned accounting from the same guy who taught Jeffrey Skilling.

[B]

I taught Jeffrey Skilling how to make sure nobody knew what was going on.

[E]

Yeah.

[A]

He was like, that's my legacy.

[D]

Yeah.

[B]

And because of that, a ton of people lost their jobs, which was horrible. I remember during that time because I was doing commentary on television back then. There were secretaries losing their jobs. There were cleaning people losing their jobs. People had nothing to do with anything that were losing their jobs. But worse than that, there were people that went on TV and said, in my 401k, I put every dollar into Enron. I had it all in company stock, because what could go wrong? It's Enron. So it isn't how good your company is. It's that you just don't know. You just. You just don't know. Unless you're one of those few people. So for that reason, I may look at 5% of your allocation into an individual stock. 10%, maybe. Here's a great litmus test. You've got $700,000, but you have it as cash. Would you say to yourself, I'm going to put it in one company? And then the second question would be, I'm going to put it in the company I work for that I already get my paycheck from. Like, I'm already using them to get income. Would I put another $700,000 in that same bucket? The answer most of the time is going to be no. There's some places, you know, people. People at Nvidia go, well, maybe, but still, that's a mistake. I mean, they might say maybe to both those things, Paula, but it would still be a mistake. What I like about the 5% or 10% is that that number gets bigger. You end up putting more and more money into your company stock, but it's still only a small percentage of all of your chance of success to continue to be happy.

[A]

Right? Right. I have a slightly different take. It's directionally similar, but the execution is a little different because there are a lot of people. And, Jax, this isn't just for you. This is for anyone who's listening to this, who has had the experience in which maybe 10 years ago, you bought a small allocation, what at the time was a small allocation of individual stock. And over the last 10 years, it has just grown and grown and grown and grown. And now it is like this. Behemoth in your portfolio that you just never expected to grow to this size. And you're like, whoa, this started off as a small allocation and now it has ballooned into a much bigger chunk of my portfolio. And because it has grown more rapidly than the rest of your portfolio, it now represents an outsized allocation. And what I would say in that event, because of course there's going to be like a, if it's in taxable brokerage account, there's a massive, massive capital gains consequence to selling it off. I would orient towards goal based bucketing. What's the bucket of money that you need for your various goals for retirement, for sending your kids to college, for any trips that you want to take in 10 years, any homes that you want to buy, etc. What's the bucket of money that you need for your goals? Plan out all of those goals and then if you have additional money that is just outside of your goals, it's, it's even outside of retirement. It's just like money that you don't associate with any particular reason. I think that is perfectly fine to take a flyer on.

[B]

Yeah. Certified financial planners will always tell you to diversify it. If your goal is to have your money make you wealthy, diversifying it more is a mistake because diversifying it more will never make you more wealthy. It'll make you more consistent with market forces. And then you rely on your other drivers of income to bring money in, which for most of us is great. I mean, if Jax wants to be on a beach or traveling or doing whatever makes him happy, you know, these shared, I love the phrase shared experiences with the two of them. So these shared experiences that he's looking for, that shared experience isn't him somebody else. And his phone as he's checking his schwab account every 20 minutes. If that's the case, then keep bringing money in the front door by leveraging raises, right? Negotiating raises, maybe changing jobs, maybe finding other income streams, doing those things. Don't rely on your portfolio as much to do that. Let your portfolio just go up with market forces and the economy. So if that's the case, then diversifying is the right thing. But if you really want your money to grow more quickly, then it becomes a little bit more of a casino because then you have to hope that your under diversified position is going to beat the market. And giving a guy that. Paula, you know and I know Grant Sabatier. Grant Sabadier says this out loud. He did this with Amazon stock. He knew it was too much money. But he's like. It was growing really fast, so I just held onto it. Made him a multimillionaire, like, just holding on to too much. And he knew it was too much the entire time.

[A]

Yeah.

[B]

But he's like, you know what? I want to retire early. I'm okay with working, but if this keeps growing, I'm going to ride this up. If it doesn't, if it goes down, then I'm back to where I was, and I was kind of happy where I was. So let's see how far it goes. And obviously, Amazon went pretty damn far.

[A]

Yeah. Yeah. I. I have excess allocation in one stock. I won't say which one it is, but it started as a $10,000 investment and grew to a lot of. But it's outside of my retirement accounts. It's in a taxable brokerage account. It is not earmarked for anything in particular. So I'm just seeing how far it goes.

[B]

Yeah. If you can take it out of the plan.

[A]

Yeah, yeah.

[B]

Then having $700,000. And if I, as a financial planner, asked you, hey, Jax, if this 700,000 went away, how would you feel, and would you be okay with working longer or whatever the case is, then keep it. But, man, based on all the goals that you told us.

[A]

Yeah, exactly. Exactly. Yeah. And so that's the thing for you, Jax, is you have a lifestyle orientation. Like, every dollar has a goal and every dollar has a purpose. And all of that purpose is building towards bringing you and your family the life that you want. Given that lifestyle happiness, Joe, as you call it, given that that is the goal, then that happiness requires diversification.

[B]

Yeah. As long as happiness is not managing your Schwab account or hanging out there watching it every four minutes.

[A]

Right?

[B]

VTS X. I mean, he already knows. What? He already knows, Paula.

[A]

Yeah. I.

[B]

Don't even say it, Jacks. Yeah, yeah, you already said it. Don't do that. Don't do that. You can do much better. And it's not hard.

[C]

And.

[B]

And the cool thing is, and the reason why I love the efficient frontier and don't go, you know, more grainy or analytical, and I like you doing it yourself or doing it with a financial advisor is, you know, why you own what you own, and then it becomes stickier. Stickier. Stickier. Stickier. Boy, easy for me to say.

[A]

Stickier.

[B]

It becomes stickier, and you become more stoic during down periods, which is awesome. You want to be stoic during down periods.

[A]

Should we tackle his third question? Can we confirm that he's reached Coast Phi I haven't run these numbers officially, but targeting 120,000 a year in retirement in about 15 years, contributing an additional 60,000 annually to brokerage over the span of the next 10 years. Okay, so that means you're contributing another 600,000. That's just contributions alone. Yeah, yeah. If you're making $600,000 in additional contributions over the next 10 years. I'm sorry, 15 years. We're targeting 120,000 a year in Retirement in about 15 years.

[B]

The answer, I believe, is yes.

[A]

Yeah.

[B]

Now, Jax, this is back of the envelope math from Paula and I. If you were going to hire an advisor anyway, because of the accumulation stuff, where I think is where they shine, and then they can help you construct the portfolio. You can do it on your own. But having a pro, since you already are going to have a pro, having them help you with that, I think is great too. They can also then confirm that. That you're Coast Fi with real hard numbers, which is going to be much more year by year spreadsheet, which is awesome. Which I. Which I prefer. There's always a danger to me, Paula, and I haven't heard somebody, anybody call this out, but there's always a danger in coastfi. And you just got to know in the back of your mind that coastfi is great, but it's based on the past to some degree. Maybe not being a mirror, the future being a mirror of the past, but rhyming with the past. And I know that you're going to be talking to historian Joseph Moore pretty soon. Joseph Moore says in his new New York Times bestselling book that the things that we think are bedrock aren't bedrock. None of it's bedrock. All this stuff about the stock market's been around for, you know, the way the stock market works now was much different in the 1960s. It was way different. So the fundamentals were different because the rules were different. The government intervention was different, the tax strategies were different. The Roth IRA hasn't, in the big scheme of things, been around that long. That's changed the game. People now indexing, everybody indexing. What happens ultimately when everybody does it. Like, even Jack Bogle, before he passed away, kind of raised the flag on like, I don't think any of this stuff's imminent. I don't think it's imminent. But when I think about Coast Phi, I feel like some people hoping to practice Coast Phi. You just got to keep in the back of your mind that the past doesn't always equal the future. That there may be Changes and that conditions change over time. You can't just set it and forget it. And I think this is another reason to have the financial advisor. Right. If I'm coast vi, I want to redo those numbers every couple of years and make sure that I'm still Coast vi, that I'm still going to be okay. But, man, it looks good. With that caveat, I think it looks great.

[A]

Yeah, Yeah, I agree. Back of the envelope, I would say yes. My vote is yes. Jax, I also just want to commend you on your dedication to accumulation, your dedication to smart money management, the portfolio that you've built and that you've kept. The why, the lifestyle, the family, the happiness, you've kept all of that at the forefront. So you've done the right things for the right reason, which I want to applaud that you've done that and that you are role modeling this and setting an example that I hope the rest of the community can learn from. Thank you, Jax. I also want to mention, because we talked about rental properties, we have this guide. It's called 7 Expensive Mistakes that rental property investors often make. It's completely free and you can Download [e-mail] mistakes. That's affordanything.com mistakes. We're going to take a moment to hear from the sponsors who make the show possible. And when we return, we are going to hear from Megan, who also has a question about lifestyle oriented money management. When I moved into my apartment in Manhattan, it's much smaller than anywhere I've ever lived. 600 square feet. And in my 30s, I have a bunch of accumulated stuff at that point. My clothes and my books and my pets. Like, how am I going to fit everything in here? And so I went to Wayfair, I bought all of this shelving, nice, modern, sleek. And I put it up everywhere. In the kitchen, near the entry, in the bathroom. And it makes everything so much more organized. The variety that they had and the style that they had, you know, I didn't want to just go to someplace with a tiny selection. Wayfair had this tremendous selection where I could pick exactly the size and shape and color that I was looking for and the right sheen and, you know, like, it matches with the cabinets. So that was what I liked about Wayfair, was the enormous selection and that. I mean, if you are looking for items for your home, I cannot emphasize enough how much selection there is on Wayfair. So for me, getting shelving that looks like it fits in the apartment, like it matches with the Cabinet so well that it looks like the builder put it in here. That makes it a really seamless experience. And I could get that because they had such a massive selection. And so that's why I like Wayfair. That's why I recommend that you shop there. They've got whatever you're looking for. Seating, grills, appliances, storage, lighting, rugs, decor. It is one place with everything you need. You don't have to bounce between stores. And There are over 20 million 5 star reviews from real customers with pictures, real pictures from their homes so you can see feedback before anything hits your cart. So if you're ready to upgrade your home for way less, head to Wayfair.com right now to shop all things home and get your space ready for less. That's W A Y F A I R.com Wayfair Every style, every home. In business, there's no room for guesswork. Every shipment matters. Every deadline counts when you're trying to keep operations running smoothly. And the last thing you need is uncertainty. That's why reliability is at the core of USPS Ground Advantage. From the moment your package is first scanned in, it moves through a secure nationwide network, aiding in a timely and accurate delivery. You get near real time tracking so you can keep up with your shipments. And with affordable upfront pricing, there are no hidden fees or surprise surcharges to throw off your cost sheets. It all adds up to predictable deliveries you can depend on, because knowing your logistics are handled lets you focus on everything else. Your customers, your team, and the future you're building. Visit USPS.com groundadvantage to start shipping with confidence. USPS ground advantage. We mean business. I've long been frustrated about the fact that negotiation is such an important part of money management. And yet we never learn it, or most of us are never formally taught how to do it. And so we negotiate for big ticket items like we negotiate for a home, for a car, for these, like, huge purchases. And we often do so without any practice and without any training. And so I wanted to do a deep dive into it. And one of the things I did in order to do that was I watched a masterclass taught by Chris Voss. He's a former FBI hostage negotiator. In his class, he talks about the importance of emotionally reading somebody, being able to repeat back what they say, being able to mirror them. One major element of negotiation is reading the room. It's that emotional intelligence. So that's what I learned from Chris Voss. But you can learn about whatever it is you're interested in. Masterclass puts you in the room with the people who define find their fields. Over 200 classes across 13 categories. Business, writing, cooking, creativity, wellness, and more. With plans starting at just 10 bucks a month billed annually. You can watch videos or you can listen in audio format. I like to put on a video if I'm doing errands like leave it in the background while I'm folding laundry so it's very convenient. Masterclass keeps adding new classes, so there's never been a better time to get in. Right now, as a listener of this show, you'll get at least 15% off any annual [e-mail] afford. That's 15% [e-mail] afford. Head to masterclass.com afford to see the latest offer. Welcome back. Our next question comes from Megan.

[E]

Hello Paula. This is Megan Richardson. I am 58 and my wife is 71. We're realtors in Baltimore who also renovate and flip houses. We have about 130,000 in retirement accounts, 100,000 in cash, and access to a $70,000 HELOC and also work with the hard money lender who can lend us up to a half million dollars. Recently, we chose to sell a renovated property for $100,000 profit instead of keeping it as a rental, which was the initial intention. This rental would have generated $500 a month in cash flow. That decision made me wonder. At our stage in life, should we be prioritizing flips, building a rental portfolio for passive income, or investing more in retirement accounts and index funds? Our goal isn't simply to maximize our net worth. We want enough financial security and passive income to travel and spend more time with friends and families while we're healthy enough to enjoy it. Is there a framework for deciding how to balance retirement investing, real estate investing, and liquidity when your goal is both financial independence and a lifestyle freedom at the same time? Thank you, Megan.

[A]

Thank you for the question. I'm just going to dive right in with the answer. One thing I noticed right away is you mentioned that you want to travel and particularly right now. You are about to enter your 60s. You're two years away from entering your 60s. Your wife is entering her 70s. It is important to travel now because 60s and 70s, you're young. You know, my parents are 85. I've seen firsthand a major, major, major difference between the vitality and energy that you have to Travel in your 70s versus in your 80s. So if you want to travel, this is a decade. Your realtors, that is a very local job where as you know, you have to be local to the area in order to transact flipping houses. Same thing. It's a very local job. Being a real estate agent and being a home flipper is very rooted. Boots on the ground. It is not a nomadic or location independent type of undertaking, but what it does have is enormous flexibility. So you can work seasonally and spend a season working and then a season traveling and then. And take these intermittent seasons where you alternate work, travel, work, travel, work, travel. That is what I would encourage you to do. That's what I'd encourage you to prioritize, given that if you want to travel, now is the time.

[B]

I'm glad you said that, Paula, because normally I would go with the buy and hold, create cash flow, real estate stuff, but with her expertise and abilities and the need to still, I believe, create more retirement income, like working in sprints.

[A]

Yeah.

[B]

And you and I, neither one of us love flips because of the fact that it's a full time job. But for the right person, who knows, you know, I've seen it firsthand with my son, right. Somebody. He already has an established team. He's in the community. He's on top of the, the project. He doesn't have to worry about his people showing up. He doesn't have to worry about getting their attention. He does, he's. He's got a team that does this as a machine. If you can turn flipping into a machine and be there, it can be phenomenal. But what you and I see are people that are brand new to real estate going, I'm gonna flip houses because I watch whatever on tv. And, and then you learn how damn hard flipping really is. But for Megan, flipping may be a really good way to just bring in some money.

[A]

Right. Well, and that's the thing, you know, Megan and her wife are both realtors. They're experienced flippers. Like, they sound like the right people to be flipping houses. You know, I don't know you, but from everything that you've described, it sounds like you're the right people to be flipping houses. And because flipping is a very full time job, when it's done, it's done. And then you can invest part of the money and then use part of the money to travel. And especially given your ages and, and your stages in life, Travel in your 70s, because if you don't, then when you get to your 80s, you'll regret not traveling in your 70s.

[B]

Well, and Megan, you asked if this was if we thought that was a good move or not not having the long term rental instead flipping it. So I just did some, some very simple math. She got $100,000 instead of $500 a month.

[A]

Right. Which is 6,000 a year.

[B]

Yeah. That $100,000 would become $416 a month. I believe. I just used a 5% withdrawal rate off of that. I used a 5% withdrawal rate off of the 100,000. So that's $416 versus $500. So initially it looks bad. Like it would have been better to keep the house and get $500 a month versus 416. But. But that 500 bucks, Paula, I believe involves what we call capex, which is capital expenditures back into the property. So if she's getting 500 of cash flow.

[A]

Well, I haven't seen her numbers when calculating free cash flow. A lot of people run their numbers differently.

[B]

Well, that's what I'm wondering. That's what I'm wondering is what that 500 represents. Because if capital expenditures haven't yet been taken out, she clearly did the right move.

[A]

Right? Right. Yeah. So I haven't seen the way that she's run the numbers. It might be that she has deducted capex. It might be that she hasn't. I mean, whenever you're projecting cash flow, it's a projection, Right. So you're making certain assumptions about vacancy rate, occupancy rate, about repairs, maintenance, capex, about the cost of utility, landlord paid utilities. Like everything that you are doing is your best projection. And I often tell my students, don't conflate precision with accuracy because oftentimes when you run these numbers on a spreadsheet, you're inputting so many variables that you end up with an outcome that is unduly precise. And that precision can feel accurate because it is so precise. But that's the reason why it's important to calculate a range. Anyway, I'm getting a little carried away. But all of that is to say we don't know what numbers went above the line when it came to making that calculation. But what we do know is that 500amonth, which is 6,000 a year on $100,000, is essentially a 6% dividend versus a 5% dividend. But that 5% is. You can just move on. You know, you can move on, you can reinvest it. You can put it into another flip. I would take the 5%. I would. I think it was great to.

[B]

Well, even.

[E]

Yeah.

[B]

Based on what you just said, if I've got $500, that whether she's taken out her or not. To your point, that number blows in the wind, right?

[A]

Right.

[B]

It's a $500ish number. The 416 is locked down like that is. So if I have a choice between 500 maybe and 416, I don't want to use the word guaranteed, but much, much closer to guaranteed, I'll take the 416 over the 500ish maybe.

[A]

Yeah. And granted, we haven't factored taxes on either of those, but you're going to be paying, ballpark, the same tax rate no matter what.

[B]

Yeah. So I think, and especially given your back to, given what you do for a profession, the people that you know, our assumption that you probably know a ton of people that can do the flip, be able to walk away is a great thing.

[A]

Yeah.

[B]

Because also if we're back to Jack's question, Paula, if we're solving for happiness, if you don't have a property manager and you're on vacation, there's still a little thing in the back of your head just thinking, you know, what if I get the call, which for 90% of real estate investors is great, it's fine because it's not that big a deal. I think it's overblown a lot of the time. But for somebody who's looking to be at the point of their life where they're doing a lot of travel and having some fun doing other stuff, I don't want to take that call.

[A]

Right. Megan, I think what's great about the position that you're in is the flexibility that your careers allow you to be able to work in sprints, work in seasons. I would strongly encourage you and your wife to travel now, like whatever it is that you want to do in the next five years, especially given your wife's age, do not delay, prioritize having as much fun as possible as soon as possible. I think that you are spot on. There was a part of your question that I really liked when you said the goal isn't simply to maximize net worth. I think that is exactly the right attitude to have, because what you want to prioritize right now is putting aside some money for your 80s and 90s, but enjoying your 60s and 70s form those memories. You know, what do they say the, the 60s are the youth of old age.

[B]

You're saying she's almost, she's almost youthful.

[A]

She is youthful.

[B]

She's getting there.

[A]

She is youthful.

[B]

No, I'm saying she's getting there. She's almost there. It's an exciting time.

[A]

It's a great time.

[B]

As a guy who's in his late 50s, it's a great time.

[A]

Well, I think we answered it. Joe, do you have anything more to add?

[B]

I don't. I think she's great and I love how we normally are. Save flipping for other people. I love that this is different.

[A]

Yeah, excellent. Well, Megan, thank you so much for the question and enjoy all of the adventures ahead. We're going to take one final break to hear from the sponsors who make the show possible. And when we return, we're going to hear from an anonymous caller who has some questions around estate planning, inheritance and how that intersects with the real estate, especially in the context of siblings. That is coming up next. Hiring isn't just about finding someone willing to take the job. I need the right person with the right background who can move our business forward. If I wanted candidates who match what I'm looking for, I'd trust Indeed Sponsored Jobs. In fact, I did. I used to need Sponsored Jobs to to make two hires. One was for an executive assistant and the other was for a customer support and operations assistant. For both positions we had the job posting up for less than 48 hours and within that time we got so many applications we got what we needed. So if your hiring Indeed is all you need, you give your job the best chance to be seen with Indeed Sponsored Jobs. Sponsored Jobs boosts your post for quality candidates and that makes a big difference. Sponsor Jobs post posted on indeed are 90% more likely to report a hire than non Sponsored Jobs and more than 1.6 million companies sponsor their jobs with Indeed. So our two hires have both been working for us for several months now. They're great, wonderful, part of the team and we found them through Indeed Sponsored Jobs. 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.

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[A]

Welcome back. Our final question today comes from Anonymous.

[D]

Hi Paul and Joe. My husband and I have an unusual housing situation. We reside in the home that I grew up in in Texas, which my mother owns free and clear. We bought my mother a smaller one story home to live in nearby on which we took out a mortgage. She just turned 70 and is thankfully very healthy, but we were trying to be prepared with estate planning for some additional details. I have two siblings and my mom plans to split her estate equally between the three of us. I don't know the details of their financial situations, but they both have good jobs and aren't living on the edge. My mom also has a comfortable retirement after a full career as a federal worker, plus benefits from my deceased father. My husband and I plan to fire sometime in the next five to 10 years, so we're comfortable as well. I view this home as our recover home and I plan to spend a fair amount of money renovating it, likely before my mom passes. Our whole family would like your help trying to determine how to split things fairly, especially considering we don't know when this will happen and aren't looking forward to it. I'd also like to hear about any risks you think we should consider.

[B]

Anonymous this is, on the face of it, an incredibly interesting question. I can see how, like how do we figure this out for the family? I think, I think Paula I may have a fairly simple solution. I'm not sure because we're going to need more details, but I think there's a fairly simple solution. But first, her name can't be anonymous.

[A]

Yes, she needs a an official name. Do you have any ideas?

[B]

Joe I do, I do. Can we say the official name? I think we should pay homage to the person who is. You know, every show has puppet masters. Can we, can we say, can we do an homage to the puppet master of this now that we're doing these live on YouTube?

[A]

Oh, you want to name her after our our in studio producer who's here behind the scenes.

[B]

Yeah, people see the two of us, but there's somebody who's really doing the heavy lifting. So I think we should acknowledge that person.

[A]

If it's okay, let me ask in chat. She says it's okay.

[B]

All right, so, Paula, who are we calling?

[A]

Her Anonymous. Your name will be Reema, in honor of our in studio producer. She's here behind the scenes with us.

[B]

Everything that we say, Rima, actually came up with it. Paula, you and I just talking ads.

[A]

Okay, so, Rima, this is gonna make me laugh now as I answer the question.

[B]

My whole goal, my mission is accomplished. My work here is done.

[A]

All right, so, Rima, so I'm just thinking through this out loud. So you and your husband purchased a home for your mother. That. Because there is a mortgage on that home. My assumption is that that means that the home is in your and your husband's name. Especially if there's a mortgage on it, that mortgage is going to be in your name, which means the deed to the home likely is also going to be in your name. That means that that home is not part of the estate plan. It's outside of the estate plan. So that should be outside of the scope of any estate plan related question. I just want to make sure that I'm understanding that correctly. That is my understanding of that particular element of the situation. If that is not the case, like if you purchased this home for your mom and then gifted it to her or made some other type of transfer, then that would have to be a separate conversation. Joe, is that what your understanding is as well?

[B]

Well, yeah, but I think there's a difference between what, like, legally is part of the estate and what mom's intentions are. If mom's intention is for this to be split equally, they buy a house for mom. Yeah, that would still compute. It's much more about the house they live in than the house that they purchased her.

[A]

Yeah. So then the house they live in is the one that they want to put renovations into.

[B]

I'm glad we're talking about this before. Before the renovations, because I think this is going to be easier, right, Bill?

[A]

Because the first question that comes to my mind is when their mom passes the house they live in, will that then be appraised at its value at that time, which means its value after renovations? And will that be counted towards their share of the inheritance with the siblings getting equal assets? Right. Or would the value. You know, do you appraise the home right now pre renovation?

[B]

I think you have To.

[A]

Yeah. And then do a separate appraisal afterwards. Find the. The forced appreciation that comes from the renovation, and then subtract that out. When you're determining the size of the

[B]

estate, that's 100% what you have to do.

[A]

Yeah. I would most definitely work with an estate planning attorney on this.

[B]

And then the fact that they took out the mortgage for Mom, I mean, this is mom while she's alive. So there's going to be some calculation that every month they make the mortgage payment on behalf of mom that also figures into this as well.

[A]

I mean, maybe. But if that home is still in their name and it is not counted as part of the estate, then that would be moot, because then they would. Again, they would simply own both homes, again, legally.

[B]

But you've got Mom's intentions. And. And that's where I'm drawing the difference. If Mom's intention is for it to be split evenly and they are paying into a mortgage on behalf of Mom's lifestyle, then I think that gets factored in. If it's meant to support mom where the other house would have supported mom without the mortgage. You know what I mean? The other house, they're doing it now for the convenience of everybody. But that monthly mortgage payment then also figures into it as well. I understand, legally how it works.

[A]

Yeah.

[B]

When we take Mom's intentions, that's going to be a different thing.

[A]

Yeah. So I'm thinking about our prior conversation about the appraisal, the appraisal of the home right now, and then the appraisal of the home after the renovation is done. Because I'm also thinking, let's say mom lives for another 20 years, and then when she passes the appreciation on that property. I think the reason that you want to do an appraisal now and then do an appraisal immediately after the renovation is because otherwise, if you're only finding the value of the property 20 years from now, after mom passes, then the market appreciation on that property gets co mingled with the forced appreciation from the renovation and that co mingling, it just. It gets blended together in a way that's going to be very difficult to untangle.

[B]

And when you see the Delta, then when mom passes between what the house is worth and the trajectory it was on, I think it's going to be easy. Not easy, but. But I think there'll be amicable ways to say it would have appreciated 2x without these. And to come up with a number that everyone appreciates.

[A]

That everyone appreciates.

[B]

I'm on fire. But especially. And I like the fact that she's asking this, that Rima's asking this question now. Because if everybody agrees now that this is the way we're going to do it, I think you evolve a lot of battles down the road.

[A]

Right. But it needs to be put in writing. Very much in writing. And that's today. Yeah, today. And you need to have an estate planning attorney, a Texas estate planning attorney, because Texas is a community property state. It has a set of rules that are very different from a lot of states in the country. So you need specifically a Texas estate attorney.

[B]

Now, in terms of pitfalls, I think, Paula, we just nailed the pitfall, which is you don't get everybody on the same page today.

[A]

Yeah.

[B]

Because ultimately there's a couple things that could happen. Number one is because of the difference between what mom wants and what is would legally just happen on paper with the shuffling of the deck that you've done with the two houses, I think it's important to make sure if Mom's wishes are going to be fulfilled and everybody is equal, then we get it down in writing today. Because the part where it gets ugly is what is ugliest, I think, is Mom's wishes and the renovation.

[E]

Right.

[A]

Because with the renovation, there could be some siblings who make the argument like, well, the renovation should simply be deducted at face value. And then there could be the counter argument of while the renovations create forced appreciation, and forced appreciation, by definition, is additional value above and beyond the cash value spent on those renovations. That forced appreciation comes largely from the effort that it takes to manage and oversee and make all of the decisions associated with the renovation. Renovations are not very, very difficult. And yet determining the method of valuation, that becomes paramount right now.

[B]

Yeah.

[A]

Right. Because there's also opportunity cost for, you know, of tying that money up into renovations as opposed to putting it into

[B]

vtsax, which also means that if there's going to be any disagreement, you know, you'll get it out in the open.

[A]

Yeah. So they're going to need some written. The whole family, mom and all the siblings are going to need some written agreements that are supervised by an estate attorney. Right now, like today, before any of the renovations begin. That is onerous and it's in the moment. It's going to feel like overkill. But down the road, you will be happy that you've done it.

[B]

So happy.

[A]

Yeah.

[B]

I could just imagine how ugly this is later.

[A]

Yeah. And there are issues that we haven't even talked about. Like, Rima, you mentioned your mom is. She's young she's 70, she's still in good health. You know what's gonna happen if 15 years from now she needs dementia care or long term care? There are all kinds of things that could unfold over the next 15 to 25 years or more, 30 years. I mean, she's 70, she could live to be a hundred. And there are all kinds of things that could unfold in that interim. The good news is the house would be paid off by then.

[B]

Well, and the great thing too, by the way, is that competent estate planning attorney is going to be able to flesh all those out today.

[E]

Right.

[A]

The risk here is, I think, Joe, you said it well when you said shuffling the deck, they traded houses and that trading of houses is a little bit of deck shuffling. Especially because now people have emotional attachments to houses that are not in their name. Right. And that is always a bit of a red flag. Like when you feel a sense of ownership and when you feel an emotional attachment to a property that is not titled in your name, that's a red flag recipe for things could go bad.

[B]

Which brings up another scenario which is, is there a way to just solve the shuffling today to just somehow negate that? I don't know what that would be, but I think at the very least I'd ask myself that question.

[A]

It'll be difficult because of the mortgage. As long as there's a mortgage on the property, any kind of retitling of the property could trigger the due on sale clause.

[B]

Well, I guess what I'm saying is, is there a way, I don't know how long ago this house swap happened, but is there a way to make that cleaner so that just the residual part becomes part of mom's estate? Some stuff is part of mom's estate, some stuff isn't. You know what I mean? And then we just wipe our hands of this nastiness of revaluing later today. Is there a way to just get, get it all down and done today so that mom's estate later is what Mom's estate is and Mom's wishes are what Mom's wishes are? I don't know. I don't know.

[A]

Yeah, I don't know. That might ultimately end up being even more complicated.

[B]

Well, again, more complicated today. But man, would it make it easier later.

[A]

Right, right. Yeah. Particularly if they appreciate at very different rates.

[B]

Right, right.

[A]

Yeah. Because that's a major risk. Imagine if one home appreciates at a substantially higher rate than the other. Just through, through the mysteries of market based appreciation. Right through the.

[B]

They're in Texas, they find oil in the backyard.

[A]

Yeah, yeah, exactly. I don't know if we could fully answer the question. I think what we really just did was raise issues and red flags, like raise issues to become aware of.

[B]

I think we also answered the question and I think the only way possible, which is it's time to bring in the. Bring in the pro.

[A]

Yeah, yeah, exactly. Well, thank you, Rima, for the question. Please call us back and let us know what agreements you end up making. And our. Our in studio producer was just. She just chatted us and said, you're welcome. Thanks, Rima. Joe, we've done it again.

[B]

We did. It was so fun, as always, and so just so interesting to see the wide variety of answers. I mean, we told Jax that some of the advisors you want to add not to add advisors, and we told Rima that she should get an advisor in the right area. And then we told Megan that the thing that we usually tell people not to do. Do it.

[E]

Yeah.

[A]

Which is flip houses. Yeah.

[B]

Yes. So it is definitely shows how personal, personal finance can really be.

[A]

Exactly. Well, Joe, where can people find you if they would like more personality?

[B]

Oh, we've got some fun this week. This is greatest hits week over at Stacking Benjamin's, which means that we're playing some of the things that really lit me up over the years. About three years ago, Scott Galloway was on for the second time. And if you've never heard Scott Galloway, you have no idea what you're missing. And if you've heard Scott Galloway, you, you know you want to hear, because Scott Galloway always drops bombs wherever he is. And Scott Galloway said some doozies a few years ago. And it's neat to go back to Scott Galloway three years ago when he was less of a huge. He was a huge name then, but less of a huge name than he is today. And, you know, some of the advice he gives, which is always evergreen, but also some of the predictions that he makes, which are never evergreen, and it's fun to see if they came true. So that's happening this week on Stacking Benjamin's while I'm visiting with my buddy Paula. You can listen to Scott Galloway.

[A]

Yes. Excited for you to be here in New York, Joe.

[B]

We're gonna have fun. Go to. You are taking us to a restaurant that you and I went to, but now Cheryl gets to go, which it's called Peasant.

[A]

It's for peasants.

[B]

Oh, look it up. It is far better than. Than Peasants. I think it's misnamed, but it is cool. If you ever wanted to have spaghetti out of a mason jar, which I know everybody's begging for.

[A]

Well, thank you so much for being an afforder. If you enjoyed today's episode, please do three things. First, share this episode with the people in your life. Friends, family, neighbors, colleagues.

[B]

With your realtor, with your estate planning attorney.

[A]

With a person who flips houses.

[B]

Oh yeah. With your house flipping team, the carpenters. The pros on the ground that are

[A]

making that happen with the people, you know who vtsax and Chill.

[B]

They especially need that.

[A]

Share this with all of those people and more because that is the single most important way that you spread the message of F I R E. Remember, we have a free giveaway. It's a guide. It's called 7 Expensive Mistakes that rental property investors often make. You can download it absolutely [e-mail] mistakes that's afford anything.com mistakes. Learn about the seven big oopsies that trip up a lot of rental property investors. Afford anything.com mistakes.

[B]

I love how you use all the technical terms. Oopsies.

[A]

The oopsies. Exactly. Also, open up your favorite podcast playing app. Hit the follow button so you don't miss any of our amazing upcoming episodes. And while you're there, please leave us up to a five star review. Thank you again for being an afforder. I'm Paula Pant.

[B]

I'm Joe Salsihai and we'll meet you

[A]

in the next episode.