Afford Anything with Paula Pant

Dr. Jim Dahle:
This is White Coat Investor Podcast number 254 – Afford Anything with Paula Pant.

Dr. Jim Dahle:
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Dr. Jim Dahle:
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Dr. Jim Dahle:
Our quote of the day today, which we should do right here upfront, since we're going to have a really great guest comes from Henry David Thoreau. He said, “Our life is frittered away by detail. Simplify, simplify.” And boy, there's a lot of wisdom there. All right, you're going to love our guest. Let's get her on the line.

Dr. Jim Dahle:
Our special guest today on the White Coat Investor podcast is Paula Pant, who you may know from her work in the FIRE community. She's a prominent personal finance blogger and podcaster, etc. In fact, she has been blogging longer than I have, longer than Mr. Money Mustache has. Paula, welcome to the White Coat Investor Podcast.

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

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

Paula Pant:
Absolutely. In terms of my upbringing, I come from an immigrant family. I am technically a first-generation immigrant. I was born in Kathmandu, Nepal, but I came to the United States as a baby. And so, growing up, my family and I, my parents and I were getting settled in the United States for the first time and my parents going through at a later age in life, in their 40s and in their 50s were going through a lot of the experiences that people sometimes go through in their teens and 20s.

Paula Pant:
They were buying their very first car. They rented their very first apartment. Then they bought their very first starter home. They were hitting all of those milestones in their 40s and 50s. My dad, in fact, did not open a retirement account until he was 50 years old.

Paula Pant:
They were very frugal out of necessity and we actually lived a very comfortable life, but the reason that it was comfortable was because we were so frugal and so attentive to money. And so, I learned a lot of money scarcity. Even though we had a very good upbringing, I learned the lesson that money is something that needs to be very, very well managed. It gave me this sense of anxiety. I wanted to make sure that I always had enough. Even though I was comfortable, I always had a fear of never having enough.

Paula Pant:
And it was that sense of anxiety, frankly, that got me into this space because I, in my 20s after I graduated from college, got my first job out of school. I found more joy or more satisfaction in saving and investing than I did in spending on discretionary items. And it was largely because if I knew that I was building up my investments, that reduced my anxiety a little bit. If I was spending on discretionary items, if I was going out to the bars or whatever, buying clothes that did nothing to quell that sense of, “Oh my goodness, things might fall apart.”

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

Paula Pant:
I went to the University of Colorado at Boulder and after graduating … Okay. Well, take this back a little bit. While I was in school, I really wanted to study abroad, but I couldn't. The study abroad programs were prohibitively expensive, $15,000 to $20,000 for a single semester. And I wanted to get through school debt-free.

Paula Pant:
I gave it some thought and I realized I don't actually want to study. I just want to go abroad. And so, my thinking as a college student was that I would graduate, work for a few years, save up some money and then just travel overseas. And that's exactly what I did. I graduated. I took a job out of school as a newspaper reporter for a small local paper in Colorado. My starting salary was $21,000 per year. This was in 2005.

Dr. Jim Dahle:
Rolling in the big bucks now, huh?

Paula Pant:
Right, exactly. Whenever I say that they're like, “$21,000 a year? Is that like 1960s dollars?”

Dr. Jim Dahle:
Just by comparison. I was a resident that year. I was making $37,000 as a resident physician. So, $21,000 was not a lot of money at that time for sure.

Paula Pant:
Yeah, exactly. Exactly. My starting salary was $21,000 at the time that I quit that job, which was in 2008, my ending salary was $31,000. And so that was the most that I ever made as somebody else's W2 employee.

Paula Pant:
While I was at that newspaper, I started freelancing. I would write freelance articles for magazines and websites. And I saved on average around $800 a month over the span of three years, which accumulated to $25,000. Basically, over the span of three years, I'd saved essentially one year's worth of income. And once I did that, I had enough that I felt confident enough to be able to quit that job and bought a one-way plane ticket to Cairo, Egypt.

Paula Pant:
And then at that point, I spent the next two years living out of a backpack traveling around. I mostly stuck to countries where the dollar exchange rate really worked in my favor so that I could geo-arbitrage. And I travelled through the Middle East, through Southeast Asia. I spent a little bit of time in Australia, New Zealand. I lived out of a car and camped that whole time.

Paula Pant:
I spent two years just backpacking, living on around a thousand dollars a month, largely by going to one place and parking myself there. And then just staying there. The expense comes in transit, but I found that if you go to Lao and then just find your little spot, stay there, your cost of living is not that high.

Paula Pant:
As I was doing this, my friends kept saying things like, “I would love to do that, but I can't afford it.” That was the number one thing that I heard over and over and over. And that remark was coming from the same friends who lived in nice apartments with stainless steel appliances. They would buy $14 martinis when they went out, they drove nice cars. And the message that I wanted to convey to them was “You can afford it. You just can't afford everything. Like life is not an endless series of ands, and choosing one thing comes at the opportunity cost of choosing others.”

Paula Pant:
And that was really where the idea came from of creating this brand to Afford Anything that is really based around this notion of opportunity cost, that every decision that we make, every spending decision comes at some type of a trade-off, whether we're conscious of it or not. And oftentimes we sacrifice what we want most, for what we want now.

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

Paula Pant:
Exactly.

Dr. Jim Dahle:
That you would spend earning the money to purchase that thing.

Paula Pant:
Exactly. Exactly. Essentially, it's the allocation of limited resources. When we think of any limited resource, time, money, effort, attention, there's only so much cognition that we can give to something. And so, I see people, fast forward to today, in this space, I'm sure you see it too. I see people who spend a lot of time-mileage hacking, like they're obsessed with credit card churning or they're obsessed with over-optimizing couponing deals or whatever it is.

Paula Pant:
That's great but sometimes that comes at the cost, all of that hacking comes at the cost of building something, whether it's a business or a non-profit or whatever it is that you want to build, creating some type of legacy project that you could leave in the world. There's only so much that we can do. And oftentimes the notion that we can endlessly be additive is I think a flawed notion. The philosophy that I really try to impress upon people is that we may think we're being additive, but we're actually, whether we're aware of it or not, substituting.

Dr. Jim Dahle:
Are you sure you got a degree in journalism and not economics?

Paula Pant:
Well, thank you. Actually, my degree is in sociology.

Dr. Jim Dahle:
Sociology. Okay.

Paula Pant:
Yeah. Yeah. I weaseled my way into that newspaper reporting job.

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

Paula Pant:
It wasn't a conscious decision to transition from blogging to podcasting. Largely, I followed my enthusiasm and I followed my curiosity and I love the broadcast mediums. And it felt like a very natural progression. Newspaper reporter to freelance writer to blogger to podcaster. That was a very natural progression, but none of it was strategic or intentional. It largely stemmed from the fact that I knew that I would have the highest quality output in whatever medium attracted me the most.

Paula Pant:
People often say follow your passion. And I think that passion is a loaded term. It's an intense word. How do you know what you're passionate about? And particularly given the fact that passion often is the consequence rather than the cause of doing the work every day.

Paula Pant:
Oftentimes if a person has minimum viable interest in a given field or a given activity, they go into that activity. And once they're in it, they become aware of how much they don't know. They transcend from unconscious incompetence to conscious incompetence. And once you make that transition and you know how much you don't know, it sparks curiosity that makes you more interested in it and therefore makes you more passionate about it.

Paula Pant:
To answer your question about the transition from blogging to podcasting, podcasting I was curious about it so I began doing it. And then once I started doing it, I realized how much there is to this field that I didn't yet know. How many skills I could develop that I didn't even know existed prior to me trying it. And once I discovered that, once I discovered how much more there is to learn, that made me even more enthusiastic about it.

Dr. Jim Dahle:
Yeah. It's awesome that it was driven by your enthusiasm. What I found is I try to go wherever the audience is. I'm trying to take this message to my audience. And what I found over the years is fewer people were reading blogs and more people were listening to podcasts.

Dr. Jim Dahle:
And so, although I consider myself a blogger, the truth is more people listen to my podcast than read my blog posts. It's interesting that I feel like it's almost been a forced transition a little bit, even though I probably feel more passionately about writing than I do about producing podcasts or speaking or doing video or any of that stuff. But such is life, I suppose.

Paula Pant:
Exactly.

Dr. Jim Dahle:
All right. Let's talk a little bit about investing. One of the memorable phrases you've used is that “Your 401(k) is like your face. Don't touch it.”

Paula Pant:
Yeah. That came about right at the beginning of the pandemic. When everyone was saying, “Don't touch your face, don't touch your face.”

Dr. Jim Dahle:
What's the problem with messing with our investments, with messing with our face?

Paula Pant:
Well, particularly at the beginning of the pandemic, as you recall, the stock market, everyone got used to this 11-year bull run that we had had prior to when the pandemic began. And the problem with an 11-year bull run is that people become so comfortable with this idea that the market is just going to continually go up, that people begin to see the market as a high yield savings account.

Paula Pant:
People forget that the market does go down, and March 2020 was a rude awakening in a lot of different ways. I saw a lot of people in my audience panic, especially the younger generation, the people who were too young to have experienced the market decline of 2008, 2009. And this was their first test. They were really panicking, but everyone was.

Paula Pant:
No one had ever lived through a global pandemic before. And so, there was very much this notion of this time it's different. Which people say every time. Every time, this time it's different. The issue of course, and it's obvious in hindsight now, the issue with panicking in March, 2020 and turning paper losses into real losses, is that if a person had done that they would've missed the rebound. Every recession differs in terms of three factors. There's severity, there's duration, and then there's in terms of multiple recessions, there's frequency. March, 2020 was a recession that had high severity, but short duration.

Dr. Jim Dahle:
Yeah. Basically, none of us went to work for six weeks.

Paula Pant:
But the market rebounded quickly. You think of March 2020, the market dropped precipitously, and then it immediately rebounded. And within a couple of months, it was back to where it was. And that stands it starts to contrast to 2007, 2008, which was high severity, long duration. Then you look at frequency also. You look at the amount of time between recessions and that frequency is declining. The duration between recessions is getting longer and longer when you look at the historic averages. Which means that people start losing their memory about what the last few recessions were like.

Paula Pant:
And to answer the question about, “Oh, what's wrong with touching your 401(k)?” Every recession differs when it comes to severity and duration, and there's no way to predict what the next one is going to be like, how long it's going to last, how bad it's going to be. And there's also no way to predict when it's going to happen.

Paula Pant:
Given that all of those are outside of our locus of control, the thing that we have to do is stay inside of our locus of control. And that means commit to a strategy, commit to a particular strategy around your asset allocation and your contributions, and stick to that regardless of what is happening in the market, which means do not be reactive to more conditions.

Dr. Jim Dahle:
Yeah. I think that's great advice. Even when it's not a terrible bear market, it seems like every time we think about adding an asset class to the portfolio, every time we think about changing our investment strategy in some way, we are almost surely adding something that's recently done well. And that recency bias leads us to a performance chase. And of course, everything's cyclical after it's done well, it tends to not do so well for a little while.

Dr. Jim Dahle:
I think the classic example for me was when I added REITs, real estate investment trusts to my portfolio in 2007. Subsequently had a 78% loss in the asset class. Now, I have held on and obviously added to it over the years. But I really did, I lost 78% of that initial investment. Because why? Well, I was probably performance chasing.

Dr. Jim Dahle:
Now I've held onto it and added to it. And my long-term returns in the asset class have been just fine, but you got to be careful anytime you make a change. It's usually best not to touch it. And if you're doing it all the time, you're going to have that effect all the time in your portfolio. So, I think you have to be really careful.

Paula Pant:
Right.

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

Paula Pant:
Sure. I stick primarily with broad market index funds. I have what's known as a barbell allocation. I have all equities and then a heavy cash allocation. I don't invest in bonds. That's not something that I would recommend for the average person. I'm personally comfortable with doing that, but I know there's risk tolerance and then there's risk capacity. Risk tolerance is psychological, risk capacity is logistical. And so, I know that for me, having tested this in the real world for many years now that I have both the risk tolerance and the risk capacity to be able to have that barbell allocation, the majority of people probably do not.

Paula Pant:
For me, I'm very comfortable having all-equities allocation. Most of my equities are index funds tilted towards small-cap. Small-cap index funds, large-cap index funds, sort of the VTSAX like broad market, total stock market index fund plus an international allocation and a small-cap allocation. I also have probably around 10% to 12% of my portfolio in individual stock picking. And that's just sort of the fund part of my portfolio. And I have a crypto allocation as well, cryptocurrency allocation.

Dr. Jim Dahle:
Large crypto allocation, or a small play money kind of allocation?

Paula Pant:
Small play money allocation.

Dr. Jim Dahle:
I understand you had some real estate investments as well, or was I mistaken about that?

Paula Pant:
I do. I have seven rental units. They are all free and clear. Mortgage completely paid down, totally free and clear. That's actually a big part of the reason that I'm so comfortable having a barbell allocation in my market investments is that I view the income stream that comes from those fully paid off rental properties as the income component of my portfolio.

Paula Pant:
And so, if you think about it, any asset gains value in one of two ways. There's the capital appreciation on the asset itself. And then there's the dividend or income stream that it generates.

Paula Pant:
When I think about my seven fully paid off rental properties, those generate a very significant income stream. While they have appreciated, they are not capital appreciation plays, they are income plays. Given that I have that as in my overall portfolio, as an income play, I'm then able to tilt my market investments towards capital appreciation plays.

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

Paula Pant:
Well, to the second question, how active should I be? My question back to anyone who is asking it is what are your career ambitions? How do you want to spend your time? Because if you are going to be active, that's going to come at the cost of any other career or business activity or life activity that you could undertake.

Paula Pant:
If you are going to be flipping houses or even going into syndication deals, which require a heavy amount of due diligence, that is going to come at the cost of being able to do anything else with that time. Whether you want to start your own non-profit, open your own business, join the circus. I don't know what you want to do, become a certified scuba diver, it's your life.

Dr. Jim Dahle:
I have a partner from residency. They took a year off and they were scuba diving instructors, essentially.

Paula Pant:
Oh, yeah. That's fantastic.

Dr. Jim Dahle:
Two emergency docs. They spent a year teaching scuba in Roatán actually. So, it's completely possible.

Paula Pant:
Exactly, exactly. That is a fun and fantastic thing to do. And if you're flipping houses, you can't be doing that. That's the first question that I would ask back, given all of the things that you could possibly be doing with your time, with your life, is that what you want it to be? And if the answer is no, if you want to set up a system that is as passive as possible.

Paula Pant:
And let me make an asterisk here. When I say passive, I want to be clear. Passive is not a euphemism for free. Passive income is not a euphemism for free money. Passive is a synonym for residual. If you want to set up a system that is as residual as possible so that you don't have to think about it, then direct ownership of properties that are managed by a property management company is probably in my opinion the most residual structure that you can set up.

Paula Pant:
If you take on any other strategy, whether that's wholesaling, flipping, syndication deals, even turnkey investing. People are attracted to it because it seems on the surface like it would be less work. But what they're really thinking is that it seems on the surface like it's a get out of due diligence free card, and it is not. In fact, if you're doing it right, turnkey investing or syndication deals require even more due diligence than direct ownership of a property that you bought yourself through a real estate agent.

Dr. Jim Dahle:
Because you also have to vet the manager and all the people involved.

Paula Pant:
Exactly. Exactly.

Dr. Jim Dahle:
Not just the property.

Paula Pant:
If you want the most hands-off residual, passive, “I don't want this to take up a whole lot of my time or energy or effort”, buy your own property from the MLS, using a real estate agent, and put a property manager on it. Boom. You're done. That's the easiest way to go about it. And then anything else from that is an iteration of difficulty.

Dr. Jim Dahle:
At least upfront.

Paula Pant:
Yes. Upfront. There's an added iteration of difficulty.

Dr. Jim Dahle:
Yeah, for sure. What would your balance be if you had to include your real estate properties and your asset allocation? Are half of your money in index funds and half in real estate investing? How does it work out for you?

Paula Pant:
Given market fluctuations, there's never a perfect answer, but if I had to guess right now, I'd say probably between 40% to 50% of my net worth is in real estate. And the other 50% to 60% is in market investments, including crypto.

Dr. Jim Dahle:
Why did you choose not to leverage the properties?

Paula Pant:
I initially leveraged them and then I paid them all off. I completely understand that that is not the most mathematically sound approach. I completely understand that I am forgoing the opportunity to arbitrage the difference between the mortgage payment and the way to grow it.

Paula Pant:
But when I think about risk, I look at risk across all activities that I'm undertaking. And so those activities include my market investments, my real estate, and also my career, my entrepreneurial activities. The single biggest risk that I'm undertaking is the ownership and growth of Afford Anything. It's a company, it has employees. I mean you know the statistics around small business. Most small businesses fail.

Paula Pant:
We just celebrated our 11-year anniversary from the founding of Afford Anything. It is the single riskiest thing that I am doing. It has the single biggest payoff of anything that I'm doing, but I am every month committing more dollars and other people's livelihoods. The livelihoods of my employees, I'm putting all of that at risk. And so, if I am going to take on that level of risk in this arena of my life, then I want the other arenas of my life to be as de-risked as possible.

Dr. Jim Dahle:
Fair enough. The other benefit, of course, a paid-off property has a lot better cash flow, because none of it's going to a mortgage payment. And you basically completely eliminated leverage risk from your life. The interesting thing about bankruptcy is you basically can't go bankrupt without debt. If you don't owe anybody anything, you can't go bankrupt. At worst you're at zero.

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

Paula Pant:
Exactly. And one thing that I often tell people when it comes to real estate is, think about the different forms of risk in real estate. You have leverage risk and if you imagine a bunch of horizontal lines each representing a spectrum, you've got the spectrum of leverage risk. You've got the spectrum of neighborhood risk, depending on the type of neighborhood that the property is located in. You have the spectrum of risk that relates to the age of the property. And then you have another spectrum of risk that relates to the condition of the property.

Paula Pant:
You have all of these separate spectrums of risk that are independent of one another. And then if you imagine a slider along the spectrum, if there's going to be a lot of risk along one or more of those spectrums, it makes sense to then put the slider on the de-risk side of some of those other spectrums. So that overall, the whole picture can balance out.

Paula Pant:
In other words, if you were to buy a property that was maybe in a neighborhood that's not so nice, then you might want that to be a property that's in good condition, or you might want to at least have the funds to improve that property as soon as you buy it so that you don't have the risk of both neighborhood risk and risk associated with the condition of the property.

Paula Pant:
Those are the ways that I think about risk or that I teach my audience to think about risk when it comes to thinking through what are the different forms of risk that I'm taking on when I'm purchasing a property.

Dr. Jim Dahle:
Yeah. I think that's a great way to think about it. I think it's exactly right that you don't want to be maximizing risk in every aspect of not just the property, but of your entire life. Every time you can justify taking on more risk here and more risk here and more risk here. But if you step back and look at it all comprehensively, it doesn't take much for it all to blow up. And really, in investing in particular, that's the name of the game. It’s to not blow up. And if you can just stay in the game long enough, you're going to win it.

Paula Pant:
Right. Exactly.

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

Paula Pant:
Yeah, absolutely. This is a free download that's on my website. affordanything.com/mistakes is where we keep it.

Dr. Jim Dahle:
Affordanything.com/mistakes. Give us a teaser. Give us a couple of them.

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

Dr. Jim Dahle:
Opinions aren't the same thing as good advice, huh?

Paula Pant:
Exactly. Exactly. I recall once touring this triplex with a real estate agent, and at the end of the tour, I asked her, “Hey, what's a typical water bill for this triplex?” This was in an area where it's very customary for the landlord to pay for the water and sewer bill for the building. If she had simply said, “Oh, I don't have that information on hand. I can look it up when I get back to my office and somebody will email you within 48 hours,” that would've been fine.

Paula Pant:
But instead, what she said was, “Well, I don't know what it is, but if it's high, just raise the rent to cover it.” Fortunately, even though that was early in my real estate investing days, fortunately, I at least had the common sense to recognize that the rent is set by market prices. I can't just infinitely set the rent higher because my operating costs have risen.

Paula Pant:
But had I been a little bit more naive, I might not have known that. And that's an example of people, agents, managers, people will often tell you things. I can't tell you how many times people, agents, managers, lenders have said, “Hey, this neighborhood, the values are going to go up.”

Paula Pant:
When they say that, they don't have any skin in the game. If they're wrong, there's no accountability for them being wrong. They can tell you that they think that the value of this condo is going to rise rapidly in the next three years. But once you close the deal, they're not accountable to what they've said. Having the judgment to understand when people are giving you good versus bad advice, that's something that takes some time to hone.

Paula Pant:
Another mistake that I made and that a lot of real estate investors make early on is buying based on market appreciation versus buying based on factors that are within your locus of control.

Paula Pant:
If you're buying because you know that you yourself can add value to a property through what's known as forced appreciation, which are improvements that you make, you yourself, you and your contracting team make. That's an example of something that is within your direct control, the value of the property rises based on actions that you and your team have taken. That's great. And I fully support that.

Paula Pant:
But if you are buying based on broad macroeconomic factors that are outside of your control, that is I think a mistake in a way to approach this field. Those are some of the more common mistakes.

Dr. Jim Dahle:
Let's turn the page a little bit. You're probably best known in the FIRE community. Financial Independence Retire Early. And FIRE of course requires a healthy dose of delayed gratification. How can one find a balance between this YOLO, you live only once life, and FIRE?

Paula Pant:
I figured there are a few different answers to that. First, as I alluded to in the beginning, financial psychology. Either you're the type of person who engages in retail therapy and finds joy through spending, or you're the opposite. You're the type of person who has a lot of money anxiety and finds joy through saving.

Paula Pant:
The first thing that a person needs to do is figure out which problem they need to solve. Because the people who naturally are spenders are probably already a little bit more tipped towards the YOLO side of the lifestyle and need to work on how to find joy in watching your investments go up.

Paula Pant:
Work on how to find joy in taking your enthusiasm for buying stuff and channeling that into “Check out this really cool index fund that I just bought. Or check out this great rental property I just bought. Oh, cool. I just bought this crypto coin that I really believe in.” You channel that enthusiasm for making a purchase into purchasing assets.

Paula Pant:
The people who are on the spending side, that's the way to do it. I don't believe in delayed gratification. It's that you are still fully gratified, but the source of that gratification is the joy and the gratification that comes from buying assets. And that is just as emotionally gratifying as buying a big screen TV or a shirt or whatever else it is that you otherwise would've bought. That's how I would answer it for the people who love spending.

Paula Pant:
Now, for the other side of the coin, for the people who suffer from money anxiety, and who have a hard time parting with their money, a lot of that stems from this really deeply internalized sense of scarcity, this fear that there's never going to be enough.

Paula Pant:
And so, overcoming that fear by embracing the sense of abundance actually oftentimes requires more spending and also more giving. Because when you have the courage to spend and the courage to give, that's a way that you can remind yourself that you do have abundance and you do have the capacity to earn more and it's okay to part with money.

Paula Pant:
Sometimes giving can be a check to a charitable organization. And sometimes it can be as simple as picking up the tab when you go for drinks with your friends. For a person who really suffers from a lot of money anxiety doing something like that is scary because there's a sense of, “Man, if I grab this bar tab for my friends, this is a lot of money, and what if I never see it again?” But if you make a practice of that, then you learn that money will be there for you and you learn to internalize this idea of abundance.

Paula Pant:
The approach that you need to take depends on which of the two sides of the spectrum you're struggling with. And for most people, it's rare to be in that happy center medium. Most people have a tendency to one side or the other.

Dr. Jim Dahle:
Yeah. I love your idea of giving as an antidote to this anxiety that you can't lose the money. It sends a message to your psyche saying you have enough and to spare. And I think that's a wonderful, wonderful thing to tell your psyche, because it's given you all these negative messages all the time, and that's one great way to push back against it.

Dr. Jim Dahle:
Now, it seems to me in the FIRE community, and maybe this is a misconception, but I think it's true with enough people that we can talk about it. There are a lot of people that want to FIRE, they're reading FIRE blogs, listening to FIRE podcasts, going to FIRE conferences, and they hate their job. They're not yet in a position where they can retire, but they don't like what they're doing. They're bored with it or it's not fun, or they hate their boss or whatever. What advice do you have for those people?

Paula Pant:
I think life is too short to hate what you're doing. In addition to that, those of us who are frankly educated enough and fortunate enough to be in the FIRE movement, to be listening to a podcast like this, we have the unique opportunity to make some significant contributions to our world in whatever field you want to do it in, and in through whatever capacity you want to do it.

Paula Pant:
And to take the opportunity- to take all of your gifts, your talents, your skills, your knowledge, your energy, your health, your ability to do something right now, to take all of that and throw it away, throw away this opportunity that you have to make a contribution, and I don't want to sound judgmental, but I find that to be very sad, very unfortunate.

Paula Pant:
I would urge people not to wait it out for the next 10 to 15 to 20 years. What a waste of the most valuable years of your life. There's a very short and unique window in a person's life where they are healthy enough to be able to go out there and do something amazing. And so, don't squander that window.

Paula Pant:
And if that means that you need to make a career change right now, even if that's going to delay your eventual “retirement” in the traditional sense of the word, that's worth it, because you're going to enjoy the journey along the way, you're going to enjoy that process. And life is far too short, and your skills are far too valuable to waste it in something that you hate.

Dr. Jim Dahle:
Now, this is particularly difficult with my audience. My audience is almost entirely high-income professionals, mostly doctors. They spent 10, 15 years learning their craft, sometimes taking on a massive amount of debt. They may not have another set of skills that necessarily can be turned into that sort of an income at least anytime soon.

Dr. Jim Dahle:
A lot of people in the FIRE community, they talk about punching out at 35. A lot of my audience is coming out of their training at 35. They're not even back to broke yet by 35. Do you think those folks should still be interested in relatively early financial independence? Is it worthwhile, still trying to be financially independent by 35 or 45? Or is it okay to spread that out and really not hit financial independence until their 60s?

Paula Pant:
Well, first of all, anytime that we talk about age, age needs to be contextualized in the amount of time from the point at which your career began. As I mentioned, my dad didn't open his first retirement account until he was 50, because we were immigrants. And so, he was in his late 30s when he came to the US, and he was 41 or 42. He was a college professor. He was a professor of civil engineering. He got his PhD at the age of 41 or 42. And so, that was when he began his career in his early 40s.

Paula Pant:
You can't compare yourself to people who start working in their 20s when you're in a position where due to career choice or due to life circumstance, you don't begin your career until your 30s or 40s.

Paula Pant:
From the point at which you begin your career, sure, you can accelerate your timeline to retirement. You look at my dad, he started his career at 41 or 42. He necessarily had to accelerate his timeline just due to the fact that once he hit his mid-sixties, that's a 25-year timeline to retirement. That's just how it works.

Paula Pant:
The first thing I would say, forget about age and contextualize it, in terms of length of career. The second thing I would say is you mentioned many people in this audience have very highly developed skillset that translates to a high income, but that they may not enjoy the way in which they're practicing it right now.

Paula Pant:
But as a result of having such a highly developed skill set, I would challenge a person to what are the ways in which they can iterate. I'm not saying become a deep-sea scuba diver, but what are the ways in which they can iterate so that they can take the skills that they've developed and put those into practice in a way that they enjoy more and in a way that continues to make some type of contribution. Some type of meaningful contribution.

Paula Pant:
What are the attributes about what they're doing that they dislike and how can those specific attributes be addressed? Maybe it means going to a different city or to a different country. There may be some sort of iteration, some tweaking that can create a progression that would allow them to continue to use the skills that they've worked so hard to develop in a manner that is more sustainable for the long term.

Dr. Jim Dahle:
I love it. Optimize for longevity.

Paula Pant:
Exactly.

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

Paula Pant:
Yes, yes, absolutely. The notion of a mini-retirement, it's essentially a sabbatical, it's to take a pause. That could be three months, six months, 12 months. Your predetermined duration of time, where you're just hitting pause and saying, “Hey, I need a break and I need to completely disengage and do something different for a while.”

Paula Pant:
And that's part of optimizing for longevity. If a person wants to have a 40-year career with no breaks, that’s a very long time to be grinding without any meaningful pauses. And sometimes it's during those pauses that you can take that time to refresh and to reflect and to figure out what's going to come next.

Paula Pant:
And of course, there's a lot of logistical setups that proceed that pause. Sometimes it means you'll have to hire a team and put into place members of that team who can handle some of your workload while you're gone. For each person, there's going to be a heavy degree of logistics that would be required. And there might be a lead time of a few years in order to plan it. But if you start today within two years or within three years, could you put the pieces in place that would allow you to take a full year off?

Dr. Jim Dahle:
Yeah. Step one's put it on the calendar for sure. If you never put it on the calendar, it's never going to happen.

Paula Pant:
Exactly, exactly. And the other piece of it, I think it's generally sort of a good practice to challenge yourself, ask yourself, “If I absolutely had to step away from work, how would I do it? Am I the bottleneck? Does everything overly rely on me or could this operate without me? Could this sustain without me? What would happen if I had such an extreme family emergency that I had to just absolutely stop working for four months?”

Paula Pant:
It's generally a good practice to be able to put into place contingency plans so that if some Black Swan event were to happen, that things could go on, or heck what would happen if I got hit by a truck tomorrow and I couldn't work for the next six months? What would happen to the rest of my life?

Paula Pant:
It's generally a good practice to be able to develop those plan B, plan C, plan D scenarios. And if you're doing it in the context of a mini-retirement, that's a lot more fun than thinking about the Black Swan events.

Dr. Jim Dahle:
Yeah. Once you can do it, you just go ahead and do it.

Paula Pant:
Yeah, exactly.

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

Paula Pant:
The best advice that I heard from this came from a podcast guest on my podcast, her name is Laura Vanderkam. And she said, we're all busy. First, fill your calendar with all of the things that you cannot outsource, like going to the gym. You can't outsource your 30 minutes on the treadmill as much as we would love to. You can't outsource lifting weights as much as we would love to. Fill your calendar with all the things you can't outsource, like calling your mom. And once you have filled your calendar with all of the things that you can't outsource, then if you still have space remaining, then you can infill it with things that are outsourceable.

Paula Pant:
But for all of us, if we're honestly filling our calendar with the things that we can't outsource, exercise, sleep, quality time with friends and family, calling your mom. If we're truly filling our calendar with that, there's just not adequate time for the outsourceable things.

Paula Pant:
And once you look at it from that framework, then you realize that the trade-off that you're making is that you're mowing your lawn at the expense of calling your mom. You're painting your own living room at the cost of getting adequate sleep. And that just doesn't make any sense.

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

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

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

Paula Pant:
Thank you so much for having me on.

Dr. Jim Dahle:
Wasn't that great? There was a depth there that I knew was there, but I was even more impressed with today. What a great person and what a great thing she's doing. Hopefully, we'll be able to hear more from her in the future here in the White Coat Investor community.

Dr. Jim Dahle:
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Dr. Jim Dahle:
Thanks for those of you leaving us a five-star review and telling your friends about the podcast. Our most recent five-star review said, “Best financial podcast. Period. I've been listening to the podcast for years and can easily say this is the best financial podcast out there. Objective, carefully researched, and accurate. Whether you're an MD, an MBA like me, on the path to FI or just trying to figure out whether the whole life insurance policy you were sold is right, this podcast is for you.”

Dr. Jim Dahle:
I appreciate that review. Those of you who have not yet left us a review, we would appreciate it if you would do so. It actually helps spread the message. People are more likely to find the podcast if there are more reviews on it. We thank you for that if you've done it. We ask you to do it if you have not yet done it. If you have negative feedback, please don't put it in the review. Just send us an email and we'll try to fix whatever the issue is.

Dr. Jim Dahle:
If you haven't been thanked today, let me be the first. Thanks for what you're doing. It's important work. Keep your head up, your shoulders back. You've got this and we can help. We'll see you next time on the White Coat Investor podcast.

Disclaimer:
My dad, your host, Dr. Dahle, is a practicing emergency physician, blogger, author, and podcaster. He’s not a licensed accountant, attorney, or financial advisor. This podcast is for your entertainment and information only, and should not be considered official personalized financial advice.