Q&A: My Mom Is 73. She Has a House — But It Doesn’t Pay the Bills. Now What?

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27:41Welcome back. Our next question comes from Anonymous. Hi, Polo and Joe. This is Anonymous. Of course, I'm interested in the name you give me. I've listened to your show for some time, although I don't recall hearing many tax questions. I'm a W-2 employee on the way to FIRE. I do my own taxes with TurboTax, and I need to pay quarterly estimated taxes on my taxable investments. I know I can do safe harbor, but I don't really like it because it doesn't work too well when performance in the market goes from good to bad or from bad to good. In the last two years, I've done estimated taxes on the spreadsheet.

28:23The 2025 penalty is smaller than 2024, so I am getting better. I keep discovering new details, and the OBVB, of course, changed a few things. I tried the local tax service. They're not interested. It's hard to believe that in a FHIR community, everyone is solving this DIY. Hope you have a better suggestion. Thank you. Anonymous, thank you for the question. And before we answer, we've got to give you a name.

28:53Paula Pant:And I think I have a good one, Paula, as Paula is here to speak specifically to the students at Texas A &M Texarkana. And this is a very smart question from a gentleman who has clearly done some very smart things with his money to accumulate enough money that he's worried about quarterly taxes on his brokerage account. So we had a great conversation last night with one of the students here. Oh, wow. Really? Wow. Okay. Let's call him Stefano. Wow. We met this and you will probably hear him when he asks a question himself, but we got to spend some time talking to Stefano and also his friend Gabriel, both two intelligent young students here at the university.

29:44Paula Pant:Stefano really was all about, I want to network with people. I want to get out there. I want to do this smart stuff. So So I feel like he's Stefano in the future. Aw. Right? Yeah, Stefano will one day grow up to be like him. That's right. Right, right. Yeah. It's been amazing being here, meeting the students. Joe and I were talking this morning about how impressed we were by so many of the students that we met. Some students were invited by Jay Davis, who people will hear, who's the head of the program, a really interesting, cool guy who is as excited about personal finance. and you could feel that.

30:21Paula Pant:And so he attracts a lot of students. Right. And we were so impressed by the students that we met. They were talking to me about how meaningful it was to meet a Nepali person who, you know, is 20 years ahead of them. Yes. And so last night we did some behind the scenes stuff, like what's it like building your brand? How did Paula build her brand? What was she doing? And it was great getting those questions. But my favorite question came from the regional director of economic development who asked Paula to move here. Yeah, he was sweet. Which was great. And she's considering it for like 20 seconds.

30:58Well, I won't be moving here, but I will be visiting more frequently. I will be visiting more frequently.

31:04Paula Pant:So anyway, Stefano. So Stefano. Yeah. And in honor of one of the students that we met last night and really symbolic of all of the students. Yes. So this question is interesting, Paula, what do you do now? Now the reason, let me talk first, if you don't mind, Paula, about the reason why, because he said, I don't believe all the people in the financial independence, retire early community have solved for this DIY. I think the issue Stefano is most of the people that I've met. And by most, I'm going to say, I'm going to peg this at 90, 95 % of people. I don't think that they build a very big taxable brokerage.

31:41Paula Pant:And I say that because here on Afford Anything and on Stacking Benjamins, whenever we get questions about this, Paula, we always encourage people to build a taxable brokerage more. Well, yeah. We encourage people to build out the tax triangle. But generally speaking in the FIRE community, a lot of people, they bias towards tax-advantaged accounts. For many people, once you've maxed out every tax-advantaged account available, including HSA and Backdoor Roth and 401k, once you've maxed out all of those, for a lot of people, there's nothing left. So yeah, I agree. I think a lot of people have not built out a big enough taxable brokerage account to have this issue.

32:23Paula Pant:Yeah. So I don't think there's a ton of people who are in this situation. So let's, let's tackle it. Well, so first of all, I think the safe Harbor method, I know you said you don't like it, but I think the safe Harbor method is great because safe Harbor, you pay last year's liability and you're done and you, you don't have to really think about it. Or, you know, you pay up to 110 % if you've got like very high income, but you have no risk of penalty. It's super simple. I guess there's a slight risk that you might overpay a little bit if the income drops or that you've, you know, there's a risk that it won't be exact, but you avoid the risk of penalty.

33:00So I think we need clarity on what the goal is. Is the goal to be exact or is the goal to avoid penalty.

33:07Paula Pant:And that was the issue for me was if I'm solving to get this perfect, okay, I do have some things there that we can talk about, Paula. But if I'm actually solving for more happiness, my goal is to not spend a ton of time on this problem. Because when I look at all the problems in financial planning that I face, all the problems in my life, all the things in my life that I want to do, I don't think I want to dedicate, I don't think the juice is worth the squeeze to solve this for perfection. Yeah, exactly. I would just go safe harbor. I don't think it's important to be exact. I do think it's important to avoid penalties.

33:41You want to avoid IRS penalties, but as long as you're avoiding penalties, if you slightly overpay because last year you made more, it'll come out in the wash. And if you slightly underpay and you end up hanging onto that money for a little longer than you otherwise quote unquote should, but you do so in a penalty free manner. I mean, over the long term, some years you'll overpay, some years you'll underpay. So be it. You know, so be it. Yeah. Over the span of the next 20, 30, 40 years, you'll have a little bit of both. It'll all come out in the wash. And the most important things that you're avoiding penalties.

34:16Paula Pant:I look at this as people who over withhold on their W-2. Yeah. And it's a problem. But is it a huge problem? It depends on what interest rates are prevailing, right? If the prevailing interest rate's very low, like it was for a long time, then it wasn't a problem at all to overwithhold because you weren't going to earn any money on that anyway, sitting in a savings account. But if the interest rate was high and you missed out on stuff, then it could have been something, but I'd still not that big an issue. I mean, if you really want to get granular with it, then when you're making quarterly payments, you could look at what you've earned so far.

34:49Don't spreadsheet out a projection of what you might make in the future.

34:53Paula Pant:This is exactly what I was thinking. You got to go to Schwab or whoever, look at the last three month statements and take the exact numbers from the statement of what stocks paid a dividend, what were your tax obligations for that three month period. There's an IRS form. It's form 2210. You can use form 2210 to look at what you've actually earned so far on a quarterly basis. You don't want to guess for the whole year. You just want to pay based on what has happened in the past. So inside of Form 2210, there's this particular thing that's called Schedule AI. AI stands for annualized income installment.

35:33That's basically a way of saying you are, it's a payment method that you are paying based on what you've actually earned so far. So the part of 2210 that you care about is Schedule AI. It's that particular schedule. And that's the part that lets you base your taxes on your actual earnings so far. So if we're comparing the actual quarterly matching with Form 2210 to the alternative of using a spreadsheet to try to calculate out the future, to try to make guesses about the future, quarterly backwards looking is the better route. But if we're comparing quarterly backwards looking to just using the safe harbor rule, I'd say safe harbor rule is the best.

36:20yeah basically we've got three options right we've got the option of safe harbor rule and that's the simplest we've got the option of quarterly form 2210 and that's the middle option maybe the goldilocks option and then we've got the option of what he's currently doing the status quo with the spreadsheet and that's i think the worst because it's not only the most complex but also the most prone to error because it's, yeah, based on so much guesswork.

36:51Paula Pant:And if your goal by going to a local tax office was to get somebody to look over your shoulder, I think, Stefano, that a better idea would be to find a financial planner also who has a history of tax preparation. As an example, you mentioned the fire community. So I'm going to give you a name of one of those people, somebody like a Sean Mulaney, whose background is in tax, but now covers the full financial planning area and just hire them for an hour of their time. If you really want somebody, and I'm not sure if Sean does that or not, but that's the type of person I'm looking for full fledged, full on financial planner.

37:31Paula Pant:So they can look at it holistically, but they know the tax code in the tax game. And that's really their core area of expertise. Stefano, those are three options for how to deal with it. And what's interesting about those options is that the one that is most complex is also the one that's the least accurate. You know, the range of options, the spectrum goes from most complex slash least accurate slash most prone to penalties, right, which is the spreadsheet method to simplest and least prone to penalties, which is safe harbor with schedule AI in the middle. And I agree with Stefano. It's not perfect.

38:13Right.

38:13Paula Pant:But it's not super offensive. Right. Yeah. Those are the three options. And that's how they map along the complexity and prone to penalty spectrum. Yeah. And you can do with that framework what you'd like. So if you want to stay in the middle of that spectrum, you can. And it would be an improvement over the spreadsheet method. But if it were me, I would just move all the way over to the safe harbor side. Thank you, Stefano, for that question. We're going to take one more break to hear from the sponsors who make this show possible. And when we return, we're going to hear from a caller who we first heard from in episode 583.

38:53She has new life updates. She just changed jobs. All right. And we're going to hear what's been happening since episode 583.

39:02Paula Pant:Cool.

39:11welcome back our final question today comes from luz hello paula and joe thanks for answering my question episode 583 i recently changed jobs and i was wondering what to do with my oval 401k it's a target date fund and it has about 129k half of it is traditional and half of it is Roth contribution. I can leave it in this account given that the currently fee is only six dollars. I can roll it to my new 401k plan that since they asset both Roth and traditional contributions or I recently opened a Roth IRA. I can roll over the traditional amounts to my 401k employer and then the Roth portion deposited in my Roth IRA.

40:03Another question is regarding this Roth IRA. I never contributed to the Roth IRA before given that I had the Roth 401k option, but I was wondering, is it worth contributing something to this account even though that my current employer also offers Roth contribution? Another thing to note is that with this new job, my salary increased about 43%. So I won't be able to do the full contribution to the rough IRA account. So it will be only a partial contribution. With my new salary, I will be able to max out my 401k this year for the first sign. So I'm really excited. I also have a brokerage account with the stocks that I mentioned from last episodes for my previous employer value around 12k.

40:54In total with my new 401k and my previous 401k is value 133k. And then thanks to this new employer, also I'm able to contribute to an HSA account. I have about 6 ,000 in my car loan left and 5 ,000 left in my student loans. Both loans are less than 5 % interest rate. I still carry that a 10k in 0 % interest fee credit card balance given that I still am the breadwinner of my household but with this job that should be easy to pay off. I own my home again and the interest is less than 4%. I have an emergency of 12k so any advice would be beneficial in trying to decide what to do with this previous 401k.

41:51Thank you.

41:54Paula Pant:It's interesting, Paula, because going back and hearing the first time that Luz called, the numbers, Luz, are much higher. Right? So much higher. The progress, like, wow.

42:08Paula Pant:Huge congratulations. And this is why, Paula, we remind people to not always chase the horizon, which we have a tendency to do. I'm always looking ahead. I'm chasing the horizon, but the horizon's an illusion. The further we march, it's always out there. Every once in a while, pause and do what we just did. Look back and go, no matter how I feel, whatever's going on, this is the progress I made. So cool. And it's only going to get better because with this new job and the raise that you're talking about what 40 something percent raise with a new job. That's incredible. So it's the numbers have gotten big and they're only, it looks like, yeah, of course we can never tell the future, but all signs point to it's only going to keep getting better.

42:57Yeah.

42:57Paula Pant:So let's take her really good situation, make it better. Better. Yeah. Yeah. Better. Okay. First of all, loose, you mentioned that you thought you would only be able to do a partial Roth IRA contribution. I have good news for you. You can do a complete Roth IRA contribution as long as it's true. As long as it is a backdoor Roth, they're very simple to execute. All you need to do is move the money into a traditional IRA. And that's going to be a non-deductible traditional IRA contribution. Because anyone can make one of those if you're a U.S. citizen, regardless of your income, income level. Exactly.

43:37Exactly. Now, Now, some trad IRA contributions are deductible and some are not. Once you're above a certain income threshold, it's a non-deductible contribution, but that's fine. It's not going to stay in your trad IRA for that long anyway. So what you're going to do is you're going to move the money into a traditional IRA. Technically, they don't require it to be there for any particular length of time. So there are some people who will move it immediately. Personally, I like to let it sit for at least 24 hours just so it's got a day to be on the books. But for me, 24 hours later, I moved the money from my trad IRA into a Roth IRA.

44:14You flip it good. And then you're done. That's it. That's the backdoor Roth IRA contribution.

44:19Paula Pant:When it comes to your decision making about what to do with your old 401k, my preference, let's go through all the things that you can do. Number one, Luz, you told us that it can stay there and it's in a fund that has only a$6 fee. By the way, sadly, that is not true. I do not know what your fund is. I don't know what your fund is. I have no idea. There is no fund on earth that just says the$6 fee is the fee that you see. What a lot of people don't know is that, and you'll find this if you look up your fund at a website called Morningstar, morningstar.com, and you put the name in, it'll tell you what the expense ratio is.

44:58Paula Pant:Now, it might have a really low expense ratio. It might have a very low fee. but I think it's going to be$6 that you see plus this additional management fee. Right, right. So six bucks might be the top line, maybe like account administration fee or something like that. Now, if the money there is significant enough and yours is, you're custodian and that's the company that your former employer hired to handle this money. If it's substantial enough, they will say, hey, you can just leave it here, which you told us is one of your choices. So you could leave it there. The second thing that you could do, which you also mentioned is roll it to your new employer.

45:39Paula Pant:And the cool thing about that is you have all the money in one place. And let's say that the choices there are really good. They have great low cost options that are super for your goals. I'm going to tell you something, lose. While I always love that, I never, ever, ever, ever, ever, ever, ever want to roll my 401k over to my new 401k. I don't know if you're that hard and fast, Paula, but I am. Wow. Would you always roll it into an IRA? Is that your always, always, always? I would. Ooh, I have a different take. Dun, dun, dun, dun, dun. Should I explain the reason why first or she gives the other take and then we'll arm wrestle or you kick me under the table again?

46:24You know what? I can summarize my other take in like two sentences. Okay. So the reason that I am a little bit IRA avoidant is because the amount of money that you can put into a backdoor Roth IRA is proportionate to your total IRA assets. So if you have other IRA assets, that reduces the amount that you can put into a backdoor Roth. And so for that reason, it's this thing called the pro-rata rule or pro-rata rule. For that reason, I like to minimize other IRA assets by prioritizing the 401k.

47:01Paula Pant:The issue with that is behavioral, which is this. we move money over to the new 401k. Well, let's deal with leaving it where it is. If we leave it where it is, there is this tendency for it to become an orphan. And 10 years from now, even though it's a substantial amount of money, it'll continue to grow because it's not where you work, because it's not the same login as everything else. People have a tendency to just forget about it. And then you go in there and you find out the company went cheap, got a new 401k provider. The new fund sucks that replaced the old fund. You didn't even know what happened.

47:41Paula Pant:You missed the, you know, the email went to your spam file and because you didn't check it because you haven't worked there for so long. So that's why I don't like leaving it there. Even though you can, I don't like it. I don't like moving it to the new employer because of the fact that average person changes jobs fairly often now. and then you're just going to roll to the next job, the next job, the next job. That doesn't even bother me that much because you're going to do it anyway, like we just said. The thing that bothers me the most, Paula, is that if your new 401k provider decides to go cheap and decides to change it, you're beholden to whatever they do.

48:20Paula Pant:And the cool thing about a Fidelity, a Vanguard, and a Schwab, what we've seen over the years from these major custodians is this. They give you not less freedom of choice. They give you more because they're competing with each other. And so what have we seen? We've seen fees drop over time. We've seen the number of choices go up. We don't need 5 million choices. I don't know a reason why you'd need more than a handful of good indexes. But the fact that you have the flexibility to do whatever it is and leave it in the same place behaviorally, and when you leave a job, everything's going into the same master account.

48:55Paula Pant:So I've got the master account, which is my lifelong account, which is my IRA at one of those three custodians. And I have the 401k where I'm currently working. And that's all I have. And then I've got just two accounts. It's really easy to follow both of them. I'm going to follow both of them because I got a bunch of money in one, the one where I've been rolling over everything. And then I have whatever amount of time I've worked at my current employer in that one. And it just simplifies everything. And behaviorally, what have we found? We found that people are more likely to pay attention when you don't have 50 million tabs open.

49:31Joe's got the behavioral answer and I've got the mathematical one because my position is if you keep it in a 401k, and I don't have a strong preference, keep it in the old one versus move it to the new one. I'd say go with whatever gives you better investment choices. I would move it.

49:44Paula Pant:If you're going to take Paula's advice, I would move it to the new one because of the number of times working with a law of larger numbers, Paula, I've seen too many people that orphan it if it's a place you don't work. At least if it's at the place where you work, you're going to pay attention at least a little bit every time you open your 401k. Right. Okay. Yeah. I don't object to that. I have no dog in the fight in terms of old 401k custodian versus new 401k custodian. My entire position is minimize IRA assets so that you can backdoor as much as possible into the backdoor Roth. But I say that because I'm such a Roth fan.

50:25Paula Pant:I couldn't believe when she showed up in mom's basement, she had like a Roth hat and t-shirt. Roth t-shirt, Roth sweatshirt, pom-poms, waving the Roth pom-poms. Yeah. She was listening to David Lee Roth sing. Right. Exactly. Came in. Yeah. Now, if you roll it to an IRA, you still want to be careful because there's a mistake that sometimes custodians will accidentally let you make, Paula, which is they will let you roll it over to the same, because you talked about your Roth that you contribute to. If you did and you could just roll this into that, your old Roth 401k into a Roth that you're contributing to talk with a tax advisor, but that can create a big mess.

51:09Paula Pant:Rollover money has slightly different rules than contributory money. So if you're going to contribute to a new Roth IRA and you get a roll over an old Roth 401k, you're going to want to have that be a rollover 401k versus a contributory 401k. and it's even worse in the pre-tax side. It can get messy in the pre-tax side. What you contribute to versus the rollover, keep those separate. Oh, I will say one good thing is if you've got money that's in a 401k, because the level of legal protection around money in 401k versus contributory IRA is different. But if it's money that was in a 401k that you then roll over, you still have the same legal protection as the 401k.

52:00So in that regard, you don't, if you move money out of the 401k, you don't have to worry about losing the legal protection as long as it's in a rollover.

52:08Paula Pant:Because it says rollover. Right. Because it's a rollover. Because it's a rollover IRA. Right. That may be the biggest point. Yeah, yeah, yeah. So as long as it's a rollover IRA, you don't lose the legal protection that 401k has. And again, this is getting a little bit granular, but it's just in the concept of if you were ever subject to a lawsuit, the money that's in a 401k is protected at the federal level. It's protected by ERISA, right? And so that extends into if you take your 401k and you put it in a rollover IRA, that same protection moves with you, right? And that is different from money that you put into a contributory IRA.

52:50Paula Pant:And there's some people that might be thinking, well, Joe, weren't you just talking about simplicity? Like why wouldn't I just put them all in one just for simplicity purpose? If you're not yet working with a Fidelity, a Vanguard or a Schwab, even if you have these multiple accounts, they will give you a pie chart of it all together if you want. You just have multiple tabs. So it's still very easy if it's at one custodian to keep those tabs arranged nicely. It still is incredibly simple and you get the additional protection that you need. Now, with regard to Roth 401k, if you're going to contribute, do I contribute to my Roth 401k or the Roth IRA?

53:30Paula Pant:And as Paula said, you can contribute to the Roth IRA anyway. Yeah. I would go Roth 401k first though. A hundred percent. That's what I was going to say. Yep. Same. Yep. Yep. Yep. And that is behavioral and, and it's also because you can stuff more money in. Yeah. And well, and as we just talked about, 401ks have higher legal protection, better legal protection than IRA assets. Better legal protection, put more money in. I love both of those. But the third thing is it's just freaking easier when you automate your life. Right. How great is it that the money just goes where it needs to go and you don't got to set up anything except for on that form at work.

54:08Paula Pant:Just go into your provider and go, I want to bump it up to, you know, 25 % of my income, 40%. Let's go 40 % Paula. Well, based on the amount loses has gone up, right? She might be at like 80%. Yeah. Yeah. I mean, she's getting a massive pay raise with this new job. Yeah. I want to talk about the debt because when she said out of all the things that I'm doing, like, do you have any other comments that are things that I should be doing? I think that car loan, is it a really, it's, it's a decent interest rate. It's a low interest rate. And I know the$10 ,000 balance is going to go away. That's at what looks like a promotional rate.

54:46Yeah, yeah. Teaser promotional rate, 0 % for the time being. Yes. But you want to wipe that out before it gets any higher.

54:52Paula Pant:Good on you. You're doing that. And if I was just looking at interest rates, I would say, you know, okay, the car loan at 6%, fine. The student loan, fine. But I just think that as Luce continues to do better with money, again, I'm going to go to behavior and I'm going to think about flexibility, I would love to see that car loan paid off. And instead she's putting money into a fund every month where it's a car payment to herself and to the next car. Right, right, right. So yeah, I refer to this as making a car payment to yourself, where when you finish paying off a car loan, the habit is to continue making that same monthly payment, but once that car loan is paid off, you keep making the same monthly payment just like you always have, but now you're making that monthly payment to yourself.

55:43So now you're making a monthly payment to a separate savings account that is different from your other, it's different from your emergency fund. It's a totally different account, different bucket, different, if you even need, and I know Joe, you don't like opening too many accounts in too many institutions, but if you even need to open an account in a different institution in order to just keep it out of sight, out of mind, you do. You have a separate account where you just keep making a car payment every single month and you're making that payment to yourself.

56:13Paula Pant:Well, it's funny you say that I don't like it because to your point, I don't like it. Simplicity rules, but sometimes friction really works in your favor. And it did for me when I was trying to go all cash lifestyle and I was trying to actually get an emergency fund together. The first thing I found was that I was touching it just because I was so used to touching any cash that I had. I'd never tried to build money before. So I had to get that bank across town at a different institution, cut up the debit card, burn the whole thing about the online access, don't get any of it. And if I had to go get money, I was going to have to drive about 45 minutes to go get it.

56:51Paula Pant:And it was funny because if it was an emergency, Paula, what's 45 minutes? Who cares? Yeah. If it's truly, truly, truly an emergency, you will get in your car and drive 45 minutes to go to the nearest bank branch to be able to access it. They also said that I couldn't ACH out of that account, but I could get it wired. But if you, and people might not know this, a wire has a fee. Right. And at the time it was like a$12 fee. These days it's like 25. Right. But it was so amazing how much a$25 fee. Right. Will stop you from doing stupid crap. Yep. If it's an emergency, who cares about a$25 fee? Right.

57:25Paula Pant:I'm like, oh yeah, 25 bucks. No, no, no. I need the money now. So 25 bucks, fine. That's great. So with the car account, if you want to make sure it's a car account, do the same thing. And it sounds like they'll lose. You're getting really good at this. So for you, you could probably just have it be another account at your same bank. Or like I use Ally where it can have different buckets inside of the same account, something like that. I got to tell you when Cheryl and I got to this point and for people that have been with us for a long time, I've told my financial journey about how we were struggling with money, but we got to the point where we finally paid the car off and we switched over.

58:04Paula Pant:The thing that was remarkable is that I do this all the time. So I kind of knew it was going to happen because I'd seen it work with other people when I got smart enough to actually do this stuff myself that I was telling other people to do. But Cheryl had never done it, meaning she had never gotten to the point where now we have this car fund. And she said, she goes, it has now become a game to see how long we can keep this car. And we ended up with more money in that account because of the fact that I wasn't for the first time in my life just going, oh, car loan's over, time to get a new one.

58:40Paula Pant:It was really fun. Really, really fun. So there's a fun piece of this too, which is great. Anytime you can gamify this thing is super. So I would get rid of that. You know, the student loans are a different thing for me because the student loans, once they're gone, they're gone. But you're always going to need a new car. So if you get in the habit of paying for your cars differently than you are now, I think I like that one, Paula. Yeah, the most important thing, as I see it, is wiping out that credit card debt before the interest rate goes above zero. Because those teaser rates, when they go up, they sneak up on people.

59:11And when they go up, they go up to shocking double digit amounts, you know, 20 plus percent.

59:17Paula Pant:Yeah, that's danger zone. Right. So you don't want to get too comfortable with the 0 % rate. The last thing here, Luz, from my perspective, I'm sure Paula has like 18 more, but the last one for me is 43 % salary increase. Right. That's the big thing. that's also danger zone because it is a time when you can use to use a phrase that you may not have heard this is the time when the rat race rears its ugly head and a lot of people maybe not you but a lot of people go oh i have a 40 raise i can now buy this i can now afford this i can do this and the cool thing paula is loses lived her life a certain way forever So whatever amount you can afford to do, and I'm not saying you need this austerity and become a monk and live in a tent.

1:00:12Paula Pant:But what I am saying is this is a huge opportunity to maybe raise your savings rate and lock in financial independence even earlier than you already were. So, holy moly, if you cut that in half and you bump up your saving to capture 20 % of that 43 % raise and you're living on the extra 23 % bump, you still get a little bit of the rat race or a little bit more enjoyment now, but you're also able to lock in sooner financial independence for yourself. And the reason I say it's danger zone isn't because it's dangerous per se. The danger is if you don't do it now intentionally, when you get the raise, you're not going to do it a year from now.

1:01:02Right, right, right, right. Yeah. The easiest time to capture a raise is when you haven't gotten used to it yet. And the easiest way to capture a raise is to forget that you have one. And so if you just continue living your life exactly as you lived it prior to the raise and you make that money automatically disappear, you'll just forget that you ever got a raise. And that money will quietly go to your HSA. It'll go to your Roth 401k. It'll go to a backdoor Roth IRA. It'll go to paying off debt. It'll just quietly go to all of these things. And you will ideally completely forget that you've received a raise?

1:01:43Paula Pant:I think you may need to bump it up a little bit because that credit card debt exists for a reason. And it's because maybe because you're the primary breadwinner, as you've mentioned, and it might be a little tight. So you might be able to loosen it up, assuming that you have good financial controls and you know where the money's going, but examining how you got that credit card debt. And a lot of times, you know, Paula, it isn't the monthly thing that kills you. It's that you have enough to make the monthly stuff happen, but then your dishwasher breaks or your mufflers dragging behind your car.

1:02:20Paula Pant:And it's these things that happen once every few years are the things that sink you, not the fact that, you know, I only go to restaurants twice a week or whatever. You know what I mean? it's not the activities of daily living that kill you it's these events that you're gonna have to pay for i yesterday with the help of my buddy cooper spilled red wine on our new carpet so i now have oxyclean coming to clean this carpet and get this big red wine blotch out of my carpet i didn't expect that but that's the kind of thing that i saw with people with a really tight budget Right. That's where the credit card debt comes from.

1:03:02Right, right, right. Yeah. I answered an email earlier today from a property manager informing me that one of my properties has a big water leak. They caught it because the water bill for the previous month topped$1 ,500 for the month. Holy. Yep. And so when they saw that bill, they were like, why is the water bill so high this month? So that's a insightful question.

1:03:27Paula Pant:Yeah. I don't think you have to be Sherlock Holmes. Yeah, exactly. Seems slightly high. Exactly. So A, got to get a plumber out there to fix that leak. And then B, we have to appeal to the water municipality to see if we can get a credit for that giant bill, which they may or may not grant. You got to ask. Right. That's the kind of reason you want to have a little bit of money set aside. And if you don't, that's where the credit card debt is. Yeah. I found so many people who are so conscientious about their spending and it's value-based spending, but their income is so close to that monthly number that the water leak sinks you.

1:04:04Paula Pant:And then now you've got the interest payment every month because you can't pay it off right away. And then it just slowly gets a little bit worse, a little bit worse, a little bit worse. It's death by a thousand paper cuts. Right, right, right. Yeah. Well, Luz, this is fantastic. Yeah. I'm so happy for you for all of the progress that you've made and all of the progress that you are going to continue to make. Oh, I haven't told you, I hope this is obvious. Please max out your HSA. That should be said. Please max that out. Max out your HSA contribution. And if possible, if you have the money to do so in your budget, pay for your healthcare expenses in cash, even though you've got money in your HSA, so that the money just accumulates inside of the HSA, so that you can continue to compound the tax advantages of the HSA rather than spending money from it.

1:04:54What I do is whenever I pay a medical bill, I just pay it in cash. I take a picture. I just upload that photo to a Dropbox folder. And so if I ever need the money, I've got a Dropbox folder full of receipts. But the behavioral reality is that out of sight, out of mind, you know, this is like Joe and you had to drive 45 minutes.

1:05:17Paula Pant:Yeah. Like. Like, once it's in a Dropbox folder full of receipts, I've kind of forgotten about it. And unless it's truly an emergency, I'm not going to think about harvesting those receipts in order to reimburse myself from my own HSA. But later on, when it's part of your withdraw tax strategy. Yeah, or you could just wait until you hit retirement age, in which case that money all becomes available without penalty anyway. But if you want to still take it tax-free after that. Tax-free after that, yeah, yeah. I mean, I would still go for the tax-free even after that. Yeah, exactly. Although by that time, if you think about how much those receipts will lose value to inflation, right?

1:05:54The nominal dollar value of those receipts, you know, 40 years into the future, but sure.

1:06:01Paula Pant:Right. The prescription was 12 bucks and prices have doubled twice. It's the equivalent of$3 you're saving tax-free. Yeah, that's funny. It's weird to think about. Yeah. And so, Luz, congratulations on the new promotion, on all of the progress. And thank you for calling back and sharing this update. That's so cool. Nice work. Joe, we've done it again. Already? Already. Holy cow. Yeah, now we can get out of your mom's basement and out into the world, into the wide world. Yes, let's go talk to some college students. Yeah, Texas A &M. Here we come. Joe, where can people find you when you are not on the Texas A &M campus?

1:06:46Paula Pant:We did a fantastic interview with a gentleman. This is really cool. He self-published a book a long time ago called Inner Excellence, which I'm sure a lot of the afforders know. The book ended up being a huge seller, even as a self-published book. and there was a massive auction for it when major publishers came knocking because they knew it was going to be a number one New York Times bestseller. And as people who aren't insiders may not know, everybody says number one bestseller. Well, Jim Murphy's book, Inner Excellence, was a number one New York Times bestseller. And he's coming on Stacking Benjamins to talk about living your best life.

1:07:29Paula Pant:This whole idea of affording anything and not everything is about choosing what's your best life. And Jim is a coach to some of the top executives in the world and some of the top sports stars. This is how good Jim's work is. It's the Superbowl. A player named AJ Brown was photographed reading inner excellence while he's on the bench playing in the Superbowl. During the game? During the game. Wow. He took it out on the field with him. And while he wasn't on the field playing, while it's not his unit out there, he's reading Jim Murphy's work. That's what a great coach Jim Murphy is. And it's inspiring.

1:08:13Paula Pant:And it really resets what's important, which I think we all need from time to time. So Jim Murphy coming up on stack. He's visiting mom's basement right after the amazing Paula Pant. Wow. I'm followed by great company. Yes, you are. Well, thanks to all of you for being part of the Afford Anything community. If you enjoyed today's episode, please share this with friends, family, neighbors, colleagues. Share this with people who have taxable brokerage assets. Because they all needed to learn about the Safe Harbor rule. With your HR director at your old company and your new company. Share this with Cyndi Lauper.

1:08:51Paula Pant:That's right. Cyndi Lauper Sr. Yes. And Kim Basinger. And Shaka Khan. All the people with birthdays today. My goodness. Well, birth years this year. Yes. Share it with a condo salesperson. Share this with residents of California and Maryland. All the residents. All of them. We dare you. Share this with all the people in your life and more, because that is the single most important way that you spread the message of F-I-I-R-E. Remember to subscribe to our newsletter, affordanything.com slash newsletter. We have a course on rental property investing, and it's only open for a very limited window twice a year.

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1:10:24Thanks again for tuning in. I'm Paula Pan. I'm Joe Solcija. And we will meet you in the next episode.