Q&A: Your Kids Just Inherited $350,000 Each. Now What?

23:43That's how this shakes out in all three of those domains. I think zooming out, the other major piece of it is how to talk to your kids about the expectation around this money. I think one of the really beautiful ways that this was designed, with this not going to them until they're 35, it means that they get it once they've had some time to mature. I know people who have gotten big payouts at the age of 18, and that has done more harm than good at that age. But I think that this is a good time to start having those conversations with them, frequent, ongoing conversations with them about investing, about compounding, about thoughtful use of money for big ticket major items such as buying a home at the age of 35 or setting up their own kids for success, essentially building a multi-generation family trust or for providing for their own retirement.

24:46You know, if they opt not to touch this at 35, if at the age of 35, they make the decision to let it accumulate for an additional 30 years, walk through that exercise with them, show them what that compounding could do and what that could mean for them when they're in their 60s and 70s. And then explain why that matters because many people, especially when they're young, don't quite grasp that in your 60s or 70s, you just don't have necessarily the health, the energy levels, the desire to go out and crush it in your career the way that you desire that in your 30s and 40s. Many people do.

25:26Paula Pant:I like the fact that this could also be not just financially a nice leg up, but also education, educationally. Educationally, is that a word? Yeah, educationally. Yeah, it could be a real leg up as well. Absolutely. A nice headstart. Thank you, Karen, for the question. Kudos to you for stewarding this so well. One of the greatest ways that you can honor someone who has passed you a legacy is by being a careful steward of what they have passed to you. Congratulations to you for doing that. We're going to take a moment to hear from the sponsors who allow us to put the show on the air and deliver the show at no cost to you.

26:07When we come back, we're going to hear from Matt. Matt's in his early 50s. He wants to retire in about six years and he has a 100 % equity portfolio. He wants to talk about portfolio optimization. We're going to unpack his question after this. Grilling season is finally here. And let's be honest, the difference between a good cookout and a great one comes down to the quality of the meat that you're cooking. You can have the best grill setup in the world, but if your cooking isn't great, the steaks, the burgers, the chicken, If you're not cooking great meat, you can taste it. That's why I've been using ButcherBox.

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31:05Welcome back. Our next question comes from Matt.

31:10Paula Pant:Hey, Paul and Joe, it's Matt. I have a quick question. I have been investing for a long time. I'm in my low 50s and hope to retire in six years or so. I have a index portfolio of index funds at Fidelity, and I have a total market, a total international market, a small cap value from Avantis, and a mid-cap index, and that I'm 100 % equities. And I want some advice on how to handle the idea of always wanting to tinker and adjust. I like to digest podcasts, books, blogs, and I learn new ideas. I learn new concepts. And it's tempting to want to change. I don't usually do that, but it's on my mind a lot.

31:55Paula Pant:Like, is it better to add more Avantis funds? What about a target index, target date index fund? What about the portfolio I have? What about needing bonds in the mix? And I would just love to hear you and Joe dissect that and talk about that. because I think a lot of us probably have the same issue where we just have a desire to change things, let perfect be the enemy, a good kind of thing. Anyway, I love your show. Appreciate all you guys do and would love to hear an answer. Thank you. Matt, thank you for the question. Broadly speaking, my recommendation is pick one asset allocation. And we can talk about, in a minute, we can talk about what that might be.

32:37pick one asset allocation and then spend a little bit of money developing a hobby that's going to distract you from this seriously try pickleball try stand-up comedy learn how to paint pick up

32:52Paula Pant:soccer matt and just to be clear what i'm laughing about i'm not laughing at you or the fact that you want to do this because this is me this is 100 me i want to do the same thing i love this stuff you love this stuff. Paula loves this stuff. But every, every, every statistic shows the more you mess with it. Exactly. The worse it gets. So pick one asset allocation, organize the portfolio, and then hands off. Yeah. But looking at his asset allocation, Paula, where he's using total market indexes, I think he can do better, especially if he's in his early fifties. Now, if you're just, if you're listening to this and you're starting out, Matt's got the right allocation for you.

33:35Paula Pant:Do what Matt's doing. And I bet Matt's been a successful investor because of what he's done. Right. So that's our message to people in their 20s. Absolutely. Yep. Or whatever age you're starting out at, right? Oh, yeah. True. Yeah. No matter what. But I think you get to a certain point. Generally, I earmark that around $100 ,000 that you should start being more technical. So Matt, I don't disagree that you could be more technical. And I love the fact that you're looking at all these different ways to do that, I think rather than messing with the portfolio, I like the pickleball recommendation, but I also like here's something to tinker with, create an investment policy statement.

34:16Paula Pant:Because rather than messing with the investments, which will totally mess you up, that will completely mess you up. If you're going to make changes, make a machine that's lasting and then tweak the machine. Don't tweak the investments every 10 minutes. Tweak the machine to make it better and then better and then better. And if you wonder if the machine is actually going to get better with the next move, what I would have as part of my investment policy statement is have a little sandbox portfolio that is your playpen with new ideas for the machine and have, So you got one investment policy statement that's 99 % of your portfolio and 1 % that's the rest and play with the piece that you want to add to your investment policy statement later.

35:05Paula Pant:I'm thinking that I'm going to get more analytical about what value means. And that's based on PE ratios. Or am I going to, let's do something else kind of esoteric. Am I going to branch into emerging markets versus just wide international? Or if we're going to get really, really, really esoteric, am I going to use bands to reallocate and rebalance my portfolio versus hard and fast numbers? So I let my portfolio drift a little bit. These are some of the exciting things people talk about. and use a little piece to say, okay, I want to experiment with, does this make my asset allocation better or does it just mess with it because I can't keep my hands off of my investment strategy?

35:58Paula Pant:But I think if you're going to mess with anything, Paula, I'd create an investment policy statement. I agree with that, but then he runs the risk of messing with the investment policy statement. Well, unless he has his skunk works, as I mentioned, where he's going to then have this R &D piece of his investment policy statement. Yeah. 1 % of the portfolio, whatever it might be. Yeah. I'm thinking about the psychology of why there is such a temptation to mess with a portfolio. And oftentimes it is that we want to have a sense of control over our net worth. I believe much of that. I don't think it's that.

36:39Paula Pant:I don't think it's that, by the way. Yeah, I think it might be a little bit of that, but keep going. Dig your hole, Paula, so I can. Well, my conclusion was going to stem from that premise. So if you accept the hypothesis premise that at least a portion of the reason, maybe not the entire reason, but the part of the reason that a person is tempted to mess with their portfolio is because they want a sense of control over their net worth. If that is the case, then an alternate, a substitute way to develop a sense of control over your net worth is through entrepreneurship. Even small stakes, side hustle entrepreneurship, it doesn't have to be your day job.

37:22But I believe that if what you're looking for is more control over the earnings lever, the income lever, the make my net worth go up lever, entrepreneurship can scratch that itch.

37:35Paula Pant:I 100 % agree with that. A hundred percent because I think that we don't think about portfolio wide enough. I think we always think about these investments that should be passive and that's my portfolio. And that's where I'm going to obsess about making money, which is my hypothesis, which I can get to in a minute. I think that if we widen that and we go, holy cow, the way to actually make more money I'm missing out on is I'm not paying enough attention to my income streams. Mm-hmm. Once we add in our income streams and we begin networking more, we begin thinking about these other semi-passive ways that we might be able to bring in money like that, that's an area where tinkering pays huge dividends.

38:20Right. Because there are infinite ways to do it. You know, there's – you could develop a product. You could develop a service. You could, you know, one thing that I like about real estate is that it's a bit of a hybrid between investing and entrepreneurship. It is in the FIIRE framework. It is perfect that it is in between the I for investing and the E for entrepreneurship because it really is that Venn diagram intersection between the two. You know, there's also, if you want to go back to market strategies, you could take a small portion of your portfolio and get into options trading. Joe, oh my God.

39:00Okay. For those of you who are not watching on YouTube, go to YouTube and just look at the expression on Joe's face when I said that. Wow.

39:10Paula Pant:This is,

39:15that was priceless, Joe.

39:18Paula Pant:Don't mess with it to trade options. I'm talking about a tiny portion. I'm not talking about your whole portfolio. I'm saying take 10 grand and we'll start with paper trading, right? Start with learning it. Start with some paper trading. Do that for a year and then take 10 grand and then see what you can do, right? If you're really tempted to be hands-on, that's a way that you could be hands-on, but still leave the bulk of your portfolio intact and then just play with$10 ,000. And again, if you're just starting out, don't do that. Yeah, yeah, yeah, yeah. I'm talking about people with a lot of money.

39:56Paula Pant:Yes. People for whom 10 grand is a rounding error. If 10 grand is a rounding error for you, then do it. Here's my thesis, Paula. And this is just from the large numbers of people that I met with. And this particular person would make me roll my eyes only because I felt very bad for them and I could not talk them out of the fact that they have a huge, huge feeling of FOMO. and I think Matt this might be this might be why part of the psychology of listening to so many podcasts reading so many books whatever you're trying to uncover this thing I would meet with these people several many times a year Paula where they're like okay I met with 15 people and you're going to have this answer for this magical approach that I have never seen before that is totally going to work.

40:55Paula Pant:And by the way, if they hadn't heard of the Efficient Frontier and asset allocation, we would set that up. If they hired me, these are the people that would fire me in the first 18 months. And the reason was, was because they soon realized that the way that I allocated money was also not a magic wand. And in fact, I'm thinking of one specific client who hired me and fired me. They hired me. They came into my office. The only reason I let them hire me, by the way, was because the man was married to one of my kid's teachers and I really liked her. But they had just fired their advisor. And the guy even told me, he said, wow, my ex advisor was really rude when I was changing to you.

41:43Paula Pant:And I said, really? Why? Because often when somebody leaves, it's just not a fit. You're like, okay, I'm not for everybody. That's fine. he said yeah she told me as i was telling her that i was letting her go when you find your magic wand let me know when he fired me 18 months later you know what i told this guy when you find your magic wand let me know because he's truly and and there's a lot of people there are a lot of people that listen to financial podcasts that are trying to uncover this mystical magical thing. It just doesn't exist. And what's cool is, is once you realize that and that sense of FOMO begins to go away, that's when you're able to really dive into the investment policy statement.

42:35Paula Pant:Because that is where the magic is, Paula. If you're going to tinker with anything, tinker with my policy. Because the cool thing is, if your policy is I'm only going to evaluate it twice a year. In the next six months, you can change that policy statement 15 times and never touch an investment, which is fantastic. And by the way, these same people, if they stayed with me, this was always cool. We tweak and we tweak and we tweak and we tweak. And then we get to the investment policy statement day, the day we're actually going to turn the machinery on and make the move. These same people are so busy second guessing all the moves they made that they thought about the last six months and they changed.

43:17Paula Pant:They second guess so much. They don't want to do any of it then. Because you realize when you mess with the investment policy statement over and over and over and over and over and you go, what is this for? What am I actually doing? The crux of that though, is that you can mess with the policy statement all you want so long as you don't take action except for one to two days per year. Yeah. The only danger of messing with the investment policy statement is you change the policy statement to say, I can mess with the portfolio all the time. Right, right, right. Okay. So like the hard and fast do not break, like the ironclad rule is one or two dates a year.

43:58Let's say your birthday or maybe your birthday and your half birthday. Those are the two days of the year that you can mess with the portfolio. Well, Joe is laughing at me again. See, for anyone who's listening to this via audio, go to YouTube and just, Joe is having, there's like a third podcast going on just in Joe's face. Joe's face throughout this entire answer is like the third guest on the podcast.

44:30Paula Pant:I can't say this one though. I have to text you. Oh dear. But anyway, yeah. Oh, is this going to be not safe for work? Yes. Not safe for podcast. Not safe for podcast. Yes, exactly. So if you break that, you've pretty much broken everything. And if you don't have an investment policy statement, by the way, this is the place to start, Paula. Start with, I'm only going to touch my portfolio on this day. This is it. This is the only day that I'm going to do anything. That's a powerful investment policy statement for 90 % of our audience. because you're used to doing it when you're paying attention, which is some rando day that you happen to look, right?

45:12Paula Pant:Either Schwab sent you something in the mail, Fidelity sent you a text, whatever Vanguard sent you an email, and you go, oh yeah, I should look at that now. So it's random anyway. So just unrandomizing that day and making it a set day. And the cool thing about that set day too that I love, look at all the geopolitical risk that we have right now. look at all the inflationary risk we have right now all of these things that make you want to make changes and your brain keeps telling you today's the day today's i got to do it today i got to do today well if you pick a day in the future and you don't know what the geopolitical situation is going to be that day you don't know what inflation is going to be that day you've no idea what's happening in the stock market that day you give all that away which is 100 % what we need to do to be successful.

46:02Paula Pant:We've got to give all that away. If we give that away and instead it is a randomly chosen day that we chose before we knew any of the headlines, our decision-making gets incredibly better immediately, gets way better. The risk though, remember Liberation Day back in April when the tariffs were announced? And remember there was a big market tank that happened right afterwards and we got inundated with messages from people saying, what do I do right now? And so oftentimes, particularly when something sudden and severe happens in the markets, people will break their own policies and say, I need to take action immediately in response.

46:45Paula Pant:We have a great YouTube video we just put out called Stock Market Maestros with a couple of - Oh, yeah, yeah. Claire Flynn Levy. Yeah. We're interviewing her. That's going to air sometime. Our video with her and Lee, We talked through this and Claire even said the big problem among pros, Paula, isn't that they have an investment policy statement. It's that they never use it. They never look at it. The true maestros use their investment policy statement. They stick to their investment policy statement. And that is a clear indicator between winners and losers. And, you know, pros don't react. The top pros do not react.

47:25Paula Pant:They have a methodology. And if things fit their methodology, no matter what the circumstances are, they act, but it's not a react. There is no reaction to, I got to do this. You don't have to do anything. You do what it says in the manual you built during calmer waters. Hmm. In order to do that, I think most people who are listening to this understand that in principle and understand that in theory, but to actually execute it in real life, in real time, the behavioral component is so challenging. And that's where I go back to the principle of substitution. You need something in your life that will take your mind off it.

48:07It could be a hobby, pickleball, painting, learn a musical instrument, join a band. It could be a hobby that takes your mind off it, learn how to kayak. Or it could be some other form of money-making, whether that's something like trading with a very, very small portion of your portfolio that keeps your brain active and engaged and it keeps you doing things, but it's confined to a small portion of the portfolio, or it could be some form of entrepreneurship, some type of a side hustle, some income generator. If the thing that's moving you is wanting to be able to pull that lever.

48:46Paula Pant:And it doesn't have to be a side hustle. It could be your main job. I mean, how many people have not asked their boss for a raise? How many people have not done the things that their boss has already told them? Hey, you could move the whole company forward. Maybe that'll help your whatever, your bonus next year, whatever it might be. It could be your main hustle that you work on. It could be. But I think for the purposes of not tinkering with your portfolio, your brain needs to be fully engaged. And when you have complete autonomy over a thing, then your brain can engage with that thing more because you don't have the constraints of bureaucracy confining what you can do.

49:23And so that's why if you can own something and you've got total autonomy, again, that's why I love real estate, you have the pure decision-making authority in that domain. And that means your brain can really start to tinker with that if you want it to.

49:39Paula Pant:No matter which one you pick, Matt, I like all those. I really like all those. And I really like starting with having a more cohesive investment policy statement. You've listened to a lot of stuff. You've heard all the different voices. Now put it into action. But I think the way to put it into action is in a way that won't scare you so much, which it clearly does, or you wouldn't have called us and go, what do I do with all this? I got all this. Put it into an investment policy statement that makes a lot of sense to you. Pick a day and then begin operating that machinery. And by the way, and start off with your investment policy statement being very, very light.

50:18Paula Pant:In other words, just one or two things. Don't make it super detailed, 26 different things you're going to do on that day. Just start small. And then if your machinery's acting the way you want, then either continue it or add a line, but add stuff at your own risk. Right. We should do a workshop sometime on writing an investment policy statement. Show of hands, would people be into that? If you are, shoot us an email. If you subscribe to our newsletter, just hit reply to any of the newsletters that you've received and let us know if that's something that you would be into. If we get enough response, we'll go for it.

51:00Matt, thank you for the question. Matt, I realize we didn't actually address what the asset allocation should be, but I also get the sense, I don't think we need to necessarily deep dive into that. You heard us talk in the previous question when we were talking to Karen, we talked about, Joe talked about 50-30-20. I talked about Paul Merriman, the four fund portfolio. And you strike me as somebody who's in this space enough that you've heard a lot of the arguments around various asset allocation feces. So for you, I think it's less of an informational gap and more of a behavioral one, which is why that was where our answer focused.

51:39But thank you for the question. And thank you for inspiring such a lively discussion. We're going to take one final break to hear from the sponsors who allow us to bring you this show at no cost to you. When we return, we are going to hear from Kate. Kate and her husband are in their late 30s. They've got about$100 ,000 saved for retirement. They live in a duplex. They're Airbnb-ing one side of it. That covers their mortgage. They are thinking about some entrepreneurship ideas. What should they do next? We're going to tackle that right after this. So I want to tell you about two items that are super cozy.

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56:41Welcome back. Our final question today comes from Kate. Paula, this is Kate. I need to ask you this question. I think you're the best one to answer it. My money situation is me and my husband are in our late 30s. We have minimal money saved for retirement, about$100 ,000 between us. My husband is going to receive a raise later this year, and we are going to put that towards maxing out both of our Roth IRAs every year until retirement. So we do have a plan manifesting in saving more for retirement. I am mostly a stay-at-home mom, but I do some personal training on the side. I also rent out one side of our duplex as an Airbnb.

57:30So that pays our mortgage. We sold our other house to move into this duplex and we have a surplus of money. So we have about$35 ,000 and we're kind of agonizing about what to do with it. We have talked about two options and maybe you can think of more, but the two that we've kind of mulled over in our mind and thought about are A, doing just a lump sum into an index fund and just letting it marinate there until we need to withdraw it in many years. And then the second is kind of the small business entrepreneurial option, which would be that I would build a gym in our side yard and take clients in that gym.

58:13That would allow me to probably make around$5 ,000 a year, which would, you know, I think be more than interest in the stock market. The real benefit to this is that right now I go to a gym myself and I do a couple classes, but I take my kids with me and they go into a daycare in which they get sick almost every single time because everybody takes their kids there and they're inevitably sick kids. So we're perpetually sick in the winter months, mostly because of this little daycare area. And it really kind of impacts our quality of life. I mean, we try to stay away as much, but I can only lean on my other childcare options so much because I do work a little bit there.

59:01And then I do really enjoy working out as does my husband. So by building this gym, I could probably pay for it with my proceeds as well as keep my kids out of that daycare, at least for the winter months and be able to kind of pick and choose who they're socializing with so that it's not with sick children, but with well children so that we don't get sick quite as much and we can enjoy more of those winter months and miss less work. Anyways, you can tell that that's the option that I'd really like to go with, but I'm worried that it's a rash option because like I said, I'm kind of the entrepreneurial type and I really like to go for stuff.

59:39But in this case, since it's kind of our$35 ,000 that we're last kind of expendable$35 ,000, I would really love your input on this. So thank you so much for your time. I look forward to your answer. Kate, thank you for the question. First of all, congratulations on everything that you're building. You are investing in the market. You bought a duplex. I love. Can we get a round of applause for the fact that you bought a duplex and you're renting out one side of it and you're using that to cover the mortgage? Round of applause. This is how it's done. I love that. I absolutely love your living situation.

1:00:21I love what you have done by making housing affordable through the beauty of house hacking. I am such a house hacking advocate. I'm here to spread the word about house hacking and how much it can improve your life. So huge kudos to you for using a house hack to pay off your mortgage so that you've got some great cash flow that you can invest and use to build your net worth and to live a better life. So let's address your question. What I hear is that there are two problems that you need to solve. There's the problem of your kids getting sick at the gym daycare. And then there's the question of how do we invest this money?

1:01:08And I worry that we're conflating those two questions. So I want to address each of those separately.

1:01:16Paula Pant:And I'm glad you brought that up, Paula, because I thought there were two different things going on as well in this question. One is what you want to do with the money. And I also feel like the entrepreneurship piece in some ways is to justify what you want to do with the money, which I frankly don't think you need to do that. I think if the best use of money is to have the gym at home and it makes your lifestyle better today, all I would do is weigh out what does that mean the trade-off is. in the future. And I think that trade-off might be wonderful. The issue I have with the entrepreneurial piece though is pretty big and we can get into that after I think we hear what you were thinking.

1:02:06Yeah. Well, with the entrepreneurship piece, I don't hear any type of a market analysis behind this. I don't hear you say, and maybe in the span of a voicemail, you just didn't have the time to say it, but I don't hear you say, hey, I've taken a look at the offerings in the area. I've taken a look at the demand in the area. I've had 20 meetings with people who run home-based exercise businesses within a 50-mile radius of here. I've had 20 coffee meetings with similar people who would be quote-unquote competitors. Based on all of those meetings and based on looking at the demand and then based on looking at what the insurance requirements are and the liability associated with it.

1:02:55And based on looking at some of the most effective ways to advertise and promote, based on all of that research, I have come to the conclusion that this is a viable route. I don't hear that being done. I don't hear this being treated like a business. I hear I hear that this gym is something that you want and monetizing it would make you feel better about spending the money. Yeah. You feel more comfortable with it. Yeah.

1:03:24Paula Pant:The issue with entrepreneurship is it can suck the fun out of this gym 100%. That's the first thing. Number two is, is that the runway to profitability is far longer than new entrepreneurs think. Number one is if you think it's going to make$5 ,000, we need to cut that in half immediately. It's going to make you$2 ,500. It might lose you. I mean, 100%. Because you're going to need scheduling software. You're going to need insurance. You're going to need, I mean, there's structure and scaffolding. You're going to need a website. You're going to need probably an assistant. At some point, you're going to need to hire somebody to help you with the managerial, the day-to-day operational tasks.

1:04:05Once you spend on all of those administrative and operational overhead components. Would you be okay with this, Jim, if you lost 5 ,000 in the first year?

1:04:16Paula Pant:And the amount of time that you're going to put in, every entrepreneur will tell you, you need to 3X the amount of time you think you're going to spend on it. You're going to spend a lot more time with a lot less profitability getting it off the ground. You also need to take the runway to profitability and also 3X that because it's going to make money more slowly. It's going to make less money. And it's also going to be a time suck, especially when you start out. Because starting out, you have to grind if it's going to be profitable. You have to. A new entrepreneur. Now, that's not the end-all be-all.

1:04:55Paula Pant:A big problem with entrepreneurship later on for a mature business is often the entrepreneur is still grinding and they need to actually instead build systems and trust their people more. But that's phase three, right? Phase one is entrepreneur is salesperson, fitness expert, like five different roles. Marketing person, infrastructure person, hiring manager, HR, function, tax, bookkeeping, it's all your job, 100 % your job. So when I heard entrepreneurial piece, I didn't like it. Yeah. I really, I didn't like it. And again, there simply may have not been enough time in the span of a few minute voicemail to express the due diligence that may or may not have been done.

1:05:49But I heard no indication of due diligence being done. And when a person has a business idea, but I don't hear any diligence behind it, I'm immediately, that's a big red flag that goes up right away. And I think the temptation to monetize the thing that you want, it's a psychological method of making yourself feel better about the cash outlay, feel better about the spending. But the reality is dollars are fungible. A dollar is a dollar is a dollar, no matter how it's earned and no matter how it's spent. You do not have to monetize the thing that you want in order to justify that thing. You can monetize something completely different and use the proceeds from that completely different thing to purchase the thing that you want.

1:06:37The fact that you live in a duplex and you're Airbnb-ing the other side, perfect example. In that case, sure, half of your house pays for the other half. So it's a one-to-one of half of one asset pays for the other half of that same asset. But let's imagine, let's fast forward 25, 30 years into the future when your house is paid off, the income from that Airbnb will pay for your groceries. It'll pay for your clothing. It'll pay for your trip to Disney World, right? So the proceeds from a given asset don't have to pay for expenses related to the same asset. It's a mental bucketing that we like to do, but it's unnecessary.

1:07:25And so if you want to have a home gym, you don't have to monetize that gym. You can monetize anything that you think would be worth monetizing, which is to say you could build a business around anything. And maybe, I mean, I don't know, I haven't done the diligence. maybe in your location, a gym would be a great thing to build a business around. The point is, I am not aware of any diligence that has been done, and therefore I cannot state whether or not a gym would be a good idea in your location, given supply, demand, logistics, liability. I don't know what that looks like.

1:08:11Paula Pant:And on the surface, just doing a little bit of math, when you talk about hiring an assistant, building the business, if she just wants it to be what's called a lifestyle business, Paula, it very well might be within her reach. $5 ,000 a year is$416 a month. She gets eight people to pay her just over$50 a month to be their workout coach and to come to her gym. Those might be friends of hers that trust her more than other people, but that's top line revenue now. She still is going to need to look into liability insurance if somebody gets hurt and her premises, she has to have that, that just the simple cost of running a company.

1:08:53Paula Pant:There's going to be hundreds of dollars, if not maybe a thousand dollars off of that, but I'm not saying it may not be as complicated and difficult as we're making it. I think it's more just the fact that I wouldn't be justifying the gym to have it. Well, and if she's got eight people, she's going to need, she's going to need a QuickBooks subscription. She's going to need a, like a savvy cow or something in order to manage scheduling. She's going to need a little bit of sass here and there. Nothing major. No, I do think a thousand of the 5 ,000 goes away though. Yeah. Yeah. A thousand of the 5 ,000.

1:09:34And with eight people, sure, maybe she starts with friends of hers, but there's going to be inconsistency, right? People go on vacation, people move away, people join SoulCycle and decide that they don't want to do this anymore. And so in order for her to consistently have eight people, she's going to need to be marketing and selling.

1:09:54Paula Pant:All the time. All the time. All the time, all the time, all the time. If you are not constantly growing top of funnel, then you are shrinking. Which also ask most entrepreneurs, not every, some entrepreneurs really love marketing, but for the vast majority of entrepreneurs, marketing is the grind. Right. Especially if you're in love with the activity. If you're in love with the activity of teaching people better fitness, marketing's a grind. Right. If you're in love with running a business, marketing's not so much of a grind. Right, right. But there's also expense associated with it, right? That's where more operational overhead and eventually more members on the team comes in.

1:10:33Paula Pant:Oh, you're talking about cost of client acquisition. Yeah, exactly. Yeah. That's a great metric for business owners because you're obviously trying to make the cost of finding a new person go down. And often a mistake that you and I see. We have had people, small business owners pitch, both of us, Paula, we've talked about this before, to market their business on our podcast. Oh, God. And I've told people on my end, you should not be marketing this way. This is not at all what I would do with a business your size. Now, you go and you look at advertisers on Stacky Benjamins, and I'm sure advertisers don't afford anything in the same way.

1:11:14Paula Pant:A company like Quint's that's on your channel and on mine. It's perfect. It's the perfect size company. But you and I were talking at one point to a coffee manufacturer. It sure felt like a startup in somebody's basement. I don't know that to be the case, but it was a really small company. And it's so hard. I believe they're out of business now, unfortunately. They did make great coffee. If you're interested in the life of a startup entrepreneur, I'm going to mention a book that I've mentioned before. Not the one you think, Paula, but the other one. Is it The Goal? No, no. The Goal is a fine book.

1:11:55Paula Pant:I thought you were going to say The E-Myth, though, because everybody knows that I love that book. Yeah. But it's a book that I've mentioned here before, but less frequently, but that I think all new entrepreneurs should read. It's called Grind, Speaking of Coffee, and it's by the creator of a fine chain in the Midwest called Big B Coffee. Grind is a great book about what it takes to begin a company. Fantastic book. And I love the double entendre of the word grind for a coffee company. Great read. He's a fun storyteller and he makes you realize what it's going to take, especially on that marketing end.

1:12:29Paula Pant:And you know what the best marketing is, by the way? What's that? Have a great product that people want more of. Yeah. And often new marketers get so obsessed with the perfect marketing campaign, they forget that if you just make the product better, then your customer becomes your marketer. Right. But making the product better, that is also expensive. Product development is expensive. Product iteration is expensive. It's all expensive. Well, and look at how the game changes too, Paula. You and I using tools now that we weren't using two years ago just because the game has changed. Yeah. Yeah. I look at, you know, your first rental property and like the costs, just the overwhelming costs of iteration, product development and product iteration and support.

1:13:19There's a lot. There's a lot under the hood. There's a lot that goes into it. I think it would shock a lot of people. Anyway, I don't mean that, Kate, I don't want to dissuade you, but because I think that entrepreneurship is obviously Joe and I are both entrepreneurs. It is a wonderful, wonderful life path and a wonderful way to spend your time, way to engage your brain, way to leave a legacy, way to impact people. I can't say enough good things about it, but I fear that you want the right thing for the wrong reasons. That's why I started this by saying, I hear two questions. I hear, how do I keep my kids out of this daycare where they get sick?

1:14:05And then I also hear the question of how do I invest this lump sum of money? And it seems like the question that you're really trying to solve is how do I keep my kids out of this daycare where they get sick? And if that's the question you're trying to solve, let's solve that question, right? That's very different than is this a viable business? That's such a different question. But Kate, here's what I would say, because you did describe yourself as naturally entrepreneurially inclined. And I want to be clear, even though it sounds as though Joe and I have both been discouraging of the idea. I am not against the idea of spending this on building a gym that you would monetize.

1:14:49I simply don't think that there's adequate due diligence to be able to evaluate this idea. So I want to see you spend 50 hours doing due diligence on the idea. I want to see you have 20 meetings with people who run similar businesses within a 50 mile span of where you live. I want to see you put a plan together, And it doesn't have to be some big formal fancy plan. It can be handwritten notes. But I want to see you put a detailed plan together with how would you market and how would you acquire clients and what would be your tech stack. And once all of that is done, you'll know. Like you will know if this is a good idea or not by the time you go through that work.

1:15:43That's my homework assignment for you. Go through that due diligence exercise. And at the end of that exercise, you're going to know the answer. And maybe it's a great idea. Maybe, I mean, maybe it's you're entrepreneurial inclined. You have already had experience as a personal trainer. Maybe it's a perfect fit, but only the due diligence will tell us that. So thank you, Kate, for the question. And please, after you finish your homework, after those 50 hours of diligence, call us back and let us know what the outcome of that diligence was. Actually, let us know the process. Walk us through the process that you went through and then let us know what the outcome was.

1:16:28Joe, we've done it again.

1:16:30Paula Pant:I can't believe we did it again. Wasn't that when I previewed, I said these were going to be great questions. These are fantastic questions. And I think that all three of these wonderful people, Kate, Karen, and Matt, have questions that I think a lot of the Afford Anything audience has. Yeah, it was a great representative sample of what's on people's mind. Well, Joe, where can people find you if they'd like to learn more? Well, I think a great place to find us because of the fact that if you're familiar with Stacking Benjamins and Afford Anything, that Paula and I generally have a great one-two punch when it comes to interviewing people.

1:17:06Paula Pant:We have some very different questions. We have a fantastic YouTube video that I think will probably, just knowing you, Paula, go really well hand in hand with your upcoming interview with Claire Flynn Levy, which is her and her co-host, Ali Freeman Shore. They all have hyphenated names, which is why I like them so much, the three of us together. We have all the hyphens. But not only do we have a great YouTube video at the Stacky Benjamins YouTube channel, we also have what we call a cheat sheet, which is all of the lessons that you learn in the video that you can download. We tell you how to do that at the beginning of the video.

1:17:40Paula Pant:So go to our YouTube page and look up Stock Market Maestros and you'll see my conversation, which I think will be a nice lead into probably some of the grittier questions that I'm sure you're going to ask Claire when you guys have your upcoming talk. Yeah. When Claire and I talk, I kick off the conversation by asking her about being a fund manager in 2008. Yeah. Boy. Right? I did not ask that. I did not ask that. We talked a lot, though, about investment policy statements. We talk a lot about that. And I did not ask that. See? Yeah, there we go. It always is a great one too. People, I hear this all the time when I talk to people in our community.

1:18:17Paula Pant:They're like, I love listening to the two of you interview people because they're so different and they're very complimentary. Excellent. Well, thank you, Joe. If you are listening to this on the day that it comes out, Tuesday, May 19, tonight, we are hosting an open house. It is at 8 p.m. Eastern, 5 p.m. Pacific. We're hosting an open house. where we're going to talk all about rental property investing. And we're going to show you the inside of Your First Rental Property, which is our course on rental property investing. It's incredibly robust. We're going to pull back the curtain, show you what's inside, talk you through the A to Z of the tools, the resources, the support that you will need if you want to be a successful real estate investor, rental property investor.

1:19:07That is tonight, Tuesday, May 19, 8 p.m. Eastern, 5 p.m. Pacific. You can sign up by going to affordanything.com slash open house. That's affordanything.com slash open house. And if you are listening to this after that open house is over, never fear. You can still go to that link and it will lead you to a page that has loads of information about your first rental property. Our course is open for enrollment only for the next two days. We're going to close our doors on Thursday. So you've got 48 hours to enroll. So go to affordanything.com slash open house. If it's prior to the open house, you can sign up for the open house there.

1:19:51And if you're listening to this after the open house has happened, you're going to go to a page where you'll learn a ton about the course and you'll have an opportunity for the next 48 hours, you'll have the opportunity to enroll. So again, affordanything.com slash open house. No matter what day you're listening to this, go there because it will lead you somewhere good. All right. Thank you so much for being part of this community. I'm Paula Pant. I'm Joe Salcihai. And we will meet you in the next episode.