Afford Anything®

Eva is finally closing in on her financial independence goals, but she’s grappling with how to make a smooth transition from accumulation to decumulation. What should she consider?

John has noticed a game-changing omission from recent discussions about traditional versus Roth IRAs. Is this as big of a deal as he thinks it is?

An anonymous caller is excited to convert his primary residence into a rental property. But he’ll only make a profit if he first sells some equities to pay down the mortgage. Is this a good idea?

Former financial planner Joe Saul-Sehy and I tackle these questions in today’s episode.

Enjoy!

P.S. Got a question? Leave it here.

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Eva asks (at 02:50 minutes):   I recently attended your Purpose Code book launch event in New York City, and one of the audience questions really stuck with me. How much cash should we hold to reduce sequence-of-return risk as you approach financial independence (FI)?

That got me thinking: Many long-time listeners, myself included, have been on this FIRE journey since your podcast started. And with the strong market over the past several years, I suspect a lot of us are either nearing or crossing our FI goalposts.

How should someone transition their portfolio from accumulation to decumulation? And when is the right time to start making those changes?

From my research, two approaches seem relevant here:

I don’t think I’ve heard you do a deep dive on risk parity models before, but I’d love to hear your thoughts. Assuming we’re less worried about adding some complexity if it supports long-term success, what’s the best way to approach asset allocation in the decumulation phase?

Anonymous asks (at 31:14 minutes):  My wife recently got a job in Cleveland, and we’re excited to make the move from Michigan. Now, we have to decide: should we sell our house or convert it into a rental property?

If we sell, we’ll likely break even. But I’ve been wanting to get into rental real estate, and this seems like a good opportunity to learn. That said, I could also just start fresh in Cleveland.

Our mortgage is a seven-year ARM at 4.875 percent with $0 down. It resets in 2030 to the one-year treasury rate plus 2.75 percent, capped at 9.875 percent. By the time we sell or rent it out, we’ll owe $421,000 on the loan.

I’ve run the numbers in Excel, and it looks like we’d be cash flow negative—somewhere between $5,000 and $15,000 per year—unless the property appreciates enough to make up for it. An alternative I’ve considered is selling some equities to recast the mortgage.

We have no debt, $105,000 in cash, $520,000 in tax-advantaged accounts, and $578,000 in taxable accounts. If I used $200,000 to pay down the mortgage, the property would likely turn cash flow positive. But I hesitate to do that for a few reasons:

At the same time, I wonder if I’m missing an opportunity here. What do you think? Should we sell or rent? And if we rent, should I pay down the mortgage first?

John asks (at 51:39 minutes):    In your recent discussions about the pros and cons of traditional versus Roth IRAs, I was surprised that neither of you highlighted one major advantage of a Roth: the ability to grow tax-free for decades, even well past retirement.

I converted my traditional IRA to a Roth back in 1997 and retired in 2020. Now, at nearly 72, I have over $1 million in my Roth that I haven’t touched—and don’t foresee needing to anytime soon.

Because there are no required minimum distributions (RMDs), I can let it continue growing, possibly for decades, all tax-free. If I had left it in a traditional IRA, that tax-free compounding would be coming to an end right around now, and I’d be facing withdrawals and taxes.

So my question is: Isn’t this a significant long-term advantage of a Roth for those who can afford to keep the money invested? Or am I missing something?

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Ever wonder if you could afford to travel for months at a time? According to Nomadic Matt, who’s visited more than 100 countries over the last 19 years, you can see the world on just $75 a day. That’s about $27,375 per year, less than many people’s current cost of living.

Matt Kepnes, better known as Nomadic Matt, joins us to challenge common assumptions about travel costs. He explains that long-term travel can actually be cheaper than staying home.

When you’re traveling, you shed many regular expenses that eat into your budget back home, like car payments, home insurance, and utility bills.

The key is to “travel like you live,” as Nomadic Matt puts it. This means using public transportation instead of taxis, shopping at local markets, and seeking out free activities — just like you might do in your hometown.

It’s not about staying at five-star resorts, but experiencing destinations authentically while keeping costs reasonable.

Nomadic Matt also breaks down several travel myths. The old advice about booking flights on Tuesdays? Outdated in today’s algorithmic pricing world. Using incognito mode to get better flight prices? No evidence supports this idea.

He does confirm that booking round-trip flights often costs less than one-way tickets, even if you don’t use the return portion.

For those interested in credit card points, Nomadic Matt recommends choosing cards based on your specific travel goals rather than chasing the most popular options. Consider which airlines you use most and what perks you’ll actually take advantage of.

The pandemic has transformed travel in significant ways. While prices have increased and some budget travel services have disappeared, new opportunities have emerged — especially for remote workers who can now take advantage of digital nomad visas to live abroad while maintaining their income.

Whether you’re planning a two-week vacation or dreaming of becoming location-independent, Nomadic Matt’s practical advice shows how international travel is more accessible than you might have thought.

Timestamps:

Note: Timestamps will vary on individual listening devices based on dynamic advertising run times. The provided timestamps are approximate and may be several minutes off due to changing ad lengths.

(0:00) Intro to Nomadic Matt and $75/day budget

(1:00) Modern hostels aren’t grungy anymore

(3:00) Origins of the $75/day travel budget

(5:00) “Travel like you live” approach saves money

(8:50) Mix accommodations based on trip needs

(9:40) Choose travel cards matching your specific goals

(16:40) Use points before devaluation happens

(20:00) Best booking times for flights

(37:00) Social media’s impact on global travel

(42:00) Overcoming language barriers easily

(48:30) Post-COVID travel costs and changes

(56:20) Remote work visas for long-term travelers

(1:02:40) Why travel costs less than staying home

(1:05:50) How location independence evolved from unusual to mainstream

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An anonymous caller is brooding over a mistake he made in 2023 when he decided to contribute to his Roth instead of a pre-tax account. How does he get over this?

June is annoyed that she triggered short-term capital gains and wash sales when she sold assets in her taxable brokerage last year. How does she avoid these issues in the future?

Zerai wants to add mid and small-cap exposure, but his 457 plan has a limited selection of mutual funds. What’s the proper way to select the best fund among the available options?

Former financial planner Joe Saul-Sehy and I tackle these questions in today’s episode.

Enjoy!

P.S. Got a question? Leave it here.

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Anonymous asks (at 01:13 minutes): I’ve been following your recent discussions on the Roth versus pre-tax decision with great interest. After reviewing my 2023 and 2024 choices, I think I made a mistake, and I’d love your take on it.

In 2023, I maxed out my 401(k) in Roth dollars while in the 32 percent tax bracket, even though I knew my bracket would drop to 24 percent in 2024. Wouldn’t it have been better to contribute pre-tax in 2023 and then do a Roth conversion the following year?

I can already hear Joe saying, “It’s just 8 percent. You can’t optimize everything.” But for those of us who enjoy fine-tuning our finances, this feels like a big misstep. My 2023 contribution would’ve been my only pre-tax contribution, so the conversion would’ve been limited to $23,000.

Did I truly make an error here? And more broadly, how do you move past the frustration of making an optimization mistake? Any personal insights or experiences from your own past financial mistakes would be great to hear.

June asks (at 28:22 minutes):  As I prepare for tax season, I realized that in selling some assets in my taxable brokerage, I triggered both short-term capital gains and wash sales. While most of my gains were long-term, I’d like to avoid unnecessary taxes and wash sale issues in the future.

Do you have any advice on how to better recognize and prevent these when managing a taxable brokerage account? I use Vanguard, which I know many of your listeners also use, so any insights specific to their platform would be especially helpful.

Zerai asks (at 48:16 minutes):   I have a 457 plan through my job with a limited selection of mutual funds. Right now, my allocation is 65 percent in the S&P 500 and 35 percent in international equities, but I’d like to add some mid-cap or small-cap exposure.

Two options are available: the Fidelity Extended Market Index Fund (FSMAX) and the Wellington CIF II SMID Cap Research Fund (SMICRX). There isn’t much publicly available information on SMICRX, and its fees are slightly higher than FSMAX.

Between these two, which would be the better choice to diversify my portfolio?

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Ever wonder what’s happening in your brain right before you knock on your boss’s door to ask for a raise? Dr. Joel Salinas, neurologist and brain health expert, joins us to explain the neurology of negotiation.

When you avoid difficult conversations, your brain actually rewards you with a small dopamine hit. That temporary relief feels good, reinforcing the avoidance behavior.

But Dr. Salinas explains this creates a problematic loop: the more you avoid conflict, the more uncomfortable it becomes when you face it.

Breaking this cycle starts with a simple but powerful step: taking a breath. A long, slow exhale activates the more deliberative parts of your brain, helping you move beyond knee-jerk reactions.

Dr. Salinas suggests focusing on what he calls the “Bigger Better Offer” — the meaningful reward that comes from pushing through discomfort. Thinking about what happens if you don’t ask for that raise (struggling to pay bills, missing career advancement) can motivate you to overcome avoidance tendencies.

Beyond workplace conflicts, we explore fascinating brain facts:

Want to boost your brain health? Dr. Salinas recommends regular exercise, brain-healthy foods like leafy greens and berries, quality sleep, supportive social connections, and challenging yourself with new skills.

The conversation meanders through various aspects of brain function — from why humans are visual creatures to how trauma impacts neural pathways — all explained in accessible, engaging terms.

Whether you’re looking to have difficult conversations more effectively or simply curious about the remarkable three-pound organ controlling your reality, this episode offers practical insights into the science of your mind.

Timestamps:

Note: Timestamps will vary on individual listening devices based on dynamic advertising run times. The provided timestamps are approximate and may be several minutes off due to changing ad lengths.

(0:00) Intro

(3:00) What happens in your brain when asking for a raise

(6:30) How negativity bias shapes interactions with authority figures

(10:41) The “Bigger Better Offer” technique for breaking behavioral loops

(19:22) Why avoiding conflict creates reward pathways in the brain

(29:12) Training your brain to tolerate disagreement

(34:52) How salience and valence affect what we perceive as conflict

(40:42) The role of internal conflict in decision-making

(55:08) Understanding the structure and functions of different brain regions

(1:00:53) Why imagination of possibility matters for breaking rumination cycles

(1:06:45) How challenging our brain creates new neural pathways

(1:11:42) Five key behaviors that improve long-term brain health

(1:17:03) Brain plasticity and how it changes throughout our lifetime

(1:22:51) Resources for learning more about conflict resilience

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Robinhood

Bilder fra Inventura-kurset Negotiation Fundamentals med Robert Borden og kollega. Foto: Eivind Senneset

Imagine you’re about to ask your boss for a raise. Your stomach tightens. You’ve rehearsed what to say, but doubt creeps in. Should you be more assertive? More understanding of company constraints?

Bob Bordone, who has taught negotiation for 25 years including 21 years at Harvard Law School, joins us to explain why you don’t have to choose between empathy and assertiveness. In fact, combining them is key to successful negotiations.

“It might feel like a tension, but it’s not an actual one,” Bordone explains. “I can fully appreciate what you’re feeling without ever giving anything up in a negotiation.”

Bordone breaks down his three-part preparation framework:

He also introduces fascinating concepts like “conflict recognition” — how quickly we perceive something as a conflict — and “conflict holding” — our comfort with leaving conflicts unresolved. These differences often cause relationship problems when we’re unaware of them.

“My best friend and I might debate over Flaming Hot Cheetos for 25 minutes. For me, with high conflict recognition, it’s completely fun. I go home and sleep like a baby,” Bordone says. “For someone with low conflict recognition, they might think, ‘That was horrible. Did I hurt the relationship?'”

When someone tries to shut down your request with policy (“that’s just how we do things here”), Bordone recommends what he calls the “Wizard of Oz tactic” — asking a few more questions rather than immediately accepting defeat.

The skills you develop asking for a raise transfer to other challenging conversations — from family inheritance discussions to political disagreements with colleagues.

Bordone emphasizes that conflict isn’t something to avoid but rather a normal part of relationships. The question isn’t whether we’ll have conflict, but how we handle it when it inevitably arrives.

Want to hear the full conversation? Listen to the latest episode wherever you get your podcasts.

Timestamps:

Note: Timestamps will vary on individual listening devices based on dynamic advertising run times. The provided timestamps are approximate and may be several minutes off due to changing ad lengths.

(0:00) Introduction to Bob Bordone

(2:35) Contentious times vs 25 years ago

(4:26) Negotiation vs facilitation vs conflict resolution

(5:56) Key negotiator skills

(8:35) Empathy meets assertiveness

(11:22) Mirror work explained

(15:58) Chair work technique

(19:58) Table work strategies

(24:10) Role-playing in preparation

(31:44) Rights, power, interests framework

(35:39) Conflict recognition vs conflict holding

(42:22) Handling power imbalances

(50:13) “Difficult people” reconsidered

(54:45) Process vs substance importance

(1:07:43) Digital vs in-person negotiations

(1:14:22) Supporting introverts in negotiations

(1:19:10) Multi-party negotiation challenges

(1:24:35) Building conflict resilience

(1:31:51) Navigating union constraints

(1:36:18) Agency and influence takeaways

Resources mentioned:

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In the left corner, we have Paul Merriman, the seasoned finance veteran weighing in at 183 pounds. In the right corner, Dr. Karsten Jeske, the scrappy newcomer at 208 pounds. The bell rings, and the small cap value debate begins.

This episode features a financial boxing match between two investment heavyweights with dramatically different perspectives. Paul Merriman champions diversification through the efficient frontier, which means adding small cap value to your portfolio. Dr. Karsten Jeska has “thrown cold water” on this approach, favoring simpler strategies like “VTSAX and chill.”

The stakes are high — we’re talking potentially millions of dollars in your retirement account over decades.

Merriman argues that history shows clear evidence for small cap value’s premium. From 2000 to 2009, small cap value outperformed the S&P 500 in all but one year, compounding at 10 percent while the S&P 500 returned negative 1 percent. He believes this pattern will continue, creating a powerful diversification effect when combined with broader market indexes.

Jeske counters that small cap value’s outperformance is mostly “front-loaded” in history, happening before anyone knew about it. Since 2006, small cap value has underperformed. He argues that once an advantage becomes widely known, it disappears in an efficient market. Adding small cap value might even be “di-worsification” — increasing complexity without improving returns.

The debate expands beyond small cap value to touch on:

While both experts disagree about small cap value’s future, they agree on fundamentals: invest early, stay invested for the long term, and understand that no one can predict markets with certainty.

What starts as a technical debate evolves into a philosophical discussion about evidence, probability, and the limits of our knowledge — all with millions of retirement dollars hanging in the balance.

Timestamps:

Note: Timestamps will vary on individual listening devices based on dynamic advertising run times. The provided timestamps are approximate and may be several minutes off due to changing ad lengths.

(0:00) Debate intro: small cap value vs index funds

(4:01) Merriman: small cap value offers premium returns

(9:40) Jeske: small cap value underperformed since 2006

(18:20) Historical performance data significance

(25:15) Stakes: difference of millions over time

(33:08) Diversification vs added volatility debate

(41:45) Risk-adjusted returns comparison

(49:08) Questioning true diversification benefits

(57:40) Value traps and actively managed funds

(1:05:08) Technology stocks vs value investments

(1:13:45) Data selection bias in studies

(1:19:40) Faith vs science in investment decisions

(1:29:20) Personal risk tolerance considerations

(1:36:08) Closing arguments on investment strategies

(1:42:08) Paula declares the debate a draw

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Kimmy is worried that her mom’s retirement portfolio is invested too conservatively. Is she right to advise her to take on more risk?

Peyton has heard the financial advice about staying away from Whole Life Insurance as an investment, but what about as a savings account for children? Is there good a use case for this?

Jeff and his wife are in a great financial position, but they fear that their retirement savings are too heavily apportioned in traditional IRAs. Will they run into tax problems in the future?

Former financial planner Joe Saul-Sehy and I tackle these questions in today’s episode.

Enjoy!

P.S. Got a question? Leave it here.

_______

Kimmy asks (at 02:12 minutes):  How much risk should my mom take in retirement? My mom completely turned her financial life around. She grew up dirt poor but now has $1 million in liquid assets saved for retirement.

She owns her home, worth $300,000, with $40,000 left on the mortgage. I recently ran an analysis of her spending and retirement benefits. If she starts drawing next year at age 62, she’ll have:

Since she’ll be withdrawing so little, she may run into required minimum distribution (RMD) issues later. I’m planning to help her with Roth conversions before she turns 73 to reduce that burden.

Right now, her portfolio is very conservative:

Given that she doesn’t need to rely heavily on her investments for income, I think she could afford to take on more risk. I ran Monte Carlo simulations, and in every scenario, shifting more of her portfolio into equities improves her long-term outlook.

Am I missing anything? My top priority is ensuring she has a secure and comfortable retirement. She insists on living simply, but I want her to have every opportunity to enjoy life.

There’s a secondary factor, too. I’m 41 and have been severely disabled since contracting COVID two years ago. I live in a high-cost-of-living area and have $350,000 saved for retirement which is now accessible to me without penalty due to my disability. My investments are almost entirely in equities, and I’m comfortable with the volatility.

I receive $2,000 per month in disability benefits but am spending my savings at a rate of $3,000 per month. That spending should drop significantly if I’m approved for Social Security Disability Insurance (SSDI) in the next two years.

Would love your perspective—am I overlooking anything in my mom’s asset allocation or my own financial situation?

Peyton asks (at 23:15 minutes):  I’m a previous caller whose parents took out a life insurance policy for me when I was seven. They paid the premiums until I got my first full-time job, at which point they transferred the policy to me.

The last time I called in, I asked what to do with the policy since I don’t have dependents. You suggested donating it, and I ended up making the beneficiary an organization that both my parents and I support. It was funded by both their money and mine, so I wanted to honor them.

Recently, I was talking to a friend whose husband suggested doing the same thing for their future kids. That made me pause. My parents used the policy as a savings vehicle for me, but is that a good strategy?

For new parents—assuming they’re already saving for education—does buying a whole life insurance policy make sense as a way to gift money to their children? I know there’s a lot of debate about whole life insurance, so I’d love to hear your thoughts.

Where does it rank among the different ways parents can pass on wealth?

Jeff asks (at 43:09 minutes):  We’re trying to optimize our finances before my wife quits her job—what should we do? We’re a family of five in Colorado, with kids ages 3 to 10. I’m 46, my wife is 39.

We spend $12,000 a month, and our household income is $290,000—though that will drop by $90,000 once she leaves her job. We believe we can afford it, but we want to make sure we’re making the right moves both before and after she quits.

One concern is that too much of our money is in pre-tax accounts, which could create a big tax burden in retirement. I have $2.3 million in a 403(b)/401(a), all pre-tax, plus $66,000 in a Roth IRA. My employer offers a 10 percent match, and since they don’t have a traditional IRA, I’ve been doing a backdoor Roth conversion each year.

My wife’s employer contributes 12 percent of her income to retirement, and she’s been maxing out her pre-tax 403(b). She has $60,000 in a Roth and $78,000 in a traditional IRA, recently converted from a SEP when we moved everything to Fidelity.

We wanted to do a backdoor Roth for her but got confused about the pro-rata rule and whether we’d face a big tax hit—or even trigger the Net Investment Income Tax (NIIT). We also recently moved our taxable brokerage to Fidelity and have been unwinding some legacy stocks.

Last year, we pulled $75,000 while offsetting gains with losses. But we still have $380,000 in traditional stocks, with $270,000 in unrealized gains. Including what we pulled, we now have $115,000 in Fidelity’s cash management account.

Other assets:

Given all of this, what should we do before she quits to optimize our finances? Should we shift more toward Roth accounts? Adjust our investment strategy? And is real estate worth considering? By the time this airs, there’s a good chance she’ll already have left her job.

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