Bogleheads® Conference 2024 Mind Over Market with Paula Pant

00:00:00.000 | [APPLAUSE]

00:00:05.880 | So excited to introduce Paula Pant.

00:00:08.600 | She has an amazing podcast called Afford Anything.

00:00:13.480 | And she actually filmed and recorded

00:00:17.280 | several of the sessions of her podcast

00:00:19.600 | at this conference with some people who were

00:00:22.000 | speakers at this conference.

00:00:23.500 | Her podcast has had 30 million downloads, which is a lot.

00:00:28.160 | If you look at the top-ranked investment podcasts,

00:00:31.880 | because I do, because I have an investment podcast,

00:00:35.000 | Paula is usually toward the top.

00:00:39.080 | She is a leading light of the FIRE movement.

00:00:41.440 | Many of you saw her in the session yesterday,

00:00:43.740 | the panel discussion.

00:00:45.860 | She's a former newspaper reporter,

00:00:48.400 | but she's also an alumnus of the Knight-Bagehot Fellowship

00:00:52.560 | in Business and Economic Journalism

00:00:55.120 | at Columbia University, a very, very prestigious fellowship.

00:01:00.560 | And we are so excited to have her speak to us today.

00:01:03.280 | Paula has a presentation for you,

00:01:05.280 | and then we're going to take some questions from all of you.

00:01:08.360 | So if you have questions for Paula,

00:01:10.000 | you can put them on the cards.

00:01:11.240 | Paula, come on up.

00:01:12.840 | [APPLAUSE]

00:01:18.240 | Thank you.

00:01:21.560 | I'd like to start by showing you a very short video.

00:01:25.000 | This is only 17 seconds, so blink and you'll miss it.

00:01:29.360 | But it's a 17-second video that illustrates

00:01:33.520 | what I love about coming to a Bogleheads conference, what

00:01:38.560 | I love about a weekend like this.

00:01:40.600 | Let's take it away.

00:01:42.520 | Ready to fight.

00:01:45.000 | [GRUNTING]

00:01:58.840 | And this is the only room where people understand that.

00:02:01.840 | [LAUGHTER]

00:02:04.800 | So what's wonderful about a conference like this

00:02:09.080 | is that we can spend the weekend debating

00:02:13.800 | Roth versus trad and talking about how to optimize,

00:02:17.680 | if you should execute Roth conversions, and how and when.

00:02:21.960 | And we can talk about optimization.

00:02:25.000 | And we enjoy those conversations.

00:02:28.040 | But the core idea that we have learned from Jack Bogle

00:02:34.320 | is that at the end of the day, particularly

00:02:37.200 | if you're in the accumulation stage,

00:02:40.240 | money is not that complicated.

00:02:43.360 | To be directionally accurate, as Jack Bogle has taught us all,

00:02:49.520 | low-cost, buy-and-hold index funds,

00:02:54.520 | ideally in a tax-advantaged account when appropriate.

00:02:59.040 | Oh, thank you.

00:02:59.800 | Hey, look at that.

00:03:01.920 | Ideally in a tax-advantaged account when appropriate.

00:03:06.320 | Focus on making bigger contributions to the extent

00:03:09.080 | that you can.

00:03:10.360 | And if you do that, you directionally

00:03:14.560 | are in the right place.

00:03:15.720 | And then we can later talk about optimizing.

00:03:18.840 | And we can talk about particularly

00:03:20.880 | when you get to decumulation and withdrawal.

00:03:24.840 | But it's not rocket surgery.

00:03:27.720 | And I chose that, by the way.

00:03:28.960 | I chose this not rocket surgery specifically

00:03:32.040 | because I knew that this is an audience that

00:03:35.160 | has a lot of physicians and also at least one person, Bill

00:03:39.400 | Behnken, who is a former rocket scientist.

00:03:43.360 | Two people, two people, former rocket scientists.

00:03:48.440 | So many of you have done or either are in

00:03:54.120 | or have been in professions that are very complicated

00:03:59.080 | and that are very high stakes.

00:04:01.880 | And what we've learned from Jack Bogle

00:04:07.600 | is that the simplest course of action is often the best.

00:04:14.960 | Don't try to beat the market.

00:04:17.120 | Meet the market.

00:04:18.840 | Be the market.

00:04:19.560 | We also know that the answers are out there, particularly

00:04:27.960 | within this community.

00:04:31.440 | The answers are often abundant if we take the time

00:04:34.680 | to look for them.

00:04:37.160 | But it can be easy, particularly with a deluge of information.

00:04:41.560 | It can be easy to just ignore all of the answers

00:04:45.320 | and to end up doing things in a way that's a little bit harder.

00:04:49.240 | And so the question in my mind was, why?

00:04:52.840 | Why is it that often we contradict our own investment

00:04:59.240 | thesis?

00:05:01.280 | Oftentimes-- and I will raise my own hand.

00:05:04.520 | I am guilty of this.

00:05:06.480 | I sometimes make money moves that are against my own better

00:05:10.200 | judgment.

00:05:12.480 | I know better, but I will sometimes

00:05:16.960 | take that ill-thought-out, risky, proverbial water cooler

00:05:22.160 | investment on a lark.

00:05:26.720 | Or I will not make as many contributions

00:05:30.400 | as I know I should.

00:05:31.360 | It's the financial equivalent of eating that second slice

00:05:35.680 | of chocolate cake, or the third slice, or the fourth slice.

00:05:43.080 | You know better.

00:05:44.440 | We absolutely know better, and yet we do it anyway.

00:05:49.480 | So why?

00:05:53.120 | And what it comes down to, the answer to that why,

00:05:56.360 | is that we have been led to believe that money management

00:06:01.560 | is simply tactical.

00:06:03.120 | It's all about numbers.

00:06:04.320 | It's all about spreadsheets.

00:06:06.240 | It's the hands.

00:06:09.040 | That money management comes from our hands,

00:06:10.840 | meaning tactics, logistics.

00:06:15.760 | But in reality, it isn't tactical.

00:06:19.680 | It's emotional.

00:06:20.760 | It's psychological.

00:06:23.520 | If you think head, heart, hands, it's

00:06:28.040 | our cognitive biases in our head,

00:06:31.040 | and it's our psychological realities in our heart

00:06:35.000 | that influence what we do with our hands.

00:06:40.160 | And so the reason that we often make decisions

00:06:44.360 | that go against our own investment thesis,

00:06:47.560 | that go against our better judgment,

00:06:49.720 | is because we often get in our own way.

00:06:56.920 | Our behaviors are suboptimal.

00:07:01.760 | And largely, that's because we are either anxious,

00:07:06.160 | we are avoidant, or we are obsessed.

00:07:11.080 | And so what I want to talk about today are each of these three.

00:07:14.880 | And by the way, I want to give credit.

00:07:16.560 | These ideas very much draw from the research of Dr. Brad

00:07:20.040 | Klontz, who is a financial psychologist.

00:07:23.680 | He actually formed four money mindsets,

00:07:26.080 | but I condensed them into these three.

00:07:31.640 | But anxious, obsessed, and avoidant.

00:07:35.520 | And we see this not only in ourselves,

00:07:38.680 | but we see in the way that life imitates art,

00:07:41.920 | and art imitates life.

00:07:43.680 | We see depictions of this in traditional media.

00:07:47.800 | I know social media gets a lot of--

00:07:49.840 | when we talk about money, social media

00:07:51.520 | gets a lot of finger pointing at it.

00:07:54.560 | But there's a lot that we can see in traditional media

00:07:56.880 | as well that illustrates some dysfunctional relationships

00:08:01.800 | with money.

00:08:02.280 | And since sometimes it's hard to read the label when

00:08:05.400 | you're inside the jar, it's easier to recognize behavior

00:08:08.000 | when it's presented as an archetype

00:08:10.680 | or as a character type on others,

00:08:12.640 | I'm going to walk through a few examples

00:08:16.920 | that we see in popular media of dysfunctional relationships

00:08:19.920 | with money so that we can see the ways in which that

00:08:23.320 | mirrors in ourselves.

00:08:24.560 | We'll start with-- oh, go back one.

00:08:32.000 | We'll start with feeling anxious about money.

00:08:35.480 | And the clear example of this is Ebenezer Scrooge,

00:08:41.160 | the fictional character from A Christmas Carol.

00:08:47.680 | Ebenezer Scrooge had a lot of money

00:08:51.280 | but was so cheap that he would not even heat his own office.

00:08:57.280 | And he made his employees shiver inside of their office.

00:09:02.120 | And what I like about this example

00:09:06.200 | is that oftentimes there's this myth

00:09:08.400 | that to be quote unquote "good at money,"

00:09:10.920 | you simply don't spend.

00:09:12.720 | That being good at money means being frugal.

00:09:16.520 | But Ebenezer Scrooge is a great fictional example

00:09:20.960 | of how that idea, taken to its extreme, becomes dysfunctional.

00:09:27.160 | It becomes antisocial.

00:09:29.160 | It becomes counterproductive.

00:09:31.600 | This is a guy who neither he could not enjoy his money,

00:09:36.960 | nor could he use his money as an expression of his values.

00:09:42.720 | He didn't even know what his values were.

00:09:44.920 | That's the entire plot line of A Christmas Carol,

00:09:47.120 | is revealing to him what matters

00:09:50.440 | and why values ought to be the North Star.

00:09:55.400 | And then money can be the physical manifestation

00:09:58.640 | of his direction towards that North Star.

00:10:02.600 | And you'll notice his catchphrase, "Fah Humbug."

00:10:05.640 | When did he say that?

00:10:06.720 | He said that any time that he was presented

00:10:10.640 | with the proposal to spend some money.

00:10:15.320 | His answer, "Fah Humbug," was his way of deriding

00:10:23.160 | or dismissing the idea that he spend a little bit of money

00:10:28.000 | to make the lives of the people around him better.

00:10:33.000 | And so here's someone who is wealthy,

00:10:36.040 | but anxious about money, miserly.

00:10:39.800 | Now, another example, and this is a different type

00:10:42.880 | of anxiety about money, Monica Geller from Friends.

00:10:47.200 | So Monica, and the reason I wanted to highlight both of them

00:10:50.640 | is because these are very different types

00:10:52.480 | of financial anxiety, right?

00:10:54.360 | Scrooge was cheap.

00:10:56.200 | Monica isn't cheap towards her friends.

00:10:59.120 | You know, she's a good friend.

00:11:02.320 | That's the name of the show, after all.

00:11:05.720 | But Monica was just very anxious all the time.

00:11:09.280 | She, I mean, didn't have a catchphrase per se,

00:11:11.840 | but she would often, at multiple times during the show,

00:11:16.080 | she would say, "Oh, do you know how much these things cost?"

00:11:19.560 | as her way of expressing a little bit of stress

00:11:24.480 | around money.

00:11:26.480 | And over the, I don't know how familiar you are with Friends,

00:11:29.280 | over the span of the show,

00:11:31.560 | she ended up in a fairly good financial situation.

00:11:36.400 | In the beginning, she was kind of working lower-paying jobs,

00:11:40.480 | and she had a little bit of career insecurity,

00:11:43.800 | but then towards the end, she had a great job,

00:11:46.600 | she was happy in it, she was making good money,

00:11:49.000 | but she was always anxious.

00:11:52.320 | And that anxiety would come out in the way

00:11:56.760 | that she fixated on costs.

00:12:04.560 | It's a different form of money obsession,

00:12:07.040 | which we're gonna talk about next.

00:12:09.680 | It's this pervasive scarcity mindset

00:12:14.680 | that says, "I'm not sure that more money

00:12:17.800 | "is going to come my way, and therefore,

00:12:19.640 | "I feel the need to clutch onto every penny."

00:12:22.120 | Monica wasn't, she's not Scrooge.

00:12:25.520 | She isn't cheap towards her friends, but she is anxious.

00:12:29.080 | And so, to the extent that either of those characters

00:12:33.480 | can show a mirror, what are the ways

00:12:38.240 | in which we feel anxiety, even when external circumstances

00:12:43.240 | do not warrant that worry?

00:12:45.800 | That's the question to reflect on.

00:12:49.760 | What are the ways in which old scripts, old behaviors,

00:12:53.680 | memories of times in the past

00:12:57.320 | when we might not have had enough,

00:13:00.120 | what are the ways in which that has stayed with us,

00:13:04.040 | even though our actual financial reality today

00:13:07.800 | is quite different, but the scars from back

00:13:12.800 | when we had less remain, and therefore,

00:13:16.160 | those dysfunctional relationships with money also remain.

00:13:19.760 | Those are the questions to ask yourself

00:13:22.800 | as we look at some of these characters.

00:13:25.720 | All right, let's move to money obsession.

00:13:30.040 | This is my favorite.

00:13:31.040 | Montgomery Burns from The Simpsons.

00:13:35.720 | Now, his catchphrase, "Excellent."

00:13:39.000 | When does he say that?

00:13:41.960 | He says it when he is harming others

00:13:48.520 | in order to make more money.

00:13:51.720 | That's when he says the word, "Excellent."

00:13:57.760 | There is an episode in which,

00:14:00.000 | so Montgomery Burns, for those who aren't quite

00:14:03.120 | as familiar with the topic, he is, in The Simpsons,

00:14:06.120 | the owner of Springfield's nuclear power plant

00:14:09.120 | and the boss of Homer Simpson.

00:14:12.560 | And there is an episode in which he literally

00:14:16.240 | blocks out the sun from Springfield

00:14:19.800 | in order to force the residents of Springfield

00:14:22.480 | to buy more energy from his power plant.

00:14:27.120 | There is an episode where he dumps

00:14:29.560 | all of this nuclear waste into the river

00:14:32.120 | and then the river springs up

00:14:33.680 | a bunch of three-eyed fishes.

00:14:35.400 | He famously has a bunch of hound dogs at his mansion

00:14:42.440 | and one of his other big catchphrases is,

00:14:45.160 | "Release the hounds."

00:14:47.440 | And so anytime that anybody does something

00:14:49.160 | that displeases him, he just releases

00:14:51.880 | a pack of angry dogs at them.

00:14:56.080 | So he is the proverbial obsessed with money,

00:15:00.280 | obsessed with making more,

00:15:02.000 | but also incredibly isolated and lonely.

00:15:06.600 | He doesn't have any friends.

00:15:08.200 | He has an employee who is very devoted,

00:15:13.040 | but no real friends whatsoever.

00:15:17.760 | And so he stands as a, not just a character,

00:15:22.640 | but really a caricature, an extreme caricature

00:15:27.640 | of someone who has lost the plot,

00:15:32.840 | someone who forgot that money is a means to an end

00:15:37.320 | and has hyper-focused on simply the money itself

00:15:41.360 | and has forgotten the fact that money

00:15:44.280 | is supposed to be a tool that allows

00:15:47.400 | and facilitates for better relationships,

00:15:50.920 | a better impact on your community,

00:15:52.960 | for all of the pro-social things that it can do.

00:15:56.680 | Another person who's obsessed with money,

00:16:02.320 | and this is a different type of character,

00:16:04.440 | Tywin Lannister from Game of Thrones.

00:16:07.480 | He is, for those of you who are not familiar with this show,

00:16:14.320 | he is, on the surface, appears to be a family man.

00:16:20.160 | Because he really is devoted to the Lannister family

00:16:25.160 | and he wants the Lannister family to succeed.

00:16:29.840 | So, on the surface, almost looks as though

00:16:34.840 | he's doing the right things.

00:16:36.720 | And again, one of his favorite phrases,

00:16:40.360 | which he repeats often, is,

00:16:42.760 | "A Lannister always pays his debts."

00:16:45.000 | And on the surface, that sounds great.

00:16:47.640 | You pay your debts, wonderful.

00:16:49.840 | That's great, we should all pay our debts.

00:16:52.160 | But under the hood, he is someone

00:16:57.040 | who actually is chasing status.

00:17:00.520 | The reason that a Lannister always pays his debts

00:17:04.960 | is because that's how he maintains

00:17:07.400 | power and status and control.

00:17:10.880 | The reason that he wants his family to succeed

00:17:13.760 | is because he wants the ego gratification

00:17:16.560 | of the Lannister name to continue on,

00:17:19.960 | but he doesn't actually care

00:17:21.840 | about the individual members of his family.

00:17:25.640 | And without spoiling anything in the show,

00:17:28.280 | his obsession with the Lannister name

00:17:34.320 | actually ends up driving a wedge

00:17:37.280 | between him and his children.

00:17:39.680 | It actually ends up, ironically,

00:17:42.280 | harming his relationships with the very legacy,

00:17:47.040 | the very offspring that he purports to want to help.

00:17:51.320 | And so here's another person who,

00:17:54.640 | on the surface, appears to care about his legacy,

00:17:59.120 | but actually destroys the underlying relationships

00:18:02.280 | within his legacy in an effort to make his name prominent.

00:18:07.280 | And these are two examples of money obsession.

00:18:11.320 | And it's really, it's an obsession with status

00:18:16.080 | at the expense of relationships.

00:18:20.560 | And then we move to avoidance.

00:18:26.040 | And you might think, all right,

00:18:27.400 | well, we're at a conference about money,

00:18:29.520 | so clearly we're not avoidant.

00:18:31.840 | Clearly, that can't be an issue that plagues any of us.

00:18:37.560 | But, and I'll speak for myself,

00:18:41.680 | there are certainly elements of my financial life

00:18:46.560 | that I pay close attention to,

00:18:48.240 | and elements of my financial life

00:18:51.480 | that I don't really want to think about, right?

00:18:55.320 | In the broad scope of overall financial planning,

00:18:59.720 | there are parts that are more interesting than others.

00:19:03.080 | And so it can be entirely possible

00:19:06.760 | to be a good steward of your money in certain domains,

00:19:11.760 | but also avoidant about your money

00:19:14.400 | in other very specific domains.

00:19:16.760 | So a couple of examples of people who are avoidant of money.

00:19:23.040 | So this is Ron Weasley from Harry Potter.

00:19:26.080 | And he is very dismissive

00:19:30.840 | of anything that seems to relate to money.

00:19:36.360 | He calls it rubbish.

00:19:37.680 | He seems a little bit intimidated by it.

00:19:41.160 | And money avoidance largely stems from,

00:19:47.280 | again, a similar thing to money anxiety,

00:19:51.200 | there is this sense of scarcity.

00:19:52.960 | There's this worry that money might go away.

00:19:58.320 | And so we don't want to think about it

00:20:00.400 | because it triggers this fear.

00:20:04.280 | Another avoidant person actually is Homer Simpson.

00:20:08.360 | And I chose this photo intentionally

00:20:11.360 | because Homer often has,

00:20:15.440 | how many of you are Simpsons fans here?

00:20:17.460 | Excellent.

00:20:19.320 | Homer often has these get-rich-quick schemes

00:20:26.800 | that he's chasing.

00:20:28.040 | So he has had across the span of the show,

00:20:31.240 | I think 400 different side hustles

00:20:34.160 | that he's chased.

00:20:35.920 | He's always looking for a quick buck,

00:20:38.480 | as you can see in this photo.

00:20:40.560 | But he actually doesn't do anything

00:20:42.120 | to try to learn about money, to grow his investments.

00:20:45.800 | He is, even though he's constantly

00:20:47.680 | chasing get-rich-quick schemes, he's avoidant.

00:20:51.040 | And that also stems from the scarcity mindset

00:20:55.520 | of I'm afraid that money might not be there.

00:20:58.960 | I worry that I myself am not taking care of it well enough.

00:21:03.140 | I kind of want somebody else to do it for me.

00:21:05.680 | Let me chase these get-rich-quick schemes.

00:21:08.560 | All of that can play into ways that we are avoidant.

00:21:13.080 | Maybe not with our entire financial lives,

00:21:15.160 | but maybe with specific elements of it.

00:21:19.140 | So money anxiety, money obsession, and money avoidance.

00:21:24.880 | Those are all ways in which we can

00:21:27.880 | sometimes get in our own way

00:21:30.120 | and sometimes do things that are counterproductive.

00:21:34.500 | And so the major lesson that I want to impart

00:21:38.760 | is to take a look at some of these examples.

00:21:42.560 | You know, and in the way that life imitates art

00:21:45.340 | and art imitates life,

00:21:46.820 | ask yourself what resonates.

00:21:51.260 | You know, maybe not, obviously you're not a caricature,

00:21:55.780 | but what elements of those pieces

00:21:58.220 | resonate with specific areas of your life,

00:22:01.660 | even micro areas of your life?

00:22:04.300 | You know, how do you see these things showing up in you?

00:22:07.260 | And then, how can you overcome that

00:22:09.960 | so that you can get out of your own way?

00:22:11.960 | Thank you.

00:22:14.180 | (audience applauding)

00:22:19.080 | - Thank you, Paula, that was fantastic.

00:22:21.600 | So we've just gotten a few questions so far.

00:22:24.100 | If you have questions for Paula,

00:22:25.760 | please do put them on a card

00:22:27.960 | and there'll be someone walking around collecting them.

00:22:31.420 | Here's a great question.

00:22:33.440 | The person is curious if you have resources for,

00:22:37.260 | or strategies for couples who are of two different types,

00:22:41.480 | e.g. the avoidant, married, the obsessed person,

00:22:45.800 | or the anxious is partnered,

00:22:48.880 | or the parent of an avoidant.

00:22:51.800 | So tactics for relationships

00:22:54.160 | where you have different personalities.

00:22:56.280 | - Oh, that's an excellent, excellent question.

00:22:58.680 | Now I can't say excellent anymore without excellent,

00:23:03.380 | excellent question.

00:23:04.820 | So if one person is avoidant,

00:23:11.560 | what I would do, I would start not with the money itself,

00:23:15.120 | which is a tool, but rather with a vision

00:23:18.620 | that you want to co-create together.

00:23:21.040 | So what is the ultimate end game, what is the goal?

00:23:24.400 | Maybe as a couple, the two of you really want

00:23:27.320 | to retire at a certain age, but why?

00:23:32.260 | Like retire and then do what?

00:23:35.280 | Maybe you want to travel more,

00:23:37.440 | maybe you want to spend more time with your grandkids.

00:23:39.520 | Like be very, very clear on what that end goal is

00:23:44.080 | because especially to somebody who's an avoidant,

00:23:49.960 | money might sound like a solution looking for a problem.

00:23:54.440 | The point of paying attention to money

00:23:59.040 | is not necessarily immediately clear

00:24:01.960 | to somebody who's avoidant,

00:24:03.720 | but the point of getting out of a job that you dislike

00:24:08.720 | and spending more time traveling

00:24:11.380 | and hanging out with your kids or grandkids,

00:24:14.240 | that's immediately clear.

00:24:15.960 | So you start with that end goal

00:24:18.020 | and then work together on working backwards

00:24:22.120 | from that end goal to show how money is a resource

00:24:26.920 | that facilitates the end goal.

00:24:28.480 | But you keep the end goal as the focus

00:24:31.000 | and money is sort of as a tool that facilitates that.

00:24:35.920 | - I have a question about the avoidant

00:24:39.920 | and whether people who are inert,

00:24:44.280 | who just don't do anything because they're busy,

00:24:47.880 | are they also avoidant or can you just be too busy

00:24:51.220 | to get into this stuff asking for a friend?

00:24:54.060 | (laughing)

00:24:56.320 | - Well, the great thing about low cost

00:25:02.160 | buy and hold index fund investing

00:25:04.640 | is it doesn't actually take that much time.

00:25:08.320 | - True.

00:25:09.160 | - And so again, it goes back to the 80/20 of it

00:25:14.000 | being directionally,

00:25:17.120 | particularly if you're in the accumulation phase,

00:25:19.960 | being directionally on the right track

00:25:23.300 | is, if you follow the Bogleheads philosophy,

00:25:25.800 | very relatively simple.

00:25:28.060 | Low fee, index funds, good asset allocation,

00:25:34.160 | good asset location, rebalance periodically,

00:25:37.520 | and you're done.

00:25:38.360 | - Great.

00:25:41.680 | Here's a good question.

00:25:42.640 | If one of these characteristics helped you be successful,

00:25:47.440 | but they no longer serve you,

00:25:49.280 | what suggestions do you have to enact change

00:25:53.000 | to serve you better going forward?

00:25:54.880 | - Ooh, which character?

00:25:57.200 | Was it Tywin Lannister?

00:25:59.040 | There's an expression,

00:26:04.720 | what got you here won't get you there.

00:26:08.400 | So oftentimes there are strategies that we take on

00:26:11.980 | that are helpful in a given context,

00:26:15.600 | but that become even counterproductive

00:26:20.480 | in a different context.

00:26:21.640 | So let's look at money anxiety, for example.

00:26:24.720 | Maybe being Monica Geller

00:26:27.640 | and being hyper fixating on every penny

00:26:32.320 | at a time when you just don't have that many pennies,

00:26:36.640 | that can be very, very advantageous.

00:26:40.480 | Being ultra, ultra, ultra frugal,

00:26:42.560 | being that Monica Geller character

00:26:44.980 | can be very advantageous when you don't have a lot,

00:26:48.160 | but as you get more and more money,

00:26:50.620 | your time becomes more valuable,

00:26:56.080 | and then you end up underselling your time

00:26:59.480 | for what is not very,

00:27:04.440 | relative to where you are now, not very much money.

00:27:07.560 | And so what I would suggest doing

00:27:10.120 | is think of every resource at your disposal,

00:27:14.580 | not just your money, but your time,

00:27:17.000 | your energy, your focus, your attention,

00:27:20.440 | all of which are related but different.

00:27:23.160 | Think of each of those as limited resources,

00:27:27.360 | and you're trading each one limited resource for another.

00:27:32.360 | And so your goal is to figure out

00:27:35.660 | what is the right trade-off of time with money.

00:27:42.520 | - I think this is a related question, Paula.

00:27:44.860 | You mentioned the sense of scarcity

00:27:46.740 | can linger long after one's circumstances have improved.

00:27:50.300 | Do you have any guidance or steps one can use

00:27:53.220 | to get over the sense of scarcity and the attendant anxiety?

00:27:57.960 | - Yeah, that's a hard one.

00:27:59.540 | I struggle with this one a lot.

00:28:01.900 | Again, it comes back to really placing a high value,

00:28:08.100 | not just on your time,

00:28:09.320 | because it's easy to lie to yourself about your own time.

00:28:12.960 | It's easy to be like, "I'm quitting sleep, I'm done,

00:28:17.960 | "I'm giving it up."

00:28:19.820 | It's so easy to lie to yourself about your time.

00:28:24.560 | I think it's harder to lie to yourself about your focus,

00:28:28.900 | your mental concentration,

00:28:30.380 | 'cause even if you push yourself to stay awake later

00:28:33.940 | or to wake up earlier,

00:28:36.940 | at a certain point, you just can't focus anymore.

00:28:39.580 | Everything kind of turns blurry,

00:28:41.180 | and then you end up, people blame social media,

00:28:43.660 | but before social media,

00:28:45.540 | people still built those paperclip chains.

00:28:48.900 | People still built paperclip chains.

00:28:50.860 | People still stared vacantly out the window

00:28:53.580 | or at the ceiling.

00:28:54.960 | That preexisted Instagram.

00:28:58.960 | What I would do is really try to be a capital allocator

00:29:07.140 | of your concentration,

00:29:09.540 | because that focus and concentration

00:29:12.040 | is maybe the most limited thing that we have.

00:29:15.180 | - And how do you capital allocate your concentration?

00:29:17.780 | Do you have any tips on that front?

00:29:19.940 | - It's a matter of, I write things out with paper and pen.

00:29:24.940 | Here's everything that is in my brain dump,

00:29:30.180 | here's everything that's in my brain,

00:29:31.640 | here's everything that could be going on,

00:29:33.620 | and then I just, with paper and pen, I start ranking.

00:29:36.380 | The reason I do it with paper and pen

00:29:38.020 | is I know that if I open a screen,

00:29:41.860 | I'm immediately gonna be like, oh, look, cat videos.

00:29:45.220 | (laughing)

00:29:48.260 | And so paper and pen eliminates that distraction.

00:29:51.540 | - What is the name of the financial psychologist

00:29:54.980 | you mentioned?

00:29:55.820 | - Oh, Dr. Brad Klontz, K-L-O-N-T-Z.

00:30:01.780 | - How do you view real estate investing

00:30:04.820 | as part of your financial life and profession?

00:30:07.420 | I know it's part of what you've done

00:30:10.740 | to become financially independent, so talk about that.

00:30:13.860 | - Yeah, for me, it's one of many things

00:30:18.380 | that I have invested in, so I invest in index funds,

00:30:21.580 | I invest in real estate.

00:30:28.020 | What's interesting to me is in terms of the attention

00:30:33.020 | that the real estate component of my portfolio gets,

00:30:35.420 | and I should say my portfolio is about 50% real estate,

00:30:39.460 | 50% public market investments,

00:30:43.460 | and those market investments, personally,

00:30:45.460 | I hold all equities, I don't have bonds,

00:30:48.340 | but I have a barbell allocation, equities, and cash.

00:30:52.820 | So my portfolio is 50% market investments,

00:30:57.060 | 50% real estate currently,

00:30:58.660 | and then there's a tiny sprinkling of individual stocks,

00:31:01.780 | but that's, I don't know, a small percentage.

00:31:05.180 | What's interesting to me about real estate

00:31:09.580 | is that it's tangible, it's visceral,

00:31:14.100 | it's discreet, and it's a little bit different

00:31:20.500 | than the norm, and so that tends to get,

00:31:23.060 | I think, not an undue amount,

00:31:26.520 | it may have maybe an undue amount of attention,

00:31:28.820 | perhaps because of its tangibility,

00:31:33.620 | whereas fewer people ask me about my index funds

00:31:37.300 | because, like, big whoop, everybody's got index funds,

00:31:40.860 | even though I actually have them

00:31:42.380 | in equal proportion in my portfolio.

00:31:45.020 | So I view, personally, I view real estate

00:31:48.380 | as the fixed income portion of my portfolio,

00:31:51.420 | which is the reason that I don't have a bond allocation.

00:31:54.420 | So in that regard, I guess I have maybe a bit

00:31:57.880 | of a overly conservative portfolio

00:32:00.040 | because if I'm viewing real estate as fixed income,

00:32:02.100 | then that means, functionally, I'm 50% equities,

00:32:05.240 | 50% fixed income, which would be conservative at my age.

00:32:10.240 | - What should people know, I mean,

00:32:13.240 | what should they be cut out for

00:32:14.960 | in order to have real estate as a,

00:32:18.040 | like, tangible real estate as part of their portfolios?

00:32:21.200 | What characteristics should people have before they do that?

00:32:24.000 | - So I think that, number one,

00:32:26.500 | don't do it if your reason for doing it is FOMO.

00:32:30.620 | Like, if your reason for doing it is,

00:32:32.620 | well, everyone on TikTok is doing it, that's a bad reason.

00:32:36.940 | Do it if you have what I call minimum viable curiosity.

00:32:43.000 | And so what I mean by that is,

00:32:46.180 | you know when you were a kid

00:32:49.420 | and you were in elementary school

00:32:51.260 | and there were all these subjects,

00:32:52.540 | there was reading, there was history,

00:32:54.100 | there's chemistry, there's biology,

00:32:56.780 | there's, you know, math, yeah.

00:33:01.420 | And there are certain subjects that you were,

00:33:05.660 | maybe there was one or two subjects that you loved

00:33:08.340 | and one or two that you hated,

00:33:11.680 | and then a few that you had, like,

00:33:13.860 | kind of a passing curiosity in,

00:33:16.580 | and there's a kernel of interest

00:33:19.420 | that could be developed there.

00:33:21.820 | You want, for real estate, you want at least that, you know?

00:33:25.940 | If you have zero interest in it

00:33:28.140 | and you're doing it only because you feel a sense of FOMO,

00:33:32.660 | that's the wrong reason.

00:33:34.460 | But if there is that minimum curiosity

00:33:38.140 | and you're like, hm, yeah, no, I'm curious to know,

00:33:42.820 | I'd like to learn more, this engages my interest

00:33:47.400 | just as much as that history class engaged my interest.

00:33:51.880 | Okay, then pursue it, then follow that curiosity,

00:33:55.760 | because what I have discovered is that

00:33:58.000 | the more I learn about something,

00:34:00.040 | the more I realize how little I know,

00:34:02.320 | which then fuels my curiosity and my desire to learn more,

00:34:06.160 | and then that becomes a self-perpetuating learning cycle.

00:34:10.240 | - Why do you think real estate investing

00:34:13.120 | has gotten so popular?

00:34:14.720 | When I look, again, back to the top podcasts,

00:34:17.880 | half of them are about investing in real estate.

00:34:20.800 | What is it about this moment

00:34:22.360 | that has people so intrigued about that?

00:34:25.820 | - You know, I do think that the tangibility of it,

00:34:31.920 | it feels real.

00:34:40.080 | I think that's part of the reason why,

00:34:42.480 | in general, at any given time,

00:34:44.440 | that's an evergreen reason,

00:34:46.200 | but as an evergreen reason, I think at any given time,

00:34:49.640 | people are drawn to real estate

00:34:51.160 | because of the fact that you can see it,

00:34:54.320 | you can hear the floorboards creak,

00:34:56.640 | you can smell the paint dry.

00:34:58.760 | That feeling of realness,

00:35:02.360 | the fact that it engages all five senses,

00:35:04.800 | particularly in an increasingly digital world,

00:35:07.420 | it becomes emotionally evocative,

00:35:10.560 | and things that are emotionally evocative

00:35:12.120 | tend to be psychologically sticky.

00:35:14.200 | I also think, particularly at this moment in history,

00:35:17.280 | where we have just had such high inflation,

00:35:20.240 | periods of high inflation,

00:35:21.560 | we know that tangible assets, art, gold, real estate,

00:35:26.560 | that's where people put their money

00:35:29.160 | in high inflationary periods,

00:35:31.000 | and so it makes sense, particularly now,

00:35:33.920 | coming out of a very high inflationary period,

00:35:36.720 | and coming out of that huge real estate run-up in 2020, 2021,

00:35:41.560 | that people are chasing returns

00:35:44.240 | and chasing an inflation protection.

00:35:46.080 | - This person says, "Great talk.

00:35:49.840 | "This was so great.

00:35:51.160 | "You talked about the three mindsets,

00:35:53.700 | "but all of them were negative.

00:35:55.480 | "What is the right mindset?

00:35:57.240 | "What are the healthy monthly habits

00:36:02.240 | "that we should all follow?"

00:36:03.920 | - I would say that the quote-unquote right mindset,

00:36:06.860 | the healthy mindset, is one in which

00:36:11.220 | your money is a reflection of your values,

00:36:16.740 | so you treat your money as a physical manifestation

00:36:21.200 | of your values and your priorities,

00:36:24.020 | and you have an awareness of how your cognitive biases

00:36:29.020 | and your psychological fears, insecurities,

00:36:35.300 | hang-ups are playing a role in your decision-making.

00:36:39.100 | We can never get rid of that.

00:36:40.600 | That's never gonna go away.

00:36:42.380 | We're not like, you don't wake up one morning

00:36:44.260 | and you're like, "I'm healed now, all done, check."

00:36:49.260 | That is always there.

00:36:53.300 | It's simply a matter of learning to recognize it

00:36:56.380 | and learning to not let it control you.

00:37:00.220 | Fear never disappears.

00:37:02.820 | You just get better at seeing it for what it is.

00:37:05.340 | - So this question, I'm hoping the person who asked it

00:37:09.780 | can help clarify.

00:37:11.260 | What do you make of Susie Orman's pronouncement

00:37:13.600 | that those with only two million for retirement

00:37:17.900 | will burn up alive?

00:37:20.380 | (panelists laughing)

00:37:22.660 | - Are you familiar with this, Paula?

00:37:24.140 | - Oh, yes.

00:37:24.980 | (panelists laughing)

00:37:28.100 | Okay, this person is referring to a 2018 interview

00:37:33.100 | that I did on my podcast in which Susie Orman

00:37:38.740 | came on the "Afford Anything" podcast

00:37:40.700 | and my opening question was,

00:37:42.900 | "What do you think of the fire movement?"

00:37:45.220 | And her response was, "I hate it, I hate it, I hate it.

00:37:49.660 | "And let me tell you why."

00:37:51.700 | And then she went on to explain that

00:37:54.780 | unless you had a minimum of five to $10 million,

00:37:57.540 | you could never retire.

00:37:58.820 | But strangely, that applied only to early retirees

00:38:03.900 | and not to traditional age 65 plus retirees

00:38:08.260 | for reasons that she could not explain.

00:38:10.420 | I tried to press her on.

00:38:12.580 | I was like, "Wait a minute.

00:38:13.420 | "So I can retire at 55 with 10 million

00:38:18.360 | "but at 65 with two million?

00:38:20.540 | "Can you math that out for me?"

00:38:22.940 | You know, and she couldn't.

00:38:26.540 | So what do I think of that pronouncement?

00:38:29.600 | I mean, there were a few things going on there.

00:38:37.700 | Number one, she was defining retirement

00:38:41.420 | as the complete permanent irrevocable cessation

00:38:46.420 | of all income, which is a very rigid definition

00:38:53.080 | of the word retirement, and it leaves no room

00:38:56.640 | for any type of part-time income, any type of flexibility.

00:39:00.320 | It played to one thing that was going on a lot in 2018,

00:39:04.520 | which was this very semantic debate

00:39:07.280 | about the word retirement.

00:39:08.920 | So I like to, particularly for early retirees,

00:39:12.360 | I like to kind of avoid the word retirement

00:39:14.280 | because then we get into, you know,

00:39:17.160 | the internet retirement police, you know,

00:39:19.320 | who sit there and like they finger,

00:39:20.640 | "Well, you did that consulting gig.

00:39:25.300 | "Therefore, you're not retired."

00:39:26.720 | You know, like it gets into this semantic debate

00:39:30.440 | that then becomes a distraction from the overall point,

00:39:34.000 | which is let's have enough money

00:39:37.240 | that you are more or less gonna be okay

00:39:40.840 | and that work pretty much becomes optional, you know?

00:39:44.540 | So I think that was one of the things that was going on

00:39:47.920 | and her dramatic pronouncement kind of highlighted

00:39:52.360 | the disconnect within that semantic debate.

00:39:55.480 | As to the actual claim that you can't retire

00:39:57.700 | with less than 10 million, I mean,

00:40:01.000 | the math is pretty clear that you can.

00:40:04.360 | So, I mean, there's just no justification

00:40:09.160 | for the fact that you need 10 million to retire.

00:40:12.680 | - Well, Paula, we have been so happy

00:40:16.160 | to have you here with us today.

00:40:17.440 | Thank you so much for joining us.

00:40:19.480 | (audience applauding)

00:40:22.640 | [BLANK_AUDIO]

Bogleheads® Conference 2024 Mind Over Market with Paula Pant

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