Debi is feeling pressured about saving for a down payment on a house in her expensive area. Should she liquidate her brokerage account to accelerate the process?
Lucas and his wife earn a high income, but they feel drained and are ready for a change. What tactics can they use to optimize their investments and make a confident transition away from their jobs?
Grant is confused by recent conversations regarding the efficient frontier. It seems to him like market timing based on a selective set of historical dates for investment strategies. What is he missing?
In today’s episode, former financial planner Joe Saul-Sehy and I address these queries.
Enjoy!
P.S. Have a question? Feel free to leave it here.
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Debi asks (at 01:41 minutes): I have a question about home financing. My husband and I have been trying to save for a down payment, but it’s been challenging since we live in New York City, which Paula loves.
At present, we have 5 percent saved, but I realized that cashing out our ETFs and mutual funds could allow us to achieve a 20 percent down payment. This would significantly lower our monthly mortgage, particularly with current rates.
I would appreciate an objective viewpoint from someone not emotionally tied to our savings or the concept of owning a home. Does this appear to be a wise decision?
Additionally, we’re expecting a baby later this year, which is a major reason for our urgency—working from home, our small one-bedroom apartment won’t suffice for me, my husband, my workspace, and a baby.
We do contribute to our employer-sponsored 401(k)s and hold Roth IRAs, so this wouldn’t be depleting our sole savings. Considering all this, what are your thoughts?
Lucas asks (at 25:13 minutes): What’s the most effective way to expand our taxable brokerage account so we can eventually lessen our workload or switch careers?
My wife and I are both 33, work in IT consulting, and have a combined income of $315,000 before bonuses. We’re not passionate about our jobs, but they pay well and offer flexibility. Our goal is to save enough to allow us to step back from our careers.
Here’s our current financial overview:
Home: Bought in 2019 for $375,000, fully paid off
Vehicles: Both owned outright.
Investments:
$470,000 in traditional 401(k)
$130,000 in Roth IRA/Roth 401(k)
$10,000 in a Health Savings Account (HSA)
$15,000 in a 529 plan
$27,000 in company stock
$160,000 in a taxable brokerage (predominantly S&P 500 index funds)
Cash: $40,000 in an emergency fund.
Annual expenses: Generally $80,000, but expected to rise to $100,000–$110,000 due to daycare and baby-related expenses.
We worked aggressively to pay off our house in just over four years, and in 2024 alone, we saved $100,000 in our brokerage account. Once we commit to a financial objective, we typically achieve it.
As we keep building our taxable brokerage account, what critical factors should we consider before using it to supplement our income?
Apart from dividends, capital gains taxes, and the possibility of making quarterly tax payments, are there significant pitfalls or strategies we should be aware of? Is it really as straightforward as growing the account to a comfortable level and then withdrawing from it as needed?
Grant asks (at 49:15 minutes): I have an inquiry regarding the efficient frontier. After listening to earlier episodes, it seems like there’s a bit of selection bias and market timing suggested in how you and Joe discuss it.
Specifically, the year 1970 keeps recurring, which raises concerns for me. You’ve always warned against using arbitrary time frames to evaluate returns—so why choose 1970 as the starting point? Why 54 years? What occurs if you look back to 1965 or before?
I understand some of this may stem from limitations in tools, but I’d like to hear your thoughts on why that particular date is chosen and how to better grasp the efficient frontier.
Resources Mentioned:
YouTube interview with Codie Sanchez
YouTube interview with Paul Merriman
#303: A World Without Email, with Cal Newport – Afford Anything
Dr. Cal Newport: How to Achieve More by Doing Less – Afford Anything
#176: Digital Minimalism – with Dr. Cal Newport – Afford Anything
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Debi is feeling anxious about accumulating a down payment for a home in her expensive area. Should she withdraw funds from her brokerage account to make the process faster?