Speaker 1: Welcome to Hout of Money.
Speaker 2: I'm Joel and I am Mat and today we're answering
Speaker 2: your listener questions.
Speaker 1: Joe, you know, Monday episodes we might just be the
Speaker 1: best episodes because we get to listen. It's not just
Speaker 1: about us talking and for everybody out there to hear
Speaker 1: our voice. It's about us hearing from the people. That's
Speaker 1: what it's all about.
Speaker 2: Most of the time people hate Mondays, but I like
Speaker 2: how you're reframing it.
Speaker 1: It's a whole new spin on it. We are, in fact,
Speaker 1: we got a case of the Monday. It's not the
Speaker 1: Mondays today, can listener questions? During this episode, a listener
Speaker 1: is wondering where he should be stashing an extra one
Speaker 1: thousand dollars a month. Another listener is considering dropping full
Speaker 1: coverage in order to say she wants to know if
Speaker 1: that's something that's worth considering. And another listener, I guess,
Speaker 1: not her specifically, but a family member. I think her
Speaker 1: son is considering getting loans in order to attend flight school.
Speaker 1: She wants to know if if she's got our blessing, Joel,
Speaker 1: So yeah, be sure to put on your best what's
Speaker 1: your cardinal hat? Like the the pope. Is that the
Speaker 1: word anything that describes the office of the pope is people?
Speaker 1: I think so, yeah, it's like people office.
Speaker 2: You remember when those AI generated photos of him in
Speaker 2: some Balentiaga jacket.
Speaker 1: We're going around of the pope with like the big,
Speaker 1: the big fluffy fluffy jacket.
Speaker 2: Yeah, there have been a lot of other sense that
Speaker 2: went viral, but that was that was definitely one that
Speaker 2: kind of caught people by storm. But yeah, we got
Speaker 2: a lot of good questions to get to on this episode.
Speaker 2: But man, I just want to share one thing real quick. Uh,
Speaker 2: our four year old, we're starting to kind of teach
Speaker 2: him about money. We've got older, your four year old,
Speaker 2: not my four years I'm not teaching your four year old. Yeah, yeah,
Speaker 2: that's up to you.
Speaker 1: Well, you just said it in such a way it
Speaker 1: made it sound like we share a four year old.
Speaker 1: You've got your own four.
Speaker 2: Year old their best bunts, yes they are, but no,
Speaker 2: so I'm teaching my four year old. But and it's
Speaker 2: it's finally time to kind of start doing the beginning
Speaker 2: sort of steps. So much of what our kids pick
Speaker 2: up about personal finances is how we talk about it
Speaker 2: and how we act. But then there's also like intentional
Speaker 2: discussion and intentional kind of show and tell sort of
Speaker 2: stuff that has to happen along the way too, Right,
Speaker 2: And the ten and eight year old they've got allowance,
Speaker 2: they've got chores, Like we've got a system set up
Speaker 2: for that.
Speaker 1: But the four year old, do they do their chores? Yeah,
Speaker 1: and then they do.
Speaker 2: Their laundry, They pick up the room every single week
Speaker 2: on the weekend, same day, every it's every it's Sunday.
Speaker 1: So maybe we should tie it to more of the
Speaker 1: day to day stuff because when you say, like they
Speaker 1: do their jobs and they're getting their money, that's like
Speaker 1: that's the problem that we're running into is that like
Speaker 1: the kids, they don't really care, Like we make them
Speaker 1: do sort of the expected stuff around the house, but
Speaker 1: when it comes to getting them excited to earn money,
Speaker 1: they're just kind of like, eh, I guess there's no
Speaker 1: there's no like pot of gold in their mind at
Speaker 1: the at the end of the rainbow, so they're like
Speaker 1: not pursuing the thing, like the extra stuff. I guess yeah.
Speaker 2: I think with the youngest kid too, it can kind
Speaker 2: of be like, oh, well, they'll pick it up my
Speaker 2: osmosis and you forget to do that true kind of
Speaker 2: some of the teaching, you're you're hoping they see what
Speaker 2: they're what they're sis are up to. But we were like, okay,
Speaker 2: wait a second. We actually had this piggy bank, this
Speaker 2: digital piggybank that has like a counter on top, so
Speaker 2: when you put the money in, it's counting up how
Speaker 2: much money is going in there. And he doesn't have
Speaker 2: any jobs, he's not making any he's not making any
Speaker 2: recurring income via allowance every single week. But I gave
Speaker 2: him this piggy bank, and we've scraunched up some coins
Speaker 2: and he loves popping them in there. And I feel
Speaker 2: like that's like literally the most basic thing I can
Speaker 2: do right is to kind of at least get him
Speaker 2: hands on with some money. Yeah, and watching the number
Speaker 2: go up, just kind of getting an idea of playing
Speaker 2: with it a little bit.
Speaker 1: Number go up. Before you know, he's going to be
Speaker 1: investing in bitcoin and all the cryptocurrency. Yeah. No, I
Speaker 1: think that's that's true a what you're saying about being intentional,
Speaker 1: because I know that's the case for us man, Like
Speaker 1: I feel I know with our oldest we were so
Speaker 1: intentional and diligent and it's like, Okay, while we're going
Speaker 1: to teach you about how the money that you leave
Speaker 1: quote unquote invested with d that's going to earn interest
Speaker 1: and in fact it's going to compound weekly. We like
Speaker 1: that of all these systems, and maybe we a little
Speaker 1: overboard for let's say a six year old, because I
Speaker 1: think that's when we started doing that. But I yeah,
Speaker 1: I think the temptation might be to just fall off
Speaker 1: the horse completely. And we haven't done much of that
Speaker 1: at all with our four year old. I mean, we've
Speaker 1: got it. We do have a piggy bank that he
Speaker 1: got for Christmas that sits up on the shelf, but
Speaker 1: he doesn't earn anything yet.
Speaker 2: You always figure get what was the timeline like for
Speaker 2: the yeah, and so you just kind of I think
Speaker 2: the timeline just gets more and more delayed. And it's
Speaker 2: also the same thing where you're the youngest ends up
Speaker 2: watching like scarier movies at an earlier age their diet,
Speaker 2: like they're not restricted from sugar in the same way
Speaker 2: as like the firstborn was. You were so careful with
Speaker 2: the first one, and then the third one, everything just
Speaker 2: kind of goes to pot as he's he's already fan
Speaker 2: of IPAs so true. Yeah, just kidding, don't don't call
Speaker 2: defects on me.
Speaker 1: No, I think it's true, And I think for us
Speaker 1: it's a matter of I was thinking about this, actually
Speaker 1: does like coffee, does he?
Speaker 3: Yeah?
Speaker 1: So does my dude. Yeah we should. We'll share a
Speaker 1: picture of them both throwing down their little their little
Speaker 1: kid coffees when we get coffee on Wednesdays. But I
Speaker 1: was thinking about the other day how I almost want
Speaker 1: to introduce consumption and advertising to the kids, maybe a
Speaker 1: little bit more so, in order for them to have
Speaker 1: something to that they want to chase after that they're
Speaker 1: excited about, because I almost feel like our quasi minimalist
Speaker 1: lifestyle has led to them just being like, Okay, we're good,
Speaker 1: We're fine with whatever, whatever, mom and d whatever you
Speaker 1: get us, as opposed to them being like like, don't
Speaker 1: you want a Stanley cup or something? Maybe not that,
Speaker 1: maybe not have a pony. Let's go yeah, yeah, we'll
Speaker 1: go that way. But no, I think you being intentional
Speaker 1: finding a way to get the kids excited about personal finance.
Speaker 1: It's huge. It's important to do.
Speaker 2: Those little digital piggy banks are like four or five
Speaker 2: bucks at the dollar store.
Speaker 1: I mean, they're super cheap.
Speaker 2: And as for a four year old, it's to go
Speaker 2: a way to begin maybe like one of those how
Speaker 2: do we haven't done any money books either, Like I've
Speaker 2: yet to find like a great money book for kids,
Speaker 2: but especially for like really little kids. If someone out
Speaker 2: there listening knows the one, please reach out, let us know,
Speaker 2: and maybe I'll jump in that direction too. But I
Speaker 2: feel like the tangible, hands on thing is always kind
Speaker 2: of the most fun and the most rewarding.
Speaker 1: Yes, right, let's introduce our year is called Once Upon
Speaker 1: an Orchard. This is a sour red ale, and this
Speaker 1: one is by Aligash Brewing them already enjoying this one,
Speaker 1: but looking forward to sharing our thoughts at the end
Speaker 1: of the episode.
Speaker 2: One of the great American breweries, that's for sure.
Speaker 1: It's a good one. Yeah, we'll get our thoughts on.
Speaker 2: This one just a bit. But Matt, let's take listener questions.
Speaker 2: And if you are listening and you have a money
Speaker 2: question you want Matt and I to tackle, maybe on
Speaker 2: the next Ask htm episode, we'll just record a voice
Speaker 2: memo real quick, state your name at the beginning, and
Speaker 2: then send it our way. If you want more specific
Speaker 2: directions and the email address and stuff, just kind of
Speaker 2: how money dot com slash ask. But Matt, let's get
Speaker 2: to this first one. This question actually starts off with
Speaker 2: kind of a pitch for a saving strategy that you
Speaker 2: can find readily on YouTube, but does it actually work
Speaker 2: out in your favor?
Speaker 3: Hi, Matt Joel, This is Jen from Ohio. Been loving
Speaker 3: listening to your podcast and going back pretty far because
Speaker 3: I'm just devouring all the content, which is great. I
Speaker 3: had a comment and a question. So the comment that
Speaker 3: I was going to make was I haven't heard you
Speaker 3: guys talk about Velocity banking at all. So my husband
Speaker 3: and I we have three kids now, and we bought
Speaker 3: a van last year, and we actually opened a heelock
Speaker 3: for our house and we use the heelock to pay
Speaker 3: off the van loan, and then we dumped all of
Speaker 3: our income into the heelock and then pulled money out
Speaker 3: to like payer bills for the month, So essentially all
Speaker 3: of our overage for those months we're going to pay
Speaker 3: down the heelock. So we paid that off pretty quickly
Speaker 3: and we now are enjoying a van that's totally paid off.
Speaker 3: My second question is that my retirement is going to
Speaker 3: be a little bit different because my husband and I
Speaker 3: are both teachers, and my husband will have a pension plan,
Speaker 3: and with inflation and with him getting Masters plus forty
Speaker 3: five and all the things, and if he retires later,
Speaker 3: it would we think that the pension plan will be
Speaker 3: around one hundred to one hundred and fifty per year
Speaker 3: when we are retired, which is a lot of money.
Speaker 3: Our yearly senses are probably around sixty thousand right now.
Speaker 3: So for me, I stay home with kids part time
Speaker 3: and I have a roth ira with twenty thousand dollars
Speaker 3: in it. My question is with our overage right now,
Speaker 3: you know, since he has a very solid retirement plan,
Speaker 3: should I put money into our roth iray my roth iray?
Speaker 3: Should I put money into our five twenty nine plans?
Speaker 3: Should we try to pay off our house sooner? What
Speaker 3: kind of advice would you guys have for that?
Speaker 1: Thanks so much, all right, Jin, thank you so much
Speaker 1: for your question, and we are glad you kick things
Speaker 1: off with Velocity Banking. You know, there's a reason, Joe,
Speaker 1: that we don't talk about it very often, and the
Speaker 1: only times we do actually talk about it is in
Speaker 1: response to questions about it and that's because it's not
Speaker 1: what the influencers out there wants you to think it is.
Speaker 1: And so oftentimes, like you alluded to, Joel, you'll see
Speaker 1: it on YouTube, although I'm sure it's over on TikTok
Speaker 1: as well. It isn't. But velocity banking is it doesn't
Speaker 1: really help you to get ahead with your finances more quickly,
Speaker 1: and for many folks, what it does, in fact, is
Speaker 1: it muddies the water. It gets them in trouble, and
Speaker 1: it can cause your money priorities to get out of whack.
Speaker 1: It sounds like with Jen that maybe it was more
Speaker 1: of a one time thing where she used it to
Speaker 1: if you are using it in order in order to
Speaker 1: pay it on a debt or a loan that's got
Speaker 1: a much higher interest rate, So in this case, it
Speaker 1: sounds like a maybe it was a one time thing
Speaker 1: where she used the helock, she pay it off the
Speaker 1: car loan, and then then focused on paying off the helock.
Speaker 1: I can get behind that, like the principle behind that
Speaker 1: is not all that unlike like a zero percent transfer. Well,
Speaker 1: let's take advantage of this small period of time, a
Speaker 1: limited window where we can eliminate the most egregious debt.
Speaker 1: But that's not typically how velocity banking is pitched. It's
Speaker 1: this continual sort of trap that you find yourself in
Speaker 1: where you are continually paying interest. And that's why we
Speaker 1: are are not big big fans of velocity banking, because
Speaker 1: you're just constantly behind the eight ball, basically, like you
Speaker 1: are constantly on the back side of the wave, as
Speaker 1: opposed to in front of it, where you're just riding
Speaker 1: the interest and where you are accumulating the interest yourself. Instead,
Speaker 1: you're just constantly and basically by like a month or two,
Speaker 1: just constantly paying interest to somebody else, in this case
Speaker 1: the bank that holds your he lock. Yeah.
Speaker 2: Yeah, So if you're looking to basically swap one debt
Speaker 2: for another and take on a debt that has a
Speaker 2: lower interest rate in better terms so that you can
Speaker 2: pay off that debt more quickly, if you have that focus,
Speaker 2: then I think, like you said, Matt, that can be
Speaker 2: a good way to go. But that's not necessarily what
Speaker 2: velocity banking is kind of preaching. And some people use
Speaker 2: credit cards instead of helocks with velosity banking and they
Speaker 2: swear by that too. That's just seems even worse. That
Speaker 2: can get you in real, real financial trouble. See, you've
Speaker 2: got to be massively careful. So yeah, that's why we
Speaker 2: don't talk about it. We actually want people, for the
Speaker 2: most part, to stay away from the velocity banking thing
Speaker 2: and onto the heart of your question, Jen, Let's get there.
Speaker 2: It's amazing that you're going to have such a large,
Speaker 2: guaranteed pension in retirement. Not many folks have that, Matt,
Speaker 2: especially younger listeners. They're like, wait, pension, can you define
Speaker 2: that real quick? I'm not really I don't know what
Speaker 2: that is because I haven't been offered one. I think
Speaker 2: my grandma maybe had one. This is just one of
Speaker 2: those things that's going away. It's going the way of
Speaker 2: the Dodo bird. It's basically a fossil. It's a relic
Speaker 2: at this point. But it is one of the main
Speaker 2: perks of being a teacher, right, some of the public
Speaker 2: service professions they have more access to pensions, even though
Speaker 2: those are going away for a lot of public service
Speaker 2: pros too, But you often deal with, obviously as a teacher,
Speaker 2: a bunch of years of stress and being underpaid. You know,
Speaker 2: you can earn more in the private sector for the
Speaker 2: promise of that.
Speaker 1: Pot of gold at the end of the rainbow.
Speaker 2: That's kind of what you're hoping for is like, listen,
Speaker 2: I'm going to be underpaid for decades. Hopefully I'm going
Speaker 2: to enjoy my job. But at the end of the day,
Speaker 2: once I do hit retirement, I've got this pension and
Speaker 2: that kind of makes up maybe for some of those
Speaker 2: years where you weren't getting as paid as much as
Speaker 2: you could have. And I retire teachers I know who
Speaker 2: have saved and invested decently, well, they've got a lot
Speaker 2: of financial security because of the pension combined with what
Speaker 2: they've been able to sock away.
Speaker 1: That's right, And so Jen, you've got a lot of
Speaker 1: different options here for these extra funds in your life.
Speaker 1: Like you said, that pension might mean that you don't
Speaker 1: have to be quite as diligent of an investor. Let's say,
Speaker 1: instead of investing fifteen to twenty percent like we typically
Speaker 1: encourage folks to do, maybe you're early socking away ten percent.
Speaker 1: But if it's between the three options that you mentioned,
Speaker 1: the roth Ira it likely wins over the rest because
Speaker 1: that account offers just great future tax breaks, the ability
Speaker 1: to not have to pay any taxes on that money
Speaker 1: off in the future when you withdraw that money, and
Speaker 1: they're incredibly flexible as well. But on top of that,
Speaker 1: what if your husband doesn't work. As long as you
Speaker 1: are predicting, there are different road bumps that that might
Speaker 1: arrive in your future, and so it's best to be
Speaker 1: saving up in other ways just in case, and the
Speaker 1: roth ira it's the ideal vehicle for those additional savings.
Speaker 1: It sounds like at some point in your life you
Speaker 1: wise up to the roth iray and you said, okay, yeah,
Speaker 1: let's go ahead and start putting some money in here. Definitely,
Speaker 1: assuming you're with a low cost provider, definitely fire that
Speaker 1: thing back up and consider maxing nothing out. I think
Speaker 1: that's a good point too, Matt. Though.
Speaker 2: If a teacher, let's say, has been teaching for seven, eight,
Speaker 2: nine years in the same district and they're like, all right,
Speaker 2: if I hit thirty, that's when I get this full pension,
Speaker 2: So I'm just not going to invest as much because
Speaker 2: I'm banking on that.
Speaker 1: Well, what if you change your tune.
Speaker 2: What if at year twelve you say this is kind
Speaker 2: of unsustainable, or man, I got this job offer down
Speaker 2: the street, it's going to pay me more. But you
Speaker 2: have been chronically undersaving, and now that pension is either
Speaker 2: going to be non existent or it's going to be
Speaker 2: a fraction of what you assumed it would be. It's
Speaker 2: really important to save in a way that you're planning
Speaker 2: for that you're at least thinking about contingency plans and
Speaker 2: maybe not getting the full pension that you're hoping you're
Speaker 2: gonna get, because hey, life happens and that might not
Speaker 2: be the way it shakes out. And Jen mentioned five
Speaker 2: twenty nine plans. Let me mention a caveat about those plans.
Speaker 2: I would say it's a good idea to put at
Speaker 2: least a little bit of money in those, largely because
Speaker 2: it kicks off this timeline thanks to new rules about
Speaker 2: rolling five twenty nine dollars into a roth ira for
Speaker 2: your kids in the future.
Speaker 1: And while we still.
Speaker 2: Want you to prioritize your own financial future in the
Speaker 2: form of your wroth ira, first opening up an account
Speaker 2: and putting in like one hundred bucks for each kid.
Speaker 2: Now it makes a whole lot of sense. And Jen
Speaker 2: lives in Ohio, Ohio matt has one of the best
Speaker 2: five to twenty nine plans in the country because the
Speaker 2: fees are ridiculously low. The investment options are really solid,
Speaker 2: so Jen, I would just got.
Speaker 1: That state deduction yeah as well.
Speaker 2: So definitely check out the Ohio five twenty nine plan.
Speaker 2: You can read up on about it on a site
Speaker 2: like Saving for College dot com. And if you have
Speaker 2: more money down the line right beyond the roth IRA,
Speaker 2: maybe then you opt to stick more money into those
Speaker 2: five twenty nine accounts for their future. But I think
Speaker 2: for the time being, maxing out the wrath for you
Speaker 2: and for your husband takes precedence over sticking money into
Speaker 2: five twenty nine acounts beyond. Like I said, just that
Speaker 2: hundred bucks to get the timeline started, so open it up,
Speaker 2: but just don't prioritize funding it.
Speaker 1: Yeah, and definitely do that before you pay more down
Speaker 1: on your house as well, because we've been saying that
Speaker 1: mortgages are pretty far down the list of financial priorities
Speaker 1: for most folks if they have a locked in low rate.
Speaker 1: But maybe you took out a mortgage at seven percent
Speaker 1: or even higher, and if so, well that's going to
Speaker 1: change the calculus. But we would rather see you funding
Speaker 1: flexible retirement accounts first, even with the reality of that
Speaker 1: future pension, because it's going to offer you the most
Speaker 1: flexibility down the road. And these are all basically kind
Speaker 1: of like the smart, nerdy things to do with your money,
Speaker 1: assuming you don't have any additional debts. I think it's
Speaker 1: worth maybe zooming out a little bit, like looking at
Speaker 1: the big picture and what it is that you want
Speaker 1: to be doing, like in the more medium term, Like
Speaker 1: you are looking at all like long term goals, like
Speaker 1: long term retirement goals for you and your family. But
Speaker 1: I think it's worth like brainstorming with your with your
Speaker 1: husband and thinking through like what do we want our
Speaker 1: life to look like? Do we want the kids to
Speaker 1: be in more activities in the coming years? Are they
Speaker 1: playing expensive sports that are going to require more of us?
Speaker 1: Do we want to take a vacation abroad every single
Speaker 1: year that's going to cost us a lot of money?
Speaker 1: If so, these are all things that you want to
Speaker 1: start socking at least planning to set money aside for
Speaker 1: these things in the future. But if even after you
Speaker 1: go through all of that, let's say you're like, oh no,
Speaker 1: we don't want to do any of that, well that's fine.
Speaker 1: Just realize what you're prioritizing by doing that is you're
Speaker 1: prioritizing more flexibility and more options for yourself in the future,
Speaker 1: because you're not going to be as dependent on maintaining
Speaker 1: that job at the school or just continue to work
Speaker 1: in the future. So just realize, in one way or
Speaker 1: the other, you are prioritizing something, whether you are prioritizing
Speaker 1: it intentionally or if it's just something that you know
Speaker 1: is generally good, and that it becomes sort of a
Speaker 1: default option for you.
Speaker 2: And of course you want to prioritize your future, and
Speaker 2: you want to prioritize some of those investment accounts, but
Speaker 2: not going so hard in that direction that you you
Speaker 2: you're unable to use some of those dollars in the
Speaker 2: here and now to enjoy your life and to make
Speaker 2: sure you're funding the lifestyle you want for your family. So, Matt,
Speaker 2: we've got more questions to get to on this episode,
Speaker 2: including one about taking out a loan.
Speaker 1: To go to flight school. How do you do that?
Speaker 1: We'll talk about that and more right after this. All right, Jill,
Speaker 1: we are back from the break, and it's now time
Speaker 1: to hear from a listener who's trying to figure out
Speaker 1: where he should stash that extra thousand dollars. A month.
Speaker 4: Hey guys, what's going on? This is START Studio in
Speaker 4: San Antoonio, Texas. My question for today is I have
Speaker 4: about one thousand dollars a month extra that I want
Speaker 4: to pay forward to Pittsbell to the house, just to
Speaker 4: try to get a paid off sooner. The idea I
Speaker 4: was having is what if instead of the twelve thousand
Speaker 4: dollars annually that I was being going towards the principal,
Speaker 4: I was to stick it into SMP account and then
Speaker 4: it accrued for let's say five to eight years and
Speaker 4: pull it out and then throw all of that towards
Speaker 4: the principle. Doing the math, and it's looking at it
Speaker 4: ten to fifteen thousand dollars. I don't know if I'm
Speaker 4: off on this or not. I mean, any guide it
Speaker 4: will help. Love to hear your opinion. Thanks again, Love.
Speaker 2: The show all right, Arsenio man, I love that you've
Speaker 2: got one thousand bucks extra, Matt.
Speaker 1: That's you.
Speaker 2: Look at the stats. Who can come up with a
Speaker 2: thousand bucks in case of an emergency? Like half of Americans? Right,
Speaker 2: And it almost doesn't even depend on your income. A
Speaker 2: lot of people making six figures still can't come up
Speaker 2: with a thousand bucks, that's right, Whereas Arsenio he's like,
Speaker 2: I got a thousand bucks extra every single month, So
Speaker 2: he's obviously living frugally. He's made a big, big space,
Speaker 2: a big gap between what he spends and what he
Speaker 2: brings in, which is admirable. And I love that you
Speaker 2: want to use this money to make serious progress, our senior.
Speaker 2: You're not saying, like, how can I blow it on
Speaker 2: crazy stuff? You want to use this to further your
Speaker 2: financial future.
Speaker 1: Ye, he's not looking at one thousand dollars a month
Speaker 1: and thinking, man, I could put that towards a payment
Speaker 1: on a motorcycle, which is like what typical broke America
Speaker 1: would be doing.
Speaker 2: I mean, yeah, And when you look at even just
Speaker 2: the average car payment now for a new car in America,
Speaker 2: like something like yeah, close to twenty percent of people
Speaker 2: have a more than thousand dollars monthly payment on that vehicle,
Speaker 2: and Arsenio likely isn't one of them, is my guess,
Speaker 2: because he's actually using that money to further his future.
Speaker 2: Like these dollars they can make a big debt in
Speaker 2: whatever financial goals you have, Our senio, your head's in
Speaker 2: the right place because you want the best of both worlds.
Speaker 2: You want to juice returns on the extra money that
Speaker 2: you're saving, but you also want to be rid of
Speaker 2: your debt sooner than later. I really like Matt kind
Speaker 2: of where Arsenio's head is at here that he's kind
Speaker 2: of taking the both and approach. Lots of people it's
Speaker 2: either the oh, I'm super debt diverse and I even
Speaker 2: want to get rid of this low interest rate debt
Speaker 2: just because it's it scares me, or maybe they get
Speaker 2: a little too cozy with debt and they're not thinking
Speaker 2: enough about paying it off. And Arcenio's like, ah, I'm.
Speaker 1: Both yeah, yeah, he's doing the smart thing by looking
Speaker 1: to pay off that debt, but then he's also to
Speaker 1: like take it up to like another level. I like
Speaker 1: the scrappiness, Like I feel like he's the kind of
Speaker 1: guy that's gonna like cut open the tube of toothpaste
Speaker 1: and like use the tooth, like wipe out the inside
Speaker 1: of the tooth, Like no little bit is gonna be left.
Speaker 1: He's gonna like squeeze every last drop out of it.
Speaker 1: But our Cinio, obviously we want you to consider your
Speaker 1: interest rate on that mortgage. If then we kind of
Speaker 1: touch on this with Jim. But if you're in the
Speaker 1: three percent range, then there is no rush to eliminate
Speaker 1: this mortgage. I would just invest and pay the mortgage
Speaker 1: off as agreed, because even if you can pay it
Speaker 1: off sooner, you just might not want to. The only
Speaker 1: other caveat, though, is if you're the kind of person
Speaker 1: who's just gonna sleep better at night just knowing that
Speaker 1: you own your home free and clear, and we want
Speaker 1: you to keep debt levels reasonable. Of course we're not
Speaker 1: fans of debt, but if your money can be put
Speaker 1: to more productive uses, then why not take that route instead?
Speaker 1: Which is at least partially what you're proposing here, But
Speaker 1: we wanted to hammer that point home. Paying off your
Speaker 1: low interest rate mortgage, especially in today's environment, would just
Speaker 1: know that it would be done for personal reasons, like
Speaker 1: your own personal psychological reasons and for your emotional state,
Speaker 1: not because it's the best way to optimize your dollars,
Speaker 1: not because the math makes sense.
Speaker 2: Yeah, and the thing is, you don't even have to
Speaker 2: get super risky in order to out earn what your
Speaker 2: mortgage rate is. Right, So just a random OL savings
Speaker 2: account and a place like c I T or even
Speaker 2: places that don't pay quite as high a rate of
Speaker 2: ci t, you're still out pacing for a whole lot
Speaker 2: of Americans. You're outpacing your your mortgage interest rate, and
Speaker 2: so there's just no rush, like you said, Matt, to
Speaker 2: pay it off quickly. But let's say you are in
Speaker 2: that position and you do want to get rid of
Speaker 2: that mortgage, that mortgage debt as soon as possible, even
Speaker 2: if it has a low interest rate attached, because that
Speaker 2: is your prerogative.
Speaker 1: You certainly can do that.
Speaker 2: It's personal finance, and this is your money. If you're
Speaker 2: incredibly debtiverse, your timeline sounds like it's long enough to
Speaker 2: where investing makes sense. You said five to eight years.
Speaker 2: That is a length of time at which I'd feel
Speaker 2: comfortable investing instead of just saving. If our say you
Speaker 2: had said, Matt, two years, we'd be far less inclined
Speaker 2: to sign off on this plane, like, oh, I'm gonna
Speaker 2: hope that my investments outperform over over a two year period. Well,
Speaker 2: then it feels like more of a gamble than making
Speaker 2: decision based on historical returns. Right, And I think the
Speaker 2: other thing that works in his favor. The good news
Speaker 2: is that he can also be flexible, right, because once
Speaker 2: you start investing those dollars, you're still not pod committed
Speaker 2: to paying off that mortgage early. That's true, and you
Speaker 2: can let the circumstances on the ground inform how you proceed.
Speaker 2: So let's say you're seven years into this process and
Speaker 2: the market's in a really tough spot. You still don't
Speaker 2: have the need to sell in order to pay off
Speaker 2: that mortgage. Fully, you can wait until things recover. Your
Speaker 2: flexible timeline, I think is clutch to your ability to
Speaker 2: decide to and opt to invest instead of just paying
Speaker 2: off that debt more quickly every single month as you
Speaker 2: have that money coming in.
Speaker 1: Yeah, and that's assuming that you want to continue to
Speaker 1: do that, say five, six, seven years down the line,
Speaker 1: because I think what you might find is that after
Speaker 1: having invested that money and seeing perhaps and this is
Speaker 1: there's no guarantee here, but seeing what your returns are
Speaker 1: on that thinking well, why would I take this money
Speaker 1: out and use that to pay down this lower rate
Speaker 1: mortgage debt that I have when instead I could leave
Speaker 1: that invested, continue to see a compound, and you are
Speaker 1: likely to see that money grow because it's he said
Speaker 1: five to eight years I think the five year rolling
Speaker 1: returns in the stock market, the market is likely to
Speaker 1: see positive returns something like over eighty eight percent of
Speaker 1: the time, But if you bump it up to eight years,
Speaker 1: it jumps up significantly. It's something like ninety five percent
Speaker 1: of the time. For a rolling eight year period of time,
Speaker 1: you're going to see a positive return. Odds are in
Speaker 1: your favorite man that this money is going to be
Speaker 1: well served being invested as opposed to paying down that debt.
Speaker 1: But think long and hard about what accounts that you're
Speaker 1: going to opt to use, because of course taxable brokerage
Speaker 1: accounts they're great for some shorter term investing goals like
Speaker 1: a quicker mortgage payoff. But don't forget about the rath Ira.
Speaker 1: This is like a roth Ira episode We're going to
Speaker 1: talk about all the day different ways that it is
Speaker 1: just wonderful because if you great account are not already
Speaker 1: maxing out a wroth Ira, well do that, and then
Speaker 1: you can actually use this awesome account to help you
Speaker 1: to fulfill this mission while still keeping those additional dollars
Speaker 1: locked away for the future. And the way that you're
Speaker 1: able to do that is because you pay tax on
Speaker 1: the money going into a roth IRA now, and then
Speaker 1: that means that you can take out those contributions at
Speaker 1: any time in the future, tax and penalty free, if
Speaker 1: you so choose to withdraw those contributions to pay down
Speaker 1: some of your mortgage. So why not max out that
Speaker 1: account for the next eight or so years and then
Speaker 1: you can just pull the contributions, which in eight years
Speaker 1: you're looking at fifty six thousand dollars in total at
Speaker 1: that point, assuming that we maintain the seven thousand dollars
Speaker 1: contribution limit, and then you can use that to help
Speaker 1: pay off the mortgage and also keep the earnings in
Speaker 1: there to continue growing. Yeah, So that's one of the
Speaker 1: amazing things that the Wrath offers is flexibility. But and
Speaker 1: even beyond that, I would say continuing to prioritize four
Speaker 1: flexibilities is key because I think there's a chance you
Speaker 1: might we all have to diferent priorities, and I think
Speaker 1: if there's anything I've learned is that I changed my mind,
Speaker 1: or that my wife changes her mind, or that collectively
Speaker 1: we decide that our family has different priorities that we're
Speaker 1: looking to pursue, and even just looking to beef up
Speaker 1: your emergency fund. Right, So, let's say, because you Joel,
Speaker 1: you mentioned the like a savings account earning five percent,
Speaker 1: I would first be looking to just really pad that
Speaker 1: thing out, have it nice and a nice thick emergency fund,
Speaker 1: and give that a couple of years before I would
Speaker 1: even be willing to invest that money, because dude, imagine
Speaker 1: what you might be thinking in two years, what you
Speaker 1: want to be doing with your money. I bet there's
Speaker 1: a decent chance that it's gonna there might be something
Speaker 1: on the horizon that's completely different than what it is
Speaker 1: that you're thinking about now. We all have dynamic interests
Speaker 1: and the things that we're interested in, and so I
Speaker 1: just want our Senia to just take and take that
Speaker 1: into account.
Speaker 2: Yeah, well that's why I like your suggestion of the
Speaker 2: roth iray and I think that makes sense. Like a
Speaker 2: lot of people would assume, oh, taxable brokera's account is
Speaker 2: the way to go in this case, Well, maybe it
Speaker 2: is if it's additional dollars on top of the roth
Speaker 2: ira money that our Senio was already made out or
Speaker 2: something like that. But if not, if he's neglected the
Speaker 2: roth iray up until this point, that is the go
Speaker 2: to account that makes the most sense, and then you're
Speaker 2: getting kind of the best of both worlds, like he's
Speaker 2: aiming for. You're able to force save fifty six thousand
Speaker 2: bucks over that timeline, but you're also by by the
Speaker 2: time you would draw those contributions, you've got a lot
Speaker 2: of money left over in that roth iraty that's growing
Speaker 2: for your future. So you've got a mortgage that you're
Speaker 2: getting closer to paying off, You've got significantly more saved
Speaker 2: and invested for retirement. So I really like that as
Speaker 2: a plan for Oseneo.
Speaker 1: Yep. Yeah. The only downside though is if he changes
Speaker 1: his mind in two years, because the chances of that
Speaker 1: being a positive outcome could be significantly lower then of course, where.
Speaker 2: He just to sock it away and saving timeline step
Speaker 2: clutch if.
Speaker 1: You're exactly Yeah, And that's the part where I just
Speaker 1: want our Seny for you to keep that in mind
Speaker 1: because you mentioned the five to eight year timeline, but
Speaker 1: just think about even like two years down the road,
Speaker 1: what it is that you might have pivoted to is.
Speaker 2: What I'm saying, Yeah, our Senior, I hope that helps.
Speaker 2: I feel like there's a few different directions you can go.
Speaker 2: A lot of it based on kind of your own
Speaker 2: personal desire hosts, goals and dreams, and there's a few
Speaker 2: different accounts that you can use.
Speaker 1: To help get you there.
Speaker 2: Just make sure you're making those decisions with intentionality, right,
Speaker 2: knowing the trade offs of each.
Speaker 1: And it's a good problem to have. Like basically what
Speaker 1: we're doing here, like what artist Sun was asking us
Speaker 1: to do, is to solve the problem of having too
Speaker 1: much money on hand. And that's a yeah, a great
Speaker 1: problem to be solving.
Speaker 2: Yeah, exactly. And he's got the again, the right mindset.
Speaker 2: He wants to make progress and not like go in
Speaker 2: reverse which or continue to like, I don't know, spin
Speaker 2: your wheels. All right, speaking of spinning your wheels, man,
Speaker 2: let's talk to you or let's get a question from
Speaker 2: a listener here by going to flight school propellers, that's right, Yeah,
Speaker 2: you're right, So all right, let's get to that one.
Speaker 5: Now. Hi, my name is Lindsay and I'm from San Diego.
Speaker 5: My son wants to attend a flight school, a commercial
Speaker 5: flight school. We paid for his pilot's license on the
Speaker 5: side to save on cost, but we don't have extra
Speaker 5: money to pay for the actual school and it's going
Speaker 5: to need to take out a loan, and the cost
Speaker 5: for the school is about ninety thousand dollars. The school
Speaker 5: recommends that we go through Sally May for the loan,
Speaker 5: but the interest is crazy high. We've checked with our
Speaker 5: credit Union and some other banks and they don't give
Speaker 5: out what's considered a certificate. It's not a diploma that
Speaker 5: he would get it, it's a certificate. So I don't
Speaker 5: know where else to turn. Is there anywhere else where
Speaker 5: I can go to get a loan with better interest
Speaker 5: rates for a certificate? Thank you?
Speaker 1: All right, lindsay, first oftngrats to your son who's considering
Speaker 1: flight school here. I think this could be a great
Speaker 1: career that he's embarking on. But having said it is
Speaker 1: not cheap to get the education that she said ninety
Speaker 1: thousand dollars and it seems like that is right there,
Speaker 1: smack dab in the middle of what flight school typically costs.
Speaker 1: But the light at the end of the tunnel is
Speaker 1: a very in demand career that pays pretty dang well.
Speaker 1: We can link to the Bureau of Labor Statistics and
Speaker 1: you can see kind of what the average or the
Speaker 1: mean salaries are for different pilots. Oh, do you know
Speaker 1: it off the top of your head. Matt. It's in
Speaker 1: the six figures. I know that much. Yeah, so when
Speaker 1: even I think, for like a commercial pilot, Okay, let
Speaker 1: alone some of the additional income, and I don't know
Speaker 1: bonuses you earn bonuses as a pilot. I don't know
Speaker 1: personally some of those.
Speaker 2: You know, the major airlines, the new contracts they've made
Speaker 2: with pilots, the pilot's got significant pay increases. So it's
Speaker 2: a it's a good position to be in, and it
Speaker 2: meets our threshold Matt, of you want your first year
Speaker 2: salary to be more, in all likelihood than what you're
Speaker 2: going to fork over in education costs. Right, So I
Speaker 2: think that even though it seems incredibly expensive, and it
Speaker 2: is expensive, ninety thousand dollars spent a lot of money,
Speaker 2: flight school is not is not cheap. But it's still
Speaker 2: important to note that this that doesn't make make it
Speaker 2: a bone headed financial decision. So, yeah, we would love
Speaker 2: for you to find ways to minimize the debt that
Speaker 2: you take on. Those still, right, we don't want you
Speaker 2: to just to be comfortable taking on a ridiculous amount
Speaker 2: of debt because even though this debt is going to
Speaker 2: you know fuel his earning potential and if this is
Speaker 2: the line of work he wants to be in for decades,
Speaker 2: that that that debt is of course going to pay
Speaker 2: off in a major way. And let's talk about flight school, Matt. Like,
Speaker 2: most flight schools are considered trade schools, so this is
Speaker 2: a different ballgame than going to a four year state
Speaker 2: school or private school. This means that you often can't
Speaker 2: take out traditional federal student loans in order to get
Speaker 2: that degree. It puts you in this second tier system
Speaker 2: of trying to finance this getting this certificate. And yeah,
Speaker 2: I'm glad that your school says that you can snag
Speaker 2: Sally May loans. Lindsay said Matt that the interest rate
Speaker 2: was crazy high. I would be curious to know how
Speaker 2: high and what she meant by that.
Speaker 1: And it's true because she didn't give us a hard number, so.
Speaker 2: Much is in the eye of the beholder. And are
Speaker 2: we talking about a seven percent fixed rate? Because that's
Speaker 2: actually not awful these days. It seems awful compared to
Speaker 2: an era of three or four years ago. But given
Speaker 2: kind of the options that you have at your disposals today,
Speaker 2: that would actually be a reasonable choice. There's a site
Speaker 2: called College Avenue. That's another option. They apparently have interest
Speaker 2: rates that start in the five percent range, but then again,
Speaker 2: depending on credit and other circumstances, the loan rate could
Speaker 2: go up to eighteen percent. You could also check out
Speaker 2: a website called Zootify. They make flight school loans. We'll
Speaker 2: link to all these in the show notes. But you
Speaker 2: might not be able to secure a better rate than
Speaker 2: what you're going to get through Sally May. I just
Speaker 2: I just want to put that out there, like, there
Speaker 2: are potentially other options, but sally May actually could be
Speaker 2: the best option you have.
Speaker 1: Yeah. On one hand, like it's kind of terrible news
Speaker 1: because there aren't a whole lot of options to shop around.
Speaker 1: So on one hand, I think that's terrible. On the
Speaker 1: other hand, I kind of like there's part of me
Speaker 1: that's just like, man, I don't want it to be
Speaker 1: super accessible, Like I don't want it to be like
Speaker 1: this default place where you go and you can take
Speaker 1: massive loans up to a hundred thousand dollars without hardly
Speaker 1: even thinking about it, because that's I think one of
Speaker 1: the problems we've run into with higher education is the
Speaker 1: fact that students have been able to take out boat
Speaker 1: loads of debt without really considering where this is gonna
Speaker 1: spit them out at the end of this four year
Speaker 1: for your career.
Speaker 2: And unadvertising interest rates should hopefully help you and your
Speaker 2: family get a little more creative about ways to reduce
Speaker 2: the cost of that.
Speaker 1: Education too, because we don't want you, lindsay, to take
Speaker 1: out a loan just for the full price of admission.
Speaker 1: If you can help it, could your son maybe even
Speaker 1: work at the flight school to maybe receive a tuition reduction,
Speaker 1: Like basically, we want you and your your son to
Speaker 1: be on like a first name basis because and I
Speaker 1: think by doing that you're gonna have more of an
Speaker 1: ability to possibly get a discount. This isn't like some
Speaker 1: popular state school that just won some football championship or
Speaker 1: they're letting in like thousands and thousands of students in
Speaker 1: every single class, Like this is a flight school. I'm
Speaker 1: guessing there's like twenty kids, twenty students like in the
Speaker 1: actual classroom like on the ground for classroom instruction. But
Speaker 1: then beyond that, it's like you're you're with an instructor.
Speaker 1: It's like one on one, like you're in the air
Speaker 1: with a flight instructor. So like it costs more, Yes,
Speaker 1: But I guess what I'm saying is I picture you
Speaker 1: having the ability to be the squeaky wheel and to
Speaker 1: stand out and to find ways to reduce the cost
Speaker 1: of admission or cost of tuition that maybe otherwise would
Speaker 1: not be available by going to some giant school where
Speaker 1: you're just one of hundreds or thousands of cogs. I
Speaker 1: think you do have the ability to figure something out,
Speaker 1: a solution that just might see them a little non conventional. Yeah.
Speaker 2: They seem say necessity is the mother of invention, and
Speaker 2: I'm hoping that's the case for Lindsay and for her son,
Speaker 2: Like put the ball on his cart, make him make
Speaker 2: some of these emails like yes.
Speaker 1: Yeah, yeah, Like think about that, this isn't all just
Speaker 1: on you. How badly does your son want to be
Speaker 1: a pilot? That's right?
Speaker 2: And can he makes me? Matt? I did work study,
Speaker 2: I was an ra I did all sorts of things
Speaker 2: on campus to reduce the costs of my college and
Speaker 2: reduce the amount of loans I was taking on. And
Speaker 2: granted that's at a traditional four year school, but there
Speaker 2: are I would imagine there are similar sorts of avenues
Speaker 2: to reduce the cost out of flight school. But it takes,
Speaker 2: like you said, being the squeaky wheel asking those questions
Speaker 2: being and him in particular being the person because it
Speaker 2: shows some gumption on his part, and I think the
Speaker 2: instructors of that school might say, oh, well, yeah, we
Speaker 2: can fitch you in here and then we can get
Speaker 2: you a little discount by doing this, this and this.
Speaker 2: So I just wouldn't take that face value price tag
Speaker 2: and think that there's nothing you can do about it.
Speaker 5: Yeah.
Speaker 1: I like the idea of having buy in from the
Speaker 1: sun as well, because if he has to show up
Speaker 1: and he's like in the hang I'm picturing i don't know,
Speaker 1: like a classic romantic view of what it looks like
Speaker 1: to be a pilot, and so I just picture him
Speaker 1: in this leather hat and then he's there having to
Speaker 1: like sweep. Yeah, And if there's an option to do
Speaker 1: something like that and he's just like, oh, may that sucks,
Speaker 1: Like I don't want to have to do that, I
Speaker 1: think then at that point a larger conversation is warranted
Speaker 1: because I guess when Lindsay mentioned that they were able
Speaker 1: to buy the or pay for the pilot's license, the
Speaker 1: initial pilot's license on the side. I'm starting to realize
Speaker 1: that maybe this Sun is a little bit younger, in
Speaker 1: which case Lindsay's assuming that she that she's going to
Speaker 1: be footing the bill, but finding a way to get
Speaker 1: buy in by from the Sun without having him completely
Speaker 1: saddled with ninety thousand dollars in debt. I think finding
Speaker 1: some sort of solution there is what we're seeking here. Yeah.
Speaker 2: Yeah, And I think both of your powers combined can
Speaker 2: kind of help figure this out. It's not all on
Speaker 2: your shoulders, Lindsey. And Okay, on that note, man, I
Speaker 2: think there's one other thing, one other arena in which
Speaker 2: you could potentially save money on this higher education and
Speaker 2: that scholarships. They're not as widely available as they are
Speaker 2: for let's say, going to get an undergrad degree or
Speaker 2: even a graduate degree. Maybe, But the best thing about
Speaker 2: scholarships is that's free money that doesn't have to be repaid.
Speaker 2: So I would get serious about applying applying for those
Speaker 2: in order to reduce the financial burden of flight school.
Speaker 2: And then on top of that, look into airlines right
Speaker 2: that offer tuition reimbursement for flight training school. Boeing is
Speaker 2: one of those companies, Matt that offers that I think
Speaker 2: for a lot of young pilots, you know, you might
Speaker 2: have to take loans on the front end. But if
Speaker 2: you're willing to commit to a specific airline, right or
Speaker 2: a specific company that offers that tuition reimbursement, they offer
Speaker 2: that perk for a number of years, you might be
Speaker 2: able to get paid at that company in that job
Speaker 2: and see that get eradicated completely by the largest essentially
Speaker 2: of your new employer. That's also worth looking into.
Speaker 1: Yeah, we didn't even touch on joining the Armed services,
Speaker 1: and maybe is it considered the armed services if you're
Speaker 1: a pilot, Oh yeah, joining the military. You yourself aren't armed,
Speaker 1: but your vehicle is, right, But I don't know what
Speaker 1: your views on joining the military. But like joining the
Speaker 1: Air Force or joining the Navy, and I mean hello, like,
Speaker 1: here's a way to not only not have to pay
Speaker 1: a ton of money in order to get your probus
Speaker 1: pilot's license and learn how to fly, but they teach
Speaker 1: you how to do this. You are earning a significant income,
Speaker 1: you are starting your career, all while avoiding some potentially
Speaker 1: massive amounts of loans that could potentially be close to
Speaker 1: the twenty percent. Joel, like you and I We've got
Speaker 1: a friend of ours who was in the Air Force
Speaker 1: and for a period of time was instead flying for
Speaker 1: FedEx because he had stepped out of the Armed Services.
Speaker 1: And so there are just a lot of different ways
Speaker 1: to skin this cat than just taking the ninety thousand
Speaker 1: loans path.
Speaker 2: Yeah, and I'm pretty sure the GI Bill actually allows
Speaker 2: you to pay for the cost of flight school up
Speaker 2: to a certain amount as well. So if you've served, Yeah,
Speaker 2: if you've started the Armed Forces for a number of
Speaker 2: years and you get you qualify for the GI Bill,
Speaker 2: that's another way to massively reduce the cost peak And
Speaker 2: I love it. It's on the US government shoulders instead
Speaker 2: of your own, right, So again that's a very personal decision,
Speaker 2: but it's at.
Speaker 1: Least worth throwing out there.
Speaker 2: All right, Right, we got a couple more questions to
Speaker 2: get to, including one about tapping retirement accounts to pay
Speaker 2: for high in your stead.
Speaker 1: We'll talk about that and more right after this. All right, man,
Speaker 1: let's get back at it before we get to the
Speaker 1: four oh one k loan question. Let's talk about Hyundais.
Speaker 1: This is our Facebook question of the week.
Speaker 2: Are you just talking about Hondai's because I mentioned how good.
Speaker 1: The new Santa Fe.
Speaker 2: Looks it does look good. It does look pretty sweet.
Speaker 2: All these new SUVs look they just have this new
Speaker 2: sharper edge here.
Speaker 1: Look to them.
Speaker 2: The new Toyota land Cruiser looks so good. The new
Speaker 2: Santa Fe.
Speaker 1: Yeah, I think you can think the cyber truck for that. No,
Speaker 1: they don't look like that. It'll look like that. But
Speaker 1: again we've had this discussion before. However, even if you
Speaker 1: don't like what it is that Tesla is doing that
Speaker 1: what Elon Musk is doing, when you push design and
Speaker 1: when you push certain technologies, it allows anything up until
Speaker 1: that point to almost seem normal. And so when you
Speaker 1: have somebody that's something that's the bleeding edge, the leading
Speaker 1: edge of technology, I think it does allow for other
Speaker 1: kinds of innovation. Yeah, it's funny.
Speaker 2: It's all so kind of a throwback though, to a
Speaker 2: lot of the ways that some of the like the
Speaker 2: old Broncos and stuff used to load.
Speaker 1: Yeah, that's true. That's the kind of like nineteen seventies.
Speaker 1: Vibe is hot again. I like it, Okay. The Facebook
Speaker 1: question of the week, this one is from Rebecca and
Speaker 1: she says, I have a twenty sixteen hun day paid off,
Speaker 1: and Kelly Blue Book says it's worth five to seven
Speaker 1: thousand dollars. I'm currently paying full coverage for car insurance,
Speaker 1: and I'm thinking about switching to liability. Only work from
Speaker 1: home and only drive it about seven thousand miles per year.
Speaker 1: My plan is to keep the car until it's well
Speaker 1: and dead. With my car's current value, should I switch
Speaker 1: or keep it at full coverage? What are some other
Speaker 1: things to consider when making this decision which you think,
Speaker 1: Joel Rebecca.
Speaker 2: I would totally go in this direction if I were you,
Speaker 2: but only if you have the money set aside to
Speaker 2: replace the car, because I'll say you get in a
Speaker 2: wreck next week after you've dropped full coverage and it's
Speaker 2: your fault. Terrible timing, bad timing, yes, for sure, and
Speaker 2: if you have the cash on hand to cover it.
Speaker 2: It's not ideal, it's not what you would have wished,
Speaker 2: but at least you have the money to cover yourself
Speaker 2: replace that car in the event of that accident. So basically,
Speaker 2: collision is the coverage you need to replace your own
Speaker 2: car if you were at fault. If I was in
Speaker 2: your situation, I'd be very comfortable dropping that additional coverage.
Speaker 2: But only if I had the money set aside in
Speaker 2: a car savings bucket. You said it's worth five to
Speaker 2: seven grand. Well, sometimes it's worth more to you. Unless
Speaker 2: I had something like three to six months worth of
Speaker 2: living expenses on hand, plus that additional car fund bucket
Speaker 2: set aside of seven grand or something like that, then
Speaker 2: I probably would hold on to it. But ultimately it's
Speaker 2: probably gonna save you a bunch of money.
Speaker 1: Matt.
Speaker 2: We just got an email from listener Benjamin out in California.
Speaker 2: He saved so much by I think his car, he said,
Speaker 2: was worth thirty five hundred to four grand, and he
Speaker 2: saved a ton of money, something to the tune of
Speaker 2: like four figures annually by reducing his coverage.
Speaker 1: That's a big savings for most of locality.
Speaker 2: And oftentimes by dropping your coverage you might be able
Speaker 2: to save an insurance cost the full amount of the
Speaker 2: value of the vehicle in like four or five six
Speaker 2: years time.
Speaker 1: Totally. Yeah, I like what you said about having special
Speaker 1: funds designated for this car replacement where the situation to arise.
Speaker 1: That being said, is as much as I like to
Speaker 1: shy away from risk like this, I would also feel
Speaker 1: comfortable not having I guess a full amount of money
Speaker 1: set aside on top of the emergency fund, Like I
Speaker 1: might even be willing to split the difference a little bit,
Speaker 1: Like I wouldn't want to fully deplete my emergency fund,
Speaker 1: like I wouldn't want it to, say, knockout a month
Speaker 1: or two's worth of living expenses. But I think I
Speaker 1: would be comfortable like splitting and splitting the difference a
Speaker 1: little bit, Like, all right, it's gonna cost seven thousand
Speaker 1: dollars to replace that car. What maybe let's pad this
Speaker 1: thing out in an extra a thirty five hundred, maybe
Speaker 1: extra four grand, Yeah, because that way, it's like, well,
Speaker 1: it's not like you're expecting to wreck this car, right,
Speaker 1: It's not like it's not like replacing the tires in
Speaker 1: your car, where you know, at some point, I'm gonna
Speaker 1: have to pay for some new tires. Like Rebecca said,
Speaker 1: hopefully this is something she's going to be able to
Speaker 1: like drive off into the sunset, and she's got many
Speaker 1: more years of use ahead. But at some point, yeah,
Speaker 1: I could see you going from like four thousand dollars
Speaker 1: right now, it's like next oh it's still kicking, all right,
Speaker 1: Maybe you'll throw another five hundred bucks in there. Oh,
Speaker 1: another year, you like slowly kind of expand that that
Speaker 1: bucket because you know that you are getting closer to
Speaker 1: the end.
Speaker 2: Of that Well, let's be honest to you, that vehicle,
Speaker 2: you're gonna be able to throw that extra money in
Speaker 2: there because you're going to pay a whole lot less
Speaker 2: on insurance.
Speaker 1: You'll be able to do it very quickly.
Speaker 2: Throw that difference into the savings bucket, earning interest all
Speaker 2: the while. Yeah, and that money's going to work for you. Granted,
Speaker 2: it's also acting as a form of self insurance, but
Speaker 2: it's working for you, and instead of going to pay
Speaker 2: the insurance company totally. Yeah.
Speaker 1: I think one of the thing that she could do
Speaker 1: is ask her agent as to whether or not she
Speaker 1: qualifies for a discount based on how few miles she drives,
Speaker 1: because Rebecca, like motions, insurance companies will reduce the premiums
Speaker 1: if you drive fewer than like seventy five hundred miles
Speaker 1: in the average year.
Speaker 2: That's like the for some reason, the magical amount.
Speaker 1: So whatever reason. Yeah, yeah, So not only might you
Speaker 1: say by switching your policy to liability only, but you
Speaker 1: could get another helpful discount because of how little you
Speaker 1: drive and stacking those discounts like that can add up
Speaker 1: in a pretty significant way.
Speaker 2: Yeah, we'll link to an article we talked about. There's
Speaker 2: a bunch of other ways you can try to try
Speaker 2: to snag some discounts on auto insurance. Given how expensive
Speaker 2: auto insurance has become, specifically over the last twelve months
Speaker 2: for so many people, it's worth looking under every single
Speaker 2: rock that you can to try to find every additional
Speaker 2: discount that you possibly can, because the savings can be significant.
Speaker 1: But I'm not aware of any.
Speaker 2: More significant savings that you're going to get that rivals
Speaker 2: ditching full coverage and opting for liability only. That is
Speaker 2: the number one way to save if you can self insure,
Speaker 2: like we said, And I love that you're wanting to
Speaker 2: keep that car for years to come as well. It's
Speaker 2: just twenty sixteen and you drive so little. It sounds
Speaker 2: like you take good care of it, like this is
Speaker 2: a car you should be able to own and enjoy
Speaker 2: for years and years and years to come, and all's
Speaker 2: really gonna do is save you money. Right, Let's take
Speaker 2: one more question from the Facebook group Real Quick. This
Speaker 2: one came from anonymous and it said, my husband and
Speaker 2: I have some credit card debt. We're considering a loan
Speaker 2: from our four to one K because the interest we
Speaker 2: pay is going back to us to our accounts. We're
Speaker 2: about eight years from retirement and on track with savings
Speaker 2: and investments. Are there any concerns with this?
Speaker 1: All right? Well, Anonymous, First off, we're glad that you
Speaker 1: are on track with your retirement savings. But this credit
Speaker 1: card debt, it's a top priority for you right now.
Speaker 1: It's actually easier for you to tap your four one
Speaker 1: K for cash than it's ever been before, and that's
Speaker 1: because of the Secure Act two point zero that made
Speaker 1: hardship withdrawals of one thousand dollars as easy as stealing
Speaker 1: candy from a baby, which is actually really easy. I
Speaker 1: do it all the time, very easy, especially at Halloween
Speaker 1: Daddy tacks. It's right, But because it's easy doesn't mean
Speaker 1: that this is something that you shouldn't necessarily do. It's
Speaker 1: not the worst thing that you could do, but we
Speaker 1: want you to be very careful before you take the plunge.
Speaker 1: And the reason for that is if you lose your
Speaker 1: job before you're done paying back those funds, you've got
Speaker 1: to pay back the full amount of the loan immediately,
Speaker 1: and then on top of that, the money that you're
Speaker 1: borrowing is not working in the market for you, which sucks.
Speaker 1: That's the whole point of your four one K is
Speaker 1: to be able to fund your retirement opportunity costs, not
Speaker 1: to pay for life in the here. Now, that's right.
Speaker 2: Yeah, if you run some scenarios of someone, let's say,
Speaker 2: taking out money to do something frivolous, to buy a
Speaker 2: new car or and I know this isn't for that reason.
Speaker 2: This is to pay off debt, so it seems like
Speaker 2: it's a more noble ambition. But still, if you look
Speaker 2: at the numbers that you're going to have in retirement,
Speaker 2: if you had a four one K loan for let's
Speaker 2: say four or five years, taking that money out, not
Speaker 2: letting it grow and paying it back over time, you're
Speaker 2: going to end up in a significantly worse financial position
Speaker 2: come your retirement age. And it's not that a four
Speaker 2: to one K loan can't make sense in a worst
Speaker 2: case scenario. It's just that there are likely better options
Speaker 2: for you. And so you can call your credit card company,
Speaker 2: you can ask for an interest rate reduction. That is
Speaker 2: something you can do in about ten minutes, and they
Speaker 2: might do it just because you asked. It is worth
Speaker 2: at least asking the question. A balance transfer card could
Speaker 2: make more sense, too, depends on your credit score and
Speaker 2: how disciplined you're going to be. That also depends on
Speaker 2: your timeline for getting that credit card debt paid off.
Speaker 2: If it's going to take you four or five years,
Speaker 2: then a balance transfer card might not make the most sense.
Speaker 2: But the City Simplicity card, for example, We'll give you
Speaker 2: twenty one months a zero percent interest, But again, can
Speaker 2: you get the full debt paid off in this timeframe?
Speaker 2: If so, that might be a better direction than taking
Speaker 2: money out of your four one k, But it's crucial
Speaker 2: to take stock also at the same time of what
Speaker 2: got you into this credit card debt in the first place.
Speaker 2: If you go to the ballance transfer route, but you
Speaker 2: don't have the discipline to pay off your debt, you're
Speaker 2: going to wind up in a worse financial position. And
Speaker 2: that's kind of what's problematic too, Matt about the four
Speaker 2: one k loan you mentioned, Hey, if you've got a
Speaker 2: long timeline to pay it off but you lose your job, well,
Speaker 2: you're over a barrel financially. Where you going to come
Speaker 2: up with that money. Now you've got to find another
Speaker 2: place to get money from.
Speaker 1: It supposed to you to more risk, but it doesn't
Speaker 1: address the underlying cause that got you to this point
Speaker 1: in the first place. Like the four one k lon
Speaker 1: just feels like a band aid and it doesn't like
Speaker 1: address the root cause, which might be like, did you
Speaker 1: find yourself in a crunch because you didn't have any
Speaker 1: cash on hand and therefore you had to rely on
Speaker 1: your credit cards. Well, if that's the case, you need
Speaker 1: to address the fact that you need to have more
Speaker 1: cash on hand, you need to have a fatter emergency fund.
Speaker 1: If it's because in this credit card debt, So maybe
Speaker 1: there's spending that was involved that was not very intentional. Well,
Speaker 1: if that's the case, it's worth thinking through how can
Speaker 1: we be more proactive and intentional with our spending. Yeah,
Speaker 1: and maybe it's even like just like not being organized
Speaker 1: because you're like, whoa, we don't, oh, shoot, forgot about
Speaker 1: this account? And if that's the case, it sounds like
Speaker 1: this couple might be a little bit older. But I
Speaker 1: would say that like a budget is the solution here,
Speaker 1: like to which I don't think I've ever said this
Speaker 1: but hey, you might want to check out copilot as
Speaker 1: you're getting closer to retirement age. I don't think we've
Speaker 1: ever told a couple who's considering retirement to get on
Speaker 1: a budget. But that being said, it can help to
Speaker 1: figure out how much it takes to live on every
Speaker 1: single year. It can actually give you the confidence needed
Speaker 1: to enter into those retirement years. And so what I'm
Speaker 1: getting out here though, is addressing what the underlying root
Speaker 1: cause might be before just pulling the trigger on something
Speaker 1: like a for Win k Lom.
Speaker 2: Yeah, And I think there's like there's like an insidious
Speaker 2: thing that happens mentally when you when you actually take
Speaker 2: money out of your retirement account before you reach retirement age,
Speaker 2: you start to think, oh, this is a place I
Speaker 2: can take money from and and maybe you end up
Speaker 2: taking more money from it down down the line in
Speaker 2: the future. Like it's like once you cross that barrier,
Speaker 2: you start to you have like an inappropriate relationship. Then
Speaker 2: with that foural one K and so I just want
Speaker 2: you to maybe keep it above board, not touch that money,
Speaker 2: find another place to get it, and then, like you said, Matt,
Speaker 2: be disciplined about kind of getting rid of that credit card.
Speaker 1: Debt as soon as.
Speaker 2: Possible, keeping that money growing in your retirement account be
Speaker 2: he goaes, Hey, guess what, you're getting closer to retirement
Speaker 2: age and you don't want to unduly interrupt that compounding process.
Speaker 1: That's all right, especially those last few years, or the
Speaker 1: compounding has the largest impact on your overall net worth
Speaker 1: in those those final few years. But Joe, let's get
Speaker 1: back to the beer you and I enjoyed Once upon
Speaker 1: an Orchard by Aligash. What were your thoughts?
Speaker 2: So this one was more tart than I thought it
Speaker 2: was going to be, but I loved it. I was
Speaker 2: a big fan. Sometimes the fruity ones can be a
Speaker 2: little more, a little more fruit forward and a little
Speaker 2: less of whatever that base beer is that's got like
Speaker 2: the sour notes going on. This one was like the
Speaker 2: best of both worlds. It was fruity, but it was
Speaker 2: also really tart, really sour. I love everything Alligash does
Speaker 2: and this is a big win for me.
Speaker 1: Yeah, it was, dude. It was like super jammy, like
Speaker 1: because I feel like the fruit and I was afraid
Speaker 1: of that this because a lot of times I think
Speaker 1: one of the reasons I don't like raspberries is they
Speaker 1: have sort of like that fruity tartness but without much
Speaker 1: depth or body. And I feel like it's funny because
Speaker 1: at the beginning, before we hit record, You're like, what's
Speaker 1: in this? Is there strawberry in this? It smell almost
Speaker 1: like strawberries, And I feel like what strawberry has that
Speaker 1: raspberry doesn't is like backbone like depth, Like just imagine
Speaker 1: having like strawberry jam as versus like raspberry jam. Like
Speaker 1: I don't know, in my mind, there's just more flavor
Speaker 1: with strawberry. Obviously, I think it has to do with
Speaker 1: the fact that they blended this with blueberries. But yeah, man,
Speaker 1: it's just it had this depth and like this umame
Speaker 1: where I felt like my mouth was still sort of
Speaker 1: chewing on it, still enjoying it even after I had
Speaker 1: after I had swallowed it.
Speaker 2: Yeah, I had a nice viscosity. It wasn't too thin,
Speaker 2: and yeah, it lingered. The fruit really came forward in
Speaker 2: this one, and it's kind of what we've come to
Speaker 2: expect at this point from Aligash. They just make again
Speaker 2: phenomenal beers.
Speaker 1: This one was a corked and cage too, so it
Speaker 1: always feels a little bit fancier too. When you end
Speaker 1: up making that pop, yeah, that popping sound as a
Speaker 1: versus just popping a cap off true story. Well, that's
Speaker 1: going to do it for this episode.
Speaker 2: We'll have show notes up on our website at howtomodey
Speaker 2: dot com with links for some of the resources that
Speaker 2: we mentioned during this episode today, But Matt, that's going
Speaker 2: to do it for this one. Until next time, Best
Speaker 2: Friends Out, Best Friends Out,