Speaker 1: Welcome to How the Money, Joel, you messed it up.
Speaker 1: That's not how we do it. Why not? We can
Speaker 1: do it that way? Okay, today we're answering your listener questions.
Speaker 1: I thought you made a mistake, so I was just
Speaker 1: catching it early on. Switch things up, all right, This
Speaker 1: is and ask how to Money episode. Uh. Listener is
Speaker 1: considering coppying healthcare plans in order to save it's open
Speaker 1: enrollment season after all, Joel. Another listeners wondering open season
Speaker 1: on our wallets healthcare fronts. That's what it feels like.
Speaker 1: Another listener, he's wondering if you and I if we
Speaker 1: could ever love buy now, pay later, so we'll share
Speaker 1: our thoughts there. Another listener is considering pausing her investing
Speaker 1: for some debt payoff goals. We'll get to those plus
Speaker 1: more during our episode today, Buddy. Okay, So, I don't
Speaker 1: know where this quote comes from, but I think it's
Speaker 1: a it's either a quote from an old economist, but
Speaker 1: then Forrest Gump, you might I don't think of us
Speaker 1: the chocolates quote. No, not thinking about that one. No,
Speaker 1: I just so I was listening to UH that there
Speaker 1: aren't many politicians I appreciate these days. But I was
Speaker 1: listening to one politician that I actually like in a
Speaker 1: sea of awful ones. And I'm not even gonna mention
Speaker 1: his name. I'm just not. I'm just not because I
Speaker 1: don't want to. I'm just I don't want to get
Speaker 1: that feedback. You're like, have you heard of this guy
Speaker 1: named Donald? I forget his last name? Yeah? Right right? So, uh,
Speaker 1: there's like literally two politicians I think make any sense
Speaker 1: right now. But he was talking on a very obscure podcast,
Speaker 1: so good luck, I want to find this. But he
Speaker 1: was talking about the high prices of beef in this country,
Speaker 1: which we've all been confronted with. If you've tried to
Speaker 1: buy a steake recently, you wanted to punch yourself in
Speaker 1: the face it was that expensive, and you probably opted
Speaker 1: for chicken instead, unless you're just a baller like Matt.
Speaker 1: Was he talking please? Was he talking about Brazil? Evidently
Speaker 1: the Argentina? Oh is it he's talking about? Yes, talk
Speaker 1: about our beef import the desire to import beef right now.
Speaker 1: And he talked about how that's actually going to prolong
Speaker 1: the problem. And one of the things that he said was,
Speaker 1: and I thought this was so true, it's one of
Speaker 1: those kind of destruction, creative destruction, elements of that happened
Speaker 1: in a free market society. He said, high prices are
Speaker 1: the cure for high prices, And that's just a really
Speaker 1: classic like economist talk, yes again slogan. How often you
Speaker 1: hear smart stuff like that come out of the mouths
Speaker 1: of a politician, But it's really true in so many
Speaker 1: ways that when prices get too high, it's I think people,
Speaker 1: especially politicians, are often tempted towards a non free market
Speaker 1: solution or a way to stem the pain of their
Speaker 1: constituents in a quick manner. And what this guy was
Speaker 1: saying was actually what happens when prices get high is
Speaker 1: people either a make different choices, they demand less of
Speaker 1: that item. So in the case of beef, like people
Speaker 1: start opting for chicken or veggies, whatever it is, and said,
Speaker 1: chicken super affordable these days, that's right, or especially with
Speaker 1: that five six dollars off per package a costco. Baby,
Speaker 1: When that happens when you stock up and throw a
Speaker 1: pack in the freezer too, heaven. Yeah. And then the
Speaker 1: other thing that happens is it attracts more suppliers, So yeah, farmers,
Speaker 1: the suppliers see that the prices are high, they say,
Speaker 1: I want a piece of that action. Right, They get
Speaker 1: in start providing more supply, which then does what lowers
Speaker 1: the overall the problem with beef is is that it
Speaker 1: just takes a lot longer to go from raising cattle
Speaker 1: to that being a steak in the supermarket. As long
Speaker 1: as it take, I think it's like multiple years, right,
Speaker 1: whereas like with chickens or pigs, like it's so much
Speaker 1: quicker turnaround months, right, yeah, chickens it's literally like like
Speaker 1: eight weeks or something, six weeks three months before the Yeah,
Speaker 1: you go from hatching to like these chickens are ready
Speaker 1: to go. So the pain is felt a lot longer,
Speaker 1: which makes people want to get involved in the system
Speaker 1: to lower the prices. When ultimate, as that politician said,
Speaker 1: as a commists before them have said, high prices are
Speaker 1: the cure for prices, let it go. So he would
Speaker 1: see advocating for more of a free market. So he was, dude,
Speaker 1: I'm all about that, because what's true is also the
Speaker 1: opposite of that too, right, So low prices are also
Speaker 1: the cure for low prices. Yeah, right, So it's a
Speaker 1: self it's like an autocorrecting mechanism. This also makes me
Speaker 1: think through it's like okay, beef is it's kind of
Speaker 1: a really long runway, like years. But it makes me
Speaker 1: think about other industries a that have really short lifespans
Speaker 1: or short cycles that allow for there to be a
Speaker 1: whole lot of adjustments where you see prices in a
Speaker 1: much more dynamic way, and then different industries where it's
Speaker 1: really stretched out. And when that comes to mind as
Speaker 1: far as it being really stretched out, is higher ED
Speaker 1: because ye like as opposed to eating a steak, which
Speaker 1: is something you do in one sitting. When it comes
Speaker 1: to higher ED, it literally takes most people at least
Speaker 1: four years to consume that product, and then years, if
Speaker 1: not decades beyond that to decide was that purchase it's
Speaker 1: worth my money? Right, because a lot of it depends
Speaker 1: on job satisfaction, career, how much money they're able to make.
Speaker 1: But it makes Yeah, it makes me think that like
Speaker 1: he's I guess he was talking about how painful it
Speaker 1: is during during those sort of down periods where you're
Speaker 1: trying to figure out the best decision, and I think
Speaker 1: that's where folks could be potentially when it comes to
Speaker 1: higher ED because they're saying, well, was that worth it? Ah,
Speaker 1: I don't know. It's tough to tell. It's not something
Speaker 1: you're gonna know, maybe even for a decade out because
Speaker 1: I think about like when I was right out of school,
Speaker 1: I remember thinking, man, what a waste of time. It's
Speaker 1: even your perception. Your perception of it changes. But is
Speaker 1: the solution what you're saying then, is a solution for
Speaker 1: the government to get involved into distort prices? I would
Speaker 1: say no, and that's just not the solution. Let's just
Speaker 1: be honest that a lot of price distortment that currently happens,
Speaker 1: like let's say we're talking about prescription drugs or healthcare,
Speaker 1: there already is a lot of like it's not really
Speaker 1: a free market system, and so, which is awesome. Why
Speaker 1: it's so broken. We have a ton of distortment, and
Speaker 1: so a lot of people are like, I prefer distortion.
Speaker 1: How the free market's working on that. It's like, yeah,
Speaker 1: it's it's not because it's not a free market really,
Speaker 1: and that is a problem too. So all right, sorry,
Speaker 1: random wonky economists. Not No, I think it's fun. All right,
Speaker 1: should we mention the beer we're having? You and I
Speaker 1: are enjoying an athletic brewing company beer that happens to
Speaker 1: be called Upside Dawn, which is a golden And I
Speaker 1: wanted to have this one on specifically because I told
Speaker 1: you about our friend Jimmy who gave me a beer,
Speaker 1: and I think maybe he was thinking we would have
Speaker 1: it on the show, but then I just drank it,
Speaker 1: and then anyway, he cried himself to sleep. Then I know,
Speaker 1: I haven't talked to him about it, but I should soon.
Speaker 1: He's not talking to you anymore. Last time I was
Speaker 1: out I saw it. I was also athletic, and I thought, oh,
Speaker 1: I should get that mentioned Jimmy. So the one he
Speaker 1: gave me was an october Fest, which evidently you can't
Speaker 1: get where we are. You have to order it. And
Speaker 1: even still they don't you have to order it to
Speaker 1: a different state. Maybe I don't know if i'd recommend
Speaker 1: that there's somebody from to us at one point, maybe
Speaker 1: we should holler at them and see if they can
Speaker 1: send us some October but they would. I like the
Speaker 1: way you're like, where your head's out? Good folks. Anyway,
Speaker 1: Free beers the best kind of beer to you, by
Speaker 1: the way. Yeah, so this is an NA we'll share
Speaker 1: our thoughts. Have we had an NA on the show before,
Speaker 1: I want to say we've had one or two? Really? Yeah,
Speaker 1: it might have been an athletic back in the day.
Speaker 1: Oh no way, Yeah, I just swear like the heat
Speaker 1: reached out and brought us some beers and we try them.
Speaker 1: But yeah, But let's let's get onto money questions. Matt
Speaker 1: the if you're listening right now and you're like, I
Speaker 1: have a money question on the tip of my brain
Speaker 1: and I would love for Matt and Joel to tackle
Speaker 1: it in maybe next week on the show. Even well,
Speaker 1: you can go to have to money dot com, slash ask,
Speaker 1: or literally just record a voice memo on that voice
Speaker 1: recorder app on your phone. Email it over to us
Speaker 1: at how to money pot at gmail dot com. We
Speaker 1: look forward to hearing from you. Matt. Let's get to
Speaker 1: man speaking of not real free markets. Well, let's get
Speaker 1: to a question now, specifically about open enrollment.
Speaker 2: Hey, Matt and Joel, I've got a question about health insurance.
Speaker 2: It's open enrollment season at my employer, and they're offering
Speaker 2: us a couple of different options for health insurance this
Speaker 2: year with a major provider right now, and it looks
Speaker 2: like they're about twelve hundred dollars more expensive than one
Speaker 2: of the other major providers that's being offered. I'm interested
Speaker 2: in taking those savings, but I'm also weighing the cost
Speaker 2: of confirming that all of our doctors accept the other ensure,
Speaker 2: making sure that all of our prescriptions are covered for
Speaker 2: my whole family of five. So any advice about how
Speaker 2: to weigh the cost some benefits of switching from one
Speaker 2: insurer to another.
Speaker 1: All right, Jil And that was Brian from Chicago, by
Speaker 1: the way, And open enrollment, Man, this can be a
Speaker 1: trying time for a lot of folks who they've got
Speaker 1: all these options laid out before them. So we'll offer
Speaker 1: a few thoughts that will hopefully make this process a
Speaker 1: little less difficult. And yeah, I don't think Brian is
Speaker 1: the only person to find himself in this situation as well,
Speaker 1: because healthcare costs have risen significantly and they're yeah, obviously
Speaker 1: trying to find different ways to say so, here's some numbers.
Speaker 1: The average annual cost now is twenty seven thousand dollars
Speaker 1: dollars for the average family in the US, and the
Speaker 1: average employer covers most of that twenty thousand dollars, But
Speaker 1: that still leaves a ton of money for you to
Speaker 1: cover as the employee, a little over six thousand dollars,
Speaker 1: and that's just the premiums like that, that doesn't include
Speaker 1: the other costs. And so even with great workplace coverage
Speaker 1: here we're talking that man like you could easily spend
Speaker 1: over ten thousand, maybe closer to fifteen on healthcare costs
Speaker 1: in a given year between just like themistons and then
Speaker 1: just some of the other costs that go into it.
Speaker 1: Paying those premiums gets you the coverage right in case
Speaker 1: of catastrophic some catastrophic happens to you, but it also
Speaker 1: gives you the ability to pay less to go see
Speaker 1: the doctor when we're talking about cope's and stuff like that.
Speaker 1: But just to think that that's how much it requires
Speaker 1: just to have health coverage in this country, even when
Speaker 1: your employer is putting a substantial amount of the bill,
Speaker 1: it's it's harrowing. That's kind of hard to fathom. And
Speaker 1: I know that there are some employers who do even
Speaker 1: better on the healthcare coverage front, and they pay even
Speaker 1: more or all of your premiums. I think if you
Speaker 1: are an individual working for one of those employers just
Speaker 1: don't neglect to realize how great of a benefit that is,
Speaker 1: because it really is substantial. And you see, you might
Speaker 1: have friends working down the street for another firm that's
Speaker 1: less generous and they are paying a lot more of
Speaker 1: They've got more skin in the game essentially when it
Speaker 1: comes to premiums than you do. So if you're in
Speaker 1: that case, be thankful, I'd say, and Matt, I think
Speaker 1: when it comes to this question, we want to compare
Speaker 1: the total annual cost. Right It's hard to do because
Speaker 1: we're using predicted costs. There's no way to one hundred
Speaker 1: percent predict exactly what you're going to spend in healthcare
Speaker 1: in a given year. So much of healthcare is like
Speaker 1: ow I broke my ankle, I need to go see
Speaker 1: the doctor right now. You don't usually know exactly what
Speaker 1: you're going to spend in the coming year, understandably so,
Speaker 1: but you can come up with a solid estimate, I think,
Speaker 1: based on what you spent last year and whether or
Speaker 1: not there any procedures you already have planned that are
Speaker 1: in the works. And some folks they even batch bigger
Speaker 1: health needs into a specific year while they're on let's
Speaker 1: say a lower deductible plan, and then they move to
Speaker 1: a higher deductible plan in years where they're less likely
Speaker 1: to need care, which is I think a solid planning option.
Speaker 1: If you're saying, listen, I know I've got this major surgery,
Speaker 1: and my spouse has this other thing going up, my
Speaker 1: kid needs to get their tonsils removed. Let's go for
Speaker 1: the lower deductible plan in twenty twenty six, and then
Speaker 1: twenty twenty seven, hopefully most of our major surgeries are
Speaker 1: over with boom, Like, we're going to go back to
Speaker 1: the high deductible plan, try to save more money. But
Speaker 1: the total costs we're talking about here is premiums, it's
Speaker 1: your potential deductible, it's copays, and it's also really important
Speaker 1: to know what your out of pocket max is as well.
Speaker 1: I think those are really kind of the crucial moving
Speaker 1: parts we've got a factor in, Yeah, the overall costs,
Speaker 1: because if you just go simply seeking lower premiums, well
Speaker 1: that's often going to mean higher deductibles. So also take
Speaker 1: into account how much cash, how much money you have
Speaker 1: in savings, whether or not you can go with a
Speaker 1: plan like that if you have some more healthcare expenses
Speaker 1: next year, Joel, you mentioned copay costs as well. Those
Speaker 1: really can add up, so make sure you are aware
Speaker 1: of that if you do go and see the doctor regularly.
Speaker 1: And it's yeah, And Brian he mentioned specifically looking into
Speaker 1: the doctors that he has making sure that they accept
Speaker 1: the new health insurance as well. It may not be
Speaker 1: worth it for you. So you get you're a family
Speaker 1: of five, right, If you have to go and find
Speaker 1: a new pediatrician, if you have to find a new
Speaker 1: doctor for you, if your wife or your partner, if
Speaker 1: they need to go find a new doctor as well,
Speaker 1: it might be a massive headache. But that being said,
Speaker 1: I don't know. Maybe extreme time situations call for extreme
Speaker 1: measures here and the ability to save an extreme amount
Speaker 1: of money. Yeah, yeah, And so I don't want the
Speaker 1: default to be like, well, yeah, obviously make sure because
Speaker 1: that's just presupposing that he's not going to make a
Speaker 1: big change like that. And I actually want to introduce
Speaker 1: the idea that hey, maybe it's worth doing something completely
Speaker 1: different in order to save some money here. Yeah maybe,
Speaker 1: but you might with three kids, you're attached to the physician.
Speaker 1: I mean, I remember Matt when we moved the one
Speaker 1: of the hardest parts about leaving where we lived was
Speaker 1: how much we loved the pediatrician where we were, and
Speaker 1: we just not to throw shade, but we haven't found
Speaker 1: a great pediatrician where we are now. It's just okay, yeah,
Speaker 1: and we miss the old and we're like, we even
Speaker 1: think about do we go back and just drive forty
Speaker 1: five minutes to go see a pediatrician. Maybe you can.
Speaker 1: And so if you if you feel that attached and
Speaker 1: you're like, huh, well my pediatrician who we love, you know,
Speaker 1: doesn't take this new healthcare coverage, doesn't doesn't take this plan,
Speaker 1: well I get how that's going to help sway your decision,
Speaker 1: and you might be like, not worth the savings if
Speaker 1: we can't see that person again. And yeah, you got
Speaker 1: a factor in prescriptions too, because if there are any
Speaker 1: regular prescriptions that you'd want to you know, that you take,
Speaker 1: you'd want to see how much those are going to
Speaker 1: cost underneath this new plan as well. Although depending on
Speaker 1: what you take, especially if it's an older generic, you
Speaker 1: might actually save a lot of money by not going
Speaker 1: through insurance and using a site that we've mentioned before
Speaker 1: like cost plus Drugs. Good Rx is another good place.
Speaker 1: So don't necessarily think you have to go through insurance
Speaker 1: to save money on prescriptions. You might save more not
Speaker 1: going through insurance. We'd also love to see you on
Speaker 1: an HSA eligible high deductible health care plan if it
Speaker 1: makes sense for your overall health care costs. Don't let
Speaker 1: the tail wag the dog here, but if a high
Speaker 1: deductible health care plan is ideal from that total cost
Speaker 1: perspective that we're discussing, it'll mean you can utilize an
Speaker 1: HSA two, which can just be another way to save
Speaker 1: money on healthcare because it reduces your taxes for the
Speaker 1: current year and it allows you to grow those dollars
Speaker 1: for your future too. Your employer they might be generous
Speaker 1: enough to even offer an HSA match. We have heard
Speaker 1: from many listeners who have that as a benefit where
Speaker 1: they work. That sweetens the pot. We're seeing more of
Speaker 1: this and we love it. But just take that into
Speaker 1: consideration as well, because there are additional perks with the
Speaker 1: high deductible healthcare plan. You save on premiums, you have
Speaker 1: access to the HSA. Still, that doesn't mean it's always
Speaker 1: the best choice for everyone. Yeah. Yeah, And Brian, he's
Speaker 1: talking about saving twelve hundred bucks here. But kind of
Speaker 1: piggybacking off of the taking more extreme measures. I've got
Speaker 1: to bring up health sharing plans because if you are
Speaker 1: interested in saving, what I would say is the most
Speaker 1: extreme amount of money trol. So I logged into our
Speaker 1: state's healthcare exchange, so healthcare dot gov, or if you
Speaker 1: live in a state where healthcare dot gov no longer
Speaker 1: works because the state exchanges took over, check that out.
Speaker 1: But I logged in there and guess what our family
Speaker 1: of six monthly cost was going to be. I'm gonna
Speaker 1: guess for a bronze plan for the cheapest. Okay, I'm
Speaker 1: gonna guess like twenty three thousand monthly, So I'm me
Speaker 1: eight nineteen hundred, twenty five hundred dollars wow a month?
Speaker 1: Okay a month? Yeah, versus three hundred and seventy four
Speaker 1: dollars a month, which is what we're paying here. This
Speaker 1: is the difference between oh, paying over thirty thousand dollars
Speaker 1: over the course of a year and versus six. And
Speaker 1: that's you're not talking about a gold plan, No, this
Speaker 1: was like prices you might be able to get a
Speaker 1: plan starting at and it said that I could not
Speaker 1: believe it, and by the way, when I said six
Speaker 1: thousand dollars, that's not only the quote unquote premium that
Speaker 1: I'm paying towards the health sharing but also that also
Speaker 1: includes our out of pocket costs. So we spent a
Speaker 1: little over six thousand dollars total last year. Yeah, and
Speaker 1: you're probably thinking, all, yeah, I know how you are,
Speaker 1: with like not ever going to see the doctor last
Speaker 1: year was actually we had several doctor's visits out of
Speaker 1: which is yeah, you have to take that rational a
Speaker 1: few times kind of out of the ordinary for us.
Speaker 1: So I'm just highlighting that if you are looking to
Speaker 1: save the absolute most amount of money, you've got to
Speaker 1: look into health sharing. And not all of them are
Speaker 1: are are religious, are faith based either Sidera, So you
Speaker 1: and I both both of us families are with Meta Share,
Speaker 1: but Sidara is a great option as well, where there's
Speaker 1: a whole lot of folks who are served well yea
Speaker 1: via that organization. The problem is, it's really hard when
Speaker 1: you're offered a Cadillac health insurance plan through your work,
Speaker 1: the premiums are highly subsidized. It's tough to think about
Speaker 1: saying none of the above and going getting your own
Speaker 1: health sharing plan. I think it. They typically make the
Speaker 1: most sense for self employee people, right who don't have
Speaker 1: access to any sort of health coverage to work, or
Speaker 1: if you're if maybe you're employed by an employer who says, yeah,
Speaker 1: we don't you're kind of your own. Yeah, but like
Speaker 1: we don't really subsize the premiums very much, and you're
Speaker 1: feeling more of that healthcare dot Gov sort of slap
Speaker 1: in the face where you're faced with paying the bulk
Speaker 1: of the premiums yourself exactly. But even assuming the average
Speaker 1: American where it's okay, say twenty seven thousand employers covering twenty,
Speaker 1: you're covering six. I paid six total last year, not
Speaker 1: just in the cost of health care, but also in
Speaker 1: out of pockets what I call in my excel sheet
Speaker 1: medical out of pocket costs. Yeah. Uh, and so you're
Speaker 1: still looking at saving a few thousand dollars right there,
Speaker 1: assuming uh, you know, a healthier year. But that's something
Speaker 1: else you got to keep in mind too, because if
Speaker 1: you do use the doctor a whole lot, if you've
Speaker 1: got a whole lot of procedures lined up, if you've
Speaker 1: got different you know, regular visits that you need to
Speaker 1: go in and get things checked in on that's probably
Speaker 1: not going to work out for you quite as well. Yeah,
Speaker 1: So I think what we're ultimately saying here to Brian
Speaker 1: is to, yeah, look at that over all out of
Speaker 1: pocket costs and say, is it word jumping through these hoops?
Speaker 1: And am I gonna have to give up too much
Speaker 1: in order to save the twelve hundred bucks? Or is man?
Speaker 1: I'm still getting everything that I really value. Maybe a
Speaker 1: couple things are gone, but I don't really care about
Speaker 1: those things or use those things anyway. And yeah, it's
Speaker 1: really it's partly math, but it's partly kind of lifestyle
Speaker 1: and what you care about when it comes to your
Speaker 1: healthcare coverage. But twelve hundred bucks, that's not chump change.
Speaker 1: It's potentially worth jumping through some of those hoops in
Speaker 1: order to save that much money every year. All Right,
Speaker 1: We've got more questions to get to. We'll get theoretical
Speaker 1: about buy now, pay later, and we'll also man that
Speaker 1: classic personal finance question of investing or paying down debt.
Speaker 1: We've got a good question on that front. We'll get
Speaker 1: to those and more right after this. All right, buddy,
Speaker 1: we are back from the break. Let's now hear from
Speaker 1: a listener who has a hypothetical discount question for.
Speaker 3: Us, again from Philadelphia, calling in with yet another question.
Speaker 3: This question pertains to buy now and pay later services. Now,
Speaker 3: I would like to preface this with I have never
Speaker 3: in my life used or even considered to use any
Speaker 3: of these services. And I say that just to cover myself,
Speaker 3: because I know your views of them are fairly negative.
Speaker 3: And I understand that and mostly agree that. Said, I
Speaker 3: had a thought experiment. I thought you might want to
Speaker 3: indulge me in it. What if to attract more people
Speaker 3: to use buy now and pay later services and to
Speaker 3: get them used to using them in general, they started
Speaker 3: offering large discounts on the items that you were purchasing.
Speaker 3: Figure something along the lines of ten twenty thirty percent off.
Speaker 3: Would something like that move the needle on how you
Speaker 3: felt about buy now pay later services? If your answer
Speaker 3: is no, I would be curious if there's anything these
Speaker 3: buy now now, pay later services could do to interest
Speaker 3: you in using them. For instance, even a larger discount,
Speaker 3: let's say eighty percent off just to be ridiculous, or
Speaker 3: perhaps some other kind of bonus that I can't think of.
Speaker 3: Is there anything that would get you interested in doing this,
Speaker 3: and I promise I don't work for these companies and
Speaker 3: I'm trying to trick you into using the services and
Speaker 3: or becoming an advertiser for them by now pay later services.
Speaker 3: Can they be made into something that the how the
Speaker 3: money guys would approve of? What do you say, man,
Speaker 3: Jil can you fix it? As always? Best? Wayne out?
Speaker 1: Inside man for Klarna? Wayne, not cool? Wayne, we know
Speaker 1: what you're doing now, Matt, I could if there was
Speaker 1: a gun to your head, would you use a buy now,
Speaker 1: Pay later service? If it was existential life or death? Yeah? Okay,
Speaker 1: that's not wouldn't be the end of the world. Okay, Yeah,
Speaker 1: I agree, I agree. So they're they're Wayne, that's the answer.
Speaker 1: If Matt were faced, Well, a lot of it does
Speaker 1: come down to the discount, so that it comes down
Speaker 1: to the particulars. So I mean, I'm glad that Wayne's
Speaker 1: avoided them so far, but I think the shortening it
Speaker 1: truly is yes, like not even goin to my head
Speaker 1: sort of situation. And I think what Wayne is really
Speaker 1: putting his finger on the heart of why we're not
Speaker 1: fans of buy now, Pay later if there were discounts
Speaker 1: involved for using buy now pay Later, I'd be more
Speaker 1: than happy to consider using them. I actually did, and
Speaker 1: I think I talked about this on the show. I
Speaker 1: used by Now Pay Later one time, and it was
Speaker 1: because I got a meaningful discount on some running shoes.
Speaker 1: I don't I don't remember if it was like, do
Speaker 1: you buy anything else other than running shoes? No, not really.
Speaker 1: I just ripped through on so fast, though, but it
Speaker 1: was I was like, I'll just go buy these shoes
Speaker 1: are a good price here, And then there was I
Speaker 1: think it was like fifty bucks off one hundred and
Speaker 1: fifty bucks for using Clara, and I was like, I'll
Speaker 1: just get another pair of shoes. I stick them on
Speaker 1: the top of my closet mat in a row, and
Speaker 1: then I just like pull down the next pair when
Speaker 1: I need it. But yeah, I was like, well, if
Speaker 1: they're gonna offer me fifty bucks off, then I'm happy.
Speaker 1: I'm happy to use by Now pay Later. And then
Speaker 1: I just didn't use it, Like by Now Pay Later.
Speaker 1: I immediately paid off the loan or whatever they call
Speaker 1: it in order to avoid the behavioral trap because I
Speaker 1: just don't want to be caught in that sort of
Speaker 1: like I've got how many outstanding loans do I have?
Speaker 1: And am I being tempted to buy things I wouldn't
Speaker 1: otherwise buy? But yeah, if there was like a ten
Speaker 1: or twenty percent off perk for using buy now, Pay later,
Speaker 1: I'd probably use it a lot more. Yeah, you know.
Speaker 1: Like so occasionally folks will reach out to us to
Speaker 1: say that, well, credit cards, they're not much better than
Speaker 1: buy not pay later, Like you are still using debt
Speaker 1: to purchase something that you don't have the money for
Speaker 1: at the time, And that's that's kind of true. But
Speaker 1: I think I would say that if that is how
Speaker 1: you are actually using your credit cards, and if that
Speaker 1: is how you are using your buy now, pay later,
Speaker 1: well then that's not something I'm happy with, right, that's
Speaker 1: not happy with you, I'm not because if that if
Speaker 1: you don't have the cash on like you need to
Speaker 1: have the cash on hand if you are going to
Speaker 1: use these methods of payment, it doesn't matter if it's
Speaker 1: a credit card or if it's a buy now, Pay later,
Speaker 1: like that is the like you must have that ticket
Speaker 1: in order to ride Like that is like we're trying
Speaker 1: to raise the standard here, We're trying to raise the bar,
Speaker 1: like the cash on hand that is your license to
Speaker 1: be able to play this game. Otherwise then it's too
Speaker 1: slippery of a slope. Otherwise we don't once you messing
Speaker 1: with it at all. And so if okay, then if
Speaker 1: they are the same, You got the cash on hand,
Speaker 1: why would you then go with a credit card over
Speaker 1: the buy not pay later? And it does come down
Speaker 1: to the perks, going back to what you're saying as
Speaker 1: far as getting the discount, you were saying, like, maybe
Speaker 1: get like ten or twenty percent off, like truly, if
Speaker 1: like I would do it for like five percent off? Yeah,
Speaker 1: because because that's roughly what a credit card. Yeah, because
Speaker 1: I'm getting anywhere between two percent and six percent off
Speaker 1: with my credit cards. If there is a buy not
Speaker 1: Pay later. And this is me maybe wishing this out
Speaker 1: into existence, but if there was a a buy now,
Speaker 1: Pay later that was willing to offer five percent off
Speaker 1: just across the board in order to use their products,
Speaker 1: guess what I would do it. I would get in there,
Speaker 1: I'd figure out how to incorporate that into my financial system,
Speaker 1: into my Excel spreadsheets to spread that out over the
Speaker 1: four months. But actually probably wouldn't do that. I'll probably
Speaker 1: just like i'd do with a credit card. I would
Speaker 1: pay it off at the end of the month, snag
Speaker 1: the discount, and I would probably stop using credit cards.
Speaker 1: Although that being said, there are other perks as well
Speaker 1: that the credit cards offered, right, not just the discount,
Speaker 1: but I think I would consider it like the buyer
Speaker 1: protections and how if someone steals your credit card. Wouldn't
Speaker 1: rent a card, I'm sorry, I wouldn't rent a vehicle
Speaker 1: with buy not pay later. Yeah, and some of these
Speaker 1: other flight and some of these other perks that maybe
Speaker 1: we can touch on. But as far as just general spending,
Speaker 1: I think I do it even for five percent, not
Speaker 1: even you don't even need a tune me with eighty percent,
Speaker 1: because you're so What you're really getting at the heart
Speaker 1: at is that credit cards offer meaningful protections and benefits
Speaker 1: when you use them. The only thing that buy now,
Speaker 1: pay later offers. The only perk you get is you
Speaker 1: get to pay that item off over a longer period
Speaker 1: of time. And so what that leads to for so
Speaker 1: many people, What that has led to for so many
Speaker 1: is poor behavioral and financial results, which have been well documented.
Speaker 1: People spend more on average when they have the ability
Speaker 1: to use buy now, pay later Klarna or afterpay or
Speaker 1: whatever at checkout, and it's it's just one of the
Speaker 1: reasons to be wary when you see those statistics that
Speaker 1: that's why retailers want to do business with buy now,
Speaker 1: pay later companies because they know that when they make
Speaker 1: that available at checkout, people will buy more stuff, they
Speaker 1: will add more things to their card, it will juice
Speaker 1: their sales. And you could, you know, argue that tapping
Speaker 1: your credit card to pay insulates you from maybe some
Speaker 1: of the pain and friction of buying too. And yes
Speaker 1: that I think that can be true for lots of folks.
Speaker 1: But the goal of using a credit card it's not
Speaker 1: just to mitigate the pain of purchases. That's but that
Speaker 1: is the whole essential use case and reason for existence
Speaker 1: to buy now, pay later companies to mitigate friction. And
Speaker 1: you know, there are important consumer protections alongside these rewards
Speaker 1: that I think and boosting your credit score by now
Speaker 1: pay later doesn't do that. Credit cards do help do that.
Speaker 1: I think there's so many Even though credit cards have
Speaker 1: their downsides, there are so many potential positives for using
Speaker 1: them if you use them effectively. There just really aren't
Speaker 1: any for buy not pay later yeah, thinking about the
Speaker 1: friction lists, I'm assuming are there apps on your phone
Speaker 1: or can you put Klarna or the different buy now
Speaker 1: pay later companies in your wallet? Right, because I like,
Speaker 1: I've been thinking about it recently and the fact that
Speaker 1: I can double click and pay and then the little
Speaker 1: transaction device, the clover or the square pay or whatever
Speaker 1: like when they has it, when it's got the little
Speaker 1: when it's got the little ding like the little chime.
Speaker 1: There's something about that that makes it so satisfying. And
Speaker 1: I think I've mentioned this before, but I've since that,
Speaker 1: since I've mentioned it previously, I've been thinking about that
Speaker 1: because it used to be what with a chip You
Speaker 1: stick it in there and it would make this terrible
Speaker 1: sound like that, Yeah, and it made what does that reinforce?
Speaker 1: It makes it seem like you did something wrong, as
Speaker 1: opposed to they completely change the user interface of it.
Speaker 1: Now it's like this nice little congratulations you have been approved.
Speaker 1: You did it. I think I was half the reason
Speaker 1: they invented. It's a nice technology. It's a nice pat
Speaker 1: on the back. And I think that's the friction. Whereas honestly,
Speaker 1: I think credit cards feel a little more dangerous because
Speaker 1: of the fact that we can use them in Apple
Speaker 1: Pay or the Google Pay and the wallets as opposed
Speaker 1: to because when you're sitting down at a computer clicking
Speaker 1: the uh, the four easy installments, the four that doesn't
Speaker 1: seem any more difficult to me than the fact that
Speaker 1: you've got a credit card auto saved in there, right,
Speaker 1: But the in personness of that sort of physical response
Speaker 1: that a device does to you when you purchase something
Speaker 1: that to me almost puts credit cards back on my radar.
Speaker 1: As far as the payment method, that might be a
Speaker 1: bit more nefarious right now. Yeah, yeah, Well we talked
Speaker 1: about this with Jason Gorski a while back, right when
Speaker 1: he professor who writes about the power of cash, And
Speaker 1: I do think they're again like kind of what you're
Speaker 1: getting at is the insertion took a few seconds, was
Speaker 1: kind of annoying. The tapping makes it then the awful buzz, Yeah,
Speaker 1: it makes it super easy and you feel like you're
Speaker 1: breezing through the line. And I think that is actually
Speaker 1: a downside making it really easy to use credit cardslet
Speaker 1: physically parting with the cash that's right hand, that's right.
Speaker 1: So we have to be careful about how we're paying
Speaker 1: what we're getting used to, how we're reconciling our books
Speaker 1: and looking at our spending at the end of the month.
Speaker 1: And if by now pay later works for you, you're
Speaker 1: using it in a really intentional manner and you're not
Speaker 1: overspending using those services, then by all means like you
Speaker 1: do you. But I just think the whole way they're
Speaker 1: designed is essentially to get people to spend in ways
Speaker 1: the otherwise wouldn't, to become even more of a consumer.
Speaker 1: And I think those incentives have really gotten the best
Speaker 1: of a lot of people. Speaking of paying with cash,
Speaker 1: did you notice the old lady who was paying for
Speaker 1: her coffee with cash this morning? No, And she was
Speaker 1: a little confused about the price, and he's like, oh, no,
Speaker 1: we actually round down when you pay with cash, so
Speaker 1: he didn't say the precise amount. But I was like,
Speaker 1: oh my gosh, that's right. Yeah, because when you pay
Speaker 1: with card, they charge you that service feed That's true. Yeah,
Speaker 1: but yeah, fascinating how that has an impact on how
Speaker 1: it is we consume, though, Joel, let's hear from a
Speaker 1: listener who is trying to right her former wrongs.
Speaker 4: I met and Joel, This is Kelsey from Colorado, springs.
Speaker 4: Love your podcast, and I have a question regarding investing
Speaker 4: for four one K wrath Ira and brokerage accounts first
Speaker 4: paying our debt and saving. So for context, my first job,
Speaker 4: I wasn't making a bunch was my first job, and
Speaker 4: so I was investing fifteen to twenty percent of that
Speaker 4: those still in my four to one K and putting
Speaker 4: five hundred lives a month into maxing out my roth
Speaker 4: IRA as well. I was young and naive and strut
Speaker 4: for money, took out some loans trying to pay those off,
Speaker 4: still in there about eighteen percent wracked up credit card debt.
Speaker 4: Have since been paying those off, but just curious your
Speaker 4: thoughts on whether I continue putting into my four one
Speaker 4: K and roth first, maybe pausing those for a little bit,
Speaker 4: just so that I can get my auto and other
Speaker 4: signature loans paid off for contacts. I have about ninety
Speaker 4: thousand dollars in my roth IRA, about eight thousand dollars
Speaker 4: in savings, but have about twenty five thousand dollars in debt.
Speaker 4: So just trying to figure out how I can navigate
Speaker 4: this thought I was doing the right thing, but now
Speaker 4: in a little bit of a financial picko, which ironically
Speaker 4: feels like it came from investing so much so any
Speaker 4: insight is super helpful. Looking to buy a house within
Speaker 4: the next two years or so, and just wanting to
Speaker 4: make sure I'm handling my money here on out in
Speaker 4: the right way. Love your podcast, Love what you guys
Speaker 4: are doing.
Speaker 1: Thanks, Oh man, I'm so glad Kelsey said this question
Speaker 1: largely because it's like one of those point essential personal
Speaker 1: finance questions that people will have, the investing first, debt
Speaker 1: payoff question, And there's never just like a right or
Speaker 1: wrong yes or no answer to this either, never completely straightforward,
Speaker 1: and the answer really depends on a number of factors.
Speaker 1: Despite the credit card debt and the loans that Kelsey
Speaker 1: has taken out, which aren't our fave, I think we
Speaker 1: should also just say congrats to her for all she's
Speaker 1: been able to do saving for her future. She's got
Speaker 1: ninety thousand dollars in a roth iray. Yeah, that in particular,
Speaker 1: that's pretty solid. That's solid, man, And that's going to
Speaker 1: grow to be a much larger amount over time thanks
Speaker 1: to compounding returns. And those are that they'll never be taxed,
Speaker 1: which is one of our favorite things about the roth
Speaker 1: Ira that's all your money tax free in the future,
Speaker 1: which is a beautiful thing. Also, Matt, do you want
Speaker 1: to highlight how you did something Oh, very similar to
Speaker 1: what Kelsey did by investing. I heard I heard too early.
Speaker 1: I heard in Kelsey's voice, She's just like, then this happened.
Speaker 1: Don't feel bad about it. I mean, I don't know.
Speaker 1: Is it like a rite of passage that there are
Speaker 1: there's a certain subset of us make this mistake. But
Speaker 1: like you, I heard the glories of compounding. I had
Speaker 1: some friends who were a little bit older, and I
Speaker 1: was like, oh man, they're already investing. I need I
Speaker 1: got to get investing as well. You were O old
Speaker 1: twenty three okay, yeah, which is or twenty two very young,
Speaker 1: because the average person doesn't start investing till like what
Speaker 1: like like thirty times. I don't even know. But I
Speaker 1: just knew that I wanted to invest. I hadn't been,
Speaker 1: and so I had I had ground to makeup drill.
Speaker 1: That's basically where I saw myself. And but what I
Speaker 1: didn't do was have money in the bank, and so
Speaker 1: I was investing. Again. I didn't have nearly as much
Speaker 1: as Kelsey, but I found myself in a tight spot,
Speaker 1: and instead of relying on debt, I actually pulled those
Speaker 1: contributions out, which probably ended up costing me more money
Speaker 1: because the market was down a little bit and I
Speaker 1: was investing in mutual funds that were very expensive, and
Speaker 1: so it was like a double waymy I learned that
Speaker 1: lesson there early on. Next to learn it early though, Yeah, yeah,
Speaker 1: oh yeah, you learned the lessons with like one or
Speaker 1: two zeros at the end of it, as opposed to
Speaker 1: like three or four. Yeah. But we're gonna talk about
Speaker 1: the money gears here, Kelsey, because when you go through
Speaker 1: the money gears, which by the way, you can find
Speaker 1: up on the website it had to money dot com
Speaker 1: forward slash start here. But you will see that paying
Speaker 1: off high interest debt that is gear number three. It's
Speaker 1: just after getting your four one K match. It's just
Speaker 1: after saving up the basic emergency fund. But then after
Speaker 1: that credit card debt or other debts with double digit
Speaker 1: interest rates, that should be your top focus. And that
Speaker 1: is because you are unlikely to see higher returns from
Speaker 1: the market were you to invest those dollars. And so
Speaker 1: the thinking goes like, why not get the guaranteed return
Speaker 1: along with the peace of mind of not having that
Speaker 1: debt in your life anymore. Yeah, yeah, yeah, and I'm
Speaker 1: with you on that. I mean, I think for a
Speaker 1: little while, probably the best way for Kelsey to proceed
Speaker 1: is to suspend any contributions she might be making to
Speaker 1: her wroth IRA. Yeah. And normally, Matt, we're not telling people,
Speaker 1: don't contribute to your wroth IRA, but the truth is,
Speaker 1: if you're doing it out of order, Yeah, for a
Speaker 1: little while, you do need to stop that. We say,
Speaker 1: keep getting them four one K match at work if
Speaker 1: you have one, but don't contribute beyond that either. And this,
Speaker 1: if you do both of those things, stop contribute to
Speaker 1: your roth. Contribute less to your four one k only
Speaker 1: up to the match that allows you to claw back
Speaker 1: more cash flow to work towards debt, payoff a heck
Speaker 1: of a lot more quickly. Every other dollar basically that
Speaker 1: you can afford to part with each month it should
Speaker 1: be funneled then towards the credit card debt and the
Speaker 1: eighteen percent loan that you mentioned. You know, hopefully, hopefully
Speaker 1: that hyper focus is going to allow you to eradicate
Speaker 1: those debts more quickly, get them completely out of your life,
Speaker 1: because after that, that's when you can resume investing for
Speaker 1: your future and you'll have even more money for that
Speaker 1: purpose with less debt lingering in your life. But sometimes Matt, like,
Speaker 1: trying to do all those things at once feels like
Speaker 1: spinning a bunch of plates, and it can feel like
Speaker 1: it's so easy to lose one, and then you lose
Speaker 1: them all. They all come crashing down to the ground.
Speaker 1: Drop them. Plant's. Yeah, that's where the hyper focus comes in,
Speaker 1: especially when you have higher interest rate debt. It's like,
Speaker 1: just let's go all in on that. Put the other
Speaker 1: stuff to the side for now. You can get back
Speaker 1: to it soon. Yeah. Well, aside from like that eighteen
Speaker 1: percent loan that she mentioned, which so she mentioned her
Speaker 1: car loan, and I'm guess seeing that that car loan
Speaker 1: is not as offensive as maybe some of her credit
Speaker 1: card debt or that eight percent loan that she took out,
Speaker 1: So I hope. So, I imagine you're right, medium or
Speaker 1: even low interest rate debt is worth addressing here, and
Speaker 1: that is money gear number six. It is further on
Speaker 1: down the line, and that's because there are just more
Speaker 1: productive things that you can be doing with your money.
Speaker 1: You don't have to forsake investing until you are completely
Speaker 1: debt free. We ideally want all the how to money
Speaker 1: listeners out there to not have a car loan. But
Speaker 1: if you've already got one in your life and you're
Speaker 1: making this a binary choice, I would love to see
Speaker 1: you paying off a bit more slowly while also investing.
Speaker 1: Like I think about too over the most recent years,
Speaker 1: like this isn't the best decision right for her to
Speaker 1: be investing aggressively while keeping some of the really high
Speaker 1: rate debt around like the credit cards as as well.
Speaker 1: But it's also not the worst outcome because of what
Speaker 1: the market has done over the past few years. But
Speaker 1: the thing is is that is not guaranteed to continue. Yeah,
Speaker 1: you looked to last year and you're looking at twenty
Speaker 1: five percent returns, but in the year before that too,
Speaker 1: But you go one more year Joel to twenty twenty two,
Speaker 1: and things weren't looking so great, sure, and so you
Speaker 1: can't count on that continuing, even though you're not in
Speaker 1: the most terrible position given what you have done over
Speaker 1: the past few years. But what you are playing with
Speaker 1: fire right when you yes it is to keep it
Speaker 1: is risky, you know. Eighteen twenty something percent interest rate
Speaker 1: debt around in your life for longer than you need to. Man,
Speaker 1: I always I hear people sometimes talk to me about
Speaker 1: credit card debt as though it's not a big deal.
Speaker 1: I've got six eight, ten thousand dollars hanging out and yeah,
Speaker 1: I have the cash to pay it off. But you know,
Speaker 1: I'm just I'll get around to it, and like, nothing
Speaker 1: bothers me more than that. I you know, I don't
Speaker 1: like to give unsolicited advice. We give advice here because
Speaker 1: it's solicited. People are asking questions, but it's not financial advice,
Speaker 1: by the way, This is just for fun. But when
Speaker 1: those people like come up and say that to me,
Speaker 1: I mean, it bothers me so much, even though I
Speaker 1: don't want to offer my advice. But like, but what
Speaker 1: you want to say is what are you doing with
Speaker 1: your life right? Exactly? What do you think? It is
Speaker 1: a big problem and there aren't many better things you
Speaker 1: could be doing with your money than paying that debt
Speaker 1: down as quickly as possible. Is it just interesting though, too,
Speaker 1: that Kelsey did invest so aggressively though, because that's the thing.
Speaker 1: I think most folks who are kind of like I
Speaker 1: don't know, I'll take care of that at some point.
Speaker 1: They're also I'm guessing not typically the folks who are
Speaker 1: funneling dollars like it's their like it's their job into
Speaker 1: the wroth, which it sounds like Kelsey has. Yeah, she's
Speaker 1: got way more in her wrath, by the way, than
Speaker 1: I did when I had to tap my tap my contributions.
Speaker 1: When when I found myself in that cash pinch, we
Speaker 1: should we should out for it. Maybe a last little
Speaker 1: piece of advice here for Kelsey, and I just want
Speaker 1: to note that she's got money in savings, she's also
Speaker 1: gotten money in WROTH contributions that are accessible, and she
Speaker 1: could use either one of those or both to pay
Speaker 1: down her debt more quickly. But I would say, in
Speaker 1: all likelihood she shouldn't. And that's because you know, while
Speaker 1: WROTH contributions they are accessible without paying tax or penalty,
Speaker 1: you can never get those dollars back into the wroth
Speaker 1: right because of annual contribution limits, and you're interrupting the
Speaker 1: compounding of those dollars. But it can also, I think,
Speaker 1: create this unhealthy relationship with your retirement accounts that we
Speaker 1: want to prevent where we're seeing more and more Americans
Speaker 1: feeling like they can take money out of their retirement
Speaker 1: account because of changes to the law and just wanting
Speaker 1: it to make it easy and not pinch their lifestyle.
Speaker 1: They're taking money from their four to one case, and
Speaker 1: that to me is a red flag. We see people
Speaker 1: going back to the well multiple times to their retirement
Speaker 1: accounts when they shouldn't. It would also be much better
Speaker 1: to invest less, to be more frugal, and to pay
Speaker 1: down those debts quickly with cash flow that you have.
Speaker 1: I think that's the proper relationship. You want to this debt,
Speaker 1: like get rid of it quickly, but don't necessarily pull
Speaker 1: money from your investments to do so well. And she
Speaker 1: also doesn't want to completely deplete her liquid savings on
Speaker 1: hand in case she finds herself again cash strapped off
Speaker 1: in the future to where she feels forced to draw
Speaker 1: on retirement contributions. And specifically she said eight thousand dollars
Speaker 1: is what she has on hand in cash, and that's
Speaker 1: not a ton. I mean it's great, it's a great start,
Speaker 1: but after you pay off that high interest rate debt
Speaker 1: again just heading cruising down down those money gears, I'd
Speaker 1: be looking to beef that up to three to six
Speaker 1: months worth of living expenses, and I'm guessing that's probably
Speaker 1: for you. It sounds like she might be single. She
Speaker 1: didn't mention a family, but I'm guessing for her that's
Speaker 1: probably like a couple months worth of living expenses. But
Speaker 1: then beyond that, I would even want to want to
Speaker 1: see something even a bit more robust than what she's
Speaker 1: currently got. Agreed, But Kelsey, you got this one step
Speaker 1: at a time. We know you get rid of that
Speaker 1: debt and you'll get back to investing in no time.
Speaker 1: All right, mat we got more questions to get to.
Speaker 1: Let's talk about how closing a credit card impacts your credit.
Speaker 1: We'll get to that more right after this. All right, buddy,
Speaker 1: we are back from the break. It is now time
Speaker 1: for the Facebook question of the Week, which is from
Speaker 1: an anonymous poster who writes the guys that would be
Speaker 1: You'd me Jeal. The guys have mentioned multiple times how
Speaker 1: closing a credit card can cause a dip in your
Speaker 1: credit score, especially if that is your longest active credit line.
Speaker 1: I have an opportunity to pay off my mortgage only
Speaker 1: current outstanding debts, and I use my credit card more
Speaker 1: like a debit card and pay it off weekly. With
Speaker 1: paying off my mortgage and essentially closing out that line
Speaker 1: of credit hurt my credit score, particularly if I am
Speaker 1: looking at investing in other real estate in the next
Speaker 1: two years. Yeah, which you think, jo'l. That's a great question.
Speaker 1: Help this poster to understand. And this is one of
Speaker 1: those non basic personal finance questions where you're getting a
Speaker 1: little bit further into the weeds about how your credit
Speaker 1: score is constructed. But I'm glad people are asking this
Speaker 1: question because all this stuff matters, right, And Yeah, paying
Speaker 1: that close of attention to your credit score, how the
Speaker 1: credit scoring system works, shows a high level of personal
Speaker 1: finance acuity. And it's typically, by the way, why we
Speaker 1: don't recommend people close a credit card accounts, because if
Speaker 1: you can avoid it, it's actually going to help boost
Speaker 1: your credit scord if you keep that credit card active
Speaker 1: in your credit mix. If it doesn't have an annual fee,
Speaker 1: just use it less. And if it does have an
Speaker 1: annual fee, maybe ask your credit card company if you
Speaker 1: can downgrade to a card that doesn't have one. That
Speaker 1: way you kind of get the best of both worlds.
Speaker 1: But I just want to maybe highlight the credit card
Speaker 1: thing map before we get to this mortgaging, because that's
Speaker 1: a question that gets asked even more frequently, and it's
Speaker 1: why we typically recommend people, Hey, we want you to
Speaker 1: keep your credit score robust. Closing the card could do
Speaker 1: the opposite, it's a more more typical example. But you
Speaker 1: can't do that with your mortgage. And so if your
Speaker 1: mortgage is winding down, which is a great thing, you
Speaker 1: can't really stop that process, no, nor would you want to, right,
Speaker 1: And so, yeah, paying off your mortgage it will ding
Speaker 1: your credit score, which sounds kind of ridiculous, but it's true.
Speaker 1: The fact that you now completely outright own this home. Yeah,
Speaker 1: that's actually gonna hurt your credit score. That's one of
Speaker 1: those counterintuitive realities of the credit scoring system that people
Speaker 1: are just like, I what in the world you pay
Speaker 1: off debt and it takes your score down a peg
Speaker 1: like that. It's so counterintuitive, and it's kind of frustrating
Speaker 1: as an individual consumer, to be honest. Yeah, And in
Speaker 1: part not only because this is the longest line essentially
Speaker 1: a line of credit where you've you know, you have
Speaker 1: a history here of making payments, but also because of
Speaker 1: the type. Right, So this is an installment loan that
Speaker 1: you're paying off, and I'm guessing based on the way
Speaker 1: this person is posting that they don't have any other
Speaker 1: installment loans. Well they said, they said they don't have
Speaker 1: any other debt, so it's not like they have student loans,
Speaker 1: or it's not like they have a car payment where
Speaker 1: they're paying that on a regular basis, which, by the way,
Speaker 1: are great things from a personal finance standpoint, but from
Speaker 1: a perfect credit score standpoint, not the best, not ideal.
Speaker 1: I do want to highlight here though, that they wrote
Speaker 1: I have an opportunity to pay off my mortgage, which
Speaker 1: tells me that it's optional. Like I wonder if they
Speaker 1: came in they got a bonus at work, or maybe
Speaker 1: they inherited some money and they're thinking, oh, I want
Speaker 1: to do something smart with this money. I'm going to
Speaker 1: pay off the house. I have the opportunity to pay
Speaker 1: this thing off ten years early. I should be jumping
Speaker 1: at this opportunity. And I would say, let an opportunity
Speaker 1: continue knock and don't answer that door, because I'm as
Speaker 1: if you've had this loan for this mortgage for a while,
Speaker 1: or if you like, let's see you refinanced ten fifteen
Speaker 1: years ago, you've got this thing locked in. I'm guessing
Speaker 1: at a really low rate. And again, there are just
Speaker 1: better things, more optimal things that you can do with
Speaker 1: those dollars than eliminate a three percent mortgage. Yeah, agreed,
Speaker 1: saving and investing and you used to saving would not
Speaker 1: outpace your mortgage rate. But it still does right now.
Speaker 1: Until the Fed lowers interstrates even more and savers get
Speaker 1: dinged even harder. The chances are, if you're in a
Speaker 1: high held savings account with one of our favorite online banks,
Speaker 1: that you're outpacing your mortgage rate. By the way, if
Speaker 1: you do decide to pay off this mortgage, it shouldn't
Speaker 1: negatively impact your ability to invest in more in real
Speaker 1: estate and to get the best rates in the coming years.
Speaker 1: Typically that yeah, getting rid of that line of credit
Speaker 1: from your credit mix not ideal from a credit score perspective.
Speaker 1: But if you have a great score, yeah, you'll see
Speaker 1: a ding for a while, maybe for a few months,
Speaker 1: but without the primary mortgage, you're gonna have tons of
Speaker 1: cash flow to save up for a down payment for
Speaker 1: those investment properties, and your credit score is going to
Speaker 1: have more of like a short lived impact, negative impact,
Speaker 1: and I think it'll bounce back pretty quickly. I doubt
Speaker 1: it'll still be dinged after a couple of years. Yeah, agreed.
Speaker 1: And even if it, even if it is still down
Speaker 1: ten to fifteen points, if you have a really high
Speaker 1: credit score to begin with, it doesn't matter. You're still
Speaker 1: going to be able to qualify for the best rates
Speaker 1: in terms. All right, you know what, Let's do another
Speaker 1: one here real quick. Another anonymous poster. Hi trying to
Speaker 1: learn here. I keep seeing that people should be investing
Speaker 1: at least fifteen percent of their earnings. I think this
Speaker 1: is the last money wheel. Does this include or not
Speaker 1: include money you already put into your four oh one
Speaker 1: k money wheel? Obviously we a man man, we're doing
Speaker 1: a bad branding job. Money gear. It's the money gears
Speaker 1: money years. And the reason we call it the money
Speaker 1: years is because we like biking and we're like just
Speaker 1: thinking about oh seven gears on the bike. When you're
Speaker 1: first getting started, you start off on year one and
Speaker 1: then before you got to gain some speed before you
Speaker 1: ramp it up. That's right before you shift gears. So, yeah,
Speaker 1: does this include four one K dollars? Though? Joel the
Speaker 1: fifteen percent? Well, the answer the answer is simple here,
Speaker 1: we're all about your savings rate being a minimum of
Speaker 1: fifteen percent of your gross income. But gross income includes
Speaker 1: your four one K right, so yes, yes, and so
Speaker 1: we count investing and we count debt payoff in your
Speaker 1: savings rate. So whether you're paying off credit card debt
Speaker 1: or you are putting more money towards four on and
Speaker 1: K roth I right, those are all included, we would
Speaker 1: say in your your savings rate, what's known as your
Speaker 1: savings rate. Part of the reason is because you're not
Speaker 1: spending that money the others because if you had to
Speaker 1: go into liquid savings at some point in the not
Speaker 1: so distant future, you'd have way too much allocated to cash.
Speaker 1: You'd be really imbalanced, right if like all of your
Speaker 1: savings rate went straight into to a savings account. But
Speaker 1: isn't that that's an investing question though, right, Well, versus
Speaker 1: a percentage savings rate should go to saving, investing, paying
Speaker 1: down debt, that's another question. And it's highly specific. But
Speaker 1: you like diving into these details more than I do.
Speaker 1: Like some of this. I like it makes me think
Speaker 1: about like when you weigh yourself, Like some people are like, no, no,
Speaker 1: you gotta weigh yourself first thing in the morning. And
Speaker 1: some folks were like, no, I like to do it
Speaker 1: at night before I get before I jump in the shower.
Speaker 1: Or some folks they strip down and they're totally naked,
Speaker 1: and some folks are like, ah, I just war my clothes.
Speaker 1: Joel always wears his cutof geen shorts, though he never
Speaker 1: takes those off. Yeah, like Cobias Chunky. I mean the
Speaker 1: way I think about it, as long as you are
Speaker 1: consistent with like however it is you're you are calculating
Speaker 1: your savings rate over time, As long as you stick
Speaker 1: with that, I think that's the biggest thing, especially if
Speaker 1: early retirement is a goal of yours, to you know,
Speaker 1: slowly but surely ratchet that thing up. I guess I
Speaker 1: just worry that some of the basic personal finance advice
Speaker 1: to the years has really told people, yeah, save ten
Speaker 1: percent of your income, and we've and we set the
Speaker 1: bar so low. Granted a lot of Americans not even
Speaker 1: hitting that savings rate. And yeah, but if you set
Speaker 1: the bar so low and you don't really help people
Speaker 1: understand how much a higher savings rate can impact their
Speaker 1: ability to attain financial freedom, then maybe we're letting people.
Speaker 1: We're not helping people realize what they can build for themselves,
Speaker 1: the piece out money they can amass, and the optionality
Speaker 1: they're able to find in the not so distant future
Speaker 1: if we say, you know, if we keep the savings
Speaker 1: right ideal too low, or we make it sound like
Speaker 1: it's not as important. So yeah, I guess that's where
Speaker 1: I think it is important. But I think you're probably
Speaker 1: right to Matt. People obsessed over it kind of as
Speaker 1: far as the semantics way, they find Yeah, I'm less
Speaker 1: interested in that, And I think maybe what they're saying
Speaker 1: too is like, hey, my gross income and with that's
Speaker 1: what you address there, right, Does it include the four
Speaker 1: win k dollars? It's not just your take home pay
Speaker 1: and you investing on your own within an IRA and
Speaker 1: within a brokerage account. The four one k totally counts.
Speaker 1: There are going to be so many four one k
Speaker 1: millionaires in the next ten twenty thirty years because of
Speaker 1: the fact that folks have been auto enrolled. They're going
Speaker 1: to be doing that like clockwork. The behavioral aspect of
Speaker 1: it is just firing on all cylinders, and yeah, they're
Speaker 1: going to be hopefully set up quite well for retirement.
Speaker 1: I think this poster will too, if they maintain it
Speaker 1: at least fifteen percent savings, right, which I think is
Speaker 1: the floor that most people should be striving for. All right, matt,
Speaker 1: Le's get back to the beer we had on this episode.
Speaker 1: This was an athletic brewing company upside down, Golden Ale
Speaker 1: upside don. An athletic, of course, is the heavy hitter
Speaker 1: in the ina beer space or your thoughts on this
Speaker 1: one the non alcoholic beer space. Yeah, you know what
Speaker 1: I thought of. So we're not vegan, but it makes
Speaker 1: me think of the fact that it's harder to cook.
Speaker 1: I think vegan meals that taste really good.
Speaker 2: M hm.
Speaker 1: And I think the same as tree when it comes
Speaker 1: to alcohol in beers, right, Like it's you're just working
Speaker 1: with less and it makes it tricky, like if you're
Speaker 1: not including butter or something like. There's just a depth
Speaker 1: and a richness that comes with that. And which is
Speaker 1: what's funny is I actually saw in here that it
Speaker 1: says this is vegan, So I thought I was gonna
Speaker 1: have like a food analogy, but in fact, this is
Speaker 1: a vegan beer. But I think if you think of
Speaker 1: this less as a beer and more as a different
Speaker 1: type of drink or a different type of beverage, then
Speaker 1: I can get behind it. Right. If I think of
Speaker 1: this as like a multi multi hopwater, then I'm like, oh, yeah,
Speaker 1: that was that was pretty good multi hop water. That's
Speaker 1: a really good way to describe it, as opposed to
Speaker 1: thinking of it as an actual beer. All that craft beer.
Speaker 1: All I can think while drinking this for the first
Speaker 1: half of the show was so watery but barely beer flavored.
Speaker 1: And then I had Yeah, I just had to reorient
Speaker 1: my mind to be like, this is this isn't craft beer. Yeah,
Speaker 1: so if you think of it as a craft in
Speaker 1: a beer, which is not really the same thing, Yeah,
Speaker 1: it's a different category. So if I put this more
Speaker 1: in the category of seltzer, oh okay, I could totally
Speaker 1: see myself opting for this over a lime seltzer from Aldi. Ah.
Speaker 1: Thought that would be a whole lot more affordable. Go
Speaker 1: with the seltzer. But that being said, it's still got
Speaker 1: those flavor profiles and I still really enjoyed it. Still
Speaker 1: really liked to notice here on the can that Athletic
Speaker 1: they restore They give up to two million every year
Speaker 1: to help restore local trails. Okay, that's something you can
Speaker 1: get behind right. Sure, yeah, I like that makes me.
Speaker 1: I don't think I ever had an Oduel's like your
Speaker 1: uncles in a beer. This has got to be better,
Speaker 1: I'm pretty sure I've I don't know something would be
Speaker 1: so long. I know that this is better. This has
Speaker 1: to be way better. I'm not even going to mention
Speaker 1: the fact that this has reminds me of lot Duels
Speaker 1: back when I was twenty years old, and it doesn't
Speaker 1: because I never had it, but my goodness, this has
Speaker 1: to supersed it by a long, a long way. Yeah,
Speaker 1: either way, glad that you and I got to share
Speaker 1: it today. You can find show notes up on the
Speaker 1: website at Howdymoney dot com and that's gonna be get money.
Speaker 1: So until next time, best friends Out, Best Friends Out,