Speaker 1: Welcome to How the Money. I'm Joel and I am Matt,
Speaker 1: and today we're discussing checkout hacks, calming, compounding, and Balenciaga babies. Dude,
Speaker 1: I barely know what Balenciaga is. There's no Emily doesn't
Speaker 1: own any course, it's not a turn that we often
Speaker 1: use and so but we know it's a fancy fashion.
Speaker 1: I was going for the little Yeah, it's a fancy brand. Uh.
Speaker 1: We are going to talk about the money that we
Speaker 1: spend on babies, but this is our Friday fight. Uh.
Speaker 1: And specifically we're talking about some of the different headlines
Speaker 1: we've come across and specifically how those headlines are going
Speaker 1: to impact your money, your ability to earn an invest
Speaker 1: and to spend. But it looks like you've got a person,
Speaker 1: well Finnance win here that you want to talk about. Yeah,
Speaker 1: so I'm saving five hundred bucks this here for making
Speaker 1: one move. We've talked about the show on the show before,
Speaker 1: but we I just bought our house and they were
Speaker 1: in July, right. We we moved in up here to
Speaker 1: our new stopping grounds in July of this year, and
Speaker 1: so many moving parts when we're buying a house that
Speaker 1: I forgot to kind of think about what my deductible
Speaker 1: is going to be on this new property, and that's
Speaker 1: not something I have looked at either. I went back
Speaker 1: in to look at my at my premiums, and I
Speaker 1: was like, wait, this is is kind of high. Is
Speaker 1: as kind of expensive as I'm like shopping everything, I'm
Speaker 1: like literally reaching out to other insurers and stuff. It
Speaker 1: turns out I've got a decent rate overall for all
Speaker 1: the policies. I have a lot of layover policies, the
Speaker 1: car insurance policy, the home policy. But I was like,
Speaker 1: there's gotta be a way for me to cut this down.
Speaker 1: And of course, yes, raising my deductible was a great
Speaker 1: way for me to say five dred bucks more than
Speaker 1: every single year. Granted it went a lot higher. So
Speaker 1: my deductible is now not even a firm number. It
Speaker 1: is a percentage of the home's value. So it's just
Speaker 1: if something happens like I have to have a lot
Speaker 1: of money on it to make a what's the percentage?
Speaker 1: So I'm at three percent, you can do two or
Speaker 1: three percent, which is my insurance cooking. And so based
Speaker 1: on the amount of money I've got currently stashed away
Speaker 1: in savings. I feel comfortable self insuring for this and
Speaker 1: just taking taking that savings on the premium amount everyone
Speaker 1: plus as you know, sure, the goal of this insurance
Speaker 1: is is to never use it. Yeah, never use it.
Speaker 1: You want to make sure that it's it's got to
Speaker 1: be for something catastrophic, right, Otherwise, were you to use it,
Speaker 1: you're going to see this rates skyrocket. Oftentimes it said
Speaker 1: that if you use it, you lose it. But uh, man,
Speaker 1: that's what made you so you were just shopping around
Speaker 1: your insurance because typically I just got an angel reminder
Speaker 1: comes around and so we bought our homes. Well we
Speaker 1: got our house back in the spring. Uh And so
Speaker 1: I feel like I would that would pop pop up
Speaker 1: on my radar maybe in like February. So it was
Speaker 1: because I got a notice of a bump up in
Speaker 1: my car insurance rates by something close. So it was
Speaker 1: it was a huge increase, and I saw I reached
Speaker 1: back out to to my agent. I'm like, hey, what's
Speaker 1: going on here? Like why so much? But this is honestly,
Speaker 1: it's the reality for a lot of people around the country,
Speaker 1: like rates or skyrock a lot of car insurance and
Speaker 1: raising their raising the rates a lot exactly. So I
Speaker 1: was like, how can we how can we knock this
Speaker 1: one down? Sadly there wasn't much to do on that front,
Speaker 1: but I was like, I gotta find somewhere else to
Speaker 1: cut back if if my car insurance is going up
Speaker 1: by by this drastic amount. So, uh, unfortunately we have
Speaker 1: one car. Unfortunately it's a cheap car, so we don't
Speaker 1: have full coverage. So even though it's going up, it's
Speaker 1: it's relative, right, it's but it's uh, it's still I'm
Speaker 1: glad I was able to find a way to claw
Speaker 1: some savings back at the same time, jack up that
Speaker 1: deductible on your home insurance because that isn't that insurance
Speaker 1: that you typically want to see yourself using. But do
Speaker 1: make sure you've got that emergency fund set aside to
Speaker 1: handle that really high deductible if and when that event
Speaker 1: ever does come. Yeah, and just a good reminder to
Speaker 1: all of our listeners out there to take a look.
Speaker 1: Do you know what your deductible is? And do you
Speaker 1: know how much you could say if you raised it?
Speaker 1: And can you afford to raise it, like you have
Speaker 1: the money on hand to self ensure Those are those
Speaker 1: are important questions, but We'll hope you ask him because
Speaker 1: it could could save you a lot of money. All right, man,
Speaker 1: let's get to our Friday flight. So this is that
Speaker 1: quick sampling of stories that we found interesting this week.
Speaker 1: And first we want to get to I bonds. And
Speaker 1: despite the litany of issues that we heard about from
Speaker 1: listeners and you know, from the interwebs in general, the
Speaker 1: Treasury Department they managed to sell almost one billion dollars
Speaker 1: worth of I bonds in a single day last Friday.
Speaker 1: It's a tremendous amount of of money flowing into I bons,
Speaker 1: something that most folks hadn't even heard of before. If
Speaker 1: you missed out because of some of those web glitches,
Speaker 1: or maybe it just wasn't even on your radar up
Speaker 1: until now. That's okay. The new rate on I bons
Speaker 1: has shrunk, but it's still uh in my opinion, do
Speaker 1: it like a super solid six point eight nine almost seven.
Speaker 1: And it's actually higher than most had predicted because the
Speaker 1: Treasury Department they added a point four percent fixed rate
Speaker 1: of interest in addition to to netting the rate of inflation.
Speaker 1: So this means that even as inflation eases, you'll still
Speaker 1: have a fixed rate floor to count on. Which still
Speaker 1: makes I bonds an attractive buy for a decent checken folks.
Speaker 1: But it's also important to mention that I bonds there
Speaker 1: are a great tool for medium term savers. We're talking
Speaker 1: at least I mean, you can't touch it for at
Speaker 1: least one year, but you know, if not two to
Speaker 1: three years, that is a good time friend. To keep
Speaker 1: in mind, this isn't money that you need to have
Speaker 1: access to immediately. But I mean, said younger, folks with
Speaker 1: an even longer time horizon are still better off stalking
Speaker 1: away money into the stock market via those tax advantage accounts. Um.
Speaker 1: But the the other thing to point out two is
Speaker 1: that fixed rate floor, that point four percent, that's actually
Speaker 1: good for the full length of the bond. So we're
Speaker 1: talking a solid thirty years, and granted it's not much,
Speaker 1: but it is nice to know that you can kind
Speaker 1: of always count on at least that point four percent.
Speaker 1: And there's not a whole lot of folks, let's say
Speaker 1: inflation does go back to normal, who are gonna want
Speaker 1: to hold on to this I bond for full thirty years?
Speaker 1: I can't imagine most of our listeners are gonna probably
Speaker 1: not as the rate does go back down. But you're right.
Speaker 1: I think it's it isn't. Weren't to mention as well
Speaker 1: that I bans have gotten a lot of press. We've
Speaker 1: talked about I bonds quite a bit, but still even
Speaker 1: while I bonds remained a great deal, they remain a
Speaker 1: great deal for certain folks in certain situations. And there
Speaker 1: are a lot of people who would be better served
Speaker 1: by investing more and not even really considering I bonds.
Speaker 1: But yeah, so much comes down to the individual. And
Speaker 1: let's talk about gift giving for a second, map because
Speaker 1: we are getting close to that time of year. There's
Speaker 1: a new survey that I saw this week that came
Speaker 1: out from TransUnion, one of the credit bureaus, and it
Speaker 1: found that a decent chunk of shoppers are changing the
Speaker 1: way they think about buying gifts for their loved ones
Speaker 1: this coming holiday season. I think largely due to the
Speaker 1: reality of inflation, which is part of the reason I
Speaker 1: bonds are so valuable right now. But a third of
Speaker 1: folks said they planned to buy fewer gifts. Overall, seventeen
Speaker 1: percent of people said they planned to buy cheap gifts,
Speaker 1: and thirteen percent said they are turning to more practical
Speaker 1: gift options over the holidays, And I gotta say, Matt,
Speaker 1: I mostly like the people are pivoting in these ways.
Speaker 1: I think this is a good sign because we do
Speaker 1: have to make different decisions as inflation roars. Like if
Speaker 1: your salary hasn't kept up with the pace of inflation,
Speaker 1: you you're spending power has gone down and you have
Speaker 1: to change accordingly. So, yeah, buying fewer gifts, as long
Speaker 1: as you're communicating that with potential family and friends, I'd
Speaker 1: say that's one of the best ways to go totally. Yeah.
Speaker 1: We actually talked about this last year with Meg Nordman
Speaker 1: on how to have a minimalist Christmas. We can link
Speaker 1: to that episode in their show notes. And you know,
Speaker 1: you definitely don't want to just show up without any
Speaker 1: gifts on the day of the family gets together because
Speaker 1: you're tied on cash. That's not cool. But other friends
Speaker 1: and family members, uh, they're they're likely filling the inflation
Speaker 1: pinch as well, and they will probably welcome this conversation.
Speaker 1: It'll actually be a relief for them. Uh. And so
Speaker 1: that earlier that you make this phone call or even
Speaker 1: better FaceTime, the better. We're still in early November, so
Speaker 1: you know, cleaning the air about gift expectations now. It's
Speaker 1: a smart move. And if you haven't even started thinking
Speaker 1: about gifts at all, for the gifts that you are
Speaker 1: going to get, I think it also makes sense to
Speaker 1: start thinking now. Um. I say this because we recently
Speaker 1: purchased a gift for my father in law. This is
Speaker 1: a gift that we had kind of thought of last year.
Speaker 1: We didn't pull the trigger on it, but it was
Speaker 1: still on our minds, and uh, it popped up thirty
Speaker 1: It is like thirty or forty pc off on slick
Speaker 1: Deals one of their daily emails. Nice So slick Deals,
Speaker 1: Deal News. Those are sites that we talk about often.
Speaker 1: But if you thought about it ahead of time, if
Speaker 1: you've identified those gifts, then they can be on your radar.
Speaker 1: That way you can be sure to find the best deal. Yeah.
Speaker 1: I like that. And and again I do like that
Speaker 1: idea too, of just fewer gifts overall. I think, especially
Speaker 1: like when we talked with Meg, fewer quality gifts, just
Speaker 1: not the junk, not buying for adults, just saying listen,
Speaker 1: we're not doing gift giving for adults this year, or
Speaker 1: something like that. That That can actually take a lot of
Speaker 1: the pressure off because sometimes we're like, oh, I gotta
Speaker 1: get something, and it's hard to Like my dad, love
Speaker 1: the guy, I don't know how to buy anything for him,
Speaker 1: Like it's he's so hard to shop for. And so
Speaker 1: sometimes calling off the gift giving can actually like make
Speaker 1: it a better holiday and only give gifts for kiddos
Speaker 1: under fifteen or eighteen, I don't know whatever. I think
Speaker 1: that's when you bust out the coupon for a night
Speaker 1: out on the town with you and me, pops, rather
Speaker 1: than an actual item that you you package. I've gone
Speaker 1: to that well many times at this point. But yeah,
Speaker 1: it's it's worth thinking about, like as everything is getting
Speaker 1: more expensive, like do you change your your tactics when
Speaker 1: it comes to buying gifts this year? And all right,
Speaker 1: malict's get that to that Balenciaga baby's story. I really
Speaker 1: like this one. This one was probably my favorite article
Speaker 1: from the past week from the Atlantic, and it was
Speaker 1: titled Babies Don't Need Fancy Things, which I love. That's
Speaker 1: a great title and in and of itself great headlines.
Speaker 1: So freaking true because weddings and babies are, of course,
Speaker 1: two places where folks will spend insane amounts of money
Speaker 1: without really batting an eye. So yeah, from fancy strollers
Speaker 1: to newfangled sleeping devices. The amount of money slashing around
Speaker 1: in like even just like the baby development spased match
Speaker 1: to develop new products. It's astronomical. And marketers, of course,
Speaker 1: they want you to spend your money on the products
Speaker 1: that they've created. The best line in this article mat
Speaker 1: was when it said that these marketers equate certain kinds
Speaker 1: of consumption with responsible parenting. They that's true. They are
Speaker 1: selling you. That's the brainwashing that has occurred. Yes, in
Speaker 1: order to be a good parent, you have to get
Speaker 1: these items. Uh. The pressure is real for parents because
Speaker 1: they see that marketing. They internalize it and they feel like, well,
Speaker 1: I got to spend money to show that I actually
Speaker 1: love my kid. But we say, we agree with this
Speaker 1: article's babies don't need fancy things. And it's hard to
Speaker 1: turn a deaf ear to this finely tuned marketing machine
Speaker 1: trying to part you from your dollars. But we would
Speaker 1: say it's it's in your best financial interest to at
Speaker 1: least try to put on the ear muffs, give it
Speaker 1: a shot, say la la la la, la la la,
Speaker 1: and and and try to avoid all of the fancy
Speaker 1: schmancy baby stuff that's coming down the pipe. Yeah, and
Speaker 1: we've got a lot of kidos, Joel, Like you, you've
Speaker 1: you've got three kids. We have four. Our youngest dudes
Speaker 1: they're still toddlers, so we feel this pressure ourselves. Um,
Speaker 1: and we've seen how so many baby items they're described
Speaker 1: as miracle purchases. Right, they're gonna fix whatever ails your baby.
Speaker 1: Therefore it's going to decrease your stress levels as well.
Speaker 1: The biggest money making promise, honestly is it's like anything
Speaker 1: that will get your kids to sleep through the night,
Speaker 1: even sell diapers now, that will promise better sleep for
Speaker 1: your child. Seriously, I gotta say, what they're really promising
Speaker 1: is what you care about more, is less about your
Speaker 1: child sleep and more about your own sleep. Like if
Speaker 1: they sleep, I'll sleep absolutely because you know that if
Speaker 1: you can sleep and function during the day like that
Speaker 1: is gonna make everybody happier. Like I definitely get that.
Speaker 1: I mean this honestly. It makes me think of recently
Speaker 1: our youngest he's been walking into our room in the
Speaker 1: middle of the night, not sleeping through the night. And
Speaker 1: this started a conversation between Kate and I and We're like,
Speaker 1: you know, maybe what he needs is a big boy
Speaker 1: bed because he's not really sleeping on it. It's just
Speaker 1: like this little cheap phone mattress. We talked about this
Speaker 1: for a little bit before it clicked him ahead and
Speaker 1: I realized that we were it was a cell phone like,
Speaker 1: we were falling into this trap. We weren't even being
Speaker 1: presented with any marketing or advertising messages. It was us
Speaker 1: convincing ourselves that maybe the solution here is the to
Speaker 1: spend money to buy something a little bit fancier, something
Speaker 1: a little bit nicer. But then I remember that, wait
Speaker 1: a minute, our oldest daughter slept in that toddler bed
Speaker 1: for until she was like five years old. So we're
Speaker 1: convincing ourselves that, oh, yeah, it's it's not even a
Speaker 1: real bed. It's just like this fake, pretend, little cheap
Speaker 1: ikea toddler bed with like a four inch foam mattress,
Speaker 1: until we were able to look back at history and
Speaker 1: to realize that, wait a minute, this is not necessary.
Speaker 1: And it turns out it's because he had a cold.
Speaker 1: When I have a cold, I don't sleep that well
Speaker 1: at night, and he is totally back to sleeping through
Speaker 1: the night. Well, no additional dollars spent. It makes me
Speaker 1: think too that there's just like this massive gap between
Speaker 1: these expensive new baby items and then they're used value
Speaker 1: on Craigslist or Facebook marketplace. And so that's one way
Speaker 1: around it. If you are going to get yeah, if
Speaker 1: you feel the need to get the snow whatever, the
Speaker 1: baby sleeper that rotates at different times to make sure
Speaker 1: that they sleep at their optimal levels, whatever, then buy
Speaker 1: it used at least because they're they're like si new,
Speaker 1: but I bet you can get one for a few
Speaker 1: hundred dollars on Facebook marketplace like. And the thing is,
Speaker 1: you don't keep many of these items around in your
Speaker 1: life very long as your kid ages up, Like you're
Speaker 1: getting rid of baby and kids stuff all the time. Yeah,
Speaker 1: it's a revolving door of items. But we have and
Speaker 1: provide for so buying new makes less sense by used
Speaker 1: at least if you want to get some of those
Speaker 1: fancy stuff, and then maybe at least you're not going
Speaker 1: to lose a lot of money in the process because
Speaker 1: then you can sell it used again and maybe might
Speaker 1: be able to even get what you what you paid
Speaker 1: for it. And exactly there you go, and honestly it
Speaker 1: seems like the fancier the item, the more likely the
Speaker 1: uter break. I feel like I saw there's articles this
Speaker 1: past week of some sort of like baby stroller that's
Speaker 1: been like breaking in half. It's like one of those
Speaker 1: double baby strollers. Did you see that doesn't sound good?
Speaker 1: I know that's the it's like completely collapsing and so
Speaker 1: more money, more problems. That's why I approach it compared
Speaker 1: to just like the classic crib or some of these
Speaker 1: other items that are pretty basic. I think the simpler
Speaker 1: that we can keep it, the better off will be.
Speaker 1: And you are still a good parent even if you
Speaker 1: don't bamboukoo dollars on all this crap that you're being
Speaker 1: told you need to the love and attention and that
Speaker 1: you're providing your kids, not the crap that you're buying
Speaker 1: for them. Uh. Actually, speaking of buying stuff, there is
Speaker 1: an interesting article on MSN money based on a TikTok
Speaker 1: video about a new checkout hack that you might only consider,
Speaker 1: especially if you're you're one of these folks who are
Speaker 1: you know, who's always got like a pocket full of
Speaker 1: spare change. You got that jar in the corner of
Speaker 1: your room and you're trying to figure out what do
Speaker 1: I do with all these coins? Exactly? Yeah, well, it
Speaker 1: always works me to see folks using the coin star
Speaker 1: machines at the grocery stores. Right they show up with
Speaker 1: their jars and they turn that spare change into dollar bills. Uh.
Speaker 1: But this is a bad route to take because cornstar
Speaker 1: takes up to twelve and a half percent plus a
Speaker 1: fifty cent transaction fee. Uh, and so instead of convenience exactly.
Speaker 1: But what's crazy is that these often times you see
Speaker 1: these at grocery stores, right, Well, instead, just take those
Speaker 1: coins and use them when you're making a purchase at
Speaker 1: a self checkout kiosk. Well, the thing is you can
Speaker 1: literally bring if you eighty bucks worth of change, yes,
Speaker 1: and if you have like a giant draw or feel
Speaker 1: bad about so you don't have to feel bad about
Speaker 1: it if you're using it a self checkout, because the
Speaker 1: computer fine with that. But hopefully, hopefully you won't fill
Speaker 1: up their coin reservoir. Uh and we will not accept
Speaker 1: any more quarters. But yeah, self spare change. It kind
Speaker 1: of sucks rolling your change. That's not fun either, But
Speaker 1: dumping those coins into the self checkout machines specifically to
Speaker 1: you know, spend them down for purchases you're already making.
Speaker 1: We think that's brilliant. Do make sure that you keep
Speaker 1: a quarter though, for when you do go to Aldi,
Speaker 1: that you've got that quarter to be able to snag
Speaker 1: that cart. But just the ability to take the edge
Speaker 1: off as well. I like the idea of just always
Speaker 1: spending down some of the change that you've got, like
Speaker 1: in the ashtray of your car, maybe in your pocket,
Speaker 1: that kind of thing. But either way, this takes the
Speaker 1: edge off of higher prices that we're seeing in the
Speaker 1: grocery store. And speaking of Aldi, we we actually have
Speaker 1: another Aldi story that we're gonna get to right after
Speaker 1: the break. We'll talk about car Loans on the Rise,
Speaker 1: as well as five nine accounts. We'll get to all
Speaker 1: of that right after this. All right, Matt, let's keep going.
Speaker 1: It's our Friday Flights. We've got a lot more stories
Speaker 1: to get to this week. And of course, every week
Speaker 1: we tackle the ludicrous headline of the week, and this
Speaker 1: one comes from CNBC and it reads, inflation has caused
Speaker 1: adults to stop or reduce retirement savings. Bad news. Yeah,
Speaker 1: we don't like seeing this because, yeah, we want people
Speaker 1: obviously contributing to their tax advantage retirement accounts, especially especially
Speaker 1: right now when the market is on sale, so investing
Speaker 1: for your future. To us, it's non negotiable, right that
Speaker 1: the idea of paying yourself first is crucial before you
Speaker 1: start paying all those other bills. Yeah, it really is.
Speaker 1: A friend of Joel is that this is a mutual
Speaker 1: friend of ours. Reached out was like, Hey, my employer
Speaker 1: is offering a high deductible healthcare healthcare plan and it's
Speaker 1: got an h s A. What do you think I
Speaker 1: should do? And I was like, oh, absolutely yeah, and
Speaker 1: this employer chips in they will pay into that hs
Speaker 1: A for you as well, so there's more free money there.
Speaker 1: And but then he said, well, what if I don't
Speaker 1: want to say from my retirement, And I don't know
Speaker 1: if he was joking or not, like, than, you can't
Speaker 1: be my friends. That's exactly what I said. But we
Speaker 1: haven't talked about it in person yet. That's kind of
Speaker 1: one of those conversations that you probably want to follow
Speaker 1: up with in person rather than text. Well, just to
Speaker 1: make sure he knows who's talking to Yeah, he knows
Speaker 1: where I stand. Yeah. Well. In addition, in addition to
Speaker 1: this people reducing their retirement contributions. Matt. The even more
Speaker 1: shocking stat I saw in this article was that of
Speaker 1: respondents said that they opted to take money out of
Speaker 1: their retirement account in order to combat the higher prices
Speaker 1: that we're seeing, which is even worse. Right, So it's
Speaker 1: one thing to reduce or to even stop your retirement
Speaker 1: contributions altogether for a period of time. Slow in the flow. Yeah,
Speaker 1: that's a different tactic, and it's one that we don't
Speaker 1: find as appalling. But when you're talking about taking money
Speaker 1: out of your retirement account, you're reversing the flow that
Speaker 1: prevents That creates bigger problems. And so if you're opting
Speaker 1: to grab that money, let's say, in the form of
Speaker 1: something like a hardship withdrawal, which has gotten easier in
Speaker 1: recent years, so people can more easily say, yeah, I
Speaker 1: got a hardship, but you don't really have to. It's
Speaker 1: it's there's a more lenient process of approval for you
Speaker 1: to snag that money. Well, that's even worse because you're
Speaker 1: taking your money out of the market at a really
Speaker 1: bad time. You likely have less money overall in that
Speaker 1: retirement account because of sagging values and and On top
Speaker 1: of that, folks who who go this route are gonna
Speaker 1: pay taxes and a ten percent penalty on those withdrawals,
Speaker 1: and they're gonna have less money, say for their future.
Speaker 1: So you'd say, yes, stopping the account contributions for a
Speaker 1: little period of time while you're getting back on your feet,
Speaker 1: that's one thing. But taking money out of your retirement
Speaker 1: account is another. You should really be avoiding taking money
Speaker 1: out of your retirement accounts, specifically your four one K
Speaker 1: like to play. It's I think it's even slightly different
Speaker 1: if we're talking about taking out rath contributions. I don't
Speaker 1: like that either, but it's it's better, at least from
Speaker 1: a tax and penalty perspective. If you're gonna go, if
Speaker 1: you're gonna go to the Wroth, well that's better than
Speaker 1: the were on KA. Well for sure. Absolutely. Yeah. Actually,
Speaker 1: another recent study from bank rate, they found that fifty
Speaker 1: five percent Americans say that they are not prepared for retirement.
Speaker 1: And again, not a surprise that folks aren't saving and
Speaker 1: investing enough, or at least like they don't think that
Speaker 1: they're saving enough, because actually, like maybe they are, but
Speaker 1: they just haven't sat down to crunch the numbers. Because
Speaker 1: of the way that compounding returns work, most folks are
Speaker 1: going to feel like that they don't have enough, you know,
Speaker 1: within their portfolio to retire on until just those last
Speaker 1: few years right before retirement. Juli actually makes me think
Speaker 1: of I think this is an illustration we've talked about
Speaker 1: before here on the show, but the lily pad example, right,
Speaker 1: And so imagine you've got this lily pad on this pond,
Speaker 1: and it doubles in size every single day, and at
Speaker 1: the end of the month, right after thirty days, it
Speaker 1: has completely covered the entire pond, right, So you can
Speaker 1: kind of picture this of the lily pad growing. And
Speaker 1: so if you were to ask somebody, hey, when will
Speaker 1: that lily pad cover half of the pond? Without that
Speaker 1: person thinking too hard about it, they would a lot
Speaker 1: of folks would just say, I don't like maybe day fifteen,
Speaker 1: like the process with you the month, when in reality, no,
Speaker 1: it's going to cover half of the pond the day
Speaker 1: before the twenty ninth day, basically the day before the
Speaker 1: end of the month. And granted we're what we're talking
Speaker 1: about here in this example, that lily pad is growing
Speaker 1: at a rate of right, it's doubling in size every
Speaker 1: single day, and so we're not gonna we're not trying
Speaker 1: to say that that's what your investments are going to do.
Speaker 1: But the fact is we have a difficult time with
Speaker 1: that kind of math, with compounding growth, with exponential growth,
Speaker 1: and our investments are oftentimes closer to that reality, that example,
Speaker 1: than what we imagine right where you're slowly adding to
Speaker 1: your portfolio. And I think I think you're right. I
Speaker 1: think there's a problem, like a lot of us, especially
Speaker 1: how the money listeners might misperceive. They might think they're
Speaker 1: not doing enough even though they are. And I think
Speaker 1: that's what you're trying to get back here. I think
Speaker 1: the reality is too though most Americans aren't saving. Yeah,
Speaker 1: I do think there are a lot of folks who
Speaker 1: aren't saving. And we see what the saving trade is
Speaker 1: for the average American. It's abysmal. So most people really aren't.
Speaker 1: But for how the money listeners, I think this is
Speaker 1: good encouragement. You might think you're not and it always
Speaker 1: feels like you can or should do more, But when
Speaker 1: you crunch the numbers, when you take a look at
Speaker 1: the reality of compounding returns and how Yeah, later in
Speaker 1: your life what seems like a decent sized nest egg
Speaker 1: can become a massive nest egg in just a few
Speaker 1: short years. That's a that's a really important thing for
Speaker 1: for our listeners. Yeah, And so there's a practical step here.
Speaker 1: So if you're hearing this and you're like, well, I
Speaker 1: don't know where things are for me, Like, I'm not
Speaker 1: totally sure what that's gonna look like for me, will
Speaker 1: actually sit down and do the math. Uh. And a
Speaker 1: good rule of thumb is that you'll need roughly twenty
Speaker 1: five times your annual expenses once you fully retire, right,
Speaker 1: We've talked about that on the show many times, And
Speaker 1: so figure that out first and then just start playing
Speaker 1: around with a compound interest calculator, and then you'll be
Speaker 1: able to see how much you need to set aside
Speaker 1: each month in order to reach that that twenty five
Speaker 1: times you anual expenses number based on how many years
Speaker 1: you have left that you want to work. And so
Speaker 1: we share that because there's just us honestly a very practical,
Speaker 1: simple solution here to actually figure out what those numbers are.
Speaker 1: And you might find that you are perhaps far ahead
Speaker 1: of the curve then you think you are, like it
Speaker 1: feels like that you're way behind. It's difficult to understand
Speaker 1: the compounding returns that you're going to experience in your
Speaker 1: later years once your portfolio continues to swell. But the
Speaker 1: idea is that you can take that data and allow
Speaker 1: that to calm your nerves a little bit into here
Speaker 1: now for sure. And I think especially if you're like
Speaker 1: a Type A personality and you're like I'm you never
Speaker 1: feel like you're doing enough. And even I like I
Speaker 1: am not Type A, but we all we all fall
Speaker 1: into when I'm unhealthy, I fall into kind of some
Speaker 1: Type A tendencies. Think a lot of this ted on
Speaker 1: my angiogram number, but just the scarcity mindset, right like
Speaker 1: where you're just like, oh, like, am I going to
Speaker 1: have enough? I think that can easily be a default
Speaker 1: position that we fall back into you And so I
Speaker 1: think you're right. The doing the math, looking at the
Speaker 1: numbers face on can help you realize, oh wait a second, Yeah,
Speaker 1: the amount of money I have saved for where I'm
Speaker 1: at in life is actually pretty good. Compounding is going
Speaker 1: to do a lot of heavy lifting for me, and
Speaker 1: I can freak out a little bit less and actually
Speaker 1: I don't have to put the pedal to the metal
Speaker 1: quite as hard. Exactly exactly. Let's talk about another accounts
Speaker 1: math that people used to save and invest, and that's
Speaker 1: why accounts. We talked on Wednesday on the show about
Speaker 1: how to set your kids up her financial success and
Speaker 1: so yeah, if you have kids, we we actually downplay
Speaker 1: the effectiveness of saving for their college in a state
Speaker 1: sponsored five plan on that episode. Sure, yeah, it makes
Speaker 1: sense for some folks, mostly folks who are in money
Speaker 1: gear number seven though, who are pretty much in that
Speaker 1: financially independent zone, who have been saving well for their
Speaker 1: own retirement for likely a long time. They have enough
Speaker 1: financial flexibility to prioritize saving money for their kids college.
Speaker 1: But a whole lot of other folks, it just doesn't
Speaker 1: make much sense. And another reason actually for why we
Speaker 1: feel this way actually popped up in a survey that
Speaker 1: we saw this week which reinforces are are not sold
Speaker 1: lockty views of five accounts. This new study by Intelligent
Speaker 1: dot Com finds that a third of parents actually end
Speaker 1: up using five money for purposes other than college for
Speaker 1: non qualified distributions. A lot of parents, that's a lot
Speaker 1: of yea, using this money for thing other than college,
Speaker 1: which means that you're gonna pay uh tax and penalty,
Speaker 1: a ten percent penalty on any of those non qualified distributions.
Speaker 1: So yeah, five twenty nine account is a particularly bad idea.
Speaker 1: We would say, if you don't end up using those
Speaker 1: funds to pay for college expenses. It's not an awful
Speaker 1: idea to save in a five nine fund if it's
Speaker 1: actually going to go towards the stated goal and get
Speaker 1: those extra tax benefits. But if you're taking that money
Speaker 1: out and it's a non qualified distribution, it completely defeats
Speaker 1: the purpose of what those accounts are set up for exactly.
Speaker 1: It's like the least optimized way for you to set
Speaker 1: money aside. Not only are you using it for other purposes,
Speaker 1: but you're being penalized for that. This is just another
Speaker 1: reason why these accounts aren't our favorite, why they kind
Speaker 1: of end up at the back of the line when
Speaker 1: it comes to the different accounts we like to see
Speaker 1: you saving up for, you know, we'd rather you have
Speaker 1: money in more flexible accounts that but these are just
Speaker 1: hyper specific accounts that a lot of people don't use
Speaker 1: effectively exactly, and they're prioritizing these accounts at the expense
Speaker 1: of their own financial future right. Often, like we often
Speaker 1: talk about the putting the oxygen mask on yourself before
Speaker 1: you put it on your kids. But folks instead they're
Speaker 1: just looking at their kids. And it kind of makes
Speaker 1: me think of the Lanciaga babies. Folks are oftentimes so
Speaker 1: focused on the things that they want to be able
Speaker 1: to provide their kids, and in this case we're talking
Speaker 1: about college. It seems very noble. But yes, you do
Speaker 1: need to make sure that you're taking care of your
Speaker 1: own retirement first. And so let's keep moving though, Joel.
Speaker 1: You know we did talk earlier a little bit about Aldi.
Speaker 1: Here's another reason to love Aldi. Starting this past Wednesday
Speaker 1: and through November nine, Aldi they've instituted a Thanksgiving price
Speaker 1: rewind Um, I love it, which means that traditional holiday
Speaker 1: items like apple pie, green beans, and many marshmallows, uh,
Speaker 1: cornbread stuffing us all as well, they're gonna be sold
Speaker 1: at nineteen prizes, which is of stuff on that list
Speaker 1: really stinking cool. Yeah, and you know, all the is
Speaker 1: already attracting an insane amount of new customers things to
Speaker 1: rapidly rising prices on groceries. Writer's reports that because of
Speaker 1: how it is that Aldi handles thing and produce buying
Speaker 1: that the you know, they charged between twenty and less
Speaker 1: than their competitors for specifically for fresh fruits and veggies.
Speaker 1: They just need less workers because of the packaging, how
Speaker 1: they set their stores up exactly, it's incredibly efficient. Honestly,
Speaker 1: this sounds about right from our experience, you know, like
Speaker 1: we have always said that just making this one change,
Speaker 1: that it's going to be the easiest, the most effective
Speaker 1: way to decrease your your monthly food budget. But then
Speaker 1: you see Aldi and they double down on their value proposition,
Speaker 1: and I also to that love the fact that they're
Speaker 1: harkening back to their twenty nineteen prices. It makes more times. Yeah,
Speaker 1: like there's something almost nostalgic about it. Like so last night, Kate,
Speaker 1: now we had our date night and we came home
Speaker 1: to relieve you of your babysitting duties. We do the
Speaker 1: date night swap and uh You're like, yeah, you know,
Speaker 1: how was it? And we had a great time. And
Speaker 1: do you remember specifically what I said that the cocktail
Speaker 1: prices to this place where like Bucks for a cocktail
Speaker 1: where is now a lot of restaurants around here. It's
Speaker 1: like exactly, and so when you do something like that,
Speaker 1: not obviously you are saving folks money when you're able
Speaker 1: to keep your prices, though they are ingratiating themselves towards
Speaker 1: their customers, towards their patrons. That that just show up,
Speaker 1: and and that means I'm gonna go back, right, Like
Speaker 1: you create these these warm, fuzzy feelings, and does it
Speaker 1: impact me emotionally and how I view that experience we
Speaker 1: just had. Yeah, but also like there is real value
Speaker 1: that is being provided to us. Maybe the food wasn't
Speaker 1: quite as good as I remember it being because I
Speaker 1: was awash in this nine price glow. Maybe so, but
Speaker 1: it doesn't matter. I'm gonna go back. Yeah, And so
Speaker 1: it's just I don't know. Something to keep in mind.
Speaker 1: I love that not only what Aldi is doing, but
Speaker 1: just I don't know how they're saying it as well. Yeah, exactly. Yeah,
Speaker 1: it's it's good branding for them, and it's it's good
Speaker 1: price savings for for a lot of us and for
Speaker 1: our listeners who have held out against shopping at Aldi.
Speaker 1: Or legal. I don't know if is it legal or
Speaker 1: a little? I think it's a little. I don't know,
Speaker 1: but we always say legal, we do. But either one
Speaker 1: of those, Like, if you go to either one of
Speaker 1: those stores, they're gonna save you a bunch of money
Speaker 1: compared to the grocery stores you're typically shopping up. Yeah,
Speaker 1: And I'm one last thing. I feel like we've seen
Speaker 1: this firsthand as well, because recently we have started shopping
Speaker 1: more at Costco and we have been going over our
Speaker 1: grocery budget ever so slightly every single month. And it's
Speaker 1: totally because of Costco. I mean, back in the day, man,
Speaker 1: like you're buying that fancy barbecue sauce, dude, I mean
Speaker 1: that je, But like nine our grocery shopping earlier this
Speaker 1: year was was at Aldi. And since we switched to Costco,
Speaker 1: like we do maybe like eight percent of our grocery
Speaker 1: shopping there only like at Legal and Aldi. But because
Speaker 1: of that, I guarantee that that is why we're seeing
Speaker 1: our our grocery bill go up. Right. I don't hate
Speaker 1: too much the real thing. But let's let's talk about
Speaker 1: rate hikes, Matt, and how those are impacting consumers, and specifically,
Speaker 1: another rate hike was announced on Wednesday, although the FED
Speaker 1: signaled that the speed of those rate increases could slow
Speaker 1: in the near future and We've talked about on the
Speaker 1: show how credit card rates are going up, So pay
Speaker 1: off that credit card debt right if you have any
Speaker 1: lingering around. But there's another way that these rate hikes
Speaker 1: are having an impact on the lives of everyday folks,
Speaker 1: and that is a car loan rates. New data from
Speaker 1: Edmonds shows that car loan rates are at the highest
Speaker 1: they've been in fourteen years, and so the average new
Speaker 1: car loan rate is north of six percent now I
Speaker 1: think it's six point three percent. And the average car payment,
Speaker 1: according to the CFPB the Consumer Financial Protection Bureau, is
Speaker 1: up somewhere between thirteen and nineteen from a year ago,
Speaker 1: and so that means that the average annual cost of
Speaker 1: car ownership is is just shy up eleven thousand dollars,
Speaker 1: which is just so much money. We were just talking
Speaker 1: Matt about the need for Americans to save and invest more.
Speaker 1: Will imagine if just a fraction of those car payments
Speaker 1: or being invested as rates go up on these loans,
Speaker 1: it makes the cars more unaffordable, more expensive, and it's
Speaker 1: going to crimp our budgets even more. Absolutely, yeah that
Speaker 1: the CFPB. They also report that the average price of
Speaker 1: a new car has ballooned to more than forty eight
Speaker 1: thousand dollars. That's complete insanity. Not only are we seeing
Speaker 1: financing the cost of financing going up, but the actual
Speaker 1: cost of vehicles are climbing as well. Those payments are
Speaker 1: going up even more, and you're getting hit getting on
Speaker 1: both ends. Uh So, I mean yeah, With with prices
Speaker 1: being just way higher in both the used and new
Speaker 1: car markets thanks to chip shortages, thanks to supply chain issues,
Speaker 1: it's even more important to keep your transportation spending in check,
Speaker 1: despite what other folks out there are doing to their
Speaker 1: monthly budgets by opting for a new car right now,
Speaker 1: or even just a new car to them right now.
Speaker 1: We're not fans of taking on debt for depreciating assets
Speaker 1: like cars, but even less so when it becomes more
Speaker 1: expensive to do so, when the race have risen as
Speaker 1: much as they have. Uh And, actually, we're gonna do
Speaker 1: a deep dive with Mike Quincy from Consumer Reports on
Speaker 1: Monday all about cars, so you can look forward to
Speaker 1: that interview. We're gonna talk about future of electric vehicles.
Speaker 1: We're gonna talk about how to get a great car
Speaker 1: for a lot less money than forty eight thousand dollars.
Speaker 1: You do not need to be spending that much. And
Speaker 1: so that's an episode you can look forward to here
Speaker 1: on Monday. And we love Consumer Reports. My Quincy has
Speaker 1: been with Consumer Reports for a long time. Consumer Reports
Speaker 1: does a great job of it helping everyday Americans keep
Speaker 1: money in their pockets and help make good decisions about
Speaker 1: the products are buying. So we will Yeah, we'll look
Speaker 1: forward to that chat with Mike. Hope you enjoy it
Speaker 1: on Monday, and we hope you have a great weekend.
Speaker 1: That's gonna do it for this episode. Don't forget to
Speaker 1: sign up for the How the Money newsletter. You can
Speaker 1: find that at how to money dot com slash newsletter.
Speaker 1: That's right, but buddy, that's going to be it until
Speaker 1: next time. Best Friends Out, Best Friends Out.