Speaker 1: Welcome to Out of Money. I'm Joel, I'm Matt.
Speaker 2: Today we're answering your listener questions.
Speaker 1: That's right, We've got a listener question episode lined up
Speaker 1: for you on this beautiful Monday, and we've got five.
Speaker 1: Like always, we've got five listener questions to get to
Speaker 1: a letten.
Speaker 2: Me terrible weather, by the way, where our listeners are. Matt,
Speaker 2: you have no idea that is true. It's nice here,
Speaker 2: it's beautiful here though so a little little hot still,
Speaker 2: it's a little warm.
Speaker 1: She's got student loans and she's trying to figure out
Speaker 1: how much money to keep on hand, how much liquidity
Speaker 1: while also paying down those student loans. We'll get to
Speaker 1: her question. We're going to cover a five twenty nine
Speaker 1: strategy for adults for adult learners. All adults should be learners,
Speaker 1: but if you're looking to go back to school, and
Speaker 1: we're going to talk about that lifelong learning is important.
Speaker 1: And another listener he's worried about the He's wondering maybe
Speaker 1: if he should be worried about some of the bank
Speaker 1: downgrades that have been making their way through the news.
Speaker 1: We'll get to those three questions, plus a couple others
Speaker 1: throughout today's episode. All right, I look forward to it.
Speaker 2: But before we get to that, Matt, I wanted to
Speaker 2: ask you kind of a frugal or cheap I've got
Speaker 2: a couple pairs of headphones. As a dude who listens
Speaker 2: to a lot of tunes, who listens to podcasts, but
Speaker 2: who also creates audio for a living, I wear headphones
Speaker 2: a lot of the day, and over time those headphones
Speaker 2: they wear out, right, but one I actually have two
Speaker 2: pairs that this is happening to right now. The ear
Speaker 2: muff thingies that go on the outside.
Speaker 1: Are like the base. They're basically disintegrating. I'm pretty sure
Speaker 1: that's the technical term for the muff. So the other
Speaker 1: none of your most the pads, right the question that
Speaker 1: creates the nice seal.
Speaker 2: Yes, but these pads are wearing out, they're molting whatever,
Speaker 2: and actually I like a little flecks of black all
Speaker 2: over me from these pads.
Speaker 1: Is often look over at you and you've got something
Speaker 1: yes on your face.
Speaker 2: I know, like right there, buddy, So is it frugal
Speaker 2: or cheap that I'm replacing the pads not the headphones?
Speaker 1: Uh? It is the earth conscious thing. It's the green
Speaker 1: thing to do, most likely because I'm sure that you
Speaker 1: could just easily toss those and buy a pair for
Speaker 1: like another cheap pair for like ten bucks.
Speaker 2: They're not super cheap headphones. They're probably like fifty five
Speaker 2: sixty really yeah.
Speaker 1: I mean you watch all the slick deals and all.
Speaker 2: That, because I'm honure you could get a fifty dollars
Speaker 2: pair for ten When you're wearing headphones all day every day,
Speaker 2: you don't want the ten dollars pairs. So there's a
Speaker 2: difference in like ergonomics and sound quall.
Speaker 1: That's why I don't like the over the ear because
Speaker 1: it presses on I think it has to do with
Speaker 1: the fact that I wear glasses, and so I've got glasses,
Speaker 1: and when you do the over the ear, even though
Speaker 1: they're not really supposed to push on your ear, they
Speaker 1: still push on your ear a little bit. And we
Speaker 1: got glasses. It smushes the car your ear up against
Speaker 1: your head and it sandwiches the acetate the arm of
Speaker 1: the glass glasses there, and it hurts. That's why I
Speaker 1: like the in ear. Even while I'm sitting here at
Speaker 1: the desk, I don't like doing plug in. I like
Speaker 1: to do the blue.
Speaker 2: I think we can both agree that the worst of
Speaker 2: both worlds is the on ear headphones. Yep, only psychos
Speaker 2: where those my parents included. I don't know, it's headphones.
Speaker 2: I'm like, who would get these?
Speaker 1: They're the default cheap headphone, Like they look like they're
Speaker 1: the nicer ones, but in reality.
Speaker 2: They just yeah, they don't quite cut it, all right,
Speaker 2: So I think I play paid like eight or nine
Speaker 2: dollars for a replacement for the muffs.
Speaker 1: I'm like a fifty to sixty dollars pair headphones. Yeah
Speaker 1: all right, Well if that's the case, then I think
Speaker 1: you probably made the right move. I was thinking those
Speaker 1: were like a ten dollars, just a cheap pair, But
Speaker 1: I just rocked my beats. Yeah there go.
Speaker 2: If I see a great sale at some point, maybe
Speaker 2: I'll upgrade. But these things are still working. They're just
Speaker 2: I don't I don't want all the molting, you know,
Speaker 2: the plastic stuff all over.
Speaker 1: I don't want extinct dinosaur particles on you, you know, right, petroleum,
Speaker 1: that's where plastic stalk's from.
Speaker 3: With.
Speaker 1: Yeah, let's introduce the beer that we're going to enjoy
Speaker 1: it today. So this is a beer. This is a
Speaker 1: collaboration actually between Burial and the Eighth State, which is
Speaker 1: a brewery in Greenville, South Carolina. This beer is called
Speaker 1: These are depictions of yet another revolutionary absence. This is
Speaker 1: an Imperial Stouts. We were just joking about how you
Speaker 1: shouldn't drink big stouts in the summer, in the summer heat,
Speaker 1: and here we go. So this is what we're gonna
Speaker 1: enjoy it today. We'll share our thoughts at the end
Speaker 1: of the episode.
Speaker 2: And you always have to laugh at any burial naming
Speaker 2: convention because they're all ridiculous and over the top, and
Speaker 2: a state evidently allows it.
Speaker 1: Like, fine, you guys want to name it your ridiculous name.
Speaker 1: You guys do your things, all right.
Speaker 2: But we take listener questions every single week now on
Speaker 2: the show, and we would love to take yours. So
Speaker 2: if you have a money question, please feel free to
Speaker 2: reach out. You can submit yours at howdomoney dot com,
Speaker 2: slash ask, or simple Instructions. It's really just recording a
Speaker 2: quick voice memo into your phone and emailing it our way.
Speaker 2: But yeah, hopefully we can take yours next Monday. All right,
Speaker 2: But let's get to our first question for this episode.
Speaker 2: This one is from a listener who's got a bunch
Speaker 2: of young kids and has multiple money goals.
Speaker 4: Hey Matt and Joel. I'm Rachel from Crystal Lake, a
Speaker 4: sub of Chicago. You don't know this, but you come
Speaker 4: with me on several walks and I love it. Thank
Speaker 4: you so much. I'm a consultant with variable income and
Speaker 4: my husband is in sales. Together we bring in approximately
Speaker 4: two hundred K a year. We have three kids, ages
Speaker 4: five at under and boy are the expensive. Together we
Speaker 4: have about one hundred K and student loans with interest
Speaker 4: rates that vary from five to seven point twenty five percent.
Speaker 4: We've maxed out contribution for my husband's work, and I
Speaker 4: save a minimum of two K a month that doesn't
Speaker 4: go to taxes. Combined, we have about two hundred and
Speaker 4: sixteen K left on a mortgage with a rate under
Speaker 4: four point five percent, on which we make two hundred
Speaker 4: dollars principal payments extra per month. At present, we have
Speaker 4: forty K all together in the various CDs and high
Speaker 4: yield savings accounts, keeping money aside. I'll need to pay
Speaker 4: taxes should I pay off the stuit loans for us,
Speaker 4: keeping certain percentage above the emergency fund as liquid. Pay
Speaker 4: less and have more liquid and how do we decide
Speaker 4: how much to put into home upgrades with excellent ROI.
Speaker 4: I've paid off the only car we have this year
Speaker 4: and we don't have any credit cards that have a
Speaker 4: balance with interest applied. Thank you so much for your
Speaker 4: insight and your help.
Speaker 1: You guys rock all right, Rachel. So going back to
Speaker 1: what you were saying there at the beginning, we are
Speaker 1: happy to hear that we are your walking buddies. It's
Speaker 1: like the yeah, two buds that gets to walk along
Speaker 1: with you and you don't need to have a schedule
Speaker 1: and figure out where it is that you're going to
Speaker 1: meet up for where you're gonna reconnoiter meet up with somebody.
Speaker 1: But yeah, we love that. Thank you for bringing us along.
Speaker 1: And also another note too, man, kids, it is true
Speaker 1: they are expensive. They're not quite as expensive as some
Speaker 1: of the different headlines out there would lead you to believe.
Speaker 1: You know, I think is it like seven hundred and
Speaker 1: fifty thousand dollars.
Speaker 2: Now like the I think it's like three hundred and
Speaker 2: eight thousand something like that was last time.
Speaker 1: He thought was a lot more. It used to be
Speaker 1: in the upper twos. Now as there's not that much,
Speaker 1: that's a lot money over twenty years. Still a lot.
Speaker 2: But I think for some people that can scare you
Speaker 2: off and you'll be like, I thought I was gonna
Speaker 2: have kids, but not if it costs that much. There's
Speaker 2: a lot of there are a lot of ways to
Speaker 2: make sure that your kids don't cost quite. They're only
Speaker 2: cost three, I'm gonna have like five more kids. Right,
Speaker 2: it gets overwhelming, and yeah, I realized, like, yeah, it's
Speaker 2: not easy, but of course it is worth it even
Speaker 2: though it's costly. Right, But Matt, let's let's talk about
Speaker 2: kind of gets a racil's question. There's kind of a
Speaker 2: lot going on in this one, so we'll try to
Speaker 2: get to a bunch of the points or the questions
Speaker 2: that you had. And it sounds like y'all are doing
Speaker 2: really well from an income standpoint, which is great, and
Speaker 2: on top of that, you're saving and investing in a
Speaker 2: solid clip. You don't have any debts that are out
Speaker 2: of control, and you've got that paid off car and
Speaker 2: that's something we dig like, we oh, yeah, we don't
Speaker 2: like cardbt that's one of our least favorite things.
Speaker 1: And I think she said that they paid off the
Speaker 1: only car that they have, which makes it sound like
Speaker 1: that there are a one car family that they're rocking
Speaker 1: that with three kids. That is awesome. Hang on to
Speaker 1: that as long as you can. Yeah, the longer you
Speaker 1: can stick with that. Yeah, I'm like salivating this beer
Speaker 1: so it's so good. I just took a sip. But
Speaker 1: it's just easier than I think a lot of people,
Speaker 1: like in their minds, are like, oh, we've got okay,
Speaker 1: we've got kids. Now, we definitely have to get the
Speaker 1: be the two car family thing. But with so many
Speaker 1: people working remotely and the ability it takes a little
Speaker 1: more work to schedule, but the ability to bike. I literally,
Speaker 1: I mean I bike my dude to preschool this morning
Speaker 1: on the cargo bike. I'm gonna and with ride sharing too,
Speaker 1: we're gonna we're gonna take the van in to get
Speaker 1: some repair work done later this week, Gonna take it
Speaker 1: there and then I'm gonna uber home because guess what,
Speaker 1: all right, fifteen twenty bucks with tip and all of
Speaker 1: a sudden, that means I don't need that second car.
Speaker 2: Yeah, it's definitely a line item in the budget that
Speaker 2: more and more people can and should question, especially especially
Speaker 2: given how many more people are working hybrid or fully
Speaker 2: remote these days. On the student loan front, by the way,
Speaker 2: whether or not it's a priority to pay off those
Speaker 2: that student loan debt, it depends largely on this new
Speaker 2: save plan, right, which is changing the game for anybody
Speaker 2: who has outstanding student loan debt. It's this save plan
Speaker 2: is likely going to change your payment amount. It is
Speaker 2: for a whole lot of people. And there's this helpful
Speaker 2: calculator on student Loan planner that will link to in
Speaker 2: the show notes. But if this new save plan is
Speaker 2: going to reduce your payment substantially and your balance still
Speaker 2: won't be growing, which is part of the benefit of
Speaker 2: this new save plan, your student loans likely shouldn't be
Speaker 2: a top priority. The biggest benefits come to low and
Speaker 2: middle class income earners though, which isn't you guys, Rachel.
Speaker 2: It sounds like you guys are making more than that
Speaker 2: and you have three kids, though, so much depends on
Speaker 2: the specifics of what sort of subsidy you're going to
Speaker 2: qualify for under the new safe guidelines. How long have
Speaker 2: you been paying on those student loans, right, how much?
Speaker 2: There's a lot of different fact balance is left, and
Speaker 2: so yeah, take that into consideration. Plug your numbers into
Speaker 2: that calculator and kind of see, well, oh, it looks
Speaker 2: like my payment is not going to be changed. If
Speaker 2: that's the case, then that higher rate student loan debt
Speaker 2: is probably a bigger priority for you than it is
Speaker 2: for other people.
Speaker 1: Sure, yeah, yeah, normally this would be honestly, just a
Speaker 1: really tough one.
Speaker 5: Right.
Speaker 1: So she specifically said that her student loan interest rates
Speaker 1: are a little bit I don't know if they're a
Speaker 1: little bit higher relative to most other folks, but they're
Speaker 1: on the line, right, So typically any loans that are
Speaker 1: higher than seven percent, like I would want those gone
Speaker 1: if that was me, And anything lower than seven percent, like,
Speaker 1: in my mind, that wouldn't be the worst debt in
Speaker 1: the world to keep her around if you have other goals,
Speaker 1: if you are investing solidly, But if your payments Rachel,
Speaker 1: if they get reduced with this new safe plan, and
Speaker 1: you know, like let's say you hit that max twenty
Speaker 1: or twenty five years of repayments and then you end
Speaker 1: up coming out ahead, then I see no reason to
Speaker 1: pay down on them early, even though that might be
Speaker 1: your natural tendency. Especially, I mean you mentioned her her
Speaker 1: mortgage making ex additional payments to that. I get the
Speaker 1: impression that they don't like having debt around and that's
Speaker 1: something that they might want to eliminate.
Speaker 2: Which, let's be honest, is a really good way to
Speaker 2: think about debt. But at the same time, when you
Speaker 2: have low interest rate, debt and savings rates are higher
Speaker 2: and other financial goals, so other things you do, you've
Speaker 2: got to moderate maybe your approach to debt and investing.
Speaker 1: Exactly so with that forgiveness of mind, and after you
Speaker 1: crunch your own numbers, if it's likely that this new
Speaker 1: plan could basically tip those higher student loans, especially the
Speaker 1: ones that are around seven and a quarter to a
Speaker 1: lower effective rate essentially at the end of the day,
Speaker 1: then it certainly makes even more sense to not prioritize
Speaker 1: paying down the student loans.
Speaker 2: Yeah, and one of the heart at the heart of
Speaker 2: Rachel's question, it comes down to liquidity, which is such
Speaker 2: an important question map for people because having more cash
Speaker 2: on hand gives you options, gives you flexibility, and can
Speaker 2: give you peace of mind. And fortunately you're not hammered
Speaker 2: as hard now having money in savings as you were
Speaker 2: just a few years ago. And so how much money
Speaker 2: do you keep on hand? Rachel, that's a good question,
Speaker 2: And it seems like we're not prioritizing student loans, which
Speaker 2: because of this new saved plan, they're not as highber
Speaker 2: a priority as they would have been in years past.
Speaker 2: But it often comes down to what you're gonna do
Speaker 2: with the money instead. That is really the crux of everything,
Speaker 2: Like what are your alternative options? Because if you're just
Speaker 2: gonna blow that money, which I don't think you are,
Speaker 2: It doesn't sound like you're that kind of person who's like
Speaker 2: going to go on a self control Yeah, shopping's free
Speaker 2: with it, like you just want to know the best
Speaker 2: place to funnel it. Well, if you were going to
Speaker 2: spend it in a silly way, it would make sense
Speaker 2: to go ahead and be done with those student loans
Speaker 2: as opposed to buying more stuff. But you're already investing
Speaker 2: it sounds like you're maxing out your husband's four O
Speaker 2: one k at work. It might make sense to go
Speaker 2: ahead and at least open up roth iras though for
Speaker 2: the both of you. Yeah, maybe max those out to
Speaker 2: the total of thirteen grand a year for both of you.
Speaker 2: And if you did that, if you got the money invested,
Speaker 2: I think Matt, you and I would both feel better
Speaker 2: about them missing out on the guaranteed return on their
Speaker 2: money by paying off the student loans because they're putting
Speaker 2: it in a tax advantaged account to grow and compound
Speaker 2: for their future.
Speaker 1: Sure, yeah, if you wanted to do it by the book,
Speaker 1: you would say the equivalent amount that you have outstanding
Speaker 1: on your student loans, invest that money. So once you
Speaker 1: have that much additional money set aside and is either
Speaker 1: invested or even in a savings account where you're earning
Speaker 1: a higher rate. But again knowing that when you do
Speaker 1: invest that money is going to compound, it kind of
Speaker 1: makes sense that you don't. It doesn't need to be
Speaker 1: dollar for dollar per se. I think if it was me,
Speaker 1: I would not only use some of the additional money
Speaker 1: to make sure that they've maxed out their rothy race
Speaker 1: for this year, but also set aside money for next year.
Speaker 1: That way, you have that money ready to like it's
Speaker 1: sitting there on the sidelines, ready to go. January first
Speaker 1: hits you're able to lump some invest and next year
Speaker 1: it's fourteen thousand dollars because they're upping the contribution limits
Speaker 1: from sixty five to seven thousand, which is we love
Speaker 1: to see, which is awesome. And so if I were
Speaker 1: in your shoes and I was able to max out
Speaker 1: not only this year but also next year's, I think
Speaker 1: I would feel much much more comfortable about saying, Okay,
Speaker 1: let's just see kind of how this plays out with
Speaker 1: the student loans. We don't necessarily need to pay those
Speaker 1: off ahead of time. But let's also get to home renovations, Rachel,
Speaker 1: because first of all, it sounds like you've got the
Speaker 1: ability to use that additional two thousand dollars a month
Speaker 1: that you're setting aside, and you've got the potential just
Speaker 1: to straight up pay cash for any projects that you've
Speaker 1: gotten mind, which is awesome.
Speaker 2: Not to mention the two hundred bucks a month they're
Speaker 2: prepaying towards the mortgage, like funnel that back into home
Speaker 2: rental project.
Speaker 1: There you go twenty two hundred dollars and this is
Speaker 1: gonna be way better than taking out a heelock at
Speaker 1: today's rates. But then you asked about how much to
Speaker 1: put towards renovating, and this is going to have to
Speaker 1: be a judgment call on your part. You know, you
Speaker 1: and your husband y'all need to talk about this. You'll
Speaker 1: need to think through what aspects of your home that
Speaker 1: you'd like to change the most, and what will honestly
Speaker 1: have the most impact for y'all is a family. You know,
Speaker 1: like with something as simple as adding some cubbies in
Speaker 1: a mudroom, would that drastically improve the quality of life there.
Speaker 1: That's literally something that Kate and I did when we
Speaker 1: moved into our house last summer. Did not cost a
Speaker 1: lot of money, but it subs I mean, I don't
Speaker 1: know what we would do with all the shoes, the backpacks,
Speaker 1: the jackets in the winter, the bicycle helmets. Just adding
Speaker 1: these cubbies where each person we got six of them
Speaker 1: there where they have their own space, dramatically increased the
Speaker 1: usability of our little entry were there but with her
Speaker 1: or maybe like she's got three kids, so maybe she's
Speaker 1: realizing that what they need is another bathroom or something
Speaker 1: right but way those needs while at the same time
Speaker 1: keeping in mind that you may not be in this
Speaker 1: house forever, and so you don't want to necessarily overbuild
Speaker 1: your street or your neighborhood. It's difficult because you, on
Speaker 1: one hand, you want to keep that in mind, but
Speaker 1: you also don't want to make these improvements with return
Speaker 1: on investment. As the only consideration, because I think the
Speaker 1: last I read a new garage door is actually what
Speaker 1: ranks the highest as far as what improves the resale.
Speaker 1: And you just never know with who it is that's
Speaker 1: going to buy your house whether or not they're going to
Speaker 1: value the improvements that you made. And so what I
Speaker 1: would say is make sure that you're adding utility for
Speaker 1: the way it is that you and your family live there,
Speaker 1: without getting crazy with it. But instead of ROI, make
Speaker 1: it rou return of utility or something like that. Have
Speaker 1: that be the filter to which you think through some
Speaker 1: of these improvements.
Speaker 2: And so much of it comes down to how long
Speaker 2: you think you're going to be in the house. If
Speaker 2: you're like, hey, listen, we're on two acres out here,
Speaker 2: and this is the perfect spot for our family, it's
Speaker 2: just the house that's insufficient, and so if we do this,
Speaker 2: this and this, then hey, we're going to be here
Speaker 2: for the next thirty And granted I think some people
Speaker 2: think that and maybe that doesn't end up being the case.
Speaker 2: But if if you think you're gonna be there long term,
Speaker 2: it makes even more sense. I think the funnel money
Speaker 2: into the house and make it the way you want
Speaker 2: it to be as opposed to thinking about pure resale value,
Speaker 2: because if you're only going to be there for a
Speaker 2: year or two and you're gonna need like bigger bones
Speaker 2: essentially at some point you need a bigger, better house
Speaker 2: something like that, then you probably don't want to sink
Speaker 2: too much in you want to be saving up for
Speaker 2: the next time payments.
Speaker 1: They Yeah, that's when you go to Ikea and just
Speaker 1: get yourself some organization pieces the temporary fix. Yes, it's
Speaker 1: a band aid, which is very much the temporary fix. Right, Actually,
Speaker 1: scratch that. Scratch Ikea. Instead, go to your local Salvation
Speaker 1: Army or Goodwill and find you a quality piece furniture
Speaker 1: that might also solve some organizational needs. If that's what
Speaker 1: you got going, it's even better. Yeah.
Speaker 2: And I think the period matt of your life with
Speaker 2: young kids, it can be financially daunting. It feels like
Speaker 2: you're trying to do a bunch of different things at once.
Speaker 2: Three kids under.
Speaker 1: The age of five.
Speaker 2: That's about as tough as it gets from a financial
Speaker 2: and a mental perspective. It can be very trying. Childcare
Speaker 2: is expensive if you depending on whether or not you
Speaker 2: have help or something from family members, you're trying to
Speaker 2: excel in your career, you're trying to save for retirement,
Speaker 2: you're trying to buy or fix up a house. It
Speaker 2: feels like a lot and Matt, you and I we
Speaker 2: know that feeling very well because you know, we're not
Speaker 2: too far away from those years, those years. Our youngest
Speaker 2: boys they're still three and so in our oldest are
Speaker 2: ten now, so we still know, we still remember. It's
Speaker 2: a fresh experience that you're trying to do all those
Speaker 2: things at once, So just make sure you keep chipping away.
Speaker 2: Know that those goals don't happen overnight. Make little adjustments
Speaker 2: here and there, and then celebrate the wins and successes
Speaker 2: along the way, because it's just so easy to fixate
Speaker 2: on the future and think about the easier years that
Speaker 2: are coming down the pike. But enjoy these two because
Speaker 2: they really are special times, even though you're pretty worn
Speaker 2: out at the end of the day.
Speaker 1: That's right. So Rachel, best of luck to you, and
Speaker 1: I look forward to our walks together as we continue
Speaker 1: to talk about our finance, the walks that we don't
Speaker 1: even know we're taking. We take walks around here, but
Speaker 1: we just Yeah, Rachel needs the recorder of a podcast
Speaker 1: and send it our way. That way, it's like it's
Speaker 1: like a penpal. That'd be beautiful relationship. But we've got
Speaker 1: four more questions to get to, including one from a
Speaker 1: divorce a whether or not she's on the right track.
Speaker 1: We'll hear from her, plus others right after this. All right,
Speaker 1: we're back.
Speaker 2: We've got more money questions to get to from Awesome
Speaker 2: how to Money listeners and Matthi's next question is specifically
Speaker 2: about one of our favorite retirement accounts that not enough
Speaker 2: people know about.
Speaker 6: I'm Madam Joel. This is She's from Atlanta. Thank you
Speaker 6: for all you do and the wealth of information that
Speaker 6: you provide today. I had a quick question about it's
Speaker 6: a sea accounts, particularly with regards to reinbursement later in life,
Speaker 6: potentially decades down the road. How does it work in
Speaker 6: case of family members? For example, if I pay for
Speaker 6: a medical expense for my kids now and I want
Speaker 6: to get reimbursed for that thirty forty years down the road,
Speaker 6: would I be able to withdraw that fund and use
Speaker 6: it for myself? And also, how does it work in
Speaker 6: the case of spouse. If expense currently occurs for one spouse,
Speaker 6: can the partner withdraw or reimburse that amount for his
Speaker 6: or her use or medical expense later down the road.
Speaker 6: I'm just curious. Thank you so much.
Speaker 1: Oh so a Sheesh is from Atlanta. I don't think
Speaker 1: we get enough Atlanta Atlanta listener questions sentence which Aesh.
Speaker 1: So we're actually gonna should we talk about this here?
Speaker 1: We're going to have a listener beer hang here next week,
Speaker 1: not this Friday, but the next friday after that, September fifteenth.
Speaker 1: It took a lot of coaxing to get Matt out
Speaker 1: of his hobbit hole. Do we want to go ahead
Speaker 1: and share? So go ahead and pencil that on the
Speaker 1: calendar because we talked about maybe doing it at like
Speaker 1: around five, should go ahead nail it down, think four
Speaker 1: to eight at InterVoice brewing indicator indicator. Yeah, so they've
Speaker 1: got awesome pizza there. We'll make more official announcements in
Speaker 1: the future. But as Shish, this is like the little
Speaker 1: insider heads up for you as well as any others
Speaker 1: who might be listening at this point who were from Atlanta.
Speaker 2: Said great pizza, and that is true. But Inner Voice
Speaker 2: has great beers to here is so good.
Speaker 1: Yeah, So literally we're going there because you, and we
Speaker 1: chose this location because we're the ones that got to
Speaker 1: organize it. But we haven't been to InterVoice and we've
Speaker 1: had their beers before. They're so good. And the pizza
Speaker 1: it's Glyde Pizza, right, like, so this is a pizza
Speaker 1: rha that you that our families used to frequent when
Speaker 1: we lived in town, and they opened the second location
Speaker 1: out there indicator I can't snink in wait, it's going
Speaker 1: to be a ton of fun. So if you are
Speaker 1: in Atlanta or the surrounding Atlanta area, mark that on
Speaker 1: your calendar September fifteenth.
Speaker 2: Yeah, to see out there. It's we don't do this enough.
Speaker 2: It's always fun to meet listeners in person, not just
Speaker 2: I want to watch with them virtually when doing it
Speaker 2: in real war, we're not actually.
Speaker 1: There, so although we like that too.
Speaker 2: And at first, I just want to let everyone know,
Speaker 2: like why a she she's asking this and the reason
Speaker 2: is because the HSA is actually one of the best
Speaker 2: accounts to save for retirement and that's how he's trying
Speaker 2: to use it. Like we've talked about this, We've done
Speaker 2: whole episodes on this, we have articles up on the
Speaker 2: side about this, but almost nobody knows sadly that the
Speaker 2: HSA is one of the best ways, is one of
Speaker 2: the best accounts with which to say.
Speaker 1: For their future.
Speaker 2: And they you know, a lot of people treat their
Speaker 2: HSA as a way to save a little bit on
Speaker 2: taxes to pay for current health care expenses. But that's
Speaker 2: not the best way to go about it if you're
Speaker 2: thinking long term, because you can turn your HSA into
Speaker 2: a triple or even a quadruple tax advantaged account that
Speaker 2: can grow for years and decades, that can compound for
Speaker 2: a long time if you do it right. And that's
Speaker 2: that's the way she is treating it, which I just
Speaker 2: got to say, mad props.
Speaker 1: And part of what it takes to get maximum value
Speaker 1: is to pay for all of your healthcare expenses out
Speaker 1: of pocket so that you can allow for that tech
Speaker 1: sheltered money to keep on growing and compounding. That makes
Speaker 1: me think of Charlie Munger's quote on compounding, which is
Speaker 1: like the number one or the first rule when it
Speaker 1: comes to compounding to never interrupt it this unnecessarily, which
Speaker 1: is it's okay to touch it when you need to
Speaker 1: tap it, but you got to let that thing go.
Speaker 1: And that's what we want you to also do here
Speaker 1: with when it comes to your HSA. But on top
Speaker 1: of that, though, you'll want to have records for every
Speaker 1: health expense that you incur, which is going to help
Speaker 1: you when it comes time to withdraw those funds. I
Speaker 1: have never had an HSA, so I've never been able
Speaker 1: to do this, but you better believe if I hadn't
Speaker 1: a high deductible plan, I would also have an HSA,
Speaker 1: and you better believe I would have an Excel sheet
Speaker 1: or a Google sheet with the date, description, of course,
Speaker 1: the price. But also make sure that you're either taking
Speaker 1: a screenshot of those expenses or you're taking a picture
Speaker 1: of the receipt to actually have the receipt in case
Speaker 1: the eye used wants to have proof of that as well.
Speaker 1: Keep it organized. Upload it to a folder. Maybe the
Speaker 1: HSA folder lay labeled by year. Perhaps, I don't know.
Speaker 1: You come up with your own system, but you got
Speaker 1: to stay organized. That's key to making the HSA work
Speaker 1: as a retirement account. Yeah. Have you ever heard of
Speaker 1: hyper thymsia? No?
Speaker 2: Okay, so this is when you remember everything and apparently
Speaker 2: it's a real problem, Like I always like talking about.
Speaker 1: It, amnesia, right, Yeah, Okay, Well, you remember nothing, which
Speaker 1: is more akin to what I have. I don't.
Speaker 2: I don't remember things very well. I just asked my wife.
Speaker 2: But hyper thymnesia is apparently when you remember everything. I
Speaker 2: don't think she has this. And so because of that,
Speaker 2: he needs to marry taylose documents, and even if you
Speaker 2: remembered it, he wouldn't be able to prove it to
Speaker 2: the irs. So you got to keep the record.
Speaker 1: He's like, it's up here, and they're like, no, that
Speaker 1: doesn't count, right.
Speaker 2: Yeah, we can't tap that and get the files out
Speaker 2: of your brain. But the heart of Ashes's question is
Speaker 2: about whether or not his family members and their medical
Speaker 2: needs qualify to make that document. So, if let's say
Speaker 2: one of his kiddos goes to the er with this
Speaker 2: or that injury God forbid, and you where you know,
Speaker 2: you get a big medical bill, does that count towards
Speaker 2: the HSA money you've set aside. The answer is yes, Right,
Speaker 2: your HSA funds can be used to pay for out
Speaker 2: of pocket qualified medical expenses incurred by your family members
Speaker 2: who qualify as dependents on your taxes. The same is
Speaker 2: true of your spouse, right if they're listed on your
Speaker 2: tax return. If you're filing jointly then for that year, Yeah,
Speaker 2: their expenses are also eligible. And so that's true whether
Speaker 2: you have the individual or the family coverage within HSA
Speaker 2: through your plan.
Speaker 1: That's right. And your kids are actually included as long
Speaker 1: as they are dependents, and that goes up. So if
Speaker 1: your kids are students. A lot of kids go off
Speaker 1: to college and so they qualify up through age twenty
Speaker 1: three as well. So that's good to know when they
Speaker 1: go off to college. And if you're like me and
Speaker 1: you end up in the er because you ate some
Speaker 1: leftovers that were left out on the counter and you
Speaker 1: end up you think you're going to die, and it
Speaker 1: turns out you've got food poisoning and you're laid up
Speaker 1: in bed for multiple days. Why does that not surprise me?
Speaker 1: Learn my lesson. I'm willing to eat my own leftovers
Speaker 1: that where I know that they weren't necessarily left in
Speaker 1: a car for two days. All the things we did
Speaker 1: get I mean, you I can laugh now, but dude,
Speaker 1: at the time, I literally thought I was dying. I
Speaker 1: didn't know what was going on.
Speaker 2: I'm sure your parents were like, we wish he would.
Speaker 2: We're so mad at him right now.
Speaker 1: I think I barely had a cell phone at that point,
Speaker 1: so I think they knew. But you know, this is
Speaker 1: back in the old it's not the eighties. It makes
Speaker 1: me think of the Blue episode. It was the eighties.
Speaker 1: It wasn't at all the eighties. That's when I was born.
Speaker 1: But technology wasn't what it was while went back when
Speaker 1: we were in college. That's true, we still remember pagers
Speaker 1: and AOL is a messenger. But by the way back
Speaker 1: to your question the sheish, it's also important to mention
Speaker 1: that HSA funds that they can be used to cover
Speaker 1: some things that your health insurance policy may not cover. So,
Speaker 1: for instance, your health care plan it might not cover
Speaker 1: new glasses or orthodontia when it comes, especially if we're
Speaker 1: talking about your kids here, which can get crazy expensive.
Speaker 1: But those count as qualified expenses through your HSA. So
Speaker 1: if you end up spending five thousand dollars on braces,
Speaker 1: make sure to put that in the sheet excel file
Speaker 1: as well. But ashish Man, I love how it is
Speaker 1: you're thinking about using your HSA. Your long time horizon
Speaker 1: is amazing here in the fact that you're willing and
Speaker 1: able to invest HSA dollars for thirty to forty years.
Speaker 1: That is impressive. It's going to offer you so much
Speaker 1: more future flexibility because you're maximizing all of these retirement
Speaker 1: accounts that you have at your disposal.
Speaker 2: Yeah, this is like the textbook way to use an
Speaker 2: HSA if you have access to one, right, perfect like
Speaker 2: maxid joker out, get all those tax benefits, invest it,
Speaker 2: and then have a lot more money that's tax free
Speaker 2: to spend later on. But you've got to document along
Speaker 2: the way, right, and so there are a lot of
Speaker 2: details that you need to know in order to make
Speaker 2: that HSA work the most effectively for you possible. Right,
Speaker 2: So she's good luck, keep it up, Man and Matt.
Speaker 2: Let's get to our next listener question. This one comes
Speaker 2: from a listener she just like really wants to know
Speaker 2: after going through a really difficult life event, whether she
Speaker 2: is still on the right track with her money.
Speaker 3: Hi.
Speaker 5: My name is Down and I'm from Toledo, Ohio. I've
Speaker 5: listened to your podcast for several months now. I love
Speaker 5: all of your helpful Hence your explanations of all things
Speaker 5: financial are so helpful. I am fifty seven years old,
Speaker 5: I am single, live by myself and rent my home
Speaker 5: I have not purchased a home because my job is
Speaker 5: somewhat transitional, meaning that I am transferred to a different
Speaker 5: location every two to three years. I bring home about
Speaker 5: twenty eight hundred dollars a month after taxes, insurance, and
Speaker 5: money for my four O one K are deducted. I
Speaker 5: also have a side gig making about three hundred to
Speaker 5: four hundred dollars a month. I have five percent taken
Speaker 5: out for my four O one K, and my employer
Speaker 5: matches that five percent. In addition to my four to
Speaker 5: one K and my savings, I will also have a
Speaker 5: retirement pension from working for the State of Ohio for
Speaker 5: twenty seven years. My monthly living expenses are about seventeen
Speaker 5: hundred dollars. I have an emergency fund of thirty six
Speaker 5: hundred dollars in a savings age count, and I have
Speaker 5: forty thousand dollars in a CD. My only debt is
Speaker 5: a credit card with a balance of four thousand dollars.
Speaker 5: My questions are one, I plan to use some of
Speaker 5: the money in my CD to pay off my four
Speaker 5: thousand dollars credit card debt once the CD matures in
Speaker 5: five months, instead of waiting. Should I deplete my emergency
Speaker 5: fund in my savings account now to pay most of
Speaker 5: the credit card debt off. Two should I invest my
Speaker 5: forty thousand dollars from the CD differently once it matures
Speaker 5: in November? And if so, what might be some good
Speaker 5: investment options. I have considered purchasing a short term rental property,
Speaker 5: but I am a little leery of making such a
Speaker 5: big purchase. And then three, I am recently divorced and
Speaker 5: very concerned about doing the right thing with my finances
Speaker 5: so that I can retire when it comes time without
Speaker 5: being incapacitated financially. Am I on the right track or
Speaker 5: do you feel that I should be doing things to
Speaker 5: different Really? Any suggestions would be greatly appreciated. I love
Speaker 5: the show, Thanks for the help, and take care all right.
Speaker 1: Glad to have you on board, don and great job
Speaker 1: keeping a nice gap between what it is that you
Speaker 1: bring in every month and what goes out. You are
Speaker 1: living frugally what she was saying, her monthly living expenses
Speaker 1: are like seventeen hundred dollars a month. I don't care
Speaker 1: where you live. That is incredible given today's the high
Speaker 1: cost of living today.
Speaker 2: Yeah, just housing, groceries, transportation, like to keep that all
Speaker 2: in that spare is really impressive in so housing, So
Speaker 2: she mentioned not owning a home.
Speaker 1: Don don't worry about that because most folks have been
Speaker 1: brainwashed into thinking that home ownership is the only way
Speaker 1: to build wealth or the best way, right, the best way,
Speaker 1: and it's not necessarily true. I think it can work
Speaker 1: as a great forced method of savings, right, because when
Speaker 1: you buy a home, that's just something you pay every
Speaker 1: single month, and so you're kind of automatic. It's again
Speaker 1: it's forced savings. But renters who are diligent investors, who
Speaker 1: are listening to how to money or making the right
Speaker 1: moves with their money, they can actually come out ahead
Speaker 1: by not necessarily investing within you know, a primary resident.
Speaker 1: That's even more true today than it was given where
Speaker 1: five or ten years they are given where housing prices are.
Speaker 2: Yeah, resolutely, we've seen massive increases in both the cost
Speaker 2: of rents and the cost of a home, but less
Speaker 2: growth in the cost of rent and so renters are
Speaker 2: sitting prettier than homeowners or people who want to be
Speaker 2: homeowners now. And so I just want to mention too,
Speaker 2: like how great is it to work for an employer
Speaker 2: who matches dollar for dollar up to five percent.
Speaker 1: That is pretty great.
Speaker 2: Not necessarily the norm, but it's pretty sweet. And so
Speaker 2: that means just by default, by putting in the five
Speaker 2: you're getting a ten percent total of your salary tossed
Speaker 2: into a retirement account, which is a really good place
Speaker 2: to be, right especially since you've got that pension to
Speaker 2: go along with what you've been putting away on your own.
Speaker 2: In many ways, you're ahead of the game when it
Speaker 2: comes to retirement savings. So this is a good place
Speaker 2: to be. It's not that maybe you can't do more
Speaker 2: down the road, but it's a good place. It's a
Speaker 2: really good starting posies. And let's talk about the credit
Speaker 2: card debt for a second, because you're not alone on
Speaker 2: that either. About half of Americans have revolving credit card
Speaker 2: debt to the tune of like over six thousand dollars. Fortunately,
Speaker 2: you've got less than that, but we would say that
Speaker 2: this should be a really high priority for you to
Speaker 2: pay it off. But should you eliminate that small savings
Speaker 2: nest egg in order to do it in order to.
Speaker 1: Do it right now? We'd say probably not. That's that's right. Yeah,
Speaker 1: So if don if you look at our money gears.
Speaker 1: We want folks amassing four hundred and sixty seven dollars
Speaker 1: before they start paying off the credit card debt. And
Speaker 1: the thing is, you have more than that in savings.
Speaker 1: It's just not that all of it is liquid. You've
Speaker 1: got a lot of it, some of it in CDs.
Speaker 1: But if that were to you, like let's just say
Speaker 1: an emergency comes along, well, you'd be putting that expense
Speaker 1: of that emergency right back on your credit card. And
Speaker 1: so feel free to take whatever you have an access
Speaker 1: of that bare bones base emergency fund and pay that
Speaker 1: to the credit card company. Go ahead and reduce your balance,
Speaker 1: but don't use all of it because you are again
Speaker 1: you would be in a position to where you have
Speaker 1: no cash on hand. And on top of that too,
Speaker 1: she pulls in I think combined between her main gig
Speaker 1: as well as her side gig, she's bringing in over
Speaker 1: three thousand dollars, so something like fifteen hundred dollars a
Speaker 1: month because her living expenses are seventeen, right, so she's
Speaker 1: got some excess funds on hand, and I think the
Speaker 1: ability to start paying down that credit card balance even
Speaker 1: before that was it forty thousand that she's gotten slocked
Speaker 1: away on that CD that's going to mature later this year.
Speaker 1: Down you have the ability to really start shipping away,
Speaker 1: and by the time that thing matures, you could be
Speaker 1: totally free and clear of that credit card. Best by
Speaker 1: starting to chip away at it now, because you are
Speaker 1: living so frugally, and because you've got that little making
Speaker 1: that three or hundred bucks on the.
Speaker 2: Side, I love that because your margin is so substantial.
Speaker 2: Even though you're not making six figures, you're still doing
Speaker 2: You still got a big gap there, which is the
Speaker 2: key to financial success.
Speaker 1: Right. The bigger the gap, the more the more moves
Speaker 1: you can make that are going to benefit your future,
Speaker 1: regardless of how much much you make. Right, But the
Speaker 1: credit card debt's holding you back. So I agree Matt.
Speaker 2: The more she can funnel from that margin, specifically to
Speaker 2: go towards credit card debt while retaining that minimum amount
Speaker 2: in savings so that she has money on hand for
Speaker 2: an emergency, I think that's okay. And then once that
Speaker 2: CD matures, there's probably better things to do with that
Speaker 2: money too. Like you and I, we want all how
Speaker 2: to Money listeners to use credit cards wisely and to
Speaker 2: avoid revolving credit card debt. That's of course that's a
Speaker 2: wealth destroyer over time. But the truth is there are
Speaker 2: probably better things that Don can do with that additional
Speaker 2: forty K that she's gotten a CD as well. So
Speaker 2: we should talk about that and Don. First, I just
Speaker 2: want to say sorry to hear about your divorce. I mean,
Speaker 2: we know that that can be tough emotionally and financially.
Speaker 2: It's got ramifications in basically every realm of your life.
Speaker 2: But based on what you've told us, I want to
Speaker 2: tell you it sounds like you're heading into the right direction.
Speaker 2: It sounds like you're making the right moves, and it
Speaker 2: sounds like you know what you're doing too right, And
Speaker 2: so I would think about like moves you need to
Speaker 2: make and moves you should be making as more of
Speaker 2: like tweaks instead of an overhaul. Like when you're going
Speaker 2: in the right direction and you're going at the right speed,
Speaker 2: but maybe the brakes are just a little squeaky, right,
Speaker 2: it's like a tune up. It's a minor adjustment as
Speaker 2: opposed to making big changes. And so once that CD matures,
Speaker 2: I would say, keep a decent chunk around as additional savings.
Speaker 2: Kind of like that three to six months worth of
Speaker 2: the living expenses that we want people.
Speaker 1: To save up.
Speaker 2: And then after that, we suggest that you make it
Speaker 2: a goal to max out your WROTH IRA each and
Speaker 2: every year moving forward. Since you're over the age of
Speaker 2: fifty five, you can contribute seventy five hundred dollars this year,
Speaker 2: you contribute.
Speaker 1: And got that those ketchup contributions.
Speaker 2: Yeah, eight grand next year, right with that increased WROTH amount,
Speaker 2: increased IRA amount, So make it your goal to max
Speaker 2: that out. That is a great place for that additional savings,
Speaker 2: which might be too much savings really when we're talking
Speaker 2: about it, and we probably want more money growing for
Speaker 2: your future. That's where we'd funnel some of that that
Speaker 2: the CD money on once immatures.
Speaker 1: That's right, Yeah, And don you also asked about buying
Speaker 1: a rental property. It sounds like you move around a lot, right,
Speaker 1: and so with that in mind, is probably not an
Speaker 1: ideal investment for you. And on top of that, we
Speaker 1: would want you to do a ton of research and
Speaker 1: some due diligence before you consider going down that path,
Speaker 1: because it's not like an investment per se, it's more
Speaker 1: like a part time job. And you've already got a
Speaker 1: full time job that it's going to have that nice
Speaker 1: pension and a part time job on a edition what's
Speaker 1: that side gig exactly. So with all that in mind,
Speaker 1: like I mean, it could be an overwhelming endeavor, but
Speaker 1: if you are super interested in it, certainly start reading
Speaker 1: up on it. Just make sure you do a lot
Speaker 1: of research there. But sticking to tax advantaged retirement accounts
Speaker 1: and just funding those like clockwork and specifically what would
Speaker 1: you invest in. I think a target date fund would
Speaker 1: be smart as you are closer to retirement age those
Speaker 1: funds automatically readjust it and make sure that you are
Speaker 1: exposed to less volatility. That way, you're avoiding the sequence
Speaker 1: of returns risk that's when were you to retire, you
Speaker 1: start withdrawing on some of these funds. If there's a
Speaker 1: big drop in the stock market, that would have a
Speaker 1: major impact on the amount of money us left there
Speaker 1: in your nest egg. And so by switching over to
Speaker 1: less risky, less volatile investments within that target date fund,
Speaker 1: that keeps that from happening. So we would recommend that
Speaker 1: it allows you to pick a date and you can
Speaker 1: start working towards that retirement year, but a solid decade
Speaker 1: of that, plus your pension and plus social security, that's
Speaker 1: not even something that we even talked about. In addition
Speaker 1: to a continued frugal lifestyle, I think that's going to
Speaker 1: easily be able to get you where it is that
Speaker 1: you want to be. Yeah, and don hopefully our comments
Speaker 1: help you feel good about where you're going. Comments always
Speaker 1: make me feel good, Joe, Well, thank you, that's the goal.
Speaker 1: Oh right, sorry, I thought you meant I thought you
Speaker 1: said compliments. Well, but the.
Speaker 2: One thing we might suggest if you're interested is to
Speaker 2: talk to a fee only financial advisor, and so you
Speaker 2: could find one at xy Planning Network or NAPFA dot org.
Speaker 2: Those are those are two places where you could find
Speaker 2: somebody who meets kind of the standards for a financial
Speaker 2: advisor that Matt and I think are important. And if
Speaker 2: you really wanted someone to kind of like pour over
Speaker 2: all of your financials at once, it might be worth
Speaker 2: right paying a flat fee to somebody to do that.
Speaker 2: A few hours of their time would likely be enough
Speaker 2: to kind of go over some of these details and
Speaker 2: help give you even more reassurance and maybe some more
Speaker 2: direction too. But Matt, we got a couple more questions
Speaker 2: to get to including yeah, whether or not someone going
Speaker 2: back to school as an adult should be socking money
Speaker 2: aside into a five twenty nine account.
Speaker 1: Isn't that just for kids? Maybe not. We'll get to
Speaker 1: that and more right after this, Joel, everyone knows that
Speaker 1: tricks are for kids. Silly rabbit. That's that's that's what
Speaker 1: you're comment about five twenty nine. Before the break, maybe
Speaker 1: think of do you remember that this commercial? Of course? Okay, yeah, classic.
Speaker 1: We will get to that question about five twenty nine's
Speaker 1: here in a second, but first let's hear a question
Speaker 1: about the main bank that I actually used me personally.
Speaker 3: Hey, Juelan Matt, this is Massa from Boston. Again. Recently,
Speaker 3: I read that the financial ratings agency Moody gave Alli
Speaker 3: Financial a negative outlook. In past episodes, you'll have sung
Speaker 3: the praises of Ally Bank. I have a couple of questions.
Speaker 3: Is the Ally Financial that Moodies gave a negative outlook
Speaker 3: to the same Ally Bank that you really like for
Speaker 3: personal banking? And if so, should I be concerned that
Speaker 3: even if my deposits are wholly insured by the FDIIC
Speaker 3: because I have less than a quarter million dollars with them,
Speaker 3: if Alli Bank goes under, I may have difficulty getting
Speaker 3: my money back out. Thanks again for all you do
Speaker 3: to educate and inform us. Oh in confession time, I
Speaker 3: first learned about credit ratings for companies by selling bonds
Speaker 3: in the video game Railroad Tycoon three.
Speaker 2: Okay, man, that's kind of cool and it made me
Speaker 2: I think. Actually was talking to somebody I know recently
Speaker 2: and he was saying that he plays the Nintendo game
Speaker 2: Animal Crossing.
Speaker 1: Have you heard of it? Maybe?
Speaker 2: Okay, I have not. I've never played it. I probably
Speaker 2: haven't played video games in like ten years ago ago.
Speaker 2: It sounds like a video game to me, Yeah, it does.
Speaker 2: But he was saying, like, man, there's so many personal
Speaker 2: finance tidbits. As he's been listening to the show. He's like,
Speaker 2: I've been learning, but I'm also kind of putting it
Speaker 2: into action in the video game that I'm playing. And
Speaker 2: I think that's kind of cool. The video games can
Speaker 2: connect like real life truths to the stuff we're playing.
Speaker 2: It's obviously playing stupid stuff like Halo and NBA Jam,
Speaker 2: but it's like, it's cool to see that that some
Speaker 2: games are actually kind of helping teach us secually. Nintendo
Speaker 2: in particular doesn't well.
Speaker 1: It doesn't, Halo, there's some sort of market capacity, right,
Speaker 1: like don't you have a limited A lot of death.
Speaker 1: I don't remember the other stuff, but if that's the case, yeah,
Speaker 1: video games in some cases don't do as good of it.
Speaker 1: Like that's why we love nerdy board games because oftentimes
Speaker 1: the mirror real life when you're presented with a limited
Speaker 1: resource and you have to find a way to make
Speaker 1: the best of those limited resources. That is life, at
Speaker 1: least ancient real life. You know, like wheat tobacco. Well
Speaker 1: that's Puerto Rico right there. We haven't played that on
Speaker 1: in a while. But even like some video games do
Speaker 1: that like makes me think of the classics, like Zelda.
Speaker 1: You are gathering resources and you have to you know,
Speaker 1: you go into the shop. You got the three things
Speaker 1: that you can buy, and you got to decide which
Speaker 1: one am I gonna buy the bomb? Am I gonna
Speaker 1: buy the red candle? Or upgrade to the blue candle?
Speaker 1: You know, you've got all these things that you got
Speaker 1: to make decisions on. So it's not just nerdy board games. Yeah,
Speaker 1: you can actually learn from video games. Yeah, which I appreciate.
Speaker 2: I agreed, especially since you know, we're not learning about
Speaker 2: this stuff in school really, so at least if the
Speaker 2: video games have an educational element to it, I'm all
Speaker 2: for it. But that's thanks for sharing that, Massa. And
Speaker 2: let's get to the heart of Massa's question about bank downgrades.
Speaker 2: I'm sure, Matt, some listeners have seen these headlines and
Speaker 2: maybe they're either worried or they feel like they've got
Speaker 2: to change bank stats something like that. And we talked
Speaker 2: about the recent downgrade to credit down grade to our
Speaker 2: country and what we think that means.
Speaker 1: Right, well, you know, not just a bank. The US
Speaker 1: event yes, got downgraded.
Speaker 2: Literally the country we live in got downgraded from a
Speaker 2: credit standpoint, and Moody's they actually recently downgraded ten banks
Speaker 2: and they gave negative outlooks to others, ally being one
Speaker 2: of them. And then Fitch, the agency who did give
Speaker 2: our country credit rating down grade, they said that they're
Speaker 2: likely to down grade dozens of banks too, And so
Speaker 2: part of that's because of multiple bank collapses that have
Speaker 2: happened throughout twenty twenty three. It has folks on edge
Speaker 2: when it comes to where they're putting their savings. So
Speaker 2: a little nervous, yeah, and a lot of individuals have
Speaker 2: moved their deposits not to better banks, but to the
Speaker 2: biggest banks, believing that that's a safer place for them
Speaker 2: to be. We want to reiterate, as always, that is
Speaker 2: not necessarily the case. The truth is the big banks
Speaker 2: offer much worse service alongside higher fees and non existent
Speaker 2: interest rates on your savings. So no, the big banks
Speaker 2: are not safer, and they're worse on basics, actually worse, not.
Speaker 1: To mention all the shenanigans. That's like Wells Fargo a
Speaker 1: bank of America, which is a kind way of putting it,
Speaker 1: just more like fraud, right, yeah, yeah, she need their
Speaker 1: customers out of actual dollars.
Speaker 2: It's like someone murder someone and you're like, he's just
Speaker 2: not nice. Yeah, and you're like, wait a second, No,
Speaker 2: that was a mean thing to do, so much worse
Speaker 2: than that. But that doesn't mean, of course, that you've
Speaker 2: got to go bank with Ally like I do, because.
Speaker 1: There are other great online banks. So should you switch
Speaker 1: to one of those? Should you completely ditch Ally? Well,
Speaker 1: if that's not necessarily the case either here, I still
Speaker 1: think Ally is a great choice. When all this news hit,
Speaker 1: like I literally didn't think twice about what this meant
Speaker 1: for all the saving. I mean literally, my emergency fund
Speaker 1: is sitting there in ALLY, and I am not concerned
Speaker 1: about it at all. Is that just because you're a
Speaker 1: homer though, maybe? But so I will say, if I
Speaker 1: was choosing a new bank, would I go with Ally?
Speaker 1: I might go with one that is offering a slightly
Speaker 1: higher rate, but Ally offers a really competitive rate, and
Speaker 1: they're always up there in the top tier, even if
Speaker 1: they're not there the very best. And they've got the
Speaker 1: no penalty CDs, which I'm a huge fan of, and
Speaker 1: so you just plug that away and that gets you
Speaker 1: really dang close. So that keeps me from rate chasing,
Speaker 1: which can always change on a dime. It depends on
Speaker 1: what it is that if the different banks are offering,
Speaker 1: you don't want to constantly be yeah, floating, bouncing from
Speaker 1: one to the next.
Speaker 2: But I think it's interesting that you said that you
Speaker 2: would maybe not go with Ally because other banks offer
Speaker 2: better rates, but not because of this credit downgrade threat.
Speaker 1: That is not the reason that that would keep me
Speaker 1: from going with ALI, for sure. Yeah, I mean I
Speaker 1: like a lot that they offer. I like their interface,
Speaker 1: I like their app on the phone, and masa if
Speaker 1: it's not obvious, Ally Bank, it is the banking arm
Speaker 1: of Ally Financial, who is who actually received that negative outlook,
Speaker 1: And so the risk of Allied defaulting it's still relatively low,
Speaker 1: and just given the tough times within the banking sector
Speaker 1: in general here, not just here in the US, honestly,
Speaker 1: just globally, and that has largely been caused by rising
Speaker 1: interest rates, stiffer competition for your savings dollars. With all
Speaker 1: that in mind, I don't see this as a reflection
Speaker 1: of an ally specific problem. It just seems like it's
Speaker 1: more of just the It's like it's the rising tide
Speaker 1: as opposed to like a singular beach. So that's got
Speaker 1: a rising tide right right. It's something that's impacting not
Speaker 1: only the US, but I'll I mean, it's a global
Speaker 1: issue that we're all going to be facing here. A
Speaker 1: lot of experts are saying maybe early twenty twenty four
Speaker 1: that we're going to see that small rep session yet
Speaker 1: to be seen.
Speaker 2: Yeah, banks for having a tough time right now, they're
Speaker 2: having a tougher time than they were in years past.
Speaker 2: And on top of that, I think the heart of
Speaker 2: the reason we would feel totally comfortable having our savings
Speaker 2: at Ally, you do feel comfortable having your savings at Ally, Matt,
Speaker 2: I do more business with Discovered. That's kind of my
Speaker 2: main bank. But basically, if you have less than two
Speaker 2: hundred and fifty thousand dollars in that account, there's no
Speaker 2: reason to worry.
Speaker 1: Right, that would be me. Yeah, not that loaded.
Speaker 2: So we would tell you to make decision about which
Speaker 2: bank that you use or don't use based on other factors, right,
Speaker 2: Like you were talking about like the interest rate, like
Speaker 2: the interface, like the customer service, and so if you
Speaker 2: like all those features about the bank you're currently with
Speaker 2: about Ally, don't let this credit downgrade reality or potential
Speaker 2: future credit downgrade, you know, threats make you nervous, right.
Speaker 1: Yeah, Yeah, that's the thing. It wasn't even an actual downgrade.
Speaker 1: It was just a negative outlook, which means it has
Speaker 1: the potential for there to be a downgrade. I guess, yeah,
Speaker 1: off in the future. So it's just it's kind of
Speaker 1: like they're just putting it on radar, just being like, hey,
Speaker 1: we see your books, we see what's going on here,
Speaker 1: and we're just gonna go ahead and preemptively say something. Yeah,
Speaker 1: and if we saw material weakness. Yeah, if there were.
Speaker 2: More like hard evidence that Ally in particular was doing
Speaker 2: a poor job then and it was impacting their customers,
Speaker 2: like and they were having to cut rates and stuff
Speaker 2: like that, that would be one thing. But we haven't
Speaker 2: seen any evidence of that, and so so.
Speaker 1: We do we will say something, right, and I probably
Speaker 1: will move my money.
Speaker 2: Sure with that to be the case. And similar to
Speaker 2: kind of what we talked about with the US credit
Speaker 2: down grade, like, hey, this is one of those slow
Speaker 2: moving events that you should be aware of. It's not negligible,
Speaker 2: it's not nothing, but it's also not some sort of
Speaker 2: massive event that should cause you to take big changes
Speaker 2: with how you invest or what you're doing with your money.
Speaker 2: But I would say too for for other folks who
Speaker 2: have more than a quarter million dollars inn Ally or
Speaker 2: any other bank for that matter, they should fix that
Speaker 2: problem quickly.
Speaker 1: Right, you are loaded?
Speaker 2: Yeah, yeah, if you've got crazy amounts of cash on hand,
Speaker 2: One you might have too much cash on hand, and
Speaker 2: then two you got to make sure that it's between
Speaker 2: multiple banks. I talked to some but he recently Matt
Speaker 2: who inherited a ton of money. He never had a
Speaker 2: lot of money and it was hundreds and hundreds of
Speaker 2: thousands of dollars, so he was smart enough to split
Speaker 2: it up between multiple banks, and that is something that Yeah,
Speaker 2: if you have that cash on hand, why you're trying.
Speaker 1: To figure it out? It should be it should be
Speaker 1: under the umbrella of different banks so that you're getting
Speaker 1: full FDIC coverage for every dollar that you have. That's right.
Speaker 1: Let's get to our last question. This is from a
Speaker 1: listener who is looking to take advantage of a pretty
Speaker 1: sweet employer benefit.
Speaker 7: Hi, how to money? This is Hannah Tisher from Greenville,
Speaker 7: South Carolina. I'm going back to school to get my
Speaker 7: MBA part time with an employer sponsored program. However, if
Speaker 7: I want to complete the program in three years, I
Speaker 7: will have to pay between five and ten thousand dollars myself.
Speaker 7: Should I put this money in a five to twenty
Speaker 7: nine plan or continue saving it in my high yield
Speaker 7: savings account?
Speaker 4: Thanks?
Speaker 7: And I hope you guys have a.
Speaker 1: Great day, all right, Matt.
Speaker 2: Lots of cool stuff going on here with Hannah. Like, first,
Speaker 2: she's going back to school to gain more skills. Yeah,
Speaker 2: something we applaud, but it sounds like her employer is
Speaker 2: paying the bulk of this, which is also great. I
Speaker 2: love that if you can get someone else to put
Speaker 2: the bill for your education, you're doing something.
Speaker 1: Right at least most of the bill. Yeah, Which, so
Speaker 1: she said that in order to graduate early or to
Speaker 1: do the three year program, So that's one consideration. Is
Speaker 1: there a way that she could go more slowly? I
Speaker 1: guess to just take your time and not have to
Speaker 1: pay the five to ten thousand dollars, right, I'm sure
Speaker 1: there are other things that you are considering, Hannah.
Speaker 2: Sure, just the thought and sometimes graduating more quickly makes sense,
Speaker 2: and you don't mind funneling some of your own dollars
Speaker 2: into that. Yeah, And my guess is that this NBA
Speaker 2: should lead to increased opportunities and bigger pay bumps in
Speaker 2: the future. Yeah, with not too much out of pocket
Speaker 2: from Hannah, which is awesome. And so yeah, way to
Speaker 2: take advantage of this additional perk that so many other people,
Speaker 2: so many other employees just kind of leave on the table.
Speaker 1: But let's talk about how it is that Hannah is
Speaker 1: going to fund the amount that she's gonna need to contribute,
Speaker 1: or that she's choosing to contribute. At least she's wondering
Speaker 1: if she should have that money there in a high
Speaker 1: old savings account, or if she if she should consider
Speaker 1: using the five twenty nine education account, the account that's
Speaker 1: offered by her state of South Carolina. There, So which
Speaker 1: one do you use? The answer to this is going
Speaker 1: to be both of them. So, yeah, this sounds crazy,
Speaker 1: kind of weird, but stick with me here, Hannah, South Carolina.
Speaker 1: They've got a state income tax and the top rate
Speaker 1: is six and a half percent. Some folks pay zero.
Speaker 1: It all depends on your current income, but most.
Speaker 2: Zero percent tax rate, by the way, is for people
Speaker 2: who make very little, very very little, so you probably
Speaker 2: aren't in there.
Speaker 1: The vast, vast majority of folks pay that top rate
Speaker 1: because the sliding scale it only, yeah, truly benefits folks
Speaker 1: who make next to nothing. And so given that reality,
Speaker 1: any money that you contribute to a five twenty nine account,
Speaker 1: it's going to reduce your taxable income at the state level.
Speaker 1: So with that in mind, we definitely want you to
Speaker 1: sock the specific amount that you know that you're gonna
Speaker 1: need to pay for an upcoming qualified educational expense into
Speaker 1: that five to twenty nine plan.
Speaker 2: That's right, But here's the thing, you don't actually have
Speaker 2: to keep the money in the five twenty nine plan
Speaker 2: for all that long. Right. One of the biggest selling
Speaker 2: points to these accounts is that you can invest and
Speaker 2: grow those dollars for future educational expenses.
Speaker 1: Sounds like a nice thing. Yeah, why wouldn't I want
Speaker 1: to invest this money that's going to go towards my
Speaker 1: kids college in fifteen years from now?
Speaker 2: Exactly, You've got plenty of time to let that money
Speaker 2: grow for their future. But Hannah, given your need, Hannah's
Speaker 2: not two years old, No she's not, and so she's
Speaker 2: got to use this money really soon in the near
Speaker 2: term future. We don't want you investing money that's going
Speaker 2: into the five twenty nine account. Stock it in there,
Speaker 2: but we don't want you to invest it. We instead
Speaker 2: want you to keep it in the cash equivalent. But
Speaker 2: in that account, right, the cash account in the Saving
Speaker 2: for College plan, it only pays two point seventy five percent.
Speaker 2: So once you've got it in there and you have
Speaker 2: the qualified expense that year, pull it back out, put
Speaker 2: it in your HYSA, your high heeled savings account once
Speaker 2: you've got to make the payment, So the money will
Speaker 2: be in there for a relatively short period of time
Speaker 2: could be days, could be weeks, maybe even a couple months,
Speaker 2: but then you pull it back into your life and
Speaker 2: really what you've done is you've continued to maximize the
Speaker 2: yield of those savings dollars, but you've also gotten a
Speaker 2: sweet little tax break. We've done something very similar. Emily
Speaker 2: of course, is in grad school studying to become a
Speaker 2: licensed therapist, and that we've taken advantage of the five
Speaker 2: twenty nine account in order to basically get some state
Speaker 2: tax savings. But we're not using it in the same
Speaker 2: way as we are for money that we're investing for.
Speaker 1: Our kids future education. You're not using it in the
Speaker 1: traditional means. You're really just jumping through a hoop in
Speaker 1: order to discord the tax break, which is totally illegal.
Speaker 1: This is totally legit, and because there are no requirements
Speaker 1: for how long that money needs to live inside of
Speaker 1: that five twenty nine account in order to achieve that
Speaker 1: tax exempt status, essentially you're just you're filtering that. It's
Speaker 1: it's almost like you're laundering your money, but it's like
Speaker 1: it's like a legal laundering. That's exactly what the money
Speaker 1: goes into it, but then you're immediately taking it out,
Speaker 1: But because you've stuck it in there, you get that TAXI.
Speaker 2: That's why I bought the nail salon Matt, so that
Speaker 2: I could launder and pay no tax.
Speaker 1: On all my earnings. I think you kind of hinted
Speaker 1: at this, but you do have to wait to withdraw
Speaker 1: the money until the year that the qualified educational expense
Speaker 1: is going to occur. And so what that means like,
Speaker 1: if there's this were me, I would go ahead and
Speaker 1: earmark the funds that you know you're gonna need to
Speaker 1: put towards tuition, right these qualified expenses, set that money
Speaker 1: aside within your high yield savings account, and then whenever
Speaker 1: it is that because it may not be that may
Speaker 1: not be a bill that comes due this year, that
Speaker 1: might happen next year, and so you want to keep
Speaker 1: that money as long as possible, earning your five four
Speaker 1: or five percent in your high yield and then once
Speaker 1: you know that, okay, this is the year that I'm
Speaker 1: going to incur that expense, that's when you go ahead
Speaker 1: and put that within the fight twenty nine account. And
Speaker 1: that's also when you're going to take it out, because
Speaker 1: when you take it out, it's that year it has
Speaker 1: to go towards that qualified extent.
Speaker 2: If you have like a longer timeline hand, if you're saying, oh,
Speaker 2: this is money I'm gonna have to pay towards the
Speaker 2: NBA in seven eight years from now, then I would
Speaker 2: would say like, oh no, maybe it's going to open
Speaker 2: it up and invest some of those dollars and grow it.
Speaker 2: But because we're on a more truncated timetable, I think
Speaker 2: it makes sense to do it this way the.
Speaker 1: Whole Yeah, exactly. The entire reason that we're talking about
Speaker 1: not investing it is because we want you to be
Speaker 1: able to avoid the sort of like we're talking about earlier,
Speaker 1: was it with Dawn. She's getting closer to retirement, and
Speaker 1: so we're looking to avoid that risk. That's what we're
Speaker 1: trying to get you to do here, Hannah, is to
Speaker 1: avoid the investment risk, the volatility, because you know you're
Speaker 1: going to need that money now, and so anytime you
Speaker 1: know you're going to need access to funds in a
Speaker 1: time period less than two or three years, we don't
Speaker 1: want you investing that money. And so this is how
Speaker 1: you can earn the most on that money without actually
Speaker 1: investing it, and it doesn't have to sit there for again,
Speaker 1: all that long. It doesn't need a season for a
Speaker 1: year or anything. So we want you to be able
Speaker 1: to get the best of both worlds here by taking
Speaker 1: this what we'd call a slightly more optimized route. But Hannah,
Speaker 1: best of luck to you as you're heading off there
Speaker 1: to grad school or specifically to get your MBA. So
Speaker 1: did Hannah say she was in South Carolina? Did she
Speaker 1: say she was in Greenville? I don't know if she said. Okay, well,
Speaker 1: if she is, she would easily be able to go
Speaker 1: and visit the brewery that we're enjoying on today's episode.
Speaker 1: So again, this was the here you say it, let
Speaker 1: me read it. That's a silly name. Oh yeah, yes,
Speaker 1: silly saying it.
Speaker 2: Our depictions of yet another revolutionary absence.
Speaker 1: This is an imperial pastry stout, I believe. What were
Speaker 1: your thoughts on this thick bad boy that we enjoyed today, Yeah,
Speaker 1: I was the first things.
Speaker 2: First, it was thick, it was viscous, right, and then
Speaker 2: I tasted sweet vanilla and cinnamon combo, a little bit
Speaker 2: that toasted coconut coming through as well. It's just this big, burly, magnificent,
Speaker 2: magnanimous stout. I don't even know what other ad change
Speaker 2: just to throw in on this one.
Speaker 1: I would say chocolate as well. That's like the first
Speaker 1: thing that I noticed was it just was like chocolate.
Speaker 1: I felt like I was drinking like a hot chocolate,
Speaker 1: which is kind of the opposite or straight out of
Speaker 1: the Willy Wonka River. Oh my gosh. Yeah, just like
Speaker 1: Augusta snow drinking straight from the sacred fount But could
Speaker 1: you really imagine any heavier beer to enjoy it on
Speaker 1: quite possibly the hottest day? Seriously, we talked about how
Speaker 1: stouts are. Oh, you want to avoid these big, heaviestouts.
Speaker 1: It's a bad idea in the summer. It's a bad
Speaker 1: idea on ninety plus degree days. Well, okay, so here's
Speaker 1: what we're gonna give. If you're listening to the episode
Speaker 1: this deep into the episode, we're gonna go ahead and
Speaker 1: share something with you because it means that you're you're dedicated. Right. So,
Speaker 1: our little studio here, our little clubhouse, our ac unit
Speaker 1: is a window unit. And what that means is that
Speaker 1: when we record, we actually have to go and turn it.
Speaker 2: Off because it's loud. It's noisy, it's noisy. And so
Speaker 2: on these hot days with the ac turned off, it
Speaker 2: gets really warm and it starts to feel like we're
Speaker 2: like really towards the center of the Earth's court.
Speaker 1: What's the wind Hoff method whatever that is. This is
Speaker 1: the opposite. It's like we're basically like in Asana here,
Speaker 1: hey for yeah, I was gonna say, free Saunam. We've
Speaker 1: got a little thermometer over here and inside our office
Speaker 1: right now it is ninety two point eight degrees, so
Speaker 1: we're we're sweat movies dedication right there. It's one of
Speaker 1: the ways we're able to keep expenses low. Though, Joel.
Speaker 1: We've got this old carriage house that is not insulated,
Speaker 1: but man, we still love it.
Speaker 3: Though.
Speaker 2: You know what, we always say, what doesn't kill you
Speaker 2: makes you stronger, and so I think this makes us
Speaker 2: I feel stronger, better humans, better podcasters, let's hope. So
Speaker 2: if it doesn't make us hilarious, but that's gonna do
Speaker 2: it for you. This episode and listeners. You can find
Speaker 2: show notes up on our website as always at how
Speaker 2: to money dot com. We've got other resources there too,
Speaker 2: including the how to Money newsletter. How to Money dot
Speaker 2: Com slash newsletter comes out every Tuesday morning. It's a gem.
Speaker 2: It's of course, free provides a lot of encouragement alongside
Speaker 2: great money advice.
Speaker 1: That's right, so buddy, that's going to be it for
Speaker 1: this one. Until next time, Best friends Out, Best Friends Out,