Speaker 1: Welcome to Hod of Money. I'm Joel and I am Matt,
Speaker 1: and today we're talking rusty realtors, insurance issues, and equity expenditures.
Speaker 1: That's right, man, these are the stories that we think
Speaker 1: you need to be paying attention to this week because
Speaker 1: they're the stories that are going to most directly impact
Speaker 1: our finances. To pay attention to them during this episode.
Speaker 1: You need to pay attention to these things because these
Speaker 1: are the things that impact your bank account, you're spending,
Speaker 1: how much it is that you're able to save and
Speaker 1: invest and real quick. For some folks out there, this
Speaker 1: actually might be a repeat of information anybody who actually
Speaker 1: follows us on Instagram. But we wanted to mention that
Speaker 1: we won an award. Joel, you have I'm not used
Speaker 1: to this trophy, this award, this plaque that's now sits
Speaker 1: here on a record, actual hardware. And so this is
Speaker 1: this is the Fleck Media Award. It's for financial Literacy
Speaker 1: and Education and communities given to the Hod of Money
Speaker 1: podcast from the good folks over at Money Management International,
Speaker 1: which is a service we talk about a lot, actually
Speaker 1: a nonprofit that helps people in debt, credit card debt
Speaker 1: and who need credit counseling. But yeah, they gave us
Speaker 1: this sole thing. Man, it's kind of I don't know,
Speaker 1: it felt it felt really sweet to get that it's
Speaker 1: earned its place here on a recording table, the Soul
Speaker 1: so the Soule Award. Also it sits there by itself. Yeah,
Speaker 1: it's very lonely. So someone almost give us like an
Speaker 1: oscar or something like that in addition to it. That
Speaker 1: would fit. Well. So this isn't like a real Friday
Speaker 1: flight story. But did you see this is a total
Speaker 1: departure from awards or anything like that. But did you
Speaker 1: see the promotion that Subway was running that if you
Speaker 1: legally change your name to Subway. Yes, that which brought me,
Speaker 1: you have the chance of letting free Subway for the
Speaker 1: rest of.
Speaker 2: Your life, which made me think about one of my
Speaker 2: favorite TV shows, Community where Subway comes on campus and
Speaker 2: there's actual a dude name Subway and it's it's hilarious.
Speaker 2: But I remember that episode well, it was like multiple episodes.
Speaker 1: They it was a character season.
Speaker 2: Yeh, shut up, a character name Subway. So but yeah,
Speaker 2: who played the character this? Okay, it was just a
Speaker 2: guy who's there for a few Such a great show,
Speaker 2: such a great show, but I don't remember that that series.
Speaker 2: Though apparently ten thousand people or at least were down
Speaker 2: for getting paid ten grand to legally change their name
Speaker 2: to subway.
Speaker 1: I guess did they get paid ten grand? Or was
Speaker 1: subway for? Like? Oh, was it subway for? I thought
Speaker 1: I get paid too, like free sandwiches. Maybe that's even
Speaker 1: more valuable. I don't know. I mean, yeah, depending bepends
Speaker 1: on how old you are and how many times you eat.
Speaker 1: But nineteen year old me would have totally done that
Speaker 1: because I loved Subway when I was a kid, like
Speaker 1: specifically late high school, early college. You couldn't keep me
Speaker 1: away from the way.
Speaker 2: The question is, would forty year old Matt changed his
Speaker 2: name legally for free sez.
Speaker 1: I don't eat subway as much as I did in
Speaker 1: my younger years specifically. But here's the thing. Though you
Speaker 1: might have to legally change your name, that doesn't mean
Speaker 1: that your friend have to call you subway.
Speaker 2: That's just because it says says it on your subways
Speaker 2: on your doesn't mean that you have to refer to
Speaker 2: me a subway.
Speaker 1: Yes, right, So I feel like there's a there's a
Speaker 1: way around it.
Speaker 2: I feel like if it was a contest where you
Speaker 2: had to name yourself brisket for a free barbecue. I
Speaker 2: would totally do that, but I just am not Subway.
Speaker 2: You never know what's gonna happen. You never know what's happened,
Speaker 2: what's gonna happen with the brand. Well, like I just
Speaker 2: think BacT So I was a big fan of a subway.
Speaker 2: Subway back before the whole Jared like that dude, right,
Speaker 2: I watched like he kind of ruined it for me.
Speaker 2: I watched the beginning of that documentary and it was devastating.
Speaker 2: I can't I couldn't get Yeah, devastating. So I don't
Speaker 2: know if I've ever shared this on the show before.
Speaker 2: Have I talked about how I used to jump behind
Speaker 2: the counter at subways? You you you've never talked about
Speaker 2: this on the show, but you have mentioned sure really quickly.
Speaker 1: But I did this a couple of times. But we
Speaker 1: would show up at a subway, there's like a bunch
Speaker 1: of us. There's like say one person working, and they're
Speaker 1: just overwhelmed. All of a sudden, they've got a ton
Speaker 1: of foot longs that they got that they gotta make.
Speaker 1: And on more than one occasion, I was like hey,
Speaker 1: do you want some help. I may have lived and
Speaker 1: said that I used to work out a subway, but
Speaker 1: in both instances, they're like, oh, yeah, sure, And so
Speaker 1: I put the gloves on, jump back behind the bar,
Speaker 1: and start making sandwiches for my friends. They're cracking up
Speaker 1: because I think it's hilarious. It's because I was such
Speaker 1: a fan of subway. I knew how to make all
Speaker 1: the sandwiches. I knew what went out all the sandwiches,
Speaker 1: and I think in both instances they let me walk
Speaker 1: out of there with a free sandwich. They're like, hey,
Speaker 1: don't worry about paying For years, I appreciate the help.
Speaker 1: Now you and somewhere are going to be in legal
Speaker 1: troubles for that, But that is it feels like something
Speaker 1: from a bygone era. I feel like that would not
Speaker 1: be allowed.
Speaker 2: I think I think it was highlights is that both
Speaker 2: you and I are willing to go to kind of
Speaker 2: ridiculous links just to save money. Sometimes it makes me
Speaker 2: think of, or for a laugh, of wrapping my car
Speaker 2: and how that people thought it was the goofiest thing,
Speaker 2: and for.
Speaker 1: You do that not when you were eighteen, but when
Speaker 1: you were thirty.
Speaker 2: Exactly, And people are like, what do you really are
Speaker 2: you that hard up? And I'm like no, I'm just
Speaker 2: willing to do like a lot of things to save
Speaker 2: or make it a little bit of money, which I
Speaker 2: think is a good way to go through life, Like
Speaker 2: don't don't be too proud to do something silly.
Speaker 1: Should make that all things considered.
Speaker 2: Yeah, okay, but let's move on to the Friday flight
Speaker 2: mat the real stories, the real stories that we found
Speaker 2: interesting this week on the personal finance front, and let's
Speaker 2: talk about jobs for a second. The job market is
Speaker 2: it's still great for basically almost everyone, right. Unemployment levels
Speaker 2: remain near all time lows. There are apparently still one
Speaker 2: point six jobs for everyone who's hunting for one, which
Speaker 2: is good news for the economy and for workers across
Speaker 2: the country for wages and for the ability to go
Speaker 2: get a better job or a different job if that's
Speaker 2: what they're going forth, that's what they're interested in. And
Speaker 2: it's it's not blazing like it was a year ago,
Speaker 2: but workers still have.
Speaker 1: A lot of laboratory it's not Yeah, it's not two
Speaker 1: job openings for every applicant, right, everybody that's looking for
Speaker 1: a job.
Speaker 2: Yes, so it's died down a little bit, but still
Speaker 2: workers are in control right now in the job market.
Speaker 2: But there's one exception, and I found this interesting matter.
Speaker 2: It's a really bad time to be a realtor. In particular,
Speaker 2: stats show that there are something like two and a
Speaker 2: half reeltors for every house that's currently on the market.
Speaker 1: Yeah, the complete opposite Yeah of when the job market
Speaker 1: was boom and Lene.
Speaker 2: Right, it's like the ratio you normally want. It's probably
Speaker 2: the exact opposite, like multiple homes for every realtor. But
Speaker 2: this is just not great news if you're a realtor currently,
Speaker 2: and it's even worse, by the way, if you're trying
Speaker 2: to break into the business. If you're like, you know
Speaker 2: what that's going to be my tickets to riches or
Speaker 2: my new job is going into real estate. Well, realtors
Speaker 2: are hard up right now. And familters how many tough
Speaker 2: time and programmers software well just with AI and now
Speaker 2: that's putting the kabash on hiring at least in that sectors.
Speaker 2: Lenders to think about all the people that are doing
Speaker 2: home refinances and now they're not really doing it not
Speaker 2: so much.
Speaker 1: Yeah, I saw that there are six hundred thousand more
Speaker 1: realtors than there are actual homes listed. I was just insane,
Speaker 1: But this is happening for a few reasons. One, there
Speaker 1: aren't many houses for sale, and you know, with higher
Speaker 1: interest rates, folks are less likely they don't have a
Speaker 1: desire to move because they don't want to give up
Speaker 1: that sweet rate. We've talked about that. But secondly, a
Speaker 1: lot of realtors they only dabble, right that they work
Speaker 1: part time, and some industries like this there are more
Speaker 1: cyclical than others. It makes me think back to when
Speaker 1: I was a photographer. There are a lot of photographers
Speaker 1: that just dabbled because the barrier to entry. Yeah, to
Speaker 1: get yourself a digital camera and take some pictures, that's
Speaker 1: that's fairly easy. It's a lot harder to make that
Speaker 1: a full time gig like we did. But there's a
Speaker 1: lot of folks that would pick up the camera and
Speaker 1: shoot some say during the fall when family sessions are booming,
Speaker 1: because folks are wanting to get those pictures taken for
Speaker 1: their Christmas card. Yeah, the holidays coming up. But what
Speaker 1: this means for you as a consumer is that you
Speaker 1: need to be careful who it is that you choose
Speaker 1: to represent you within a real estate transaction. If you
Speaker 1: actually are buying a home because a bad or a
Speaker 1: rusty realtor, there you go. That could end up costing
Speaker 1: you money. A recent piece in Insider It details how
Speaker 1: easy it is to become a realtor in many states. Again,
Speaker 1: the bar to entry is fairly low. It's like a
Speaker 1: multiple choice question. Tests that you take it two plus two,
Speaker 1: you could be a realtor. It's not that easy to
Speaker 1: all of our real realtor friends out there. But if
Speaker 1: you offer an agent who isn't at the top of
Speaker 1: their game, you could be getting subpard i, which is
Speaker 1: going to cost you serious money in the home buying process.
Speaker 1: The ideal choice is to find an agent who has
Speaker 1: been working in your neighborhood regularly for years. They know
Speaker 1: the ends and the now, they know individuals, and they've
Speaker 1: obviously got rave reviews from friends and neighbors. That's the
Speaker 1: kind of agent that you want to be looking for,
Speaker 1: not somebody that you just whose name you just happen
Speaker 1: to see on a single sign. You see a name
Speaker 1: on a bunch of signs, that's good. But if you
Speaker 1: just happen to choose a name because it sounds cool,
Speaker 1: that's not how you know about it.
Speaker 2: That person goes to your church or you. If they
Speaker 2: don't do much business, then you probably want to go
Speaker 2: with a realtor who does more business. Not necessarily the
Speaker 2: person on the billboard. I wouldn't necessarily she's that person either,
Speaker 2: But yeah, I think you want to choose someone.
Speaker 1: You avoid the extremes. Yes, yeah, exactly.
Speaker 2: Well and just makes me think of Matt someone buying
Speaker 2: a home in your neighborhood. Right now, this was a
Speaker 2: it was an off market listing, like it never actually
Speaker 2: made it to MLS. And so the people who know
Speaker 2: about that stuff are the realtors who do a lot
Speaker 2: of business, and they might have a lead on deals
Speaker 2: that other realtors might not know about. And so who
Speaker 2: you choose to represent you matters. And by the way,
Speaker 2: speaking of realtors, there have been a bunch of lawsuits
Speaker 2: through the years that have been filed against the National
Speaker 2: Association of Realtors for essentially being a monopoly right, and
Speaker 2: those are still working their way through the court system.
Speaker 2: But if the plaintiffs win, there's likely to be a
Speaker 2: massive shift in the way agents get paid, which we
Speaker 2: think would be a good thing. There are some estimates
Speaker 2: that actually predict that consumers would save like twenty to
Speaker 2: thirty billion dollars every single year if this stranglehold the
Speaker 2: three percent fee sort of payment system times to get
Speaker 2: struck down. Yeah, yeah, six percent exactly. And it's not
Speaker 2: that agents shouldn't get paid. Like Matt, you and I,
Speaker 2: we use agents when we buy and sell homes, and
Speaker 2: we've had great experiences. We've got great agents that are
Speaker 2: you know, they're worth a lot. It's just that almost
Speaker 2: nothing else in the world works on a flat percentage
Speaker 2: feed like that, right, and this this system deserves a shakeup.
Speaker 2: So I would love I'm kind of waiting with baited
Speaker 2: breath to see what happens with some of these lawsuits
Speaker 2: because it's going to be good for consumers if this
Speaker 2: model gets kind of torn us under.
Speaker 1: Yeah. One of the like the NRA, right, So the
Speaker 1: National Association Realtors the argument that they're in RA. I'm sorry,
Speaker 1: and those are two very very different groups of people,
Speaker 1: but their argument is that it's the best model because
Speaker 1: some of the folks are advocating for like a flat fee, right,
Speaker 1: just like okay, just say it's going to cost us
Speaker 1: much and this is how much that you get paid.
Speaker 1: The argument against that is that, well, there's a lot
Speaker 1: of folks who are have less money, right, Like, if
Speaker 1: you have a smaller, smaller home or a home that's
Speaker 1: not going to sell for very much, they're not necessarily
Speaker 1: in a position to pay an upfront fee. And so
Speaker 1: I mean, I think the percentage framework, I think that
Speaker 1: that can still work, but it's just it's got to
Speaker 1: come down. Yeah, Like that's the biggest issue is that
Speaker 1: it is such it's like six you're paying six percent
Speaker 1: if you're selling your house, and that is so much money.
Speaker 1: It makes me think back to like financial advisors who
Speaker 1: have portfolios that they over like the assets under management
Speaker 1: style or whatever, and like that's even that you're looking
Speaker 1: at one percent, And with like ETFs and neutral funds,
Speaker 1: you've seen the expense ratios on those things come down
Speaker 1: over the years as technology has allowed individuals access directly
Speaker 1: to be able to invest. I'm actually kind of surprised
Speaker 1: that different platforms like Zilo, where folks are very comfortable
Speaker 1: going on there and searching themselves, that they haven't introduced
Speaker 1: some sort of marketplace that is able to eliminate so
Speaker 1: much of the mentalmen when it comes to the ability
Speaker 1: to purchase a home or in this case, selling a
Speaker 1: home without having to pay gigantic fees.
Speaker 2: I mean redfinn is trying to do that. They've been
Speaker 2: trying to break that three percent. Few model take it
Speaker 2: down to like one and a half and one percent
Speaker 2: in some cases. But it's just hard when there's things
Speaker 2: more folks with m less monopoly. Yeah, yeah, it's true.
Speaker 1: Yeah, And again I don't want to short change realtors
Speaker 1: because there's a lot of folks. This is the largest
Speaker 1: purchase that you ever make in your entire life, and
Speaker 1: so there are a lot of folks who are really
Speaker 1: nervous about that. I understand that. And so the ability
Speaker 1: to have somebody who has done many, many of these
Speaker 1: transactions to walk alongside you, to hold your hand, to
Speaker 1: provide that negotiating experience. There's so much value that they
Speaker 1: do bring. It's just that is at worth six percent,
Speaker 1: and when you're talking about more expensive homes, that is
Speaker 1: a ton a ton of money for sure.
Speaker 2: Well, the other upside to reducing realtor fees, I think
Speaker 2: it would help lubricate the real estate market. Like if
Speaker 2: the price the transaction costs go way down, people are
Speaker 2: going to be much more likely to sell their home,
Speaker 2: even if it means giving up a sweet interest.
Speaker 1: Right, and then does that all of a sudden cause
Speaker 1: prices to go up even more? Who knows? Yeah or yeah?
Speaker 1: Yeah either way?
Speaker 2: Yeah, all right, let's talk about something else on the
Speaker 2: homeowner front, homeowners insurance and listener Anastasia she sent us
Speaker 2: an interesting article last week about insurance specifically in the
Speaker 2: state of Florida. But I think there's something that we
Speaker 2: can all take away from the article that she sent over. First,
Speaker 2: Florida and California are two of the biggest states in
Speaker 2: the nation, and these are the two that are both
Speaker 2: losing insurance companies, which is going to drive up costs
Speaker 2: in both of those states on insurance, and the reasons
Speaker 2: why are completely different though. Right, this might be the
Speaker 2: most simplistic explanation ever, But insurance companies are bowing out
Speaker 2: of doing business in Florida because of the increased risk
Speaker 2: they endure, largely because of hurricanes.
Speaker 1: Yeah, And honestly, I don't think that's oversimplifying. Like literally,
Speaker 1: it's what is it a peninsula like sticks out there, sure,
Speaker 1: out in the ocean, a big finger out in the ocean. Yeah,
Speaker 1: right in the eye of the ocean. Hurricanes love to
Speaker 1: just cut that corner. They do.
Speaker 2: It's what happens, It's true. And yeah, and so Florida homeowners,
Speaker 2: they already pay some of the highest home insurance prices
Speaker 2: in the nation, and they're likely to get even higher
Speaker 2: as companies reduce their presence, issue fewer policies, cancel some
Speaker 2: of the policies that they currently have with consumers, or
Speaker 2: maybe they just like leave completely, they skid out all
Speaker 2: they're out of there.
Speaker 1: Yeah, they have the insurance companies, they've been losing money
Speaker 1: for years in Florida. It's kind of been like a
Speaker 1: lost leader in a sense for those businesses. Peron's not
Speaker 1: really leaving anything but more losses. But California it's another story.
Speaker 1: Insurers are leaving there because they're also dealing with large payouts,
Speaker 1: mainly due to the risk that wildfire's pose. I saw
Speaker 1: that in the past five years, something like thirty nine
Speaker 1: thousand homes have been destroyed due to fires. Wow, that
Speaker 1: is so I had a hard time understand, like, Okay,
Speaker 1: is that a lot of homes or maybe this not
Speaker 1: that many. There are eighty thousand single family homes in
Speaker 1: the city of Atlanta, so it's almost as if half
Speaker 1: marched through and just like burned up half of the city.
Speaker 1: But as many insurance companies are looking for for reasons
Speaker 1: to cancel policies, they're like, so they're even using drones
Speaker 1: to identify trouble spots on different properties to degenerate reasons
Speaker 1: for cancelation. That's a bit extreme, it's a bit ridiculous,
Speaker 1: of course, but it's true. Insurance companies are doing that.
Speaker 1: But a big problem is that the state, they are
Speaker 1: refusing to let these insurers increase premiums on homeowners, which
Speaker 1: will of course, it's going to decrease competition because these
Speaker 1: insurers are pulling out altogether, and it's going to lead
Speaker 1: to a more strained insurance market within the state of California.
Speaker 1: That's a perfect example of government policy completely backfiring and
Speaker 1: instead of helping those that they're seeking to protect, like,
Speaker 1: it's literally causing them more harm.
Speaker 2: Church companies are saying, no, no, look look at the numbers.
Speaker 2: We are losing money. I think All State just had
Speaker 2: their credit rating down graded, kind of like the United
Speaker 2: States just had their credit rating downgraded last week as
Speaker 2: a country, like All State just did, and so insurance
Speaker 2: are insurance companies are facing tough times. They're trying to
Speaker 2: increase premiums to make up for the losses they're experiencing
Speaker 2: and win.
Speaker 1: But if you can't do that, right, what do you say?
Speaker 1: You say, all right, well then we're gonna pull yeah,
Speaker 1: providing coverage within the state, right, more policies in Idaho,
Speaker 1: I guess, or something like that. I don't know, but yeah,
Speaker 1: like that. The number of insurance companies in Florida that left,
Speaker 1: it's staggered. I couldn't believe it. Like in the past
Speaker 1: eighteen months, I think it's like fifteen stopped writing new
Speaker 1: policies in Florida. Three of them just said, yeah, we're
Speaker 1: out of here altogether, and like a bunch of others
Speaker 1: just went bankrupt.
Speaker 2: Like yeah, they were insolvent. So I guess, first off,
Speaker 2: just don't an emoji tier face. For people in California
Speaker 2: and in Florida, it is difficult to own.
Speaker 1: It's tough.
Speaker 2: It's really really tough, and there's no easy solution. But
Speaker 2: in general, right, even not in those two states, prices
Speaker 2: for insurance have gone up quite a bit, right. The
Speaker 2: cost of supplies and labor have risen a whole lot
Speaker 2: over the past few years, and that means that repair
Speaker 2: bills right when a claim gets filed are more substantial.
Speaker 2: I think about at the tree growing through our house.
Speaker 2: We're finally just about the dumpster gets taken away today, Like, yeah,
Speaker 2: very nice.
Speaker 1: I know our neighbors are gonna be able to get
Speaker 1: your garage back. I know. That's honestly the biggest downside
Speaker 1: of that on that dumpster.
Speaker 2: That's true, our neighbors are gonna be thankful to like, well,
Speaker 2: they'll like us more now that we don't have dumps around,
Speaker 2: Like glad, we don't have a rat problem anymore. But
Speaker 2: to add to the pricing problem, right, home values have
Speaker 2: increased substantially too. It's been a perfect storm that's led
Speaker 2: to these increasing insurance rates and coverage is getting more sparse.
Speaker 2: Right These insurers are saying, well, okay, well, if I
Speaker 2: have to write the policy, well then I'm just not
Speaker 2: I'm going to write less favorable terms for the consumer.
Speaker 2: The coverage is going to be smaller, and that's the
Speaker 2: only way you're going to be able to maybe not
Speaker 2: see a massive increase in your premiums. It's just not
Speaker 2: easy right now, right, And so it's regardless of where
Speaker 2: you live, shop around. If you're looking to hit the button,
Speaker 2: just enter your information over at policygenius dot com, get
Speaker 2: some quotes from insurance companies they work with, or you
Speaker 2: can always reach out to an independent broker or agent
Speaker 2: over at Trusted Choice dot com as well. That can
Speaker 2: be easy, but don't take it lying down. It's not
Speaker 2: easy to fight back against these price increases. They're happening
Speaker 2: no matter what. But you still have a role. There's
Speaker 2: still something you can do to be able to save
Speaker 2: money while it's happening.
Speaker 1: That's all right. Well, we've got additional stories to get to,
Speaker 1: including Joel whether or not we will be able to
Speaker 1: continue watching our favorite Disney Plus content. We'll get to
Speaker 1: that story plus others right after this.
Speaker 2: All right, Matt, The Friday flight continues, and it looks
Speaker 2: like you might not be able to watch in Conto
Speaker 2: anymore soon.
Speaker 1: Talk about a spike in popularity and the ensuing just decreases. Yeah,
Speaker 1: I mean, you can't talk about Bruno. That was everywhere
Speaker 1: I know what three months. I haven't heard it in
Speaker 1: a while now, but I know you. The fire stayed
Speaker 1: lift for you the whole time. You love that we
Speaker 1: have enjoyed it. I will say Westy, our youngest, he
Speaker 1: recently discovered it, like over the summer, there's just there's
Speaker 1: more TV watching Goal. Yeah, let's be honest. And when
Speaker 1: they're not in school, and he was walking around saying,
Speaker 1: we don't talk about Bruno even though he didn't even
Speaker 1: say it. Right, it's only three, but that's awesome.
Speaker 2: All right, Let's get to our Lucro's headline of the
Speaker 2: week before we get to that story. And this one
Speaker 2: comes from Investment News and listener Gabe sent this one
Speaker 2: our way and it reads stop contributing to IRA's and
Speaker 2: four oh one K's no wonder. Gabe said, this one
Speaker 2: our way, this is.
Speaker 1: Doesn't sound like the kind of kind of advice that
Speaker 1: we would get.
Speaker 2: Sounds like financial malpractice. But you know, we've had listeners,
Speaker 2: by the way, Matt before, especially participating in the how
Speaker 2: to Money Facebook group, who were really really into real
Speaker 2: estate investing, and they made similar claims. They are like,
Speaker 2: why would you that was their argument put money in
Speaker 2: that scam four oh one K or Ira, when you
Speaker 2: could you know triple what you're going to make by
Speaker 2: investing in real estate and you and I were not
Speaker 2: against real estate investing. In fact, we'll talk to somebody
Speaker 2: next week who is like one of our favorite real
Speaker 2: estate investor influences creators out there. But why would a
Speaker 2: semi respectable site their rights about investing really want the
Speaker 2: masses to stop contributing to their retirement accounts?
Speaker 1: Completely?
Speaker 2: Right? It turns out no, that's not what they're after.
Speaker 2: They were just going for a shocking headline, which that's
Speaker 2: the internet thea's surprise, right, But the main gist of
Speaker 2: this article we actually agree with. Right.
Speaker 1: They basically wanted folks to know that WROTH accounts are
Speaker 1: better than traditional accounts for most folks. They don't want
Speaker 1: you to contribute nothing, They just want you to instead
Speaker 1: funnel that money into the WROTH. All those contributions send
Speaker 1: them into the ROTH four one K and IRA instead
Speaker 1: of the traditional versions. You'll be much better off. Yeah, yeah,
Speaker 1: the Beauty of the Wroth. IRA will link to that
Speaker 1: in our show notes. But it's a silly headline, but
Speaker 1: they're spot on. We have been all about roth's basically
Speaker 1: since since day one for most people, because I mean
Speaker 1: the downside, Yes, you miss out on the tax break now,
Speaker 1: but given where tax rates are, when we take a
Speaker 1: look back at history, they're actually fairly low. And given
Speaker 1: our country's current fiscal situation, and we talked about this
Speaker 1: last week, tax rates are very likely going to be
Speaker 1: going up come end of twenty twenty five. And in
Speaker 1: addition to switching those contributions from traditional to ROTH, it
Speaker 1: actually might even make sense for some people to come
Speaker 1: up with a WROTH conversion strategy for the money that
Speaker 1: they currently have sitting within a traditional IRA or a
Speaker 1: traditional four one K account. You do need to be
Speaker 1: strategic about this because of the tax consequences, Like once
Speaker 1: you make that conversion, the taxes are going to be
Speaker 1: due because of course those were those accounts were funded
Speaker 1: with pre tax dollars and so by moving it to
Speaker 1: a post tax account, well you got to get tax.
Speaker 1: That's yeah, don't hear us sayings tax the ross are
Speaker 1: so much better that you should go and convert two
Speaker 1: hundred k in IRA money right now to traditional iron
Speaker 1: money to WROTH money because huge tax bill.
Speaker 2: If you got a word plan, Yeah, it takes a
Speaker 2: lot of planning to get this right, and you might
Speaker 2: find that you don't have the money to pay the
Speaker 2: taxman when that happened to pay the piper yeah, it's
Speaker 2: typically something that you want to do gradually, and honestly.
Speaker 1: We we should maybe work on a Roth conversion or
Speaker 1: a rap Roth conversion ladder article up on the site
Speaker 1: because it can get confusing. But this is how if
Speaker 1: you are into early retirement, this is how you're able
Speaker 1: to tap those retirement dollars early by setting up a
Speaker 1: Roth conversion ladder. So basically by moving it from one
Speaker 1: of those pre tax accounts like a four to one
Speaker 1: K or traditional IRA and moving it over to a
Speaker 1: Wroth IRA, you're able to tap those funds because they
Speaker 1: count as quote unquote contributions from those other accounts as
Speaker 1: long as you've got to wait five years. But after
Speaker 1: those five years are up, you have access to that money,
Speaker 1: or that money can just sit there and continue to
Speaker 1: grow tax free. You withdraw it tax free, but also
Speaker 1: if you want to pull it early, it's penalty free
Speaker 1: as well. Right.
Speaker 2: I think the biggest takeaway though is for listeners who say, oh,
Speaker 2: I love getting the tax break, it's so fun, so nice,
Speaker 2: but that you're going to pay the tax at some point,
Speaker 2: and you might pay at a much higher rate in
Speaker 2: the future, and so taking the Wroth in the hand
Speaker 2: right now is for a whole lot of folks, Not
Speaker 2: for everyone, but for a whole lot of folks, is
Speaker 2: the better choice. Even though it means paying more in
Speaker 2: tax today, it's gonna mean a whole lot less tax
Speaker 2: in the future.
Speaker 1: That's what we believe, yep.
Speaker 2: And it's also true in a lot of ways too.
Speaker 2: Just well, I don't know, it's complex. Well, well we'll
Speaker 2: leave it there for now. All right, let's talk about
Speaker 2: streaming for a second, Matt, Disney Plus and Hulu are
Speaker 2: about to start charging people more money. AD free versions
Speaker 2: are going up in price in October by twenty seven
Speaker 2: percent and twenty percent, respectively. So it's not just a
Speaker 2: tiny little bitty hike to keep up with inflation. It's
Speaker 2: like a no time to turn on the earnings bigot
Speaker 2: for the for Disney right, and so that means that
Speaker 2: Disney Plus has doubled in prices at launch just a
Speaker 2: few years ago. Not only that, though, they're taking a
Speaker 2: page out of the Netflix playbook, and they plan a
Speaker 2: crackdown on password sharing. So you and I we currently
Speaker 2: share this Disney Plus log in so you can watch
Speaker 2: in conto with your son. But if the prices go
Speaker 2: up and we can't share. I feel like Disney's on
Speaker 2: the chopping block the rest, right, it's a different prop
Speaker 2: is this it's like a double price increase.
Speaker 1: Well, in one of the reasons they're doing this, their
Speaker 1: plan previously was expanding to other markets, but that's really
Speaker 1: really expensive, and it's some of those subscribers don't stick
Speaker 1: around either, and so they're trying to squeeze more money
Speaker 1: out of their existing customers, you and me, because they're
Speaker 1: counting on consumer inertia, like status quo bias kicks in
Speaker 1: and you think, well, I don't want to do this.
Speaker 1: We do not want you to be like those individuals
Speaker 1: who are just like, oh, well it's already set up.
Speaker 1: I don't want to have to create a new password
Speaker 1: if I want to resubscribe that whole thing. No, if
Speaker 1: you are not getting the value out of this scene, Yeah,
Speaker 1: like you said, it should be on the chopping block.
Speaker 2: And I know there's a new half season of Bluey
Speaker 2: and it's it's great, and but has it already come out?
Speaker 1: Yeah? I think okay, yeah, I thought they both come
Speaker 1: out over the summer. Did one come out at the
Speaker 1: end of the summer. I don't know. That's a good question.
Speaker 1: I know I can't watch dude. I wish I had
Speaker 1: enough time to sit down with the kids and watch
Speaker 1: Blue because it's the best kids show.
Speaker 2: Yeah it really is. Far it really is. But here's
Speaker 2: the thing. My kids might be, you know, crying into
Speaker 2: their blankets because they might be upset, but there's no
Speaker 2: more Bluey. Loyalty is going to cost you, right, and
Speaker 2: like we always say, you can cancel and you can
Speaker 2: always subscribe again later. So yeah, if there's a specific
Speaker 2: show you want to watch, sign up and then cancel
Speaker 2: after you've watched it.
Speaker 1: Be strategic.
Speaker 2: Yeah, don't be loyal just because for the sake of loyalty.
Speaker 2: As all these streaming services continue to just massively increase
Speaker 2: what they're charging, it's i mean starting to feel on
Speaker 2: par with, if not exceeding, what cable bills used to be.
Speaker 1: That's right, man. All right, let's talk about some credit
Speaker 1: card debt because we have officially hit the one trillion
Speaker 1: dollars in credit card debt mark. This is actually we
Speaker 1: kind of jumped the gun slightly on this, like maybe
Speaker 1: a couple months ago, and we were talking about this.
Speaker 1: It wasn't official from the FED yet, but we knew
Speaker 1: we were Yeah, we knew what was having. And of
Speaker 1: course this headline number is not great, one trillion dollars,
Speaker 1: but it's also maybe not as bad as you might think.
Speaker 1: Consumer debt. It is still below the US norm. Actually
Speaker 1: credit card debt. It's actually just six percent of the
Speaker 1: total deposits that households have in the bank, which is
Speaker 1: basically the lowest percentage in the past twenty years. It
Speaker 1: was actually double that twenty years ago. So I'm playing
Speaker 1: devil's advocate here. That was the arguments saying, hey, it's
Speaker 1: not that big of a deal. Here's the thing. The
Speaker 1: biggest spending areas that have led to this balloon and
Speaker 1: overall credit card spending and debt are dining, travel and
Speaker 1: experiences and blasted check. These are all optional categories. We're
Speaker 1: going into debt for once, not needs. And there is
Speaker 1: nothing wrong with a credit card itself. It's a tool.
Speaker 1: We are huge fans of using credit cards for the
Speaker 1: different rewards and points that they provide, but it is
Speaker 1: how you use it, and if you can't pay off
Speaker 1: the balance on time and in full every single month,
Speaker 1: we want you to stop using it. Yeah, if you
Speaker 1: keep bashing your finger with the hammer stop using the hammer, right.
Speaker 1: The same thing with the credit card. Yeah, and again,
Speaker 1: with interest rates continuing to rise all across the board,
Speaker 1: with everything, we're seeing credit card debt being even worse
Speaker 1: for you than the normal. And I wonder because I recently,
Speaker 1: I've only ever had one credit card on my Apple
Speaker 1: pay within my wall, but I recently he said, I
Speaker 1: need to have all the cards in there. That way
Speaker 1: I can if I don't happen at my walt. I
Speaker 1: don't want to be stuck using the one unoptimized card.
Speaker 1: I want to be able to funnel my spending the
Speaker 1: right way. I wonder if that has any sort of
Speaker 1: impact on individuals usage as well, when you can just
Speaker 1: double click it and top the phone. But regardless, it
Speaker 1: is becoming more costly if you are a careless user
Speaker 1: sure of your credit card.
Speaker 2: Yeah, that's true. And late payments have gone up to right,
Speaker 2: which which means those purchases are costing folks even more
Speaker 2: in interest and penalties than they were a couple of
Speaker 2: years ago. And this is good news for credit card companies,
Speaker 2: but it's just it's not for us as individuals. The
Speaker 2: US norm when it comes to handling debt is not
Speaker 2: that great. And so if you're shooting to be normal,
Speaker 2: to be like everyone else, you're you're going to be
Speaker 2: in a bad financial spot.
Speaker 1: Right.
Speaker 2: The average person has about six thousand dollars in recurring
Speaker 2: credit card debts and an average illustrate of about twenty percent,
Speaker 2: which means they're paying twelve hundred dollars a year just
Speaker 2: be able to use that piece of plastic to make privilege.
Speaker 1: Of everting those points that maybe you're not even actually
Speaker 1: fully taking advation.
Speaker 2: So it's my contention, it's ark the normal sucks, right,
Speaker 2: The average person is very little saved, which sucks. And
Speaker 2: we talk about talked about last week the average length
Speaker 2: of a car loan, it's really long. And we talked
Speaker 2: about the average price of a car what people are
Speaker 2: paying now. It's a lot of money, and that's normal,
Speaker 2: but it shouldn't be normal. So so don't base your
Speaker 2: goals on what the average American is doing with their
Speaker 2: finances based on don't don't do. Don't take your cue
Speaker 2: from what normal people who do the average American does, yeah,
Speaker 2: because normal people are, you know, screwing over their futures
Speaker 2: for current consumption. Yeah, the average American also throws away
Speaker 2: a third of all the groceries and watches seven hours
Speaker 2: of TV a day or something like that.
Speaker 1: These are not things that we want you to do.
Speaker 1: We want you to be weird. But let's talk about
Speaker 1: a different kind of borrowing. Let's talk about taking money
Speaker 1: out of your home. As anyone who who wants to
Speaker 1: buy a home nose, it's really expensive these days. Prices
Speaker 1: have gone up significantly over the past few years, especially
Speaker 1: interest rates as well, and this has created an affordability crunch.
Speaker 1: But if you bought a house between let's say a
Speaker 1: two thousand and nine to twenty twenty ish or maybe
Speaker 1: twenty twenty one after the run up, you've definitely accumulated
Speaker 1: a chunk of home equity. And some analysts out there
Speaker 1: are predicting that the next place that consumers are going
Speaker 1: to be tempted to grab money so that they can
Speaker 1: continue to spend in a way that they've become accustomed
Speaker 1: to right spending on dining, travel and experiences, is that
Speaker 1: they're going to end up tapping the equity in the
Speaker 1: form of a cash out refinance or maybe a helock
Speaker 1: or a home equity loan. These are all forms of
Speaker 1: borrowing that were almost scared because there's a large amount
Speaker 1: of money sitting there, you know, in the piggy bank
Speaker 1: of your home. And if folks turn to that with
Speaker 1: dollar signs in their eyes and they're thinking, oh, I
Speaker 1: want to continue this luxury living that been accustomed to,
Speaker 1: it could lead to some bad things for sure.
Speaker 2: Yeah, taking out that money can lead to a lot
Speaker 2: of financial heartache, a lot of financial difficulty. And the
Speaker 2: total mortgage debt right now in the country stands as
Speaker 2: something like twelve and a half trillion, but there's almost
Speaker 2: thirty trillion in home equity, and so it starts to
Speaker 2: get tempting. Right Like you said, Matt, you see dollar signs,
Speaker 2: it starts to get like.
Speaker 1: It starts a swell little yeah, like bursting. Not the same.
Speaker 2: You're like, my saving's council low, but my helock is fat,
Speaker 2: so maybe I should grab some of that. But a
Speaker 2: cash out refive is a bad idea for almost everyone
Speaker 2: with a low mortgage rate. Right now, you're giving up
Speaker 2: something great that you have locked in for a whole
Speaker 2: lot of years. You're giving up the equivalent of a
Speaker 2: luxury item for jeloppie. Right, That's that's what's happening in
Speaker 2: the financial terms in Yeah, if you train it in
Speaker 2: your three percent mortgage for a seven percent just because
Speaker 2: you want access to that cash, that's a that's a
Speaker 2: terrible ideat.
Speaker 1: It says. If you won the prize of free Subway
Speaker 1: for life and you're like, I'm just tired of my
Speaker 1: name being Subway, I don't want the free sandwiches anymore. Yeah, yeah,
Speaker 1: and changing your name to brisket.
Speaker 2: Don't give those sandwiches up unless that means free barbecue,
Speaker 2: in which case it's a smart move.
Speaker 1: Would you do it for just a chance a free barbecue? Though?
Speaker 1: Oh no, No, to keep a bird in the hand.
Speaker 2: Yeah, But most folks should avoid the temptation to use
Speaker 2: those funds to fuel their consumption. Right homeowners are, they're
Speaker 2: in a pretty solid position right now, but it's easy
Speaker 2: to undo that by treating your home like an ATM,
Speaker 2: by by snagging those funds and doing dumb.
Speaker 1: Stuff with them.
Speaker 2: If you're like making home upgrades, that's one expense that
Speaker 2: can make real sense with some of those funds. But
Speaker 2: don't over leverage yourself while using that home equity line
Speaker 2: of credit. And in one additional caveat, by the way,
Speaker 2: opening a helock can function like a backup emergency fund.
Speaker 2: We think that homeowners should in all likelihood most of
Speaker 2: the time have a helock on hand. It's nice in
Speaker 2: the case of emergency, but it's like, uh, but it's
Speaker 2: the same thing as like break glass in case of emergency.
Speaker 2: You don't grab that hatchet or the fire extinguisher out
Speaker 2: unless it really is a fire, and so you don't
Speaker 2: want to concoct a fire in your mind to grab
Speaker 2: the funds only if it's a real emergency. Doesn't make
Speaker 2: sense to actually draw that down.
Speaker 1: Yeah, that's right. And this way is just like a
Speaker 1: credit card. It's a tool. It comes down to how
Speaker 1: it is that you use it. But Buddy, that's going
Speaker 1: to be it for our Friday flight. We hope everyone
Speaker 1: has a fantastic weekend and we will see back here
Speaker 1: on Monday. We've got a great listener questions episode lined
Speaker 1: up for you. You can find the different stories and
Speaker 1: any resources that we mentioned up in the show notes
Speaker 1: for this episode at howdomoney dot com. Buddy, that's gonna
Speaker 1: be it for this one. Until next time. Best Friends Out,
Speaker 1: Best Friends Out,