Speaker 1: Welcome to How to Money. I'm Joel and I am Matt.
Speaker 1: Today we're going to answer some of your listener questions.
Speaker 2: You know what, buddy, And by the ways, there might
Speaker 2: be some newer listeners out there who are thinking, how
Speaker 2: do I get my voice memo played on the How
Speaker 2: to Money podcast?
Speaker 1: All you gotta do is record.
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Speaker 2: at how to Money pod at gmail dot com.
Speaker 1: Send Matt one hundred bucks via Venmo. It does help
Speaker 1: to question a little bit. Now, I'm just kidding. And if,
Speaker 1: by the way, whatever question you have, send it over.
Speaker 1: Like if it's a question you've been batting around in
Speaker 1: your brain, chances or somebody else has that question, you
Speaker 1: might think, Yep, this is a stupid question. Nobody else
Speaker 1: is thinking the same thing. But that's just not true.
Speaker 1: You would be wrong.
Speaker 2: And plus it just add so much color. We love
Speaker 2: hearing where everybody's from, what they've got going on in
Speaker 2: their life. It adds a lot of detail and color
Speaker 2: to the different financial topics that we talk about day
Speaker 2: in and day out. But we're gonna hear from a
Speaker 2: listener who is looking to manage some of his car
Speaker 2: at maintenance costs how to do that most effectively. Another
Speaker 2: listener is looking for some clarity on her WROTH and
Speaker 2: her traditional IRA accounts. Specifically, she's asking about contributional limits.
Speaker 2: And we've got someone else who's looking to mitigate some
Speaker 2: risk when it comes to house hacking. We'll get to
Speaker 2: that as well as additional personal finance topics during our
Speaker 2: episode today.
Speaker 1: Buddy most deeph All right, well, let's start off looking
Speaker 1: forward to it. One interesting personal finance topic that I
Speaker 1: wanted to cover, Matt after seeing it in the hod
Speaker 1: of Money Facebook group. Listener Devin made a post and
Speaker 1: you and I we haven't done a frugal achievement a while,
Speaker 1: and so I was like, oh, this is a good
Speaker 1: frugal chief, Matt, and I should bat this one around,
Speaker 1: he asked. And if you're not a if you haven't
Speaker 1: signed up for the how of Money Facebook group, please
Speaker 1: go join if you're on Facebook, because it's occasionally there's
Speaker 1: silly things like this in there, but most of the
Speaker 1: time it's people helping each other out. And this was
Speaker 1: an hon question I think from Devon truly saying should
Speaker 1: I save money in this way? And tell you what
Speaker 1: he asked you, I call this serious as well.
Speaker 2: Yeah, you should say sometimes the questions are more technical,
Speaker 2: whereas this one is.
Speaker 1: It's a little more lifestyle based. That's right, that's right.
Speaker 1: So his question was essentially, winshow wipers taking them off
Speaker 1: my car? Is that frugal or cheap? And he was
Speaker 1: basically saying, what if I take them off when I
Speaker 1: know it's not gonna rain, Because even just the sun
Speaker 1: beating down on them is wearing at these windshield wipers,
Speaker 1: And so guess what if I leave them in the
Speaker 1: garage or maybe maybe even in the house and heated
Speaker 1: and cooled, Matthews, windshield wipers are gonna last a whole
Speaker 1: lot longer. I don't know what's your take on Devon's fruguler.
Speaker 2: Cheap question, So I think, okay, I'm pretty sure that
Speaker 2: you're gonna I know which direction you're gonna go in,
Speaker 2: and so I'm gonna start start out by saying that
Speaker 2: I think the knee jerk reaction is that this is
Speaker 2: I think most people hear in this are like, man,
Speaker 2: that is so cheap.
Speaker 1: Basically everybody in the Facebook group said please don't do that.
Speaker 2: But I think the reason that a lot of folks
Speaker 2: would say that is because this is just an unorthodox
Speaker 2: way to save money. And you know what, Joel, we
Speaker 2: don't discriminate. We do not hate when it comes to
Speaker 2: how does that people spend their money. That is the
Speaker 2: craft beer equivalent. We always ask our guests, hey, what's
Speaker 2: one way that is a total waste of money in fact,
Speaker 2: but for you, you find a whole lot of joy
Speaker 2: in spending your money this way. And so by that
Speaker 2: same token, I feel I can't go down the path
Speaker 2: of hating on someone's practice of how it is that
Speaker 2: they save money because for that person it just might
Speaker 2: be I don't know, it's just one thing, and for
Speaker 2: different unique individuals out there, they might really enjoy how
Speaker 2: it is that they're able to save a buck. What
Speaker 2: I'm saying, I totally know what you're saying, Yeah, and
Speaker 2: I agree. I think for a minute there, maybe I've
Speaker 2: talked to Smack about plasma donation and I feel bad
Speaker 2: about that now because we have listeners who do that.
Speaker 2: They make extra money donating plasma, and I did it
Speaker 2: in college, and so it was just like, I think
Speaker 2: I've gotten past a point where I'm willing to do that.
Speaker 2: That doesn't mean that other people can't do it successful.
Speaker 1: If not talk trash about donating plasma on the show.
Speaker 1: I feel like I did. I don't know, maybe like
Speaker 1: a year ago or something really and then we had
Speaker 1: a listener.
Speaker 2: We had a listener even write in or maybe maybe
Speaker 2: it was an email, and that's how he would pay
Speaker 2: for vacations. Yeah, it's specifically like trips to Disney. They
Speaker 2: travel a ton and for him, it's how he's sort
Speaker 2: of mentally accounted for it.
Speaker 1: He siloed the money that he makes via donating plasma
Speaker 1: and that's awesome vacation. And I think, but I think
Speaker 1: I cheapened that a little bit because I was just like, ah,
Speaker 1: I wouldn't do that. Different strikes for different folks, but
Speaker 1: these different structure for different folks. I guess this one
Speaker 1: makes me worried about the listeners safety at time. Like
Speaker 1: let's say there is some sort of pop up thunderstorm.
Speaker 1: We live in Atlanta. Those happen all the time. What
Speaker 1: if you accidentally pop on your Wins show wipers and
Speaker 1: they're not there, you have to sit, You're wasting time.
Speaker 1: I guess the savings are so potentially small. I just
Speaker 1: don't know that it makes sense to focus on this
Speaker 1: one to take the wind show wipers on and off,
Speaker 1: like depending on how whether checking your phone and stuff
Speaker 1: like that. What's so what they're going to be like
Speaker 1: today tomorrow? And I get the downside possibilities for forgetting
Speaker 1: your win show wipers are far more severe than the
Speaker 1: potential cost savings that you're gonna accrue.
Speaker 2: Yeah, you can always keep him in your car that way.
Speaker 2: If it does start to rain, you just hop out
Speaker 2: pop them on real quick.
Speaker 1: That's true. You know you can do it that way.
Speaker 2: But I agree with you ultimately though, Like practically speaking,
Speaker 2: I just know that. So I recently changed out the
Speaker 2: wipers on our van. By the way, do they always
Speaker 2: sell them at Costco? I think the micheline ones where
Speaker 2: they don't squeak at all, and which is something that
Speaker 2: our kids have been complaining.
Speaker 1: About like for years. I actually I think they.
Speaker 2: Rode in y'all's van and they're like, oh, it's so quiet.
Speaker 2: And that's when I realized, Oh, I just need to
Speaker 2: get the non cheap whin Scholl wipers that.
Speaker 1: They sell at Costco. And honestly, when they're on sale,
Speaker 1: they're cheap. They're eight bucks a blade.
Speaker 2: Yes, literally, I bought two of them for sixteen bucks. Yeah,
Speaker 2: but so I recently changed them out. And what happened, though,
Speaker 2: is when you're popping off the old ones, a lot
Speaker 2: of times what happens is the little plastic tab that
Speaker 2: holds them on breaks. And so this could be an
Speaker 2: instance where Devin ends up actually paying more money because
Speaker 2: of the fact that maybe he's getting ready to pop
Speaker 2: off a perfectly brand new pair of wipers that he
Speaker 2: had on during last week is a rainy week, and
Speaker 2: he's going to wanting to preserve him and he ends
Speaker 2: up breaking a tab. He's up the creek without a paddle.
Speaker 2: Then he's got to go maybe buy a whole other set. Yeah,
Speaker 2: And then okay, so here's another So.
Speaker 1: We've talked about.
Speaker 2: We dedicated an entire episode to are you being frugal
Speaker 2: or are you being cheap? And one of the things,
Speaker 2: like one of the criteria that we encourage folks to
Speaker 2: think through was are you being too near sighted? Are
Speaker 2: you only looking at the short term as opposed to
Speaker 2: the long term. And so I was picturing myself in
Speaker 2: the situation and I'm like, Okay, I'm driving around my
Speaker 2: Winchel wiper arms are up there and they're sitting there
Speaker 2: against the glass, and then I pictured that.
Speaker 1: I was like, oh, I don't like that.
Speaker 2: I don't like the idea of the arms sitting there
Speaker 2: against the glass. And then I thought, what if my
Speaker 2: knee bumps the winchell wiper arm and then that metal
Speaker 2: just scratches across the glass of the of the windshield.
Speaker 2: And he's worried about having streaks on his windshield from
Speaker 2: there being gaps in the rubber because it's not able
Speaker 2: to wipe properly. How about permanent scratches on the windshield,
Speaker 2: Because here's the thing. You're not going to replace your
Speaker 2: windshield just because it's got some scratches on it. Somebody
Speaker 2: like this is going to say, now I just have
Speaker 2: to suffer through it. But that's an instance where you're
Speaker 2: trying to pinch some pennies here and there, when ultimately
Speaker 2: it's going to potentially cause you much more money or
Speaker 2: hardly down the road as well.
Speaker 1: Might say some pennies cost you dollars down the line. Yeah,
Speaker 1: you don't hit it perfectly in the way you take
Speaker 1: them on and all exactly. And I think it's just
Speaker 1: going to add a little.
Speaker 2: Hassle into your life for very little savings. So you're
Speaker 2: super tall. I know you bump the winchell wiper arm
Speaker 2: all the time. I know you're like just climbing in
Speaker 2: for me now your vehicle. It's true. Yeah, So I'm
Speaker 2: just gonna say, and you know, not again, not in
Speaker 2: a hating way, but this was cheap in my estimation.
Speaker 1: Ultimately, I agree.
Speaker 2: I love the creativity in some of the different ways
Speaker 2: that folks want to get out there to try to
Speaker 2: save some money, But in this way, practically speaking, I
Speaker 2: think it's just not going to pan outgain.
Speaker 1: Maybe too far. All right, Matt, let's mention the beer
Speaker 1: we're having on this episode. This one is called Champion Ground.
Speaker 1: It's abourbon barrel aged out with coffee in it from
Speaker 1: the good folks over at Jackie. O's really looking forward
Speaker 1: to having this one. We'll give our thoughts at the
Speaker 1: end of the episode. But yeah, if you have a
Speaker 1: money question for us, please do submit it. The instructions
Speaker 1: can be found at how money dot com slash ask mount.
Speaker 1: Let's get to the first question for this episode. This
Speaker 1: one is about car maintenance and how to budget appropriately.
Speaker 3: Hey guys, this is Rory from Highlands Ranch, Colorado. Thank
Speaker 3: you so much for everything you do and for sharing
Speaker 3: your knowledge and expertise so widely via the podcast. That's
Speaker 3: super appreciated. My question today is on navigating carbon maintenance costs.
Speaker 3: I'll just raise my hand and say, I'm not that
Speaker 3: knowledgeable about cars, and I'm not very handy. I'm certainly
Speaker 3: not a mechanic. So when I go into the shop
Speaker 3: to get oil changes performed, oftentimes the technician will recommend,
Speaker 3: you know, various sort of maintenance services that be done,
Speaker 3: like break fluid flushes, and a recent one was a
Speaker 3: rear differential fluid flush. I struggle a little bit because
Speaker 3: these these kind of everyday maintenance upkeep items are so expensive.
Speaker 3: So for example, for that break fluid flush, it cost
Speaker 3: one hundred and fifty dollars, one hundred and twenty five
Speaker 3: dollars of which was which was labor. And I got
Speaker 3: to imagine that this is a pretty straightforward procedure, so
Speaker 3: it just seems so expensive. So I'm wondering if you've
Speaker 3: got any tips or advice on how to navigate these
Speaker 3: types of costs so that you're not spending you know,
Speaker 3: an arm and a leg on them, especially when you're
Speaker 3: just not that handy and not very well equipped to
Speaker 3: do them yourself. Thanks a lot of guys, Bye Joe.
Speaker 2: I like how Rory said that he is gonna go
Speaker 2: ahead and raise his hand and admit that he's not
Speaker 2: super handy.
Speaker 1: I can just picture like a group.
Speaker 2: It's like, oh no, don't pick me, I can't change
Speaker 2: mo oil. It's being honest with your talents and the capabilities.
Speaker 1: That you have. I too, will raise my hand alongside Rory.
Speaker 1: I have friends who are great at car maintenance, and
Speaker 1: I'll you know, pick their brain, ask them questions. Sometimes
Speaker 1: Hey I'm hearing the sound, Hey this thing is going
Speaker 1: on with the car, and they've always got great advice
Speaker 1: or they're like, just take it to your mechanic. And
Speaker 1: that's what I end up doing because I can do
Speaker 1: the most incredibly basic stuff like change my winshow wiper blades.
Speaker 1: That's fairly That's about as far as it goes from me, though,
Speaker 1: And so we say, like, first, first things, first, verify
Speaker 1: whatever quote you're getting Rory. You know, one way to
Speaker 1: do that is to utilize a tool that Kelly Bluebook offers,
Speaker 1: which is going to help you estimate what to repair
Speaker 1: for your given making. My should cost. So Matt I
Speaker 1: looked up what the service that he was talking about
Speaker 1: would cost on our twenty thirteen Odyssey, and one hundred
Speaker 1: and fifty bucks seems like a great deal based on
Speaker 1: kind of the numbers that it spit back out for
Speaker 1: a break flush. Yeah, exactly. I think it was supposed
Speaker 1: to be between one hundred and seventy three and two
Speaker 1: hundred and twenty three bucks something like that. So one
Speaker 1: hundred and fifty bucks, it's like, oh, that's actually not
Speaker 1: that bad. But the tool is really, I think, a
Speaker 1: godsend when you're trying to figure out if the quote
Speaker 1: that you were given is based in reality or not.
Speaker 1: So at least you can see what Kelly Blue Book
Speaker 1: says you're likely to pay to either an independent mechanic
Speaker 1: or a dealer. They kind of break it up like
Speaker 1: that so you can know, Okay, cool, Wait a second
Speaker 1: to see it totally seems like this is not competitive
Speaker 1: with what other mechanics are likely to charge me for
Speaker 1: the same service. I need to check around, call a
Speaker 1: couple of other mechanic shops and get quotes, or wait
Speaker 1: a second, it looks like gonna get a decent deal here,
Speaker 1: or it's at least within the normal price range. Maybe
Speaker 1: I should just pay the piper.
Speaker 2: And I think that should give folks you should feel
Speaker 2: at ease once you look something up and if you
Speaker 2: can find a price, if you can get a quote
Speaker 2: that's within that range, because that's the biggest thing.
Speaker 1: It's just not knowing.
Speaker 2: It's being there in the lobby at a shop and
Speaker 2: they tell you that it's going to cost as much
Speaker 2: and you say, I don't know, well should I do
Speaker 2: that or or shouldn't I like, you've got no idea.
Speaker 2: You're kind of behold and then you're stuck there and
Speaker 2: oftentimes you probably need to get going, or you need
Speaker 2: to make a decision, you got to go to work,
Speaker 2: you're about to catch your uber or something like that.
Speaker 2: You need some data to help exactly. And so this
Speaker 2: is totally something that you can just pull up on
Speaker 2: your phone. But I think that could keep folks from
Speaker 2: just feeling taking advantage of it. I think that's what
Speaker 2: that's what I hear Rory speaking to, is the fact
Speaker 2: that it's like, well, how am I supposed to know?
Speaker 2: You feel like you just feel so vulnerable there in
Speaker 2: the moment, and especially too like.
Speaker 1: How so many people feel with people trying to sell
Speaker 1: the financial products, You're like, well, you know better than me.
Speaker 1: You're telling me I need this. I guess I should
Speaker 1: pay the big price, whereas a you know, quick little
Speaker 1: search could inform you quite a bit and you might realize,
Speaker 1: wait a second, this is fee laid and not actually
Speaker 1: terribly helpful.
Speaker 2: Except I would say that car maintenance is even you're
Speaker 2: even more. It feels like you're being held hostage because
Speaker 2: literally your car is somewhere else you or being inconvenienced,
Speaker 2: and you are just wanting to move on with life,
Speaker 2: so you.
Speaker 1: Have less time to figure out yes exactly.
Speaker 2: It's a combination of that, and I think it's also
Speaker 2: a combination of feeling that like for a lot of folks,
Speaker 2: you're not getting bigger repairs done on your vehicle like
Speaker 2: every single year, like every year you get your old changed, right,
Speaker 2: But it's not. It's like every few years that something
Speaker 2: bigger comes along. And I think what that means is
Speaker 2: that given inflation and how we've seen prices go up,
Speaker 2: we've seen prices go up on everything, and then let's
Speaker 2: say two three years go by and all of a
Speaker 2: sudden you're told it's going to cost you this much,
Speaker 2: looking the actual price of a procedure or not a procedure,
Speaker 2: this is a medical this is a car repair. Looking
Speaker 2: a fix up like that can just put you at
Speaker 2: ease as opposed to feeling like you're just getting older
Speaker 2: and you're like, oh, man, I remember when everything used
Speaker 2: to be a whole lot cheaper cars didn't used to
Speaker 2: cost us much to repair a nickel, right, exactly one
Speaker 2: thing you mentioned though, so you said, trying to figure
Speaker 2: out whether or not you should go and go see
Speaker 2: an independent repair shop or a dealer. Well, stats show
Speaker 2: that having work done at a dealership is going to
Speaker 2: cost you more, and you won't just pay more money,
Speaker 2: but you're not going to be as happy with a
Speaker 2: quality either. This is according to data from Consumers Checkbook.
Speaker 2: They found that a much higher percentage of folks were
Speaker 2: happier with the work done at a locally owned independent shop.
Speaker 2: The average hourly rate for labor there. It's also going
Speaker 2: to be more affordable as well. At a dealer it
Speaker 2: comes in at two hundred and fifty five dollars versus
Speaker 2: one hundred and eighty two dollars an hour at an
Speaker 2: independent mechanic. So that's important to keep in mind car stuff,
Speaker 2: it's not cheap. But yeah, these stats back up everything
Speaker 2: else that we've heard, everything that I've certainly experienced myself
Speaker 2: over the years about independent shops. It's at least going
Speaker 2: to be less expensive than the name brand dealership alternative
Speaker 2: out there. And you know, just because you go to
Speaker 2: one local shop doesn't mean you can't hit up some
Speaker 2: others as well, where you can maybe call around see
Speaker 2: what it is that they might charge for the same service,
Speaker 2: that kind of thing.
Speaker 1: So I needed to get new brake pads and my
Speaker 1: roaters turned recently Matt, and I was like, okay, cool.
Speaker 1: The number came back hit me in the face. I
Speaker 1: was a little surprised. I was like, wait for all
Speaker 1: four wheels, I think it was five hundred and sixty dollars.
Speaker 1: I was like, that sounds like a lot, And it
Speaker 1: was the inflation thing because I hadn't done that in
Speaker 1: a long time, and I was like, I swear I
Speaker 1: remember that being like three hundred bucks, sure, and.
Speaker 2: So maybe it was two fifty. Maybe I'm remembering ry
Speaker 2: it was like two twenty five. So I called my
Speaker 2: friend pretty sure it was one hundred and eighty dollars
Speaker 2: to fixes his own cars, and I didn't ask him
Speaker 2: to do it for me, although that would have been awesome.
Speaker 2: But I was like, does this sound normal to you?
Speaker 2: And he's like, yeah, it does. But here, call this
Speaker 2: place in this place because they do good work too.
Speaker 2: So I called two other places I trusted, and I
Speaker 2: was able to get quotes over the phone, so I
Speaker 2: didn't have to go in there and show them the car.
Speaker 2: I was like, listen, this is exactly what I'm looking
Speaker 2: to have done to this vehicle, and they had higher quotes.
Speaker 1: So I took it to the place that had given
Speaker 1: me the initial quote that I already trusted. And that
Speaker 1: I think is a really important part of this conversation too,
Speaker 1: is do you trust your mechanic? Do you think they're
Speaker 1: recommending things to you that you don't actually need. If so,
Speaker 1: that is a potential problem too, and I think it's
Speaker 1: something that maybe people worry about. I don't know how
Speaker 1: prevalent it is, but it's something people are like, I
Speaker 1: don't know if you need to replace this in such hose,
Speaker 1: but if you say that it needs to happen, I
Speaker 1: guess needs to happen. And so one thing I would
Speaker 1: recommend is to ask your mechanic to show you the issue.
Speaker 1: Most of them will, and that can be enlightening, right.
Speaker 1: I love laying eyes on the problem, even if I
Speaker 1: don't fully understand how everything's working under the hood or whatever,
Speaker 1: if you can point it out to me and show me, hey,
Speaker 1: look at the degradation in this. You can see how
Speaker 1: like this products or this part of the car has
Speaker 1: worn out over time it needs to be replaced.
Speaker 2: It pushes like a finger through some poes. You're like, oh, buddy,
Speaker 2: why don't you just leave that alone? Starts smoking and stuff,
Speaker 2: and you're like, I guess I gotta repair it now.
Speaker 1: Do whatever you gotta do. But the thing is, it
Speaker 1: is often easy for us to see, even if we
Speaker 1: don't know exactly what's going on. Maybe fluid discoloration or
Speaker 1: worn down break pads or a belt that's past its
Speaker 1: prime like those are the things that even the layperson
Speaker 1: who doesn't know anything like myself, can kind of understand
Speaker 1: when they pointed out to you. And the best mechanics
Speaker 1: are typically more than willing to spend a couple minutes
Speaker 1: showing that problem to you and explaining it to you
Speaker 1: to put you at ease totally.
Speaker 2: Yeah, I think another question to ask too is what
Speaker 2: would happen if I don't go through with this maintenance
Speaker 2: right now? Yeah, so recently I received a quote. It
Speaker 2: was like for some steering arms or like tyrod arm
Speaker 2: bushings or something. It was like the little rubber piece
Speaker 2: or plastic piece that goes between it sounds like a
Speaker 2: made up thing, I know exactly, but yeah, you get
Speaker 2: super curious and say, oh, what does that mean? Like
Speaker 2: I would love to see that A because well I
Speaker 2: am curious, but B there's a little bit of accountability there.
Speaker 2: It's just like I would love for you to help
Speaker 2: me to understand why this is gonna cost so much.
Speaker 2: He showed it to me. I saw the cracks, but
Speaker 2: then ask, okay, well, if I don't do this, what
Speaker 2: does that mean?
Speaker 1: Is it dangerous? Is the car going? Am I gonna
Speaker 1: lose control and crash or something like that?
Speaker 2: And they're like, oh, no, you'll start to notice some clunking,
Speaker 2: like when you turn over time it'll continue to degrade. Okay, great,
Speaker 2: that helps me to understand that this is not like
Speaker 2: a life or death situation.
Speaker 1: They might say, oh, six months, a year from now,
Speaker 1: you should be fine to replace them. Then if you're
Speaker 1: feeling more issues.
Speaker 2: Well, at least I can just yeah, keep I'm able
Speaker 2: to monitor it myself and kind of have a pulse
Speaker 2: as to the state of my own vehicle. And it
Speaker 2: just helps you to feel a lot more informed. And
Speaker 2: plus it helps you just to save up for that
Speaker 2: purchase as well. And so Rory, I think another I
Speaker 2: guesscommendation we'd make is just to make sure to start
Speaker 2: budgeting for these future repairs. I'm not sure how old
Speaker 2: your car is or how well it's been maintained, but
Speaker 2: depending on the age, depending on the state of your car,
Speaker 2: you might need a funnel more money maybe less into
Speaker 2: that car repair fund. Consumer reports they actually have solid
Speaker 2: stats on the likely annual repair costs based on the
Speaker 2: age as well as the vehicle type, which which certainly helps.
Speaker 2: And then if you overstuff it, you know, if you've
Speaker 2: got too much cash on hand, well, that means you've
Speaker 2: got more money on hand for.
Speaker 1: The purchase of your next vehicle. Matt, I've never had
Speaker 1: too much cash on hand. I haven't either. I would
Speaker 1: be willing to endure that problem though.
Speaker 2: I'll point out to you this is when having being
Speaker 2: a money nerd and keeping up with all of your
Speaker 2: expenses pays off. Because I was able to open my
Speaker 2: excel file, jol and I was able to quickly just
Speaker 2: a nice glance, see how much I spent on average
Speaker 2: over the past decade.
Speaker 1: You want to guess on annually for car maintenance annually
Speaker 1: on our van? Yeah, okay, I'm gonna say, I guess so.
Speaker 2: It's ten years. We haven't had our van for ten years.
Speaker 2: So before that we had the VDUB yeah beside, okay,
Speaker 2: So overall, I'm gonna say twelve hundred dollars. Okay, So
Speaker 2: I came in low. Seven hundred and thirty bucks. Wow,
Speaker 2: seven hundred and twenty nine dollars and twenty four cents.
Speaker 1: To the exact.
Speaker 2: But what that gives you the ability to do is
Speaker 2: at the beginning of the year, when you're making your budget,
Speaker 2: to say, all right, by the end of this year,
Speaker 2: let's just round up. Let's say we need eight hundred
Speaker 2: bucks in that account to handle any likely maintenance costs.
Speaker 2: All right, sixty six bucks a month. Let's just start
Speaker 2: plugging that into the savings bucket for card maintenance, four
Speaker 2: different repairs that might pop up, And that way you
Speaker 2: can It feels different too, a to know that, Okay,
Speaker 2: this is a legit repair that needs to be made.
Speaker 2: But then also, man, I've got the money set aside
Speaker 2: to make this repair happen.
Speaker 1: Yeah.
Speaker 4: Man.
Speaker 1: Last thing worth mentioning here is I think some people
Speaker 1: they when they get a repair bill or they get
Speaker 1: a quote or something like that, they freak out and
Speaker 1: they're like, it's time to ditch this ride and get
Speaker 1: something new that's not gonna give me as many problems.
Speaker 1: And I get why people think that or why people
Speaker 1: feel that way. Is that emotional response, Oh dude, it
Speaker 1: really does stink. It really does stink. But you when
Speaker 1: you look at the numbers, the numbers don't lie. And
Speaker 1: think about how much you pay have paid a year
Speaker 1: in maintenance costs for that van. Some years is more,
Speaker 1: but then some years this is. Hold on. That's the average, right, yes,
Speaker 1: But think about what the average car payment is for
Speaker 1: someone who buys a new car. It is right in
Speaker 1: that ballpark, potentially even just a little bit higher than that.
Speaker 1: I think the average monthly car payment for a new
Speaker 1: car is like seven hundred and fifty something dollars. Other
Speaker 1: other costs go up to when you buy a new car.
Speaker 1: So while it can feel like a gut punch to
Speaker 1: get a five to six twelve hundred dollars repair bill.
Speaker 1: It's so much better than the continual gut punch of
Speaker 1: a payment for sixty or seventy two months. You definitely
Speaker 1: don't want that, so Rory. Hopefully all this is helpful. Ultimately,
Speaker 1: what feels like a financial loss forking money over for
Speaker 1: car repairs, think of it as a financial win. You're
Speaker 1: forestalling your need to buy something newer that's going to
Speaker 1: cost you even more.
Speaker 2: That's right, Joel. We've got more to get to. We're
Speaker 2: gonna hear from a listener who has a sweet retirement benefit.
Speaker 2: We'll get to that and more right after this.
Speaker 1: Our back. We got more money questions we've got to
Speaker 1: get to on this episode. This next question comes from
Speaker 1: a listener who's wondering how to think about his retirement
Speaker 1: given a special perk he's been offered.
Speaker 5: Hi, Matt, Joel, this is Mike calling from Kansas City, Missouri.
Speaker 5: Love the show, love all the advice that you provided
Speaker 5: over the years, and love the theme song too. My daughter,
Speaker 5: who's now almost six, I used to comfort her and
Speaker 5: try and get her to bed back when she was
Speaker 5: an infant, and I have many happy memories of the
Speaker 5: theme song coming on as it's one or two in
Speaker 5: the morning, and I was listening to you all as
Speaker 5: I'm trying to put my daughter back to sleep. My
Speaker 5: question today is about how to figure out how pensions
Speaker 5: tie into retirement. I know you've had some previous guests
Speaker 5: and questions about teacher pensions, and my questions more about
Speaker 5: military pensions. So my spouse and I are both in
Speaker 5: our forties. My spouse is a public health service officer
Speaker 5: who's got about six more years left till she's eligible
Speaker 5: to retire, and she's able to stay in longer if
Speaker 5: she'd like. Once she does retire, though, she'll be retiring
Speaker 5: with fifty percent of base pay, and probably just as important,
Speaker 5: will also be covered from a healthcare perspective under Trycare
Speaker 5: for Life. So as we're kind of figuring out our
Speaker 5: retirement goals and strategy, how do we account for this
Speaker 5: pension or this retirement again fifty percent of base pay
Speaker 5: and having Trycare for Life. I don't want us to
Speaker 5: underinvest or underplan for retirement, but I also want to
Speaker 5: make sure that we're playing at smart so we're not
Speaker 5: sacrificing things in the current day and maybe we're putting
Speaker 5: away too much for retirement. Thanks so much and excited
Speaker 5: to hear what recommendations you might.
Speaker 2: Have, Joe, should we tell Mike that that's why his
Speaker 2: baby was up in the middle of the night was
Speaker 2: the fact that he was listening to our podcast.
Speaker 1: That's also why his baby's going to go to Harvard.
Speaker 2: Sorry, our screeching voices were in the background giving.
Speaker 1: His daughter up, like stop it, stop playing the music
Speaker 1: and they're terrible voices and I will sleep dad. Oh man, no,
Speaker 1: it's super sweet.
Speaker 2: I feel like now that we've been told this, this
Speaker 2: is the first time actually we've ever heard this, because
Speaker 2: anytime we talk about the music, we're like, man, maybe
Speaker 2: it's time to ditch the music, or maybe we're going
Speaker 2: to switch it up. I feel like you, Joe would
Speaker 2: be happy if we switch it over to like Tyler
Speaker 2: Childers sounding like so or whatever my jam. I'd be
Speaker 2: done with more like alt electronic or something like that.
Speaker 2: But now I feel now that we've heard from Mike,
Speaker 2: I feel like we.
Speaker 1: Can't really switch things up. I know, you know some people.
Speaker 1: I feel like what we've heard most consistently is that
Speaker 1: it sounds like the theme music from Entertainment Tonight. I
Speaker 1: hate that, yeah, which is kind of true. People don't
Speaker 1: even know what EAT is anymore. I don't. I don't
Speaker 1: think so.
Speaker 2: That was early nineties, dude, Man, that show was We're
Speaker 2: dating ourselves, popping back in the day, show.
Speaker 1: Fire, you know what they say? Yeah, all right, let's
Speaker 1: get to the heart of Mike's questions, specifically talking about
Speaker 1: pensions and retirement. They're dying off obviously incredibly quickly. So
Speaker 1: this question, Matt, it's not as applicable to as many
Speaker 1: folks it used to be, But I do think just
Speaker 1: to maybe make it more applicable to everyone out there,
Speaker 1: maybe use our answer to this question and think about
Speaker 1: how it relates to factoring in social security to your
Speaker 1: retirement plans. And I get the desire too to find
Speaker 1: the sweet spot here. We will offer some advice on
Speaker 1: that front, but I think it's also important to mention
Speaker 1: from the outset that it's a tall order. It's hard
Speaker 1: to predict the future, and even with the advice we
Speaker 1: have to offer here, please Mike realize there's a margin
Speaker 1: of error, right, as well as a lot of personal
Speaker 1: details that can impact the answer. So we're trying to
Speaker 1: achieve the same goal as you are. We want to
Speaker 1: save and invest enough to have a non worrisome retirement
Speaker 1: without overdoing it so much that we deprive ourselves in
Speaker 1: the here and now. That is a good goal to have,
Speaker 1: but also know that while you're striving for that, hitting
Speaker 1: it perfectly that's the die with zero mantra, Matt, I
Speaker 1: understand the goal to do that, Actually pulling that off
Speaker 1: is another matter. Yep, one hundred percent.
Speaker 3: Man.
Speaker 2: Yeah, and that balance is something that we're striving for
Speaker 2: as well, but just knowing that we're not going to
Speaker 2: be able to necessarily nail it perfectly.
Speaker 1: But Mike, it's also like Simone Biles at every Olympic event, right,
Speaker 1: whatever she fell out.
Speaker 2: Everything else, she's still the most She the most decorated
Speaker 2: American gymnast of all time.
Speaker 1: I'm going to say that's she's the goat. She and
Speaker 1: kater Ly Decky. What's crazy.
Speaker 2: We shouldn't go on the stange but like, have you
Speaker 2: seen the chart for different gold medal winners best all
Speaker 2: around gymnasts based on the with their age, They're in
Speaker 2: the chart as well.
Speaker 1: Because she is the first, the first.
Speaker 2: Gymnast over the age of nineteen. Since like nineteen fifty two,
Speaker 2: wow or something like that, all of the top gymnasts
Speaker 2: have been like fourteen, fifteen, sixteen, like all the way
Speaker 2: up to nineteen years old. But the likelihood of someone
Speaker 2: being able to maintain that kind of performance I guess
Speaker 2: into their twenties is just unheard of, which is.
Speaker 1: A part of why Tom Brady heurline touchdown for forty.
Speaker 2: She is like literally the gymnast gymnastic versions of Tom Brady.
Speaker 4: Wow.
Speaker 1: Yeah.
Speaker 2: So anyway, it is also pretty cool to know that
Speaker 2: you're not going to have significant health care expenses in
Speaker 2: retirement as well, because that is an incredible benefit that's
Speaker 2: certainly well earned thanks to your spouse's service. That's it's
Speaker 2: like one wild card that you're not going to have
Speaker 2: to deal with, that pretty big one the rest of
Speaker 2: us are going to have to deal with. You won't
Speaker 2: thanks to try care. The other thing is that she'll
Speaker 2: be getting that pension before she reaches full retirement age.
Speaker 2: It's amazing, but it also won't be as much as
Speaker 2: she's currently making. And so this is where focusing on
Speaker 2: your income replacement rate is how a lot of financial
Speaker 2: planners like to plan things out for retirement, and the
Speaker 2: typical suggestion is to have the goal of replacing seventy
Speaker 2: five percent of your income in retirement. And so the
Speaker 2: more that coming from the pension, the less you're going to.
Speaker 1: Need to save up and provide yourselves.
Speaker 2: And part of the reason that it's you're only looking
Speaker 2: at seventy five percent as opposed to like a full
Speaker 2: income replacement is because your expenses are typically lower in retirement.
Speaker 2: But also you won't be saving for your retirement anymore,
Speaker 2: like simply.
Speaker 1: So you've been putting twenty percent aside, you can automatically
Speaker 1: take that off exactly now you're at the point where
Speaker 1: you're tapping those funds, so like, stop saving for retirement
Speaker 1: now that you're seventy as well in taxes as well,
Speaker 1: so typically you're going to be paying less in taxes.
Speaker 1: You might not have a mortgage either, right, which is
Speaker 1: gonna be another big help. So yeah, using the pension
Speaker 1: amounts alongside the twenty five x rule of your projected
Speaker 1: retirement nest egg, I think I should give you a
Speaker 1: solid place to start. And that is of course a
Speaker 1: rule of thumb, because this is an imperfect science. But
Speaker 1: other questions that we would have for you. Are are
Speaker 1: you going to have a paid off home? Right, That
Speaker 1: is a big factor into the mix as to how
Speaker 1: much you're going to need to save in addition to
Speaker 1: that pension. If you're going to still have a house
Speaker 1: payment for many, many years into retirement, that's going to
Speaker 1: change the number that you need to save. When are
Speaker 1: you planning on retirement, Right, If you both want to
Speaker 1: retire in your early to mid fifties, you're going to
Speaker 1: want to invest more than if you're planning on working
Speaker 1: into your sixties or early seventies. How much you're setting
Speaker 1: aside depends largely on answers to those bigger questions and
Speaker 1: also how flexible you're willing to be, because you might say, Oh,
Speaker 1: I like to retire when I'm fifty four, but honestly,
Speaker 1: I like what I do, and if circumstances arise that
Speaker 1: I have to work longer, no big deal. The more
Speaker 1: flexible you can be, the less tightly focused you're going
Speaker 1: to have to be on getting that number as large
Speaker 1: as possible.
Speaker 2: Yeah, So as we zoom out, like when you're looking
Speaker 2: at the income replacement rate, that's an approach where you're
Speaker 2: looking at the income side of things, but which also
Speaker 2: essentially what you're highlighting here is like you can also
Speaker 2: just look at the expense side of things and calculate
Speaker 2: how much you're going to need based on that, and.
Speaker 1: So let's let's be honest, if you can it's a
Speaker 1: monocular calculate, it's going to be an easy Well, it's
Speaker 1: simpler like that.
Speaker 2: That's what I really like about that too, Because you
Speaker 2: can look at what your expenses are this year and
Speaker 2: the ability to just multiply that by twenty five and
Speaker 2: shoot for that amount in your retirement account.
Speaker 1: It's typically more accurate, it's going to be great.
Speaker 2: And so what you simply need to do is just
Speaker 2: take your pension amount that your wife is going to
Speaker 2: receive every single year, subtract that from your annual expenses,
Speaker 2: then multiply that by twenty five, and you should pretty
Speaker 2: dang accurately have a good number in mind as to
Speaker 2: what it is you should be shouldn't what you should
Speaker 2: be shooting for.
Speaker 1: Yeah, I guess the the other thing to factor in
Speaker 1: is lifestyle creep and we don't mean that in a
Speaker 1: bad way, but like, how are you going to inflate
Speaker 1: your lifestyle over time if you are retiring early. Do
Speaker 1: you have big ambitions in those early retirement years, You're
Speaker 1: going to want to save up more in your investment
Speaker 1: account for that too, Because if you're like, we're going
Speaker 1: to hold off all travel until we hit that early
Speaker 1: retirement age we're searching for. But once we get there, man,
Speaker 1: we're probably gonna be spending like fifteen twenty grand a
Speaker 1: year on travel. No shame in that game, but just
Speaker 1: make sure you're prepared for it. If you're not spending
Speaker 1: anything on travel now, but that's going to ramp up
Speaker 1: significantly in early retirement years. That is another part of
Speaker 1: the equation that you've got a factor in. That's right.
Speaker 1: The other thing to note is that when you have
Speaker 1: a pension, you can be less conservative with your investments,
Speaker 1: and that is because your pension acts as this safe
Speaker 1: asset class for you. Right, that could mean having more
Speaker 1: stock exposure for longer. You can be less conservative with
Speaker 1: your specific investment choices.
Speaker 2: Yeah, you go all in on crypto if you can. Well, honestly,
Speaker 2: a pension from the government might be as far to
Speaker 2: the conservative side as crypto is to the risky side,
Speaker 2: you think, except for one less there are government shutdowns
Speaker 2: that that takes place. But that's the question do pensions
Speaker 2: continue to get paid out during government shutdowns? That's not
Speaker 2: something I know at the top.
Speaker 1: May have you me either, but yeah, what we're really
Speaker 1: highlighting here is that you can have more a higher
Speaker 1: stock allocation than a whole lot of people because similar
Speaker 1: to as the bonds, similar teachers, like we talked about
Speaker 1: with Dan Otter back not a few weeks ago, Matt
Speaker 1: and he was basically saying, yeah, because of this pension
Speaker 1: that teachers have access to, they don't have to be
Speaker 1: as thoughtful in terms of their acid allocation. They can
Speaker 1: just have more of a stock heavy approach because they
Speaker 1: have that pension in their back pocket. The same is
Speaker 1: true for Mike and for his family, and we typically
Speaker 1: want people to invest at least fifteen percent of what
Speaker 1: they make. That's what we suggest Mike. We'd say, while
Speaker 1: you might find that you can invest a smaller amount,
Speaker 1: you might not want to diplow that point either though.
Speaker 1: If you're living a great life at your current savings rate,
Speaker 1: and you find that you can save less without cramping
Speaker 1: your lifestyle, without missing out on things that matter to you,
Speaker 1: you can keep things the same, and it just means
Speaker 1: you're gonna have more optionality sooner. So that's the other
Speaker 1: thing when we're talking about flexibility, Matt, it's like, well, yeah,
Speaker 1: I could cut down on how much I'm investing now,
Speaker 1: but if it's not going to meaningfully improve my life,
Speaker 1: why don't I keep investing? And guess what, at some
Speaker 1: point down the road, I'm gonna have more flexibility, more
Speaker 1: options to choose what it is I want to do
Speaker 1: and whether I want to rent my left lifestyle up
Speaker 1: in a bigger way that's going to make me happier five, six, eight, ten,
Speaker 1: twelve years down the road.
Speaker 2: That's true, Yeah, I will say, And that's good advice,
Speaker 2: and that's what we typically say because most Americans are
Speaker 2: not saving enough for their retirement by far. I would
Speaker 2: say that the majority of our listeners they I wouldn't
Speaker 2: assume that a lot of our listeners are on a
Speaker 2: pretty dang good path. They're like, they're on a good
Speaker 2: trajectory when it comes to their retirement savings, and it's
Speaker 2: certainly got bigger goals, but they're probably doing a lot already,
Speaker 2: I think so.
Speaker 1: I would think so.
Speaker 2: And so Mike, I guess the reason I bring this
Speaker 2: up is because you mentioned your daughter within your question, right,
Speaker 2: and so keep just keep in mind that the time
Speaker 2: that it takes to be a parent right now, it
Speaker 2: takes a lot of your time, is basically what I'm
Speaker 2: getting at, Like the next couple of years are not
Speaker 2: going to look like the last two years that your
Speaker 2: daughter is living with you there at your house. Like
Speaker 2: once they're in their teenage years, it requires a whole
Speaker 2: lot less of your time. And parent after parent that
Speaker 2: I talk to they mentioned this. They talk about how
Speaker 2: like they're their own person, they're interested in teenage things.
Speaker 2: And what that means typically is like honestly, more free
Speaker 2: time for you, more free time and more of an
Speaker 2: ability to continue to work, maybe to launch. Like imagine
Speaker 2: once you're an empty nester in fifteen years, maybe even
Speaker 2: ten years, you are going to have more of an
Speaker 2: ability to take risks, to work longer, to launch a business.
Speaker 2: And I don't want you to, I guess over sacrifice
Speaker 2: in the here and now, because you're trying to hit
Speaker 2: that fifteen percent fifteen plus percent, like you are in
Speaker 2: that stage.
Speaker 1: Of Russia with the pension backup. Yeah, yes, exactly.
Speaker 2: Like we talked to the money guy. We talked with
Speaker 2: Brian about the messy middle like you are in this
Speaker 2: stage of life where everything is being asked of you,
Speaker 2: more time than ever is being asked of you, more money.
Speaker 2: You are hemorrhaging like at all the different seams, whether
Speaker 2: it's like things that you and your wife want to do,
Speaker 2: whether it's things for the kids. And I think it
Speaker 2: can be really difficult to save that much money in
Speaker 2: these years right now, and I think it's okay to
Speaker 2: with that in mind, to not beat yourself up. I
Speaker 2: guess over the fact that maybe you're not quite hitting
Speaker 2: that mark, knowing that you be able to ramp things
Speaker 2: up further down the road.
Speaker 1: And that's what was so great. If you have been
Speaker 1: dedicated to saving and investing pretty heavily in those early
Speaker 1: years and then you hit the messy middle years and
Speaker 1: you feel like you can dial it back in terms
Speaker 1: of how many hours you're working, in terms of how
Speaker 1: much money you're saving and investing, and then guess what,
Speaker 1: ten years down down the road, when your kids are
Speaker 1: off partying with their friends or whatever, you know, and
Speaker 1: they don't want to hang out with you as much,
Speaker 1: then maybe you're like, I think I'm going to ramp
Speaker 1: up my work activities again, and I am going to
Speaker 1: ramp up my investing game a little bit too. That
Speaker 1: flexibility matters so much, and getting started early before you
Speaker 1: have kids is such a help. And feeling less pressure.
Speaker 1: I think in those years, Matt, when you feel like
Speaker 1: the time the time crunch is real. That's where we're
Speaker 1: at right now with munch of young kids and we
Speaker 1: have cut back our work schedule a little bit. I
Speaker 1: could totally see ramping that up down the road with
Speaker 1: that kind of like an empty nester and there are
Speaker 1: fewer domains being made of me, like on the home front.
Speaker 1: You're gonna be on CNBC like five days a week. Please.
Speaker 2: What I want to point out here is the fact
Speaker 2: that that optionality that Joel, that you're talking about, it
Speaker 2: might be to a lot of folks in granted this
Speaker 2: is a note for the parents out there specifically, but
Speaker 2: like that optionality to potentially work less. It doesn't have
Speaker 2: to be twenty thirty years in the future. It could
Speaker 2: be like a few years from now for a shorter
Speaker 2: window of time before you choose to say, hey, now
Speaker 2: I have the ability to ram things up again. And
Speaker 2: I think, because I don't know, I'm putting myself in
Speaker 2: that situation. I can picture myself doing that, Mike.
Speaker 1: I don't know. That might be a situation you find
Speaker 1: yourself in as well. One of our super good buddies
Speaker 1: just adopted a baby, and I love it for their
Speaker 1: family so excited, and he was like, are you gonna
Speaker 1: what are you gonna do? You're gonna take some leaf
Speaker 1: family leave time? He said, no, I just work part
Speaker 1: time and I'm gonna keep working part time. I love
Speaker 1: what I do. Yeah, and so this it's the perfect
Speaker 1: balance already.
Speaker 2: He has found the sweet spot. And that sweet spot's
Speaker 2: gonna vary from person to person. But Mike, we hope
Speaker 2: that you are able to find that for you and
Speaker 2: for your family. Joel, let's get to our next listener question.
Speaker 2: This one has to do with some of the finer
Speaker 2: points of contributing to multiple retirement accounts.
Speaker 4: Hi, Matt, and Joel, I have a question about Rock one. Okay,
Speaker 4: I have a TSP retirement plan through my company, and
Speaker 4: since this is a WROTH from a company, does that
Speaker 4: mean the amount I contribute for both the traditional and
Speaker 4: ROTH accounts. It's part of the limited twenty three thousand
Speaker 4: dollars contribution for twenty twenty four or is the Roth
Speaker 4: contribution a part of the seven thousand elemit? Thank you
Speaker 4: love the podcast, Matt.
Speaker 1: This is a really good question, and I think part
Speaker 1: of the me is it's a good question is because
Speaker 1: there's a lot of confusion over contribution limits, and there
Speaker 1: is we're talking abou alphabet soup when we're talking about
Speaker 1: retirement accounts so much of the time, And if you've
Speaker 1: been listening to Hot of Money for like two or
Speaker 1: three years, you might be thinking, well, I got this
Speaker 1: stuff figured out by now. But there are a lot
Speaker 1: of people out there, Matt, and understandably so it can
Speaker 1: be confusing. How much can I contribute to this account?
Speaker 1: What does that account even mean? And who has access
Speaker 1: to the account? Can I open up one of those accounts?
Speaker 1: And I wish it was simpler. It's not terribly simple.
Speaker 1: So I guess it allows us to continue having jobs,
Speaker 1: which is the best part of that. But yeah, especially
Speaker 1: when one of these accounts has at least shares the
Speaker 1: same name as another account, the Roth Ira and the
Speaker 1: Wroth four O one K, and then there's a traditional
Speaker 1: four oh one K, and you're like, and then we're
Speaker 1: throwing thrift savings plans into the mixed TSP into this question.
Speaker 2: That's what Oh, that's what Katie has. By the way,
Speaker 2: she didn't mention your name at the beginning. Yep, let's
Speaker 2: humanize this question, jol So.
Speaker 1: Yeah, so like so many accounts thrown into the mix,
Speaker 1: and it can feel like a foreign language, that's right.
Speaker 2: Yeah, So let's talk about limits, Katie, because the answer
Speaker 2: to this question is that you can contribute twenty three
Speaker 2: thousand dollars to your WROTH TSP, which is the.
Speaker 1: Federal employee equivalent of the four one.
Speaker 2: K by the way, and you can also contribute seven
Speaker 2: thousand dollars towards a WROTH IRA. And this is true
Speaker 2: for everyone out there listening who has a workplace retirement account.
Speaker 2: And by the way, also your your employer contribution, it
Speaker 2: doesn't count against your personal twenty three thousand dollars max.
Speaker 1: So if you're getting that six or nine percent match,
Speaker 1: you don't have the fact it's it's just your own
Speaker 1: attribution that is out side of that. Yeah.
Speaker 2: So you as an individual, you essentially have thirty thousand
Speaker 2: dollars that you can invest in tax event retirement accounts
Speaker 2: overall in twenty twenty four.
Speaker 1: Yeah, I remember hearing some of these numbers thrown around
Speaker 1: early in my investing career, Matt, when I was making
Speaker 1: almost nothing at my radio gig, and I was like,
Speaker 1: that's cool. Those contribution limits go that high. Who hits
Speaker 1: that though, that's insane, Like, haha, must be nice. I
Speaker 1: know exactly. But over time, hopefully you grow in your
Speaker 1: income and you're able to get closer and closer to
Speaker 1: maximumt those retirement accounts. It's easier said than done, but
Speaker 1: I love that goal at least. And then that number
Speaker 1: goes up regularly too, over the years we mentioned every year. Yeah,
Speaker 1: it goes up with inflation. That's right. So income for
Speaker 1: tax brackets goes up every year. Same thing with contribution limits.
Speaker 1: They're going up most years. And the only people who
Speaker 1: have different contribution limits than what match just outlined, by
Speaker 1: the way, are folks who are fifty and over. They're
Speaker 1: allowed to make catch up contributions. So, Matt, we're getting
Speaker 1: closer to that. We're still a little ways off. Well,
Speaker 1: in Katie, she didn't mention how old she is. Maybe
Speaker 1: she's in her two, but she might be at the
Speaker 1: other end of the spectrum, she might be closer to retirement.
Speaker 1: Let's say she's fifty two, and she's like, I got
Speaker 1: tons of money to toss that thirty thousand dollars, that's
Speaker 1: not enough. I have more than that. I want to contribute. Well,
Speaker 1: good news for you. You can put an additional one
Speaker 1: thousand bucks into your IRA each and every year, and
Speaker 1: an additional seventy five hundred into the TSP four oh
Speaker 1: one K four or three B. She has the TSP,
Speaker 1: but whatever account whoever's listening to this has, if they're
Speaker 1: over that age, they can contribute even more. So that
Speaker 1: means that folks fifteen over Matt can invest as much
Speaker 1: as thirty eight five hundred bucks, which is incredible. Again,
Speaker 1: one of those things that like twenty five year old
Speaker 1: Joel would have been like, who's doing that? Yeah, but
Speaker 1: there are people doing that. It's really impressive.
Speaker 2: I wanted to highlight something else too, so you mentioned
Speaker 2: kind of like the alphabet soup, which can be crazy
Speaker 2: confusing when it comes to all these different retirement accounts.
Speaker 2: I think another potential confusing aspect of retirement accounts is
Speaker 2: the fact that just putting your money within one of
Speaker 2: these accounts, that's only the first step towards investing. And
Speaker 2: actually I don't even like saying investing because you haven't
Speaker 2: actual invested your money. If your money is just within
Speaker 2: a four one k or if your money is just
Speaker 2: within a roth ira, because you actually have to like
Speaker 2: deploy those dollars, right, you have to like otherwise like
Speaker 2: that money is just hanging out in your account is
Speaker 2: they're kind of like these free radicals that are just
Speaker 2: like floating around.
Speaker 1: They haven't a big car, but it hasn't turned the
Speaker 1: ignission on. They haven't been told what to do.
Speaker 2: It makes me think of uh, surfing, like your money
Speaker 2: is just hanging out on the beach, right, And there's
Speaker 2: like this cliche of surfers, like folks who don't actually surf,
Speaker 2: and they're just like hanging out on the beach, like
Speaker 2: waxing down their.
Speaker 1: Board, talking about big ways that they've actually caught.
Speaker 2: Which did you watch any surfing during the Olympics a
Speaker 2: little bit? Yeah, it's like a newer event. But money
Speaker 2: that you haven't actually invested in any accounts are like
Speaker 2: those surfers where they're just kind of like hanging out.
Speaker 2: They're not really doing anything. You actually have to get wet,
Speaker 2: you gotta take you gotta take some risks. Because yes,
Speaker 2: there's a chance you'll get like totally wiped out, but
Speaker 2: you're never gonna have any fun. Like there's a zero
Speaker 2: chance of seeing your money grow at all unless it's
Speaker 2: actually invested, if you're not actually out in the ocean.
Speaker 1: So in this analogy, is the wet suit the emergency fund?
Speaker 2: No, no, no, because you don't invest any money that
Speaker 2: is your emergency.
Speaker 1: That's completely separate, So you're keeping that on the beach.
Speaker 4: Yeah.
Speaker 2: Yeah, that's the other person who's hanging out in the car,
Speaker 2: like completely safe away from any wave, away from any threat.
Speaker 1: Gotcha. The last thing I think is worth mentioning here
Speaker 1: to Katie is just massive props for prioritizing Wroth accounts,
Speaker 1: the Wroth version of the IRA and of the TSP.
Speaker 1: Oh yeah, then the traditional ones, because yes, it means
Speaker 1: paying more in tax now, but future you is going
Speaker 1: to be thankful for the absent tax bill in those
Speaker 1: retirement years. That we recently talked in depth about roths
Speaker 1: with Ed Slott, who's like is America's IRA experts, right,
Speaker 1: he provided a lot of good information, but I think
Speaker 1: one of the things he did I was you and
Speaker 1: I were already pro roth and now I feel more
Speaker 1: rapidly pro ROTH thanks to that talk with Ed, So
Speaker 1: I think ultimately it's going to be helpful to most people.
Speaker 1: The people love to see that little tax break now,
Speaker 1: but when you listen to that interview with Ed, you
Speaker 1: might rethink your desire for traditional accounts and that little
Speaker 1: bit of tax break now in favor of massive future
Speaker 1: tax savings.
Speaker 2: That's right, Was that just confirmation bias? Like we're hearing
Speaker 2: from somebody who also believes in what we believe, which
Speaker 2: is most likely going to be higher tax rates off
Speaker 2: in the.
Speaker 1: Future, and it's been doing it in a long time.
Speaker 1: He knows what he's talking about, and so I appreciated
Speaker 1: his in depth perspective. I think it's anybody who's on
Speaker 1: the line are not sure which account they should be
Speaker 1: investing in, traditional or WRATH, they should totally listen to
Speaker 1: that one.
Speaker 2: All right, man, we've got more to get to. We're
Speaker 2: gonna hear from a listener who has a question about
Speaker 2: house hacking, something that we feel like it's been a
Speaker 2: minute since we've talked about house hacking.
Speaker 1: But we'll get to that right after the break. Matt,
Speaker 1: Let's keep rolling. Let's get to our Facebook question. Of
Speaker 1: the week this one. We got an email this week
Speaker 1: from a listener wanted to remain anonymous, which is understandable,
Speaker 1: but had a question about house hacking. I'll read it here.
Speaker 1: She says, I'm a twenty nine year old woman buying
Speaker 1: a duplex with plans to live in one side and
Speaker 1: rent out the other. By the way, Matt, this is
Speaker 1: a strategy we would highly recommend to a lot of people.
Speaker 1: Love it, so we're all for it already, she said. Recently,
Speaker 1: I started worrying about a scenario where the only renters
Speaker 1: I could find were men who were flirty or disrespectful.
Speaker 1: I was concerned that if I denied a man housing
Speaker 1: based on this behavior, rather than his credit score or references,
Speaker 1: I might risk litigation under the Fair Housing Act. To
Speaker 1: my pleasant surprise, I discovered the Missus Murphy exemption, which
Speaker 1: states that an owner occupied property with four units or
Speaker 1: fewer can deny a tenant on any criteria they choose.
Speaker 1: To my immediate dismay, I learned that the Missus Murphy
Speaker 1: exemption may not apply to homes with an FAHA mortgage.
Speaker 1: I found that my mortgage details have an addendum that
Speaker 1: explicitly states I must comply with the non discrimination provisions
Speaker 1: of the Fair Housing Act. My question is it worth
Speaker 1: considering refinancing in the future to reduce the risk of
Speaker 1: this scenario. I would love to hear any insights you
Speaker 1: have on what good reasons there are to refinance and
Speaker 1: how to avoid litigation as a landlord. This is all
Speaker 1: new to me. I don't know any landlords.
Speaker 2: Yeah, okay, I guess I think it's worth taking a
Speaker 2: step back and just talking about house acting generally speaking.
Speaker 2: Maybe it's worth defining it because folks might be thinking, okay, well,
Speaker 2: like do you have to get a duplex to house hack?
Speaker 2: And we've dedicated entire episodes to house hacking, which can
Speaker 2: be as simple as having an apartment even and just
Speaker 2: reunning out one of the rooms of the apartment that
Speaker 2: counts as house hacking. It can be that it can
Speaker 2: be running your place out on Airbnb, or it can
Speaker 2: be something that takes a little more investment, like this
Speaker 2: listener is looking to do right like renting out or
Speaker 2: purchasing a duplex and running out half of it, getting.
Speaker 1: A triplex a quad plex. And we have talked about
Speaker 1: what a financial game changer it can be to house
Speaker 1: hack like, oh my gosh, it's huge, Because it's huge massive.
Speaker 1: You reduced your housing costs that can provide extra income,
Speaker 1: and so you're like, it's.
Speaker 2: The biggest line, single line item on your entire budget,
Speaker 2: like every single month is housing. So any way that
Speaker 2: you can significantly reduce that is going to make a
Speaker 2: massive difference. And we've talked before about the small wins
Speaker 2: that you get from being able to cut your hair
Speaker 2: or change your oil hat. This is something that is man,
Speaker 2: you are reaping massive dividends every single month.
Speaker 1: It's nice to hit the really big items on your
Speaker 1: budget to dramatically reduce the outflow on those, and then
Speaker 1: you don't have to cut your own hair. Yeah, or
Speaker 1: you can do both and then just bank even more.
Speaker 1: Mind Yeah.
Speaker 2: But like when I think back on my financial life,
Speaker 2: I don't have many like financial regrets. I guess I
Speaker 2: feel like everything that I look back on and I'm like,
Speaker 2: h now, that was a misstep.
Speaker 1: I was still able to learn.
Speaker 2: But man, I totally wish I did not know about
Speaker 2: house hacking prior to purchasing a home, and I wish
Speaker 2: that I would have considered that. Actually I take that back.
Speaker 2: I didn't know about it but it wasn't. It just
Speaker 2: wasn't something Kate and I were at all considering. And
Speaker 2: especially when you're younger, you're thinking in your twenties, even
Speaker 2: in your thirties, if you're looking at your first place,
Speaker 2: you're thinking, oh, this, this house has got to be perfect, right,
Speaker 2: I'm gonna be here forever. But the average American moves
Speaker 2: every five years. The chances are pretty slim that you're
Speaker 2: going to be in that house way off into the future.
Speaker 2: So what that means it doesn't have to be perfect.
Speaker 2: It can be a great place, maybe one that doesn't
Speaker 2: check all the boxes, but hey, you're actually able to
Speaker 2: better yourself financially every single month. I think that's something
Speaker 2: that I wish that Kate and I would have considered
Speaker 2: early on when we.
Speaker 1: Before we buy our But it also doesn't have to
Speaker 1: be permanent, right Like I think of when we bought
Speaker 1: a duplex. At one point, Matt that we saw the
Speaker 1: potential in making that a single family home, but we said,
Speaker 1: we don't really have the cash nor the desire to
Speaker 1: take on the debt to turn this home into the
Speaker 1: home of our dreams yet. But what if we ran
Speaker 1: out the back for a few years before we give
Speaker 1: it a go, have extra kids in space that needs
Speaker 1: to be filled, and that was like incredibly helpful. We
Speaker 1: were able to bank so much of that cash that
Speaker 1: we were getting from running out the back part of
Speaker 1: that duplex ultimately turn it into a killer single family
Speaker 1: home down the road. So yeah, we were able to
Speaker 1: do that for multiple years. It is a financial game changer,
Speaker 1: and we will link to some of our episodes on
Speaker 1: house hacking. But if you are willing to do something
Speaker 1: that presents a little more discomfort in the here and now,
Speaker 1: you can have a lot more financial comfort down the
Speaker 1: road because of it. And Matt, I gotta be honest too,
Speaker 1: I didn't know much about the Missus Murphy exemption until recently,
Speaker 1: and I think this is so great. It makes so
Speaker 1: much sense, especially for young ladies like this listener. Like,
Speaker 1: I was just talking to a single female friend Matt,
Speaker 1: who is trying to date online and it sounds utterly
Speaker 1: absurd these days. I'm so glad you and I met
Speaker 1: our spouses before the age of online dating really took hold.
Speaker 1: I can't imagine what it's like to date right now.
Speaker 1: Feel for all the single folks out there. Yeah, and
Speaker 1: I know this list, or she's not trying to date anyone.
Speaker 1: She's trying to do the opposite. I think, at least
Speaker 1: when it's a keeper distance, so she's at least trying
Speaker 1: to create solid barriers between tenant and person she might
Speaker 1: go on a date with. But I totally get why
Speaker 1: a female would want to try and protect themselves, especially
Speaker 1: when you know we're talking about running out half of
Speaker 1: a duplex and that's where the Missus Murphy exemption covers
Speaker 1: those people really beautifully.
Speaker 2: Yeah, and so we did some digging on this, and
Speaker 2: we didn't find anything that states that you wouldn't qualify
Speaker 2: for the miss Murphy exemption if you have an FHA mortgage.
Speaker 2: With that in mind, I wouldn't necessarily worry about refinancing
Speaker 2: for this reason. Maybe there might be other reasons that
Speaker 2: you might want to refinance in the future, but not
Speaker 2: necessarily for this. Something else too, is I want to,
Speaker 2: I guess, ameliorate some of your concerns about this actually happening.
Speaker 2: I don't know what the exact numbers might be giving
Speaker 2: your situation, but HUD so the housing and urban development
Speaker 2: everyone's heard of HUD, but they've got some numbers and
Speaker 2: figures and of the millions and millions of different rentals
Speaker 2: that are out there, I think they've received something like
Speaker 2: thirty three thousand different complaints. And that might sound like
Speaker 2: a whole lot of complaints, right, but when you actually
Speaker 2: do the math, what that comes out to is a
Speaker 2: point zero eight percent complaint rate.
Speaker 1: And that's just complaints, right, that's assuming that. I think.
Speaker 2: Let's be honest, I think there are a lot of
Speaker 2: complaints unfortunately that get voiced where there isn't a whole
Speaker 2: lot that's done essentially.
Speaker 1: Yeah, or maybe they're against maybe serial abusers from like
Speaker 1: let's say it's one of the Wall Street firms right
Speaker 1: that continues, or some frustrated people, or.
Speaker 2: Or somebody that's just being like straight up racist, right, Like,
Speaker 2: I've got to think that the folks who are voicing
Speaker 2: their concerns are I mean, they either feel like full
Speaker 2: on threatened or they feel that they've been just treated
Speaker 2: in an incredibly unfair way. It does not sound like
Speaker 2: that that's what you are planning to do. You are
Speaker 2: trying to protect yourself and so it's you do keep
Speaker 2: some of those protected classes in mind. But I think
Speaker 2: the likelihood of this happening to you as a landlord
Speaker 2: they're at your duplexes is highly unlikely.
Speaker 1: Yeah, exactly, And I wouldn't want to spend the thousands
Speaker 1: and thousands of dollars that it would take to refinance, unless,
Speaker 1: of course, you were also locking in a much lower rate,
Speaker 1: and breaks have ticked down recently, so that might be
Speaker 1: the case totally, But you don't want to spend those
Speaker 1: thousands of dollars just to feel like you're perfectly covered.
Speaker 1: These are one of those like shark bite scenarios, Matt,
Speaker 1: where my kids worry about getting attacked by a shark.
Speaker 1: But the truth is they're more likely to get I think,
Speaker 1: killed by a vending machine, and we're not worried about that,
Speaker 1: So why are we worried about the other? This is
Speaker 1: something I wouldn't worry too much about. The other really
Speaker 1: important thing to mention here real quick, too, is that
Speaker 1: in your listing you have to abide by the FHA guidelines.
Speaker 1: Even though you have protection from being forced to rent
Speaker 1: to let's say a man, as a woman living on
Speaker 1: that property, you're not allowed to state no man allowed
Speaker 1: in the listing, so you don't have the rent to
Speaker 1: the man who comes up to take a look at
Speaker 1: the property, but you also can't write anything that's against
Speaker 1: those guidelines in the listing when you put it on
Speaker 1: Zillow or or wherever it is that you're listing that unit.
Speaker 1: That's right. Yeah.
Speaker 2: I think the last thing I would say to this listener, though,
Speaker 2: is to I don't know, maybe look on the bright
Speaker 2: side of things. Like Joel, you and I we have
Speaker 2: both been landlords for I don't know years at this point,
Speaker 2: We've got multiple properties, and folks always talk about all
Speaker 2: the things that could potentially go wrong, whether it's the
Speaker 2: you know, the plumbing toilet call in the middle of
Speaker 2: the night, or like a tree falling on you know,
Speaker 2: someone's car or something like that. But these things rarely happen.
Speaker 2: Have you ever gotten a call in the middle of
Speaker 2: the night.
Speaker 1: I literally have never gotten now, and I've had a
Speaker 1: call annoying issues to deal with of course exactly, and
Speaker 1: got to maintain these properties days where I'm like, why
Speaker 1: am I a landlord again? And then I have to realize,
Speaker 1: wait a second, it's been really good to me. But yeah,
Speaker 1: you're right, like it's overblown, and there's a lot of blown. Yes,
Speaker 1: there's a lot of like landlord fear being I think,
Speaker 1: especially from people in the traditional investment community, it's like,
Speaker 1: why would I want to go through that that massive
Speaker 1: pain of being a landlord. And the truth is it
Speaker 1: can be worth the reward. Like we talked about in
Speaker 1: the beginning with just how great house hacking can be
Speaker 1: as an investment and as a wealth generator, the juice
Speaker 1: can be worth the squeeze. And realize that there's some
Speaker 1: squeeze involved, but it's usually not as difficult as so
Speaker 1: many people make it out to be. And it's also
Speaker 1: important to mention, Matt, this is the best advice you
Speaker 1: and I can offer as landlords and as people who
Speaker 1: know a lot about this stuff. We're also not lawyers
Speaker 1: speaking from personal experience. Yeah, take that into consideration too.
Speaker 1: Let's move on, Matt. Let's get back to the beer
Speaker 1: that we had on this episode. This one is called
Speaker 1: Champion Ground. It's a coffee stout from Jackie O's. What
Speaker 1: were your thoughts on this beer, my friend that this
Speaker 1: is a big old stout, it's got those and you
Speaker 1: know what, I think that led to us enjoying the
Speaker 1: heck out of it, because this is the kind of
Speaker 1: beer where if I were to have like, well, how
Speaker 1: big is this bottle.
Speaker 2: This is over twelve ounces, right, so this is twelve
Speaker 2: point seven. If you were to have enjoyed this beer
Speaker 2: by yourself, by the end of it, you're just like,
Speaker 2: oh my gosh, too much overwhelming, right, but enjoying a
Speaker 2: nice chill six ounces of this beer so good.
Speaker 1: It was perfect.
Speaker 2: It almost felt like, I don't know, enjoying a nice
Speaker 2: little port at the end of a fancy meal, like
Speaker 2: a little dessert type of wine.
Speaker 1: But it had incredibly robust coffee flavors going on.
Speaker 2: So they partnered with a local coffee roaster there and
Speaker 2: they had those flavors. It's got that nice barrel age
Speaker 2: depth that you get with a style as well. Pretty
Speaker 2: much any beer out there, I think you can probably
Speaker 2: age in oak or whatever barrels they happen to stumble
Speaker 2: upon and make it taste better. So there's just I
Speaker 2: don't know, I freaking love barrel aged beers.
Speaker 1: Barrel it makes it so much better. Stouts in particular
Speaker 1: are barrel stouts and barrel aged sours. YEP.
Speaker 2: As I was saying that, I was like, have we
Speaker 2: had a barrel aged IPA before? I'm not sure if
Speaker 2: we have.
Speaker 1: I think maybe once or Yeah, those don't lend themselves
Speaker 1: to barrel not nearly as much. This was delicious. It
Speaker 1: had vanilla and coffee vibes with a little bit chocolate
Speaker 1: thrown into and super chocolatest. It was sweeter than I
Speaker 1: thought it was going to be, not quite as roasty
Speaker 1: as I thought it was going to be. But I
Speaker 1: think that sweetness comes from the vanilla and the barrels,
Speaker 1: and I think Jackieo's make some of the best stouts
Speaker 1: out there.
Speaker 2: So you still liked it. I still love the sweetness. Yeah,
Speaker 2: you're not a huge fan.
Speaker 1: Nice to have a stout again because we haven't had
Speaker 1: a stout in a while.
Speaker 2: So even though it's not to have these bigger right
Speaker 2: stout beers during the summer when it's hot, it.
Speaker 1: Makes more sense in December and January. But still lovely
Speaker 1: to have one, and lovely to have this one. All right,
Speaker 1: that's gonna do it for this episode, Matt. Listeners can
Speaker 1: find more information about some of the things we've talked
Speaker 1: about on the show notes up on our website at
Speaker 1: howtomoney dot com, and they can also sign up for
Speaker 1: our newsletter at how to money dot com. Slash Newsletter
Speaker 1: that's right, So that's gonna be it until next time.
Speaker 1: Best friends out, best friends out,