00:00:00
Speaker 1: Welcome to How to Money. I'm Joel. I'm Matt.

00:00:03
Speaker 2: I was just talking smack to Matt before we started. But today we're talking 529 hacking, hollowed out home ec, and sucky stock pickers.

00:00:16
Speaker 1: Yeah, people don't know that we just sit there and talk trash as I'm about to hit record for like 5, 10 minutes. Sometimes an hour. If you can't talk.

00:00:26
Speaker 2: Trash to your best friend, who can you talk trash to? We're just screwing around. But yeah, this is our Friday flight. I didn't hurt your feelings, did I?

00:00:33
Speaker 1: Did I hurt your feelings?

00:00:34
Speaker 2: No, no, no.

00:00:34
Speaker 1: I don't think I hurt your feelings. We'll see. No, this is our Friday flight. We will prepare. That's what we do. We do. But we're going to talk about the top stories from this past week, how they are going to impact your finances. And hopefully one of the ways that people's finances aren't going to be impacted, Joel, is by dropping anywhere between $ 2, 000 and $ 3, 000 on the new iPhone Duo. What do you think?

00:00:55
Speaker 2: A little cringe price point for sure.

00:00:57
Speaker 1: Are you a fan?

00:00:58
Speaker 2: Well, I haven't dug in super deep. Like typically where I go when I'm trying to figure out if the new gadget is worth buying or typically I'm not buying it anyway, but I'm just curious. Is everyone else going to gravitate towards this? Is MKBHD over on YouTube? he does like the best reviews of all phones and stuff like that, in my opinion.

00:01:17
Speaker 1: All tech. Yeah, he rocks.

00:01:20
Speaker 2: But I haven't checked it out yet. I did read a Wall Street Journal article about it. I'm trying to kind of get my hands around, okay, how good is this new foldable iPhone? And I mean, it seems solid. It seems like a good, they've done a really good job with it. It's really, really expensive. And just like everything else.

00:01:35
Speaker 1: It's so expensive. And I just don't understand. I mean, I kind of, I'm starting to envision scenarios like before. It's just funny, just the way they market it. They make it look so good. Because before I was just like, why would you want a thicker device in your pocket, right? Like what I want is smaller and thinner. And it's like, well, you fold it in half. And so it's twice as thick, but then you open it up. And I see the appeal of a foldable iPad, essentially.

00:01:57
Speaker 2: It's the thinnest iPhone ever, Matt, when it's folded out.

00:02:02
Speaker 1: Folded out, sure. But that's not, are you going to stick it in your pants that way? No. It's going to be folded up like a, not a tri-fold wallet, but like a dual-fold. Oh, that's going to be the next thing. Someone's going to come out with a tri-fold. A tri-fold pad. Even thicker. Or whatever. Yeah. I think one of the more, so hopefully folks aren't getting too distracted by that. But one of the other things that they snuck into the event was that the $ 100 increase finally happened, which they had been broadcasting for months now, right? Like we talked about this over the summer, how increased prices were going to be coming along. And this even happened to the iPhone 16, which they're still selling on the Apple website, went up from, was it 700 bucks? Up to 800 bucks. because of the fact that chips are in shorter supply.

00:02:50
Speaker 2: So, I mean, I remember when they first dropped this new level laptop is a hundred dollars more now, which it's still a reasonable price point for that.

00:02:59
Speaker 1: But my goodness. Yeah.

00:03:00
Speaker 2: Some of these, some of these devices are getting really costly.

00:03:04
Speaker 1: Yeah. Yeah. Anyway, they gave a heads up. And I remember at the time I jumped on it. I remember thinking, Oh my gosh, I need to make sure I make these purchases sooner than later. Should I, you know, I didn't need to be in any sort of rush, but, um, I mean, I think we're going to see more folks move into the secondhand refurb market as well. As they should be. So I'm curious to see how that impacts that market. All right.

00:03:27
Speaker 2: Well, I will say this. You could buy two of those foldable iPhones, man, if the Republicans win the midterms.

00:03:34
Speaker 1: Oh, my gosh. You're talking about the $ 5, 000 dividend? Yeah. It's a non-story because it's not going to happen. There's no way it's actually going to happen.

00:03:46
Speaker 2: Even if the Republicans win the midterms, which doesn't look likely, the $ 5, 000 into every American's pocket is also ridiculously unlikely, and it would create more of the problem we're already experiencing, which is runaway inflation, right? We have tampered it down to a certain extent. Sending paychecks to Americans, it sounds great, I think, but we've all now, we've seen the back end of it, and it's not pretty.

00:04:14
Speaker 1: So I, yeah.

00:04:16
Speaker 2: And I just don't, I guess the one thing we don't want, we don't want to get very political on this podcast. Don't let promises from politicians like this.

00:04:24
Speaker 1: Don't let anyone buy your vote. Yep. Totally agree. And to think that like, what was the total dollar amount when it came to this, this, the STEMI money, the stimulus checks? Well, there was 600 bucks initially, right? From Trump. And then was it 1200? It was extra if you had children. Oh, that's right. Yeah. But either way, this is double that. What do you think is going to happen to actual inflation? When the government gets involved, they firehose more cash into the system, and we're going to see even higher prices. It's a short-term placation of people's money not having enough, but it's going to lead to continued long-term. Long-term financial pain is what I think, but let's talk about 529, hacking. 529 plans and how it is that people are hacking those, Joel. Basically, folks, some of which who don't even have kids, are funding their 529s in an effort to optimize even more. What do you think about that? I mean, I think it's a little ridiculous. I think.

00:05:31
Speaker 2: people are saying, I don't have kids yet. I'm not even thinking about going to get a graduate degree, but I'm funneling so much money into all of these other, maybe they're like how to make money diehards, Matt. And they're like, I'm doing the HSA to the max, the Roth IRA, the 401k. I'm doing it all.

00:05:46
Speaker 1: I want to do more.

00:05:47
Speaker 2: And they are then sticking money into 529 accounts because what can you do? You can change the beneficiary at a later date. I think it's a little risky if you're not planning on having kids and you're not planning on going back to school, then your money would probably be better put into a traditional brokerage account, right? A straight up brokerage account. I would rather see people put the money there than putting money into a 529 plan. But I also get that kind of optimization mindset. I want to avoid taxation at every turn. But yeah, it's interesting to see people using these plans, even though they don't really have an end game for Like with a child in mind.

00:06:27
Speaker 1: Yeah.

00:06:29
Speaker 2: And also it just makes me think that there's probably people who should learn how to live a little and like, and then maybe like use some of the money that comes into their life for fun stuff too. Because if you're maxing out like six different accounts, you're probably not a lot of fun.

00:06:43
Speaker 1: And maybe these are folks who have more than enough on hand and, you know, and so they are trying to invest more and they're just trying to do it the most tax optimized, efficient way. But I also don't get the folks who are looking at it from a, well, if I don't have kids and Well, Joel, I can just roll it over into a Roth IRA, but you are still, no matter what, you're limited to the $ 35, 000 lifetime cap. And so I don't get it. I don't get it from that standpoint. It doesn't make any sense to me because you stick some money in there. The growth that you're going to see on that, even if you were like, all right, let's take it up to $ 25, 000. Over the course of 15 years, it's likely going to grow to more. To be more than that, and then that money is essentially trapped there potentially. You're still limited to the annual contribution amount, whether you're putting it in directly or you're taking it from your 529 account, right? As far as how much you can put into a Roth. Yes, exactly. In a given year, right? It doesn't increase the contribution limits. It's still the same annual limits as well that you can roll over.

00:07:38
Speaker 2: It's not a backdoor way to get extra money into the Roth that you couldn't have otherwise gotten. And I think maybe some people are confused and think that's true. You could also pay a 10% penalty if you don't end up using... if you don't use the money essentially for qualifying education expenses, it's a gamble, but I guess it's one that some personal finance optimizers are willing to take. And I think it just reduces flexibility. And I would love, I would prefer to see people putting it in a taxable brokerage account and just realizing that you just can't let the tax tail wag the dog to this extent, because if you do, it might come.

00:08:12
Speaker 1: Back to bite you. Yeah, agreed. Like the only way I think it makes sense potential sense is if you're thinking, I've got the cash on hand to invest right now, I've exhausted all the other options. And they do that. And then 15 years down the road, they don't have the money to invest. And then they can then perhaps roll those dollars over from the 529 into a Roth IRA, because they don't have the additional cash on hand to max out those accounts. That's like the only sort of best case scenario. But that feels like such a narrow sort of sliver of a window. To be able to try to pass through in order to make the absolute best of that thing.

00:08:45
Speaker 2: If you're doing all the above and you're like, we're going to have kids. We're just not there yet. And then maybe you kind of start rolling that ball a little early and that's okay. You get the process started. But I think it's just too risky for a whole lot of people to put money into a 529 plan. And again, it's a great account. But for us, it's further down the list of priorities typically.

00:09:11
Speaker 1: It's not a high priority at all. Yeah. Joel, tell our listeners why you want to see more Tradwives in America. Okay.

00:09:19
Speaker 2: So I haven't read– I know there's this big– the book of the year is the Tradwife Goes Back Into Time book. Have you heard about this one, Matt?

00:09:27
Speaker 1: Yeah. Kate's read it. She did like it. Okay. Okay.

00:09:29
Speaker 2: I have not read it, although I am curious just because it sounds intriguing.

00:09:33
Speaker 1: Okay.

00:09:34
Speaker 2: What is it like for a trad wife to go back to the actual 1850s and have to live that existence? Yeah.

00:09:39
Speaker 1: I think it sounds fascinating, which is why she read it. But I don't think she thought it was executed well. It wasn't a great story.

00:09:47
Speaker 2: Great concept, bad story, perhaps. No, I'm not a trad wife guy. My wife's a working lady. She brings home the bacon and she's super smart, smarter than I am. But there was an article in- you can be a smart trad wife as well.

00:10:02
Speaker 1: That's true. Just because you're a stay-at-home mom does not mean that you're dumb. No, I agree.

00:10:05
Speaker 2: I was not trying to imply that. So sorry if I did.

00:10:08
Speaker 1: Just trying to cover my buddy's butt over here. Thank you.

00:10:11
Speaker 2: Do not send those emails of hatred. But there was an article in Common Good magazine that had me thinking about kind of back in middle school. I had a home economics class. We had to take home the baby and take care of the baby, right? Do you remember that? Did you have to do something like that?

00:10:26
Speaker 1: Yes. That's one of the three lessons I remember from home economics. It wasn't just taking care of the baby. What I specifically remember was bathing a fake baby. Okay. And you know what? When it came time for me to bathe my own baby, what, 30 years later or- I don't know, 20 years later? I don't know how old I was when I was in Home Ec. I still remember that. I still remember taking the cloth and you wipe from the outside of the eye in because you don't want to start here and spread all the germs from the center. You know, evidently right there. Anyway, I remember doing that. I remember sewing my own football. We had these footballs. Yeah, it was like a football kit. You chose your colors. I'm sure there's other listeners out there who did the same thing. Were you killing the pig, getting the skin? No, it wasn't that. It was like this fuzzy felt. thing or whatever. It was that. And then I remember making biscuits from scratch. Okay. Best biscuits of all time, as far as I remember. Okay.

00:11:21
Speaker 2: Well, so this article was just making me think that it was kind of saying that we need more home ec and it's similar to shop class. It's been declining, right? In schools across the country. And especially when you think about People ordering out more, buying more, going out to eat and getting food delivered. They don't know how to make the biscuits at home, Matt. And teaching some basic house skills and a little bit of maintenance. I think it's good for our brains and it can save us money. I would love to see more home ec and more shop class kind of coming back. And I think in an age as like AI continues to be able to do more, we need to have some more of those basic abilities. And so, yeah, I don't I don't know if this is going to start a home ec revolution, but I love the idea of that becoming more of a focus in schools. Yeah.

00:12:15
Speaker 1: Yeah. And not just the specific like learning how like, you know, oh, that's how you clean a baby. Right. Like it's not just that, but I think it's more of the lessons that you learn in realizing that it's not rocket science, that there is so much that you can do on your own at home that you can figure out that you can make some mistakes here and there and that you can essentially feel empowered. to do these things as opposed to, like it builds confidence, right? Like it's, and I actually pushed back, there's one part of the article where they were talking about like, oh, you know, there's a big difference between what you can learn on the internet and YouTube versus actual expertise. And I'm thinking, I don't know, man, there's a lot of awesome stuff that you can learn by watching two or three videos. Like I'm thinking about, I had a coaxial cable problem. you know, like the cable that plugs into your cable modem for your internet. The internet was kind of patchy a couple of weeks ago. I'm like, what's going on? And I realized there's noise because it was a loose fitting. And so I looked it up and you can buy like a $ 20, $ 25, like RG6 compression gun or something. I don't know. You strip it, you get the fittings on there, you use the compressor. I did that all by myself. I did it in like 10 minutes. It was amazing. Didn't even need to wait for the cable guy. No, and that would have cost me a hundred bucks. Yeah. Because in-house issues, which that was, Xfinity was going to be like, oh, or Comcast, you know, they're going to say that's a $ 100 service charge, as opposed, they'll do stuff outside for free, but not inside the house, right? And so the ability for me to feel handy, look some stuff up, realize that you don't have to be the cable guy in order to know how to do this stuff. There's a certain sort of empowerment that takes place that I don't want folks to I don't want the– I don't know. I did like that the authors seemed to discount some of what you can learn online. Yeah. And it promotes that DIY approach, right? Yeah.

00:14:09
Speaker 2: But there's something about in school, in those formative years, going– learning some of those things and then realizing that, oh, I can actually tackle things that I thought I didn't have an ability or an affinity for.

00:14:22
Speaker 1: Sure.

00:14:22
Speaker 2: And I think Shop Class and Home Ec do both of those things.

00:14:26
Speaker 1: I agree. I think we should ramp those back up. Well, I think that's the empowering piece that I'm referring to, right? Like maybe because I had some of that, maybe because I was shown how to do things at a younger age, I have continued that on my own. Whereas maybe somebody who didn't have that in the past might struggle a little bit more with that, right? And there's something else too, like as far as the outsourcing of all of our sort of daily tasks, there is obviously it costs you money, right? And so it's, you know, you're going to be poor to one degree or another. You're going to have less money, even if you're going to specialize in making more money in other ways. But if you outsource everything, there is a good argument to be made that you are essentially stripping yourself of meaning and what it means to exist in the world and accomplish things and to think for yourself and to solve problems. There's an identity piece and the sort of hurdles that we come up against that we fight for that I think is a good thing. And if we are constantly outsourcing, we never get to experience some of that conflict, healthy conflict. And to your point, home ec, shop class, those types of environments lead to more empowerment and for folks to take on some of these projects, I think, themselves.

00:15:43
Speaker 2: The most basic car maintenance you can do is to put in a new battery. And I put in a new battery yesterday.

00:15:49
Speaker 1: Yeah, boy.

00:15:50
Speaker 2: But if you go to one of the, I did some price shopping for batteries. And I was looking, I wanted to find a good one at a good price. Of course, the best battery at the best price was Costco. And so, but Costco won't put it in for you.

00:16:04
Speaker 1: But guess what?

00:16:04
Speaker 2: All of these other places, Advanced Auto Parts, O'Reilly's, all those guys will put the battery into the lot.

00:16:11
Speaker 1: They'll do it for you. But you're going to pay, guess what?

00:16:13
Speaker 2: Twice as much for the battery, essentially, that you could get elsewhere for a lot less money if you're just willing to get out your ratchet set and put it in. So these are the kind of things where I didn't have shop class.

00:16:24
Speaker 1: I wish I had.

00:16:25
Speaker 2: I think it would give me more confidence. But you also have to have, like, there are a lot of resources out there for us, including online and YouTube, that can give us the confidence and the know-how to do stuff that maybe we hadn't been taught how to do before.

00:16:38
Speaker 1: Totally. Joel, let's talk about ways that you can pay for things. And did you hear that? That was the sound of America not noticing that the penny is no longer being produced in our country. Nobody cares. I think people care. It's just that the pennies are still out there. They're still in circulation. People are still using them. And it's something that we made a big fuss over because of the fact that pennies cost more to produce than they actually are worth. Um, but I think it's, I think we're going to continue to see retailers. There's a story, an article in CNBC that was talking about how retailers are switching to, oh, you know, we're going to round down our prices or we're going to round up. Um, and I think the fact that the penny will continue to be in circulation is going to lead to like an, essentially an organic approach as folks are going to adopt different methods to deal with the fact that fewer and fewer people have pennies. Right.

00:17:36
Speaker 2: There's legislation at the state level and then there's proposed federal legislation to kind of round up and round down. But retailers are already kind of doing this. And I don't know if we have to enact laws to make this official. I'm sure there are people in some lines of business who would love guidance. But it's just it's interesting to see that nobody really cares that the penny is no longer in production. And once it's fully like fully out of service. I saw this the other day as gas prices are shooting up. We're going to talk about gas prices in a little bit. What about if diesel crests $ 10 a gallon, which it could, Matt, in California at some point later this year, who knows? They're going to have to change signage for gas. The way that we price things has to change over time. And I think pennies being eliminated is no sweat off anyone's back. You know, what's fascinating is that this actually puts more pressure on the nickels.

00:18:32
Speaker 1: Right? Like, as we either round down to the zero or round up to the five. Well, you know what's ironic? Is that the nickel costs even more to make than the penny, obviously. It's like nine cents, right? It's 13 cents. 13 cents. Oh, my gosh. It costs 13 cents to make a nickel. And it's only worth five. So we're losing more money per nickel than we were the penny. And so I'm here to officially... start the mob with the pitchforks and say down with the nickel as well. I think maybe we should only have dimes and quarters, I guess.

00:19:06
Speaker 2: As inflation has raged on, those pieces of currency become worth less and less. Not worthless, but they're worth less. And so why not eliminate them, eliminate the cost of production, and let's just move on. Let's just move on with our lives. Let's talk about credit cards for just a second, Matt. Credit cards can be great. We talked about that, but not if you carry a balance. And that's why we talk about what we call the golden rules of plastic. If you use a credit card the way we discuss, which is to pay it off on time, in full, every single month, then a credit card can be a great way to pay for stuff. But credit cards are bad news for like 50% of Americans. There was a lending tree study, and it found that it's more like four in 10 people who.

00:19:49
Speaker 1: Carry a balance.

00:19:50
Speaker 2: So there's depending on who you ask, it's somewhere between 40 and 50% of Americans who essentially use credit cards incorrectly. But then when you dig down deeper into the info, younger people are using credit cards, which is, I mean, historically accurate, I think too. It tracks like Gen Z or something like six out of 10, 60%. are carrying a balance on their credit card. And one, it's not abnormal. This is kind of the tale of time you learn by getting burned, right? With using credit cards and you start off by swiping, tapping, whatever, and you start to carry a balance and you kind of just say, okay, it's fine.

00:20:28
Speaker 1: Who cares?

00:20:29
Speaker 2: But when you look at the details of how much it actually costs you, to carry credit card debt, it's a problem, right? And I just want people, young people in particular, to not get used to it and not become minimum payment makers because I think so often we just don't understand how much it costs, how much the interest is actually costing us. The average credit card balance, Matt, is.

00:20:52
Speaker 1: $ 7, 800.

00:20:53
Speaker 2: It would take 27 years to pay that balance off with minimum payments. And so if you become a minimum payment person on your credit card, you're talking about decades of just forking over money to the credit card companies. And that's a real problem. Yeah.

00:21:10
Speaker 1: It just makes me think about how, like someone's thinking through this and they're just like, well, dudes, I'm not going to do it for 27 years. And like, what's a month or two of paying interest? You know what? I agree. It's not that much money. But what it does is it greases the skids so that you are more likely to continue to be in debt, which is when you can find yourself with the same credit card debt where you're paying on the balance for 27 years, right? To me, it's not the amount that you're paying on a singular month. It's the habits that are formed as you get more and more comfortable with carrying a balance. It's a trap.

00:21:44
Speaker 2: We don't want folks to fall for it. You might have the best of intentions, right? To not stay in that credit card debt for long. But it's really hard to overcome habits that you get into.

00:21:56
Speaker 1: And yeah. You got to have like a Hard line towards that. Yeah, let's move on. The Journal, they talked about how hard it is to redeem or to actually realize the benefits from some of these nicer credit cards. This is kind of a recurring theme. So I was traveling last week. Guess where I saw the longest line in the airport? Getting into the lounge. Yes, I gave you a hint. It was the Centurion Lounge. Yeah. And I swear, dude, there were more folks in line to get into that Tiny, maybe it's not so tiny. That's why there's so many people in line. Into that lounge. Then there was for security. It was crazy. I breezed right through security. Couldn't believe it. The Centurion Lounge line like wrapped. It was longer than Starbucks. It was like, I couldn't believe it. Those Starbucks lines at the airport are ridiculous. It's insane. It's insane. But bottom line, oh man. And then Robinhood, they rolled out their new platinum card, their premium card. Which, of course, $ 695, you know, it's $ 700. It's got all the different benefits. But of course, Joel, it's made from real platinum. That's what I care about. Real chunks of platinum, so you know it's good. 60% of the time, it works all the time. But yeah, I think folks just need to be careful with how it is they approach using these credit cards when they think you're going to receive the benefit, when in reality, man, it's a It's a part-time job. You got to jump through all the different hoops in order to actually take full advantage of what it is that they're offering. And the perks just continue to change, right? It's like, oh, well, we were offering this. Now we're offering this. And then you have to decide, well, I'm spending a lot of money every year on the annual fee for this. Am I actually getting what I'm paying for? And it's worth reassessing that every year with those cards. And you don't have to necessarily cut it out of your life, but you might want to at least downgrade to a card that doesn't have a ridiculously high fee. Because let's say you're traveling and you run into that line, Matt, at the Centurion Lounge.

00:23:56
Speaker 2: And you're like, dang it. This is one of the highest value things. This is one of the things I care about. And I can't even get in because I got to make my flight.

00:24:03
Speaker 1: I had an hour. I was going to lounge.

00:24:05
Speaker 2: Now I can't lounge. Now I got to get on to my destination. And if you can't even use the perks that you value, then the card is... devalued ultimately in your life.

00:24:15
Speaker 1: What's the point? Yeah. I mean, and again, that's an additional hoop that you have to jump through, right? Like, I think a lot of times folks think about the hoops and the bars you have to clear as, oh, I need to spend it in this way for this quarter, or perhaps, oh, I got to transfer the points to this portal. And then if you shop through the portal, then, you know, then you get the discount. But we're also talking about real life hassle as well, where you're standing in line and you're just thinking, Oh my gosh, this totally sucks. There's something, yeah, there's an additional element that you have to put up with if you're going to be able to enjoy some of that. But personally, this is also coming from a guy who's never been in the lounge, right? I'm content just to show up at the gate. One time.

00:24:57
Speaker 2: Oh yeah?

00:24:58
Speaker 1: With a friend, because I could get in with him. Was it glorious? How great was it? It was fine. Okay. It was fine. Maybe the drinks, maybe the cocktails are awesome. I don't know. Are they free? Do you have to pay for stuff? I don't remember.

00:25:09
Speaker 2: I think I got some food and maybe like a cup of coffee or something like that. I don't remember my life being changed by it. Obviously, I didn't like line up to get one of those fancy credit cards just so I could get in again.

00:25:19
Speaker 1: No.

00:25:20
Speaker 2: But if I'm with a friend and I can hop in with them, cool, I'll check it out. But it's not something I'm jonesing to do.

00:25:27
Speaker 1: Yeah. If they're like passing out gin and tonics or something, I'm like, oh, that sounds awesome. Like I could be all about that. I think they did have some booze.

00:25:36
Speaker 2: I don't remember if I got any or not. And I don't remember how good it was.

00:25:39
Speaker 1: Yeah. Yeah. I mean, I guess that would be different. So I'm putting that out there because the folks are saying, no, guys, you don't understand how great the lounges are. Okay. But this is coming from inexperience. I am ignorant of the lounge life myself, Joel. I think I just have peasant tastes too. Maybe it's one. Yeah. I wouldn't mind a gin and tonic. I'm just saying.

00:25:58
Speaker 2: Let's get this man a gin and tonic. But first, let's go to the break. And after we're going to talk about the competition to buy great used cars, how it's more expensive than ever to get something reliable. We'll get to that and more right after this.

00:26:22
Speaker 1: All that G & T talk got Joel thirsty over there. I am thirsty now. I'm over here enjoying my coffee. It's after the break, which means folks know that it is now time for the ludicrous headline of the week, Joel, which this week is from Barron's headline reads, SEC charges 38 investment advisor firms with bogus filings. And it's a classic story, man, of investors getting scammed, right? Like there are quote unquote advisors out there. They are filing fraudulent fake papers, filings essentially, shut down by the SEC, which is a good thing. But yeah, what's your thought on the financial advisor space and how it seems like there is some rampant scamming going on?

00:27:10
Speaker 2: Yeah, I mean, a lot of these firms were overseas pretending to be stateside, right? And I think the thing that investors have to be careful of is oh, that person calls themselves a financial advisor. That must be someone I can trust with my money. And I think this story reveals it, but then that's only in part. There are so many other people who call themselves financial advisors who might not be looking out for your best interests. And that's why when you're looking to find an advisor, you have to look for specific language, right? You want a fee-only fiduciary advisor. that holds them to a legal standard of working in your best interest. And there are a lot of advisors out there who don't hold themselves to that standard. And so you might not get scammed, but you just might not get great service. Or you might not get someone who is looking out for you. Maybe they're trying to sell you high commission, high fee products that benefit them. So these are the kind of things that investors need to be wary of. And this I'm assuming that most of our listeners, how many people fell for these bogus investment advisors?

00:28:18
Speaker 1: I don't know.

00:28:19
Speaker 2: But it certainly just prompted me to think, well, you need to do the vetting on the front end. And just assuming that someone who calls themselves something, that they're all the same, they're not. And even on top of that, fee-only financial advisors, if you want to work with some of the best ones, what about ones that are actually legitimately well-vetted? And that's why we partnered with WealthRamp, howtomoney.com slash advisor. If you need or want to work with an advisor, that is where you should go. Yeah.

00:28:49
Speaker 1: And I think the problem is, is like, it's really tough to independently verify some of these advisors, right? Like, so a lot of these fake advisors, you know, they have fake filings essentially. And so, but the filings are up there on the SEC website, right? And so the idea is like, yep, check, what was it? SEC.gov, like we're up there. But are you going to go in there and double check the SEC filing documents? Are you going to independently verify that the holdings of this financial advisor, that those assets from their clients are actually with the third party brokerages like Fidelity that like they claim that they are? Like there's a whole lot of, oh, there's another like broker check. Are you going to see if there's any, if they've been hit with any FINRA? Yeah. And FINRA, like if they've been hit, I forget what the warnings and just different vitality and like there's a whole host of steps if you want to independently do this, which is why, like you said, going with WealthRamp, somebody who has independently done this, this is their job to independently vet and verify all of these advisors. That's the way to go. I'm all about that. In a similar vein, let's talk about what I'm going to call poor pickers. Joel, you called it something else. I like that. I like that. Poor pickers. There's Morningstar data, and they found that 27% of active funds outperformed their index counterparts within the past year. But you stretch that out and you look at over the course of a decade, which, of course, we are long-term investors, that number shrinks from 27% down to 13%. And it just, again, goes... It goes to show that... I don't know, you start asking the question, is it worth the risk, the guaranteed risk of paying more for an actively traded ETF or fund for the chance of perhaps slightly outperforming it? And that's what's really... Okay, so this is what I found so interesting about this. Morningstar, they didn't have data as to how much... what the margin of outperformance was, right? And so the same... let's see, an actively traded fund that outperforms by 0.1% also qualifies as outperformance as the same actively managed fund that might outperform by 5% or 10%. If you were to actually look at the margin of success, not the margin of success, the margin by which they succeeded over the index, I think it would continue to look less and less attractive for folks who would be willing to take on, again, the guaranteed risk of paying more and kind of crossing your fingers and hoping for a higher return than what you would get with a market. And this was large cap.

00:31:33
Speaker 2: And I think there's a human impulse, especially right now, because we live in the gamblification of everything society, there is this kind of belief that I can do better than average. And so we've seen this in the proliferation of ETFs. There are more ETFs than individual stocks. You can slice and dice a million different ways. And the cult-like following that some people who run these funds receive, that people, they're like, that person rocks. They're a rock star. They're not a rock star, right? And how well do they do actually over time versus small snippets? And that's what really you're getting to with this data is a small snippet. In a small period of time, you might be able to have outrageous success. But do you know how long will that success continue? And often it's short-lived. And then at the end of the day, the index fund almost always, especially over a long period of time, proves to be the better way to go. And it avoids higher fees and wasting more mental energy. I just don't see, like all the data continues to point to the fact that index funds are the best choice for the vast majority of people.

00:32:46
Speaker 1: Yeah, yeah. It's almost like headlines about individual companies and stocks should be banned except for on like a, monthly basis or something like that, right? Like we don't need the daily sort of gyrations. Like, yes, the market does move like that. But I guess the reason that they move though is because of the fact that there is news. Companies are doing things not monthly, but on a daily, if not hourly basis sometimes. But I think long-term investors like us and a lot of How to Money listeners would benefit from ignoring certainly the daily headlines, but even like the monthly headlines. even the quarterly headlines, man, like just looking at what the market is doing. I don't know. Um, on the yearly, that could be beneficial for.

00:33:31
Speaker 2: Folks, but yeah, I mean the, the, we are often our own worst enemies and the more we dig in to what's happening, the more likely we are to make changes. And the more we make changes, the more we mess with our portfolio, the worse the results end up being. That's, there's a lot of data out there on that as well. And that like, uh, I don't remember, I don't think this was completely fake, but there's something about if you just look like dead people who don't touch their portfolios, right? That is that those are the portfolios that perform best. And so I think there's just, there's a lot of truth to that.

00:34:05
Speaker 1: Yes. Yeah.

00:34:06
Speaker 2: The more we're trying to like slice and dice and be cutesy with it, we're going to actually have worse results. Which kind of takes you to the, to the smoking, like the green egg Traeger smoker community, right? And have you, you've heard the saying, if you're looking. You're not cooking.

00:34:22
Speaker 1: Yeah. And I think that applies to portfolios as well. You want to talk about used cars, specifically the ones that are under $ 20, 000? Yeah.

00:34:31
Speaker 2: So for a long time, like my thing was buy a car that's less than five grand. And then it got bumped up to and it was kind of like, all right, let's see if can I buy a good car that costs less than 10 grand? And it's getting harder and harder, right, to buy a great car for four digits instead of five. But cars under 20K now, that is, those are, they're a hot commodity because people want something reliable, but they want something inexpensive. And something like a third of all used car sales in the second quarter of this year were for vehicles under 20,000 bucks. But there are just fewer cars under that price point now, Matt, which means the competition is stiff. So I just think it is, you got to have patience in order to get a great car for a reasonable price. When you were shopping, you shopped for many, many weeks, a couple of months really, right? Like you were kind of looking around shopping.

00:35:31
Speaker 1: A couple of years if you count the initial sort of round of research. Yeah, yeah.

00:35:36
Speaker 2: And I think like not everybody has that kind of time because something happens to a car and they need to replace it. But this is one of those things where I think it is still very much possible to buy a great car under 20 grand. And- But you just have to be patient, do the research, do the test drives, have it checked out by your mechanic, and eventually you can find something that's great. And the great thing you miss out on when you buy something that is less expensive is depreciation. It is such a big impact. it's actually the biggest impact. The biggest price tag you pay is how much of value your car loses. So fuel economy matters, reliability matters, but your depreciation is the thing you should be most concerned about. I think AAA says it's like 40% of the total cost of the car that you own. So if you buy a $ 50, 000 car that's a couple of years old, guess what? You're going to pay a big hit in depreciation. If you buy a $ 20, 000 car, that's six or seven years old, you're going to take a lot less of a hit in that regard.

00:36:44
Speaker 1: Yeah. I think I would almost rather folks buy a two to three-year-old used car and finance it than buy a brand new car in cash. Ooh, what do you think about that? I guess it depends on what the rates are. I guess you'd have to cash for either, right, in that scenario. Ideally, you're paying cash for both, but I think it would be more financially egregious Again, it depends on what car loans are at. And it depends on the car, right? Because if you're talking about a Porsche or something more silly in my book, like those seem like insane depreciation. Yeah. Like nobody wants a used Porsche. Everyone wants the brand new Porsche. But those things drop by like a more significant margin compared to something like a Toyota that holds its value really well. Well, I think the exception I would make to that too, I think there are really financially savvy people who like a new car. And the person I bought my car from, they owned it for 19 years. They bought it brand new. That's their craft beer equivalent.

00:37:47
Speaker 2: I don't know if they financed it, but let's say they bought it brand new, paid cash, and they drove it for 19 years. That's not even a craft beer equivalent. That's just a decent purchase right there. That's just like, hey, I want to know what I'm buying, but I'm going to hold onto it for a long, long time. And other people- swapping cars left and right, even if they're used cars, that could be a better, it's.

00:38:03
Speaker 1: Still a crappier equivalent in my mind. Cause you could have bought that two year, two to three years in, uh, instead of that person at that point in time, having paid 40,000 for it, they would have paid 30,000 for it and could also have maintained it for the, for the following, uh, 15 years. Um, It's just that they missed out on it being brand spanking new. And that's the hurdle that you get over. If you want to sit down in a car that nobody else's butt has touched the seat, then that's what it comes down to. It comes down to you paying that premium. But I don't know, man. I'm too much of a public transportation kind of guy. There's hundreds and thousands of butts that have been here on this airplane. What is it about a brand new car? If you think about even in a first class seat, Like, yeah, thousands of people have also sat in that. It's just the nicest thing you can get, I guess, other than a private jet. But I mean, I think it's not worth it in my opinion. I still I agree.

00:38:59
Speaker 2: And I think you can buy great used cars even still under that $ 10, 000 mark. You can like it's doable. And don't let the headlines out there lie to you, making you think that that's impossible. Last car I bought was I forget exactly how much I paid for him at $ 8, 700, I think. And that's the one I just replaced a battery in, but it's had, I've replaced a battery in a headlight in a year. It's like phenomenal. And so it's, it's very much possible. Everyone out there wants to make it sound like you can't, but you can. But, I, I still get the idea that a, that buying a used car could be coming with, it comes with problems. And so you have to know that's where getting it checked out by an independent mechanic is so clutch, so important.

00:39:45
Speaker 1: But if you're going to.

00:39:45
Speaker 2: Buy that new car and you're going to buy it with cash, you're going to hold onto it for 10 plus years.

00:39:50
Speaker 1: No shame, no shade. Yeah. The car that you're talking about that you recently purchased is a Toyota 4Runner. And basically RAV4s are like baby 4Runners, especially the new ones. Have you seen the new ones? Yeah. They look like sharper lines. Yeah. Well, like the new 4Runners also have the sharper lines, but they just look like shrunk down 4Runners. And it's crazy because Toyota dealerships can't keep those on the lots. There's an article talking about how... Yeah. it has, there's multiple factors, but man, it makes me think that it's even more of a reason that I'm kind of glad that I'm, dude, I'm just like the typical basic American. Like I just want my RAV4 just like everybody else. But I think that if you can zig while everyone else is zagging and find the car that maybe has more of a negative stigma, which is Tesla now because of Elon Musk, right? Like nobody's, You know, you got the bumper stickers on there and folks don't want to be associated. Like, I don't care about the politics. I just want a solid vehicle that is going to serve our family well. But it's just crazy to think about how you think any of those folks are going to be getting deals on those new RAV4s. There's no way, man. Like when you've got, yeah, there are no new RAV4s sitting on the lot. Everybody wants them. They're going to come at a premium. Exactly.

00:41:07
Speaker 2: It's going to cost you more when they're in high demand and when there's low supply. And so I think the question that you have to ask yourself if a RAV4 is something you were thinking about buying is, is there another model that's rated high in reliability that's similar that I'd be happy with? And let's be honest, we have a pretty competitive car market in this country. And there are many other great cars, great like smaller SUVs, right, that would hit that sweet spot for you.

00:41:33
Speaker 1: And I get it. I love Toyota.

00:41:36
Speaker 2: Like they make great cars. And when you look at the reliability ratings consistently, Toyota is at the top. but dig into consumer reports, right? And see what else could I buy that would have similar vibes that would cost me a lot less. Because right now, to buy a fancy-dancy newer RAV4, or even a used RAV4, those prices are going to be elevated because everyone else wants one.

00:41:58
Speaker 1: Totally, yeah. And something interesting about the new RAV4 is that they're only selling them as hybrids, which makes more sense that people are clamoring for them. Everyone wants the hybrid because gas prices... We saw for the first time ever over Labor Day were national average above $ 4 a gallon. I just checked right before this. Today, it is $ 4. 27 a gallon at the moment. It's a good time to own an EV. Gas prices are up 40% since February. 40%. It's so crazy. Yeah. We were out around Lake Tahoe. First time Kate and I had ever been there before. Amazing. Did a bunch of hiking. And- It was over six bucks. It was like $ 6.

00:42:40
Speaker 2: 50.

00:42:40
Speaker 1: And it was not surprising that I looked this up, but on the Nevada side, it was a dollar cheaper. So guess where I filled up? You waited until you got to Nevada. The sketchy gas station on the Nevada side. Yeah.

00:42:54
Speaker 2: Well, I was in and around Los Angeles, and I think the average price is still below $ 6 a gallon there. But there's a lot of gas stations where it's quite a bit above, depending on where you're at in the city.

00:43:07
Speaker 1: Yeah, it was pushing seven bucks. It was pushing seven bucks a gallon, dude.

00:43:11
Speaker 2: Feeling like a fancy pants over there in your EV. And I do think as gas prices remain elevated, EVs, more people should consider them, right? Especially these used EVs, despite the fact that there is no tax credit that's associated with buying an EV anymore. I was talking, I just think there are more people who it... it could make more sense. Or the other thing, Matt, another sweet spot, maybe if you're not interested in an EV, something like an older Prius. Nobody cares about those old Priuses anymore. They're pretty cheap. And they're going to save you a ton of money in gas. There was like this article about hypermilers in the New York Times. I don't know if you saw that one. And there was this guy in- Oh, he had a Prius. A 2017 Prius, and he said he averaged 83 miles to the gallon in that thing. My dad's got an old Prius. I'd be curious to know what he's averaging. I know it's nowhere close to that because he's not driving like a complete nut job. But it's upper 40s miles to the gallon in that puppy if you drive intelligently. You don't have to be an over-the-top hyper miler.

00:44:19
Speaker 1: Evidently, you can get it up into the 80s if you're an old retired— Does it surprise you that it's an old retired man kind of activity? Not at all. I did see that article. Everyone they profiled in that piece looked the same. That's their equivalent of a.

00:44:32
Speaker 2: Video game, is driving their car and trying to maximize the MPG, even if it matters really very little.

00:44:43
Speaker 1: Yeah. I don't know. There's a limited kind of mindset that you subscribe to if that's what you're trying to do. But if you're retired and you're not making any additional money, I get it. That's your... That's your hobby. Like that's your game is to find a way to reduce this cost as much as possible, which means barely accelerating when the light turns green. Man, could you imagine being in a community with a bunch of folks who are trying to do that though? Like you couldn't get anywhere. The traffic would be awful. It would be so bad.

00:45:09
Speaker 2: Well, the other thing that we don't talk about as much, Matt, but we still do. And I think it's still part of the how to money ethos, walking and riding your bike. And if you do those things more, using your car less, less wear and tear, less maintenance, less gas, that's going to help as well. And you might even be able to call up your insurance company and get a discount if you're driving your vehicle under a certain number of miles per year. Let's say fewer than 5,000 miles per year. They might make you pay less for insurance too. So these are the kind of things like we all need to take into consideration. Maybe based on your habits, a new car, a different car, not a new car, a different car makes sense. But also, can you change your habits?

00:45:49
Speaker 1: Yeah, that's right. Yeah. Yeah. because we're driving so much now shuttling the kids around, I feel like that's just in my mind, I've completely divorced myself from that as a possibility because we're just putting, we're putting so many miles as the kids are entering into the season of, of nonstop busyness. But for, for a lot of other folks out there though, absolutely. 100% consider that. Um, Hey, I wanted to mention too, it's nine 11, never forget. Have we ever talked about nine 11? Do you have a, uh, it's been 20. Yeah. So it's been 25 years, 25 years. 25th year. I was in high school Memorial Day. And you were too, right? You were in high school? I was in college. Oh, you're much older than I am. I forget. I was a little bit older, but yeah, dude, I mean, I remember riding on the bus to class and people were kind of talking about it, where it had gotten out, but crazy. But good day for everyone to remember. Actually, near us, there's an incredible memorial where they, you know, nearly 3,000 people died in that terrorist attack. And they've got like the same number of flags that Out there in the field. Have you seen it? That's right. Yeah, it's beautiful. It's breathtaking. It's incredible. It's a great reminder for sure. Yeah. Anyway, wanted to mention that too for all the folks. Yeah, thanks for sending that. Personally impacted by that as well, not to mention the entire country and how in some ways it's obviously negatively impacted our daily lives.

00:47:10
Speaker 2: And so many younger folks, they weren't alive. They don't remember it. Yeah, for us it was formational.

00:47:17
Speaker 1: It was.

00:47:18
Speaker 2: It changed the way you thought about a lot of things. And I think something as important as that needs to be talked about, needs to be brought back up, needs to be remembered, needs to be kind of passed down to other people to understand what that meant.

00:47:30
Speaker 1: Absolutely. Yeah, that's why. Never forget. All right. That is going to be it for our Friday flight. We hope everyone has a good Saturday, a good Sunday, and then we'll see you back here on Monday with a fresh Ask How to Money episode. Head over to the website, howtomoney.com, the YouTube channel, How to Money Pod, over there as well, where you can see our lovely faces. Where you can see, actually, I thought about bringing this up. I was late to record, Joel, because I've got a hole in my shirt right here. But then I thought, I don't really care. Just slap some duct tape over it. You know, do you wear holey shirts? Shirts that have holes in them? No, not really. You don't? See, if I'm loafing around the house, but I guess if I'm sitting down in front of the camera, maybe I shouldn't. Because that's not technically real. You're a video star now, buddy. You got to dress the part. Well, I could have gotten away with it because I think my microphone blocked it and the green banner down here blocked it. But now I just revealed my cards anyway. All right.

00:48:28
Speaker 2: That's going to do it for this episode. Thanks, guys, for listening. Until next time, best friends out.

00:48:33
Speaker 1: Best friends out. Later, buddy. Later.