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Speaker 1: Welcome to Had the Money. I'm Joel and I am Matt,

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Speaker 1: and today we're talking using debt to build wealth with

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Speaker 1: Tom Anderson. That's right. So virtually all conventional wisdom out

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Speaker 1: there points folks in the direction of paying off their debt,

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Speaker 1: right like debt is dumb. That's the line that you'll

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Speaker 1: hear after listening to the most personal finance podcast for

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Speaker 1: no more than thirty seconds. It's the mantra. It's the

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Speaker 1: driving force behind many money experts out there. But our

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Speaker 1: guest today wants folks to take another look. He wants

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Speaker 1: them to reconsider debt. And Tom Anderson he's the author

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Speaker 1: of the New York Times bestseller The Value of Debt,

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Speaker 1: and he's actually written multiple books on using debt in

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Speaker 1: order to build wealth. But while most financial planning experts

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Speaker 1: are only looking to grow assets and to decrease liabilities,

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Speaker 1: Tom advocates for the strategic use of debt. And that's

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Speaker 1: what we're talking about today. So Tom, thank you for

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Speaker 1: joining us on the podcast. Hey, thanks, Joel and Matt.

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Speaker 1: I really appreciate it's a pleasure to be hearing. We're

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Speaker 1: glad to have you Tom. And the first question we

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Speaker 1: ask everybody who comes on the show, We want to

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Speaker 1: know kind of what they like to splurge on. Wow,

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Speaker 1: they're saving and investing and thinking about their future. What

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Speaker 1: is it that you like to splore? John? We call

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Speaker 1: it the craft beer equivalent because Matt and I we

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Speaker 1: like craft beer quite a bit. What are you literally

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Speaker 1: drinking one right now? Yeah? So what's your craft beer equivalent? Tom? Wow?

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Speaker 1: I like that craft beer plan. That's a good one.

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Speaker 1: I would say that my splurge is a couple of

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Speaker 1: years ago I started getting into sailing, and so anytime

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Speaker 1: you do that, and it can be a very expensive

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Speaker 1: and nice splurge, I try to keep it under control

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Speaker 1: by just doing it as a share. So I'd have

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Speaker 1: a boat share that we enjoy with our family a

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Speaker 1: whole bunch. Oh nice. So are you paying for access

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Speaker 1: or do you have an actual boat that you have

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Speaker 1: some sort of equity belts up into. How does that work? Oh?

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Speaker 1: It's actually a really neat program. We should do a

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Speaker 1: separate show on it. I'll just give you the quick overview.

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Speaker 1: So you do. There's um eight families share it and

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Speaker 1: what they have is at the months in Chicagos where

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Speaker 1: I live. So you have made June, July, August, and September,

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Speaker 1: and each day has two spots, and you have this

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Speaker 1: auction every year basically, and you allocate the shares, so

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Speaker 1: you get to go out about thirty times, but you

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Speaker 1: basically only have about an eighth of the expense, so

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Speaker 1: it works. It's a little bit more than that. But yeah,

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Speaker 1: you don't have to worry about the maintenance, and it's

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Speaker 1: just a great, great, great program, and you don't have

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Speaker 1: to worry about all the pain and the things about

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Speaker 1: owning a boat. So yeah, that's the way to get

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Speaker 1: out of the nail. Then owning a boat completely on

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Speaker 1: your own and everything, all the headaches that come with

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Speaker 1: that are all on you. But when you share it,

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Speaker 1: it's yeah, you get to distribute that mess. Yeah. Well,

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Speaker 1: I mean, even like we've got a friend out in California,

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Speaker 1: and I mean when they were living out there, they

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Speaker 1: were they were part of like a boating club or

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Speaker 1: something like that, and they were they were spending a decent,

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Speaker 1: decent amount of money. But I still got to think

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Speaker 1: that you're winning one of those clubs is still a

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Speaker 1: more affordable way to go out out on the water

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Speaker 1: rather than actually purchasing a boat. And then having to

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Speaker 1: what is it you pay for a slip that's at

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Speaker 1: the right term, I don't know. Yeah, but there are

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Speaker 1: all those expenses associated with it. But that's really cool,

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Speaker 1: uh and I guess with you being Yeah, in Chicago,

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Speaker 1: there makes a lot of sense to get out on

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Speaker 1: that lake. Yeah, it's a short season. And the nice

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Speaker 1: thing is, I mean the average user only gets uses

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Speaker 1: seventy percent of their spots, so I mean it's a

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Speaker 1: lot to get out there twenty times and you get

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Speaker 1: thirty spots and the remaining open spots you can end

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Speaker 1: up using and they kind of go into a lottery system.

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Speaker 1: So yeah, it's it's great. I can't imagine who'd get

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Speaker 1: out more than that. Nice All right, Well, let's shift

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Speaker 1: gears and instead of talking about boating, let's talk about debts.

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Speaker 1: Like generally, yeah, you talk about just how debt, how

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Speaker 1: it gets a bad rap. It seems like anti debt hysteria.

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Speaker 1: It seems like it's running rampant, and on its face

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Speaker 1: it kind of sounds like an odd take. But why

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Speaker 1: is debt so often misunderstood? I think debt is so

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Speaker 1: often misunderstood because a lot of people have a bad

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Speaker 1: experience with it, and there's a lot of bad debt

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Speaker 1: that's out there. So first of all, it is absolutely

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Speaker 1: not my view that all debt is good debt. Essentially,

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Speaker 1: I think there's some debt that's good debt and some

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Speaker 1: debt that's bad debt, and debt that's good debt should

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Speaker 1: be evaluated thoughtfully, and debt that's bad debt should be eliminated.

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Speaker 1: It's it's really about that simple. Yeah, So this is

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Speaker 1: going to be a nuanced conversation here, which I'm glad.

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Speaker 1: I think what Matt alluded to in the intro when

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Speaker 1: he said that a lot of people say debt is dumb,

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Speaker 1: that is not nuanced, right. That is one particular take

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Speaker 1: that tries to say that debt is a nail and

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Speaker 1: it should be pounded, you know, anytime like that. It's

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Speaker 1: really just like a one size fits all kind of

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Speaker 1: way of viewing the world. But you're also, yeah, you're

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Speaker 1: not talking about taking on debt to spend lavishly through

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Speaker 1: out there and by ridiculous things that you can actually afford.

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Speaker 1: You're talking about taking calculated risks, right, very much. So

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Speaker 1: this is absolutely not about buying things that you can't afford.

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Speaker 1: So this is just about making strategic decisions with when

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Speaker 1: you should be using low cost debt and when you

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Speaker 1: should be choosing to pay down that debt versus when

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Speaker 1: you should be choosing to emphasize things like liquidity and

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Speaker 1: flexibility and just building up your savings. And we're gonna

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Speaker 1: get to all of that. But so as a quick example,

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Speaker 1: like skipping retirement contributions, I've oftentimes we're faced with a

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Speaker 1: question here on the show where folks are like, do

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Speaker 1: I pause my retirement investing in order to pay down debt?

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Speaker 1: Do I take money out of my retirement accounts in

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Speaker 1: order to pay down this debt? That's often a question

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Speaker 1: that folks are wrestling. We literally had a listener recently,

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Speaker 1: Tom who said, Hey, I've got a sixteen percent debt,

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Speaker 1: but should I take my contributions out of my rothira

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Speaker 1: to pay it off? These are the kind of questions

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Speaker 1: that we're getting regularly. Yeah, it's it's one of those options.

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Speaker 1: But you often will say that folks are being short

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Speaker 1: sighted if they skip out on those retirement contributions in

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Speaker 1: order to pay down some of that debt. How might

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Speaker 1: that actually end up happening. Yeah, so let's lean into

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Speaker 1: that listener had asked and kind of think about that

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Speaker 1: question just a little bit. So first of all, let's

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Speaker 1: say that let's just go to the extreme, because I

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Speaker 1: think we can set the table with an example that

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Speaker 1: we would all agree. Let's say that you are in

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Speaker 1: the fortunate position that you got a mortgage when rates

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Speaker 1: were really low, and your mortgage is let's say three percent,

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Speaker 1: and let's just say that it's tax deductible, and today

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Speaker 1: there are bank accounts that in your checking account you

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Speaker 1: can earn you about three to four percent. So if

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Speaker 1: my after tax mortgage is about two percent, I think

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Speaker 1: in this environment we would say, hey, I don't know

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Speaker 1: that I want to rush to pay down that type

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Speaker 1: of debt. Does that kind of simple example start by

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Speaker 1: making sense of maybe that would be a form of

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Speaker 1: debt that we wouldn't want to rush to pay down

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Speaker 1: for sure? Yeah? Yeah, yeah, I mean so basically, I

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Speaker 1: mean you're talking about capturing the spread here, right, And

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Speaker 1: so is there I guess, is there some sort of

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Speaker 1: threshold is in your mind? Is there a minimum sort

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Speaker 1: of spread that you would want folks to see before

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Speaker 1: they are considering something like that, or is it more

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Speaker 1: on an individual basis that you want folks to consider that.

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Speaker 1: This is absolutely about capturing the spread, and this is

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Speaker 1: exactly where the conversation is fun to have. So, first

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Speaker 1: of all, if we can start by saying, hey, some

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Speaker 1: debt might be good debt, and I should be thoughtful

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Speaker 1: about paying that down. And an example of that would

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Speaker 1: be if I had a mortgage at two percent or

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Speaker 1: a student loan at three percent, that's already then people

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Speaker 1: are being thoughtful and saying, well, hey, maybe that might

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Speaker 1: be a good form of debt. Let's just jump to

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Speaker 1: the other end, and then we'll come in the middle,

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Speaker 1: which is where your question is. If I have a

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Speaker 1: credit card debt running at twenty five or thirty percent,

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Speaker 1: if you pay that down, you get a guaranteed return

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Speaker 1: of twenty five or thirty percent. So nothing delivers that

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Speaker 1: type of return. So obviously things like credit card debt

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Speaker 1: or anything over twenty percent we can very quickly agree

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Speaker 1: is bad. So if we just set these field goals

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Speaker 1: here essentially, of like let's say two percent is good

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Speaker 1: and twenty percent is bad, we now can talk about

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Speaker 1: the middle. So then I think from there the preference

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Speaker 1: is to be toward the lower end. It's more likely

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Speaker 1: to be good, and toward the higher end it's more

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Speaker 1: likely to be bad. So you can look at this

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Speaker 1: in absolute rates, or you can look at it and relative.

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Speaker 1: So I like to think about it like, any debt

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Speaker 1: that's over ten percent, if I kind of call that

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Speaker 1: the midpoint, is going to be more toward the bad category.

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Speaker 1: So that's going to be most forms of consumer debt.

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Speaker 1: But any debt that's going to be kind of under

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Speaker 1: the seven percent range, I think it's going to be

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Speaker 1: more toward the potentially good category. So that might be

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Speaker 1: things like mortgages, it might be things like student debt.

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Speaker 1: And between seven and ten really depends and is a

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Speaker 1: little bit more personal, but I think it can require

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Speaker 1: a little bit more analysis, and it's a fun area

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Speaker 1: to talk about. Yeah, And one of the things you

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Speaker 1: just talked about kind of with mortgages, it's not just

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Speaker 1: the interest rait that you're paying, but there's also potential

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Speaker 1: tax benefits, so you get from holding onto that mortgage.

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Speaker 1: And I think you've said that it's a mathematical fact

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Speaker 1: that debt can increase or turns and reduce taxes, which

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Speaker 1: is a bold statement, but you're definitely right on the

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Speaker 1: reducing taxes part. But yeah, is that a big part

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Speaker 1: of the reason to consider holding onto debt as part

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Speaker 1: of kind of your overall money strategy. Yeah, and a

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Speaker 1: lot of tax things have changed recently, and you know,

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Speaker 1: the original book came out ten years ago, but there

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Speaker 1: always are different tax benefits, and well that's a part

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Speaker 1: of it. I think you can almost even set the

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Speaker 1: tax part aside and call that like kind of gravy

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Speaker 1: and say, look, if on average, if your investments can

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Speaker 1: earn you know, forget ten percent, let's just say they

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Speaker 1: earn eight percent, and let's just say that your debt

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Speaker 1: cost you know, six percent, then you're capturing a spread

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Speaker 1: of two percent, and that can add up to thousands

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Speaker 1: and thousands of dollars a year, can add up to

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Speaker 1: hundreds of thousands of dollars over a lifetime. Right. So

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Speaker 1: it's like a very high level sort of view here

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Speaker 1: anytime you approach debt, like there obviously have to be

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Speaker 1: seen guardrails in place, right, And so I'm talking for

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Speaker 1: about about your your five tenets of a strategic debt philosophy.

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Speaker 1: You kind of share what those tenants are, the kind

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Speaker 1: of explain how it is that we could use those

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Speaker 1: tenants to implement some debt in our life in order

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Speaker 1: to build wealth more quickly. Yeah, So I think the

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Speaker 1: first thing is is that you really just want to

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Speaker 1: be thoughtful about what applies to you, and so you

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Speaker 1: want to start by taking a holistic view and looking

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Speaker 1: at the big picture. So that's where it starts. So

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Speaker 1: when you're thinking about these different pieces, you want to

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Speaker 1: start with the big picture. What are the things that

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Speaker 1: I'm trying to accomplish. So this is a part of

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Speaker 1: a broader philosophy. And so the first thing is that

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Speaker 1: we want to be looking in a big picture sense,

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Speaker 1: and I think that what that means is you want

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Speaker 1: to be looking across kind of your complete financial plan.

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Speaker 1: So the next part of this next tenant is to say, like,

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Speaker 1: once you're looking at the big picture, to explore thinking

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Speaker 1: and acting like a company. So when you think about it,

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Speaker 1: companies have a CFO, and what a CFO is They

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Speaker 1: actually design the balance sheet of a company. They choose

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Speaker 1: how much debt that should have and how it should

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Speaker 1: be structured. So if you think about a company that

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Speaker 1: you like or admire, like an Apple or a Google,

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Speaker 1: they have debt which they choose to have because of

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Speaker 1: the liquidity, the flexibility and the tax benefits associated with

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Speaker 1: that debt. They could choose to not have it, but

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Speaker 1: they actually choose to have it. We'll kind of explore

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Speaker 1: that a little bit more. But it's an interesting thing

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Speaker 1: where I think we can learn not that we are companies,

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Speaker 1: but we can learn from the ideas that they're doing.

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Speaker 1: Does that make sense? Yeah, well, I mean, just to

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Speaker 1: interject real quick, you said that we're not companies, but

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Speaker 1: I should be thinking of myself as like the CFO

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Speaker 1: of my own finances, And I like what you said

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Speaker 1: as far as the debt that companies take on. It's

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Speaker 1: an intentional decision, right, Like, like you said that they're

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Speaker 1: designing that, and unfortunately, oftentimes in our lives when we

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Speaker 1: enter into debt, we're not doing it on purpose. It's

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Speaker 1: something that we're sort of we're being sold quite literally goods,

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Speaker 1: and it's something that we're more or less falling into

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Speaker 1: as opposed to strategically choosing on purpose. Yeah. Yeah, yeah,

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Speaker 1: it's actually lean into what you're talking about just a

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Speaker 1: little bit. See, if I'm a company and I don't

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Speaker 1: have the right debt ratio, then someone like a carl

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Speaker 1: Icon gets crabby with me and they come in and

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Speaker 1: they buy me and they lever me appropriately. Right, So

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Speaker 1: all companies have this like pressure by shareholders to kind

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Speaker 1: of have the right type of a debt philosophy. But

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Speaker 1: people tend to either have way too much debt or

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Speaker 1: they're completely debt averse. And I think that there's this

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Speaker 1: optimal middle ground where very few people actually happen to

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Speaker 1: be and those that are actually are there by luck

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Speaker 1: more than a strategic choice. We just start out with

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Speaker 1: way too much debt and then we go to way

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Speaker 1: too little, and I think there's this balanced ground that's

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Speaker 1: somewhere in the middle. Yeah. Yeah. You also you talk

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Speaker 1: about being open minded and then verifying what works, And

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Speaker 1: I think that being open minded is probably really important

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Speaker 1: because Matt and I we sometimes find ourselves in this

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Speaker 1: interesting place as personal finance podcasters where we talk about

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Speaker 1: using debt strategically and we talk about the differences of

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Speaker 1: good debt and bad and we'll get pushed back sometimes

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Speaker 1: from the anti debt community and they're like, no, no no, no, no,

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Speaker 1: all debt is bad. But the reality, especially when you're

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Speaker 1: talking about the mortgage rates. That's the perfect example right now.

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Speaker 1: There's a lot of our listeners who have locked in

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Speaker 1: low mortgage rates of two and a half to three percent.

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Speaker 1: Three and a half percent maybe right, and now when

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Speaker 1: you can make more in a savings account like it,

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Speaker 1: just you have to be open minded and be willing

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Speaker 1: to change your trajectory a little bit based on kind

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Speaker 1: of what's happening right now. But one of the things

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Speaker 1: you talk about is the optimal debt ratio, and I

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Speaker 1: think that's probably something worth kind of drilling down on

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Speaker 1: a little bit, because it's obviously, like you said, some

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Speaker 1: people have way too much debt. Some people have no

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Speaker 1: debt at all. But yeah, talk to us about the

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Speaker 1: optimal debt ratio and how we kind of figure out

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Speaker 1: what that is in our lives. Yeah, So the optimal

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Speaker 1: debt ratio is how much you're borrowing against the assets

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Speaker 1: that you have. And so if I am, you know,

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Speaker 1: buying a TV on a credit card, then a year

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Speaker 1: from now, my TV is worth less and my credit

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Speaker 1: card debt went from let's say it was a two

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Speaker 1: thousand dollars TV, if I didn't make payments on it,

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Speaker 1: that's I know, twenty four hundred dollars. What is worth

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Speaker 1: a fifteen hundred dollars TV, and then my debt ratio

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Speaker 1: would be upside down because I own more than I owe,

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Speaker 1: and so that would be an example of a bad

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Speaker 1: debt ratio, right, And that makes sense. The other side

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Speaker 1: of this is, let's say that you own something like

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Speaker 1: a house, which you know certainly can go down in value,

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Speaker 1: but maybe over a long period of time, like ten

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Speaker 1: or twenty years, might tend to go up in value

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Speaker 1: a little bit over time. Then you want to think about, well,

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Speaker 1: if this asset is going up in value over time,

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Speaker 1: even if I keep my debt relatively the same, it's

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Speaker 1: actually gradually falling. So if you even just make the

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Speaker 1: base payments on your student loan or to just make

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Speaker 1: the base payment on your mortgage, but that house is

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Speaker 1: going up, your debt ratio is actually drifting down. And

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Speaker 1: so companies look at this a lot. And what I

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Speaker 1: like to kind of explore as a debt ratio of

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Speaker 1: around thirty percent, And that's where people tend to have

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Speaker 1: way more debt than that or way less debt than that.

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Speaker 1: But it's a fun place to start the conversation. I

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Speaker 1: think the maybe how it does we define debt, I

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Speaker 1: think that can go a long ways and helping us

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Speaker 1: to determine whether or not certain debts in our lives

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Speaker 1: might be helpful, you know, how they might be able

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Speaker 1: to help out our bottom line or not. We'll get

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Speaker 1: to some of those different definitions, and we'll kind of

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Speaker 1: talk about liquidity as well. We'll get to all of

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Speaker 1: that right after this. All right, we're back from the break.

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Speaker 1: We're still talking about using debt to build wealth. We're

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Speaker 1: to have this conversation with Tom Anderson. And Tom, you

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Speaker 1: have different debt definitions basically, and like I alluded to,

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Speaker 1: Matt and I we talked about the kind of good

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Speaker 1: debt versus bad debt, strategic debt versus debt that's gonna

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Speaker 1: leave you kind of by the side of the road,

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Speaker 1: bleeding and hurt. But you're clearly you're not talking about

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Speaker 1: card debt is something that we should hold on to.

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Speaker 1: But you have three different, like working definitions. Can you

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Speaker 1: define them their oppressive debt, working debt, and enriching debt.

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Speaker 1: I'm curious to hear kind of yeah, what those are

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Speaker 1: for you. Yeah, So oppressive debt is where I just

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Speaker 1: want to make sure that everybody on this call is

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Speaker 1: completely aligned and that all of your listeners know things

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Speaker 1: like credit card debt, debt that costs in my world

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Speaker 1: more than ten percent, and clearly debt that costs more

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Speaker 1: than twenty percent is oppressive debt. It is bad debt.

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Speaker 1: And all of the conventional wisdom that you hear on

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Speaker 1: debt is correct with respect to oppressive debt. It just

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Speaker 1: puts you in a cycle that is difficult to break.

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Speaker 1: If you're buying things that you can't afford, you never

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Speaker 1: break through. And I think that a very solid fifty

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Speaker 1: percent of America gets trapped by oppressive debt, perhaps benefits

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Speaker 1: from conventional wisdom, and I just want to hit the

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Speaker 1: table and scream, like oppressive debt is terrible. So working

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Speaker 1: debt and enriching debt what are those for us? Then?

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Speaker 1: So working debt is going to be things that we're

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Speaker 1: talking about, like a mortgage. It's going to be lower cost,

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Speaker 1: maybe a low cost car loan, which is not going

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Speaker 1: to be a bad thing to buy a car rather

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Speaker 1: than buying a car with cash. There could be reasons

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Speaker 1: to use a low cost car loan rather than paying

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Speaker 1: for your student, your school and cash. There can be

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Speaker 1: a reason to have a school loan, or you're buying

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Speaker 1: an asset that you're going to pay for over time

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Speaker 1: or earn more money over time, that's going to have

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Speaker 1: a lower rate associated with it, a rate that's typically

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Speaker 1: you know, in the load of mid single digits. Those

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Speaker 1: can be examples of good debt that should be a

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Speaker 1: thought of much more carefully and can potentially add value

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Speaker 1: to you in your life. That's working debt. And then

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Speaker 1: the last type of debt you mentioned is enriching debt. Yeah,

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Speaker 1: some people would say that's an oxymoron, So I'm curious

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Speaker 1: to hear how you talk about that. The interesting thing

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Speaker 1: is that when you think about billionaires, what percentage of

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Speaker 1: them do you think borrow money? Oh? Most of them,

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Speaker 1: all of them, virtually all of them, So that's interesting.

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Speaker 1: Most of them and all of them. So we don't

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Speaker 1: have great but it's approximately seventy percent of them is

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Speaker 1: the best that can be discerned, but with trends toward higher,

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Speaker 1: but it is very clear that the vast majority do

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Speaker 1: borrow money. So why if you're a billionaire would you

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Speaker 1: choose to borrow money, because of course you could choose

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Speaker 1: to not have debt. So why are we seeing the

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Speaker 1: affluent people in America the one percent that could choose

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Speaker 1: to not have debt. Why do you think that they

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Speaker 1: choose to have debt so they don't have to sell

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Speaker 1: their assets and pay taxes on those gains. That's absolutely

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Speaker 1: one reason that they do it is so they don't

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Speaker 1: have to sell assets so that they don't have to

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Speaker 1: pay taxes on the gains. But sometimes if you see,

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Speaker 1: like you know, Elon Musk has many different businesses, but

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Speaker 1: then he's sitting around and he's like, hey, I'd like

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Speaker 1: to buy Twitter. So he wanted to fund that acquisition

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Speaker 1: with debt by not selling his other assets, and so

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Speaker 1: then he's constantly building up more assets. And you see

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Speaker 1: this across the high net worth spectrum. These are enriching

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Speaker 1: debt is when you could choose to pay cash for something,

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Speaker 1: or you could choose to sell an asset for something,

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Speaker 1: but you are making a strategic choice to use debt

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Speaker 1: as a tool to buy it instead. You see that

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Speaker 1: all the time and the high net worth market and

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Speaker 1: the ultra high net worth market, and it is a

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Speaker 1: strategy that the rest of America can learn from. So

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Speaker 1: why don't they? So my question is obviously paying cash

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Speaker 1: for everything, not taking on additional debt like that is

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Speaker 1: going to be a more straightforward and simple path to take.

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Speaker 1: Is that the main reason is that why it is

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Speaker 1: that folks tend to think, all right, I'm just going

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Speaker 1: to focus on paying off my mortgage. I'm just going

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Speaker 1: to focus on completely eliminating all forms of debt that

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Speaker 1: I have, as opposed to looking at it a little

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Speaker 1: more strategically. Is it because folks aren't thinking about it strategically, Yes,

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Speaker 1: it's because people aren't thinking about it strategically. And as

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Speaker 1: you move up the net worth spectrum, you get more

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Speaker 1: and more advisors, and those advisors tell you about the

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Speaker 1: benefits of the strategies of using your balance sheet in

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Speaker 1: a holistic way to kind of maximize is your long

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Speaker 1: term net worth? You really these high net worth people

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Speaker 1: are like little companies, right, with lots of different advisors,

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Speaker 1: and they're thinking about things strategically. And that's what I

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Speaker 1: think that we can do as well, is that there

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Speaker 1: are times when you could pay cash for something, but

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Speaker 1: you instead, or you could pay down your debt, but

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Speaker 1: you choose to make a different decision. And it's when

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Speaker 1: you're making a different choice, you're choosing to invest rather

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Speaker 1: than pay down debt. You're choosing to buy an asset

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Speaker 1: that you're making a strategic choice, and that's where I

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Speaker 1: think we can learn. Yeah, it makes me think of

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Speaker 1: the one time, the one time that I bought a

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Speaker 1: new car. I bought a Nissan Leaf and I chose

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Speaker 1: to get financing for the car because it was zero

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Speaker 1: percent for five years. And so it was one of

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Speaker 1: those things where normally I would one not buy a

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Speaker 1: new car, or two if I did, I would pay

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Speaker 1: cash for it. I would, and I had the money

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Speaker 1: I could have, but it just made sense when someone

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Speaker 1: saying zero percent and it was something I was going

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Speaker 1: to buy anyway to make that choice and allow that

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Speaker 1: debt to kind of free up my cash to do

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Speaker 1: better things. And but one of the things that you

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Speaker 1: say too, you say that whether debt is good or bad,

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00:21:11,400 --> 00:21:15,080
Speaker 1: it depends on your resources relative to your needs. And basically,

433
00:21:15,119 --> 00:21:18,240
Speaker 1: like where people are at in their financial journey should

434
00:21:18,240 --> 00:21:21,160
Speaker 1: influence how they think about and incorporate debt. Right, So

435
00:21:21,560 --> 00:21:24,359
Speaker 1: how should people think about, Hey, I'm on you know,

436
00:21:24,400 --> 00:21:26,399
Speaker 1: I'm just getting started in my personal finance journey. How

437
00:21:26,400 --> 00:21:29,000
Speaker 1: should I think about debt versus someone who's years and

438
00:21:29,119 --> 00:21:32,520
Speaker 1: years into investing and saving and paying down the worst

439
00:21:32,560 --> 00:21:35,960
Speaker 1: kinds of debt. Yeah, so we're all at different points

440
00:21:35,960 --> 00:21:39,480
Speaker 1: on the journey, and you've got a lot that kind

441
00:21:39,480 --> 00:21:42,840
Speaker 1: of combines here. So let's use your example of the

442
00:21:42,880 --> 00:21:46,000
Speaker 1: car for a second. Over time. Of course, it's nice

443
00:21:46,040 --> 00:21:47,720
Speaker 1: if you can capture the spread, and it would be

444
00:21:47,760 --> 00:21:51,000
Speaker 1: great if you could earn let's just say six percent

445
00:21:51,080 --> 00:21:53,520
Speaker 1: and your cost of your car loan was four percent,

446
00:21:53,680 --> 00:21:56,800
Speaker 1: then you know that's nice. But early in your journey

447
00:21:56,840 --> 00:21:59,240
Speaker 1: and thinking about your car, what I think is actually

448
00:21:59,320 --> 00:22:01,959
Speaker 1: more interesting and more important is you said that you

449
00:22:01,960 --> 00:22:03,520
Speaker 1: had the cash and you could have paid for it,

450
00:22:03,560 --> 00:22:05,480
Speaker 1: but you were attracted to the zero percent. Did I

451
00:22:05,600 --> 00:22:07,720
Speaker 1: hear that right? Yeah? Well, I was planning I get

452
00:22:07,720 --> 00:22:10,320
Speaker 1: in the carney where there were some tax federal and

453
00:22:10,480 --> 00:22:13,280
Speaker 1: state tax incentives, and so it was like, okay, this

454
00:22:13,359 --> 00:22:15,000
Speaker 1: is the time to pounce. The overall cost of that

455
00:22:15,000 --> 00:22:16,840
Speaker 1: car is low. Normally I wouldn't buy a new car,

456
00:22:17,080 --> 00:22:20,320
Speaker 1: and then boom, sugar or cherry. On top was the

457
00:22:20,359 --> 00:22:23,080
Speaker 1: fact that I could get a zero percent loan. So

458
00:22:23,119 --> 00:22:25,040
Speaker 1: I love the decision that you made there. I just

459
00:22:25,080 --> 00:22:27,159
Speaker 1: think it was perfect. And one of the biggest reasons

460
00:22:27,200 --> 00:22:29,680
Speaker 1: I think it was perfect is it left you with

461
00:22:29,720 --> 00:22:31,800
Speaker 1: the money in the bank that you would have had

462
00:22:31,840 --> 00:22:34,960
Speaker 1: in the car loan. Otherwise. You see what happens is

463
00:22:35,200 --> 00:22:38,440
Speaker 1: because you had that money in the bank, if you

464
00:22:38,600 --> 00:22:41,440
Speaker 1: when you lose your job, you can't get the money

465
00:22:41,520 --> 00:22:44,800
Speaker 1: back out of the car. It's so important that we

466
00:22:44,880 --> 00:22:47,560
Speaker 1: have a cash reserve and that we have liquidity. And

467
00:22:47,560 --> 00:22:49,760
Speaker 1: so when we're looking at these different phases, some people

468
00:22:49,800 --> 00:22:52,960
Speaker 1: are so focused on paying off debt, any form of

469
00:22:53,000 --> 00:22:55,880
Speaker 1: debt at any rate quickly. But once you pay it off,

470
00:22:55,880 --> 00:22:58,080
Speaker 1: if I pay off my student loan, I can't get

471
00:22:58,119 --> 00:23:00,760
Speaker 1: that money back. If I put down one hundred thousand

472
00:23:00,800 --> 00:23:03,359
Speaker 1: dollars on my house, I can't access that. If I

473
00:23:03,440 --> 00:23:06,720
Speaker 1: lose my job, I pay off my car. The only

474
00:23:06,720 --> 00:23:08,840
Speaker 1: way if I can get that money back is to

475
00:23:08,840 --> 00:23:11,040
Speaker 1: sell my car. And that's why we get into this

476
00:23:11,119 --> 00:23:14,159
Speaker 1: liquidity trap. And it's actually liquidity that creates crisis in

477
00:23:14,160 --> 00:23:16,960
Speaker 1: people's lives. Yeah. Although note and a recent talk you

478
00:23:17,400 --> 00:23:21,359
Speaker 1: mentioned the intersection of a crisis that you were facing personally,

479
00:23:21,760 --> 00:23:24,520
Speaker 1: the intersection of that with what the market was doing

480
00:23:24,560 --> 00:23:26,040
Speaker 1: at that point in time. Can you share that that

481
00:23:26,080 --> 00:23:30,560
Speaker 1: story with our listeners. Yeah. So, in at the time

482
00:23:30,600 --> 00:23:34,040
Speaker 1: I was living in Cedar Apids, Iowa, and the sixth

483
00:23:34,080 --> 00:23:36,840
Speaker 1: worst natural disaster in the history of the United States

484
00:23:37,119 --> 00:23:40,000
Speaker 1: up to then was in Cedar Appids, and the Cedar

485
00:23:40,119 --> 00:23:44,879
Speaker 1: River just leaped out of its banks and provide. It

486
00:23:44,960 --> 00:23:49,359
Speaker 1: was a huge amount of flood damage, and my office

487
00:23:49,440 --> 00:23:51,280
Speaker 1: was destroyed, and it was in an area that wasn't

488
00:23:51,320 --> 00:23:54,520
Speaker 1: supposed to even get wet. The county kept all the

489
00:23:54,680 --> 00:23:56,640
Speaker 1: court records in the basement of the building and didn't

490
00:23:56,680 --> 00:23:59,000
Speaker 1: even move them because this is a site that it

491
00:23:59,080 --> 00:24:03,160
Speaker 1: shouldn't get wet it And so you know, when that happens,

492
00:24:03,320 --> 00:24:09,520
Speaker 1: you need money right away. And natural disasters strike everywhere, hurricanes, floods, tornadoes,

493
00:24:09,720 --> 00:24:12,480
Speaker 1: it's you never know, you know what it's going to be.

494
00:24:12,520 --> 00:24:14,919
Speaker 1: And insurance can certainly be helpful, and it was helpful

495
00:24:14,960 --> 00:24:18,600
Speaker 1: for me, But insurance doesn't say, hey, you need a

496
00:24:18,680 --> 00:24:20,639
Speaker 1: lot of money right now. I'll just send you a

497
00:24:20,720 --> 00:24:23,360
Speaker 1: check and you send back the rest. Like you need

498
00:24:23,400 --> 00:24:26,359
Speaker 1: liquidity to get through you know that scenario, and you

499
00:24:26,400 --> 00:24:30,760
Speaker 1: need it before the insurance is there. The timing of that,

500
00:24:30,840 --> 00:24:33,080
Speaker 1: if you caught it was in two thousand and eight

501
00:24:33,160 --> 00:24:36,840
Speaker 1: and coming right into the financial crisis, And so if

502
00:24:36,880 --> 00:24:40,520
Speaker 1: my solution would have been well I'm going to sell

503
00:24:40,560 --> 00:24:43,199
Speaker 1: my assets at this point in time, that would have

504
00:24:43,240 --> 00:24:48,120
Speaker 1: been devastating. I just needed to get through a terrible

505
00:24:48,160 --> 00:24:50,600
Speaker 1: period that was already you know, my life upside down

506
00:24:50,640 --> 00:24:55,479
Speaker 1: and my business under fire. Just having access to money

507
00:24:55,720 --> 00:24:59,280
Speaker 1: is what really matters, and that's what can be access

508
00:24:59,320 --> 00:25:01,440
Speaker 1: to money. A line of credit can be accessed to money.

509
00:25:01,640 --> 00:25:04,000
Speaker 1: Cash in the bank can be access to money. But

510
00:25:04,080 --> 00:25:09,320
Speaker 1: people just don't emphasize enough having liquidity, and they instead

511
00:25:09,400 --> 00:25:12,000
Speaker 1: prioritize paying down debt at all costs, And I just

512
00:25:12,040 --> 00:25:15,879
Speaker 1: I don't understand it. Yeah, So liquidity puts you in

513
00:25:15,880 --> 00:25:18,080
Speaker 1: a position of power in a lot of ways, right

514
00:25:18,080 --> 00:25:21,320
Speaker 1: where you can make different choices as opposed to having

515
00:25:21,880 --> 00:25:24,280
Speaker 1: no cash in the bank or no access to funds.

516
00:25:24,440 --> 00:25:27,640
Speaker 1: But maybe a slate of zero debt. But let's talk

517
00:25:27,640 --> 00:25:30,240
Speaker 1: about maybe a few examples. For instance, if you own

518
00:25:30,240 --> 00:25:33,439
Speaker 1: a home having a helock, right, that's one way in

519
00:25:33,480 --> 00:25:36,919
Speaker 1: which you could have potential liquidity. How else have you

520
00:25:36,960 --> 00:25:40,119
Speaker 1: seen like middle income folks using debt intelligently, Like what

521
00:25:40,200 --> 00:25:44,520
Speaker 1: are the methods, what are the paths they pursue for that? Sure? Well,

522
00:25:44,560 --> 00:25:47,080
Speaker 1: so one of the most simple things that I don't

523
00:25:47,119 --> 00:25:49,400
Speaker 1: understand why a lot of people don't do. But it's

524
00:25:49,600 --> 00:25:52,919
Speaker 1: having a credit card and not using it. There's a

525
00:25:52,960 --> 00:25:55,440
Speaker 1: lot to that. I mean, that's just interesting to pause

526
00:25:55,520 --> 00:25:58,400
Speaker 1: on right or you using it and paying it off

527
00:25:58,440 --> 00:26:01,080
Speaker 1: every month. So if you have a credit card and

528
00:26:01,160 --> 00:26:04,159
Speaker 1: you can access you know, five or ten thousand dollars

529
00:26:04,200 --> 00:26:07,040
Speaker 1: if there was an emergency, But the second that you

530
00:26:07,080 --> 00:26:09,359
Speaker 1: start to carry a balance on a credit card, you

531
00:26:09,480 --> 00:26:11,919
Speaker 1: now if there's an emergency, you have two problems. You

532
00:26:12,000 --> 00:26:15,240
Speaker 1: owe that huge interest rate on the balanced, you can't

533
00:26:15,359 --> 00:26:17,960
Speaker 1: repay it, and you don't have access to as much credit.

534
00:26:18,760 --> 00:26:22,280
Speaker 1: So there's so many bad things about carrying a credit

535
00:26:22,280 --> 00:26:24,880
Speaker 1: card balance. That's just a huge place to start. Don't

536
00:26:24,960 --> 00:26:27,560
Speaker 1: carry a credit card balance. You avoid appressive debt. You

537
00:26:27,640 --> 00:26:31,560
Speaker 1: have access to credit, and that's just it's kind of

538
00:26:32,000 --> 00:26:34,600
Speaker 1: base one. Number two would be a home equity line

539
00:26:34,600 --> 00:26:37,600
Speaker 1: of credit. Rather than using the home equity line of

540
00:26:37,600 --> 00:26:42,200
Speaker 1: credit for the home improvement project, imagine that you have

541
00:26:42,560 --> 00:26:46,119
Speaker 1: access to the money that you could borrow in case

542
00:26:46,200 --> 00:26:49,240
Speaker 1: you're in an emergency. This is what CFOs of companies do.

543
00:26:49,440 --> 00:26:52,760
Speaker 1: All companies have access to lines of credit and bad time.

544
00:26:52,800 --> 00:26:55,000
Speaker 1: So that's the first job. If I'm president of a

545
00:26:55,000 --> 00:26:57,240
Speaker 1: company and you're the CFO. It's a set up a

546
00:26:57,280 --> 00:26:59,560
Speaker 1: line of credit, and if you didn't, I would fire you.

547
00:26:59,359 --> 00:27:02,280
Speaker 1: So a whole equity line of credit, a credit card,

548
00:27:02,320 --> 00:27:05,399
Speaker 1: a personal line of credit, setting them up and not

549
00:27:05,600 --> 00:27:10,360
Speaker 1: using them as a fabulous defensive strategy. I mean, bottom line,

550
00:27:10,359 --> 00:27:13,200
Speaker 1: there are massive amounts of folks who might go through

551
00:27:13,200 --> 00:27:16,320
Speaker 1: those initial stuffs, but then they don't hit pause, they

552
00:27:16,359 --> 00:27:18,280
Speaker 1: in fact use them, and I think that's the biggest

553
00:27:18,320 --> 00:27:21,199
Speaker 1: problem here. Like I think from a psychological standpoint, the

554
00:27:21,240 --> 00:27:23,800
Speaker 1: biggest hurdle is for folks to have is to have

555
00:27:23,840 --> 00:27:26,080
Speaker 1: a table lined with a bunch of different pies that

556
00:27:26,200 --> 00:27:29,280
Speaker 1: smell and look wonderful, but they're told don't touch of

557
00:27:29,280 --> 00:27:32,080
Speaker 1: those desserts. It's having that cash available to them, and

558
00:27:32,080 --> 00:27:33,960
Speaker 1: they're thinking, man, I would I would really love to

559
00:27:34,000 --> 00:27:36,320
Speaker 1: be able to do something. It takes some of those

560
00:27:36,359 --> 00:27:39,960
Speaker 1: lines of credit, but I'm currently not in a situation

561
00:27:40,040 --> 00:27:42,200
Speaker 1: that calls for that. I think that's the biggest difference

562
00:27:42,200 --> 00:27:45,040
Speaker 1: between you know what it is that you're advocating here

563
00:27:46,119 --> 00:27:51,200
Speaker 1: versus the more mainstream conventional wisdom of completely eliminating debt.

564
00:27:51,840 --> 00:27:55,239
Speaker 1: There's that psychological side of things where folks like you said, Jell,

565
00:27:55,280 --> 00:27:57,479
Speaker 1: where folks don't have that discipline is to say no,

566
00:27:58,119 --> 00:28:00,600
Speaker 1: and that is the fifth tenant is what you have

567
00:28:00,640 --> 00:28:02,720
Speaker 1: to as we were talking before, you have to verify

568
00:28:02,800 --> 00:28:07,480
Speaker 1: what works for you. But obviously, mathematically and logically it's

569
00:28:07,520 --> 00:28:09,679
Speaker 1: better for someone to have access to money than not

570
00:28:09,760 --> 00:28:13,680
Speaker 1: have access to money. So my view is that you

571
00:28:13,680 --> 00:28:15,919
Speaker 1: should have access to lines of credit and that that

572
00:28:15,960 --> 00:28:18,080
Speaker 1: will be good for you because it protects you in

573
00:28:18,119 --> 00:28:21,480
Speaker 1: a bad time. That is right out of the CFP book,

574
00:28:21,720 --> 00:28:24,639
Speaker 1: the Certified Financial Planners. I mean, this is what you

575
00:28:24,680 --> 00:28:27,040
Speaker 1: should do. But you are absolutely right. A lot of

576
00:28:27,040 --> 00:28:30,719
Speaker 1: people can't handle having access to the credit because then

577
00:28:30,760 --> 00:28:33,760
Speaker 1: they will spend it. But you're spending money that you

578
00:28:33,840 --> 00:28:36,280
Speaker 1: don't have, so that is of course a terrible idea

579
00:28:36,359 --> 00:28:39,920
Speaker 1: and not what we're talking about today. Yeah, so obviously

580
00:28:40,080 --> 00:28:42,800
Speaker 1: we're seeing you mentioned savings accounts rates in the three

581
00:28:42,840 --> 00:28:45,720
Speaker 1: to four percent range, which is nice to finally see.

582
00:28:45,760 --> 00:28:48,720
Speaker 1: We had a bunch of years there where the best

583
00:28:48,800 --> 00:28:50,520
Speaker 1: you could expect to earn will be half a percent,

584
00:28:50,800 --> 00:28:53,880
Speaker 1: And so I guess I'm curious, did like near zero

585
00:28:54,000 --> 00:28:56,280
Speaker 1: rates on savings make you feel any differently? There was

586
00:28:56,560 --> 00:28:59,320
Speaker 1: a whole contingent of people who would say cash is

587
00:28:59,360 --> 00:29:02,200
Speaker 1: trash and put your money to work for you in

588
00:29:02,240 --> 00:29:05,360
Speaker 1: the market, and liquidity became less of a concern. Or

589
00:29:05,600 --> 00:29:09,080
Speaker 1: did you still feel the same way about liquidity even

590
00:29:09,080 --> 00:29:12,720
Speaker 1: at the time when savings rates were pretty abysmal. First

591
00:29:12,720 --> 00:29:15,360
Speaker 1: of all, I'm always a fan of liquidity, and so

592
00:29:15,600 --> 00:29:18,600
Speaker 1: there's so from a liquidity perspective, you want to have

593
00:29:18,680 --> 00:29:20,560
Speaker 1: access to lines of credit and you want to have

594
00:29:20,600 --> 00:29:22,800
Speaker 1: a three to six month cash reserve, and those two

595
00:29:22,840 --> 00:29:27,840
Speaker 1: things of conventional wisdom are absolutely completely right. So having

596
00:29:27,960 --> 00:29:31,400
Speaker 1: some cash and having some debt just kind of like

597
00:29:31,480 --> 00:29:34,320
Speaker 1: back to that car examples, not necessarily bad. You don't

598
00:29:34,320 --> 00:29:36,920
Speaker 1: always have to have a positive spread. If you had

599
00:29:37,680 --> 00:29:39,600
Speaker 1: some debt that was costing you a little bit more

600
00:29:39,640 --> 00:29:42,160
Speaker 1: than you were earning on your cash, that's not necessarily

601
00:29:42,160 --> 00:29:45,560
Speaker 1: a bad thing because you benefit from the liquidity. So

602
00:29:45,600 --> 00:29:49,120
Speaker 1: then when you look at interest rate environments in two

603
00:29:49,440 --> 00:29:51,720
Speaker 1: and thirteen when the book came out, let's just say

604
00:29:51,720 --> 00:29:54,520
Speaker 1: that interest rates were at zero on cash, and borrowing

605
00:29:54,600 --> 00:29:58,560
Speaker 1: rates were sometimes zero on a car, but typically higher

606
00:29:58,720 --> 00:30:01,200
Speaker 1: in a home. So well, why if cash is at

607
00:30:01,280 --> 00:30:04,320
Speaker 1: zero and my home loan is at four percent, your

608
00:30:04,400 --> 00:30:06,719
Speaker 1: value of debt idea is a dumb idea. Well, of

609
00:30:06,720 --> 00:30:08,600
Speaker 1: course we can look at that now and say, look

610
00:30:08,600 --> 00:30:12,440
Speaker 1: over the past ten years, anything that you owned has

611
00:30:12,480 --> 00:30:14,800
Speaker 1: gone up a lot in value, and cash rates are higher,

612
00:30:14,800 --> 00:30:17,160
Speaker 1: and if you locked in those low rates, of course

613
00:30:17,200 --> 00:30:21,400
Speaker 1: that looks like it was a great trade. A famous

614
00:30:21,400 --> 00:30:24,560
Speaker 1: economists said that interest rates are neither good nor bad.

615
00:30:24,600 --> 00:30:27,080
Speaker 1: They're a function of the environment at any point in time.

616
00:30:27,160 --> 00:30:28,720
Speaker 1: So you don't want to be looking at your debt

617
00:30:28,800 --> 00:30:31,320
Speaker 1: relative to just your cash. You want to be looking

618
00:30:31,360 --> 00:30:34,800
Speaker 1: at it relative to everything that you own. And so

619
00:30:35,240 --> 00:30:38,960
Speaker 1: you know, if stocks go up at inflation plus three

620
00:30:39,000 --> 00:30:41,560
Speaker 1: to four percent over time and you're borrowing at rates

621
00:30:41,600 --> 00:30:45,440
Speaker 1: closer to the inflation than over time, these strategies add

622
00:30:45,480 --> 00:30:48,239
Speaker 1: up to it just a tremendous amount of value. So

623
00:30:48,320 --> 00:30:51,520
Speaker 1: you have less stress and you're making more money when

624
00:30:51,520 --> 00:30:55,280
Speaker 1: you're embracing these ideas. Okay, yeah, all right, So Tom,

625
00:30:55,320 --> 00:30:56,840
Speaker 1: we've got a couple more questions to get to you

626
00:30:56,880 --> 00:31:00,800
Speaker 1: with you about debt using debt to build wealth, including

627
00:31:00,840 --> 00:31:03,160
Speaker 1: we want to talk about what if you've already got

628
00:31:03,160 --> 00:31:05,320
Speaker 1: debt on hand, how do you know whether that's a

629
00:31:05,320 --> 00:31:07,920
Speaker 1: debt that needs to be eliminated or one that you should, yeah,

630
00:31:08,040 --> 00:31:20,480
Speaker 1: keep around. We'll discuss that right after this. All right,

631
00:31:20,480 --> 00:31:22,320
Speaker 1: we are back and we are talking with Tim Anderson

632
00:31:22,360 --> 00:31:25,320
Speaker 1: still about using debt in order to build wealth. And

633
00:31:25,440 --> 00:31:27,600
Speaker 1: just before the break, you're talking about interest rates. How

634
00:31:28,160 --> 00:31:30,400
Speaker 1: different rates, whether or not they're good or bad, isn't

635
00:31:30,400 --> 00:31:32,840
Speaker 1: necessarily the case. Oftentimes you have to look at your

636
00:31:33,040 --> 00:31:37,560
Speaker 1: own personal situation and along those lines, like what about

637
00:31:37,560 --> 00:31:41,720
Speaker 1: the psychological reality of debt? Right, because different folks have

638
00:31:41,920 --> 00:31:44,440
Speaker 1: different preferences as to what it is that they prefer

639
00:31:44,800 --> 00:31:47,200
Speaker 1: in their own lives. And there's a lot of folks

640
00:31:47,240 --> 00:31:48,760
Speaker 1: out there who find it hard to sleep at night

641
00:31:48,800 --> 00:31:51,400
Speaker 1: having debt hanging over their head. How do you talk

642
00:31:51,440 --> 00:31:54,680
Speaker 1: to your clients when they get nervous about keeping some

643
00:31:54,760 --> 00:32:01,480
Speaker 1: of those smart debts just around longer in their lives. Yeah,

644
00:32:00,360 --> 00:32:04,280
Speaker 1: So often what we tend to do in America is

645
00:32:04,360 --> 00:32:07,360
Speaker 1: we take on a whole bunch of debt early in

646
00:32:07,400 --> 00:32:10,520
Speaker 1: our life, and then we spend a long number of

647
00:32:10,600 --> 00:32:13,160
Speaker 1: years racing to pay that debt down. And then we

648
00:32:13,200 --> 00:32:16,040
Speaker 1: wake up when we're fifty and we feel like we're undersaved,

649
00:32:16,480 --> 00:32:19,000
Speaker 1: and so then we try to save for fifteen years

650
00:32:19,040 --> 00:32:22,920
Speaker 1: and then we want to retire, and that mathematically just

651
00:32:22,960 --> 00:32:24,680
Speaker 1: doesn't work. I mean, it works if you're going to

652
00:32:24,760 --> 00:32:27,280
Speaker 1: save basically twenty five percent or more of your income,

653
00:32:27,320 --> 00:32:29,120
Speaker 1: but if you're not going to save at a very

654
00:32:29,160 --> 00:32:33,160
Speaker 1: aggressive rate, that strategy is flawed. It is why a

655
00:32:33,200 --> 00:32:36,360
Speaker 1: lot of people wake up and they feel behind, and

656
00:32:36,400 --> 00:32:39,680
Speaker 1: it's why people don't feel on track. If you take

657
00:32:39,680 --> 00:32:41,960
Speaker 1: on too much debt early at too high of a cost,

658
00:32:42,040 --> 00:32:43,880
Speaker 1: and then you spend all your time paying that down

659
00:32:44,000 --> 00:32:46,080
Speaker 1: and then you wake up and try to save, the

660
00:32:46,120 --> 00:32:50,800
Speaker 1: math doesn't work. So I don't think that you should

661
00:32:50,840 --> 00:32:55,320
Speaker 1: sleep well with that strategy because it's a mathematically flawed strategy.

662
00:32:55,960 --> 00:33:01,160
Speaker 1: The alternate strategy is that you could build up assets

663
00:33:01,240 --> 00:33:04,840
Speaker 1: early in your life. Invest This is not about taking

664
00:33:04,880 --> 00:33:06,320
Speaker 1: the money that it would have gone to pay down

665
00:33:06,360 --> 00:33:09,760
Speaker 1: debt and going to Disneyland or going voting, like we're

666
00:33:09,800 --> 00:33:12,720
Speaker 1: talking about it in the beginning. It's about taking the

667
00:33:12,800 --> 00:33:16,320
Speaker 1: money and saving it. And once you save it, you

668
00:33:16,320 --> 00:33:18,920
Speaker 1: can either put it in cash, which builds up your liquidity,

669
00:33:19,160 --> 00:33:21,720
Speaker 1: or you can build up your investments. But if you

670
00:33:21,760 --> 00:33:25,040
Speaker 1: start saving and building up your investments early, you have

671
00:33:25,160 --> 00:33:28,040
Speaker 1: more money growing for you for a longer period. Of time,

672
00:33:28,440 --> 00:33:31,120
Speaker 1: and then you can pay down your debts later. So

673
00:33:31,160 --> 00:33:33,320
Speaker 1: then what you happens is, let's say I wake up

674
00:33:33,360 --> 00:33:36,160
Speaker 1: if I have two million dollars of assets and five

675
00:33:36,240 --> 00:33:39,719
Speaker 1: hundred thousand dollars worth of debt, I'm a millionaire, right,

676
00:33:39,720 --> 00:33:41,840
Speaker 1: I'm worth one and a half million dollars. That's better

677
00:33:41,920 --> 00:33:45,160
Speaker 1: for me than having no debt and five hundred thousand

678
00:33:45,160 --> 00:33:47,240
Speaker 1: dollars of assets. And that's where just a lot of

679
00:33:47,240 --> 00:33:50,720
Speaker 1: people find themselves as they wake up with maybe I

680
00:33:50,880 --> 00:33:53,160
Speaker 1: paid down my debt, but I don't have enough assets,

681
00:33:53,200 --> 00:33:56,440
Speaker 1: and their dreams don't come together. My goals make these

682
00:33:56,520 --> 00:33:59,560
Speaker 1: dreams happen. Yeah, I think that's really important. Well, one

683
00:34:00,080 --> 00:34:03,120
Speaker 1: said that mathematically, it just doesn't work right to take

684
00:34:03,160 --> 00:34:07,720
Speaker 1: that approach of not investing until you're just a decade

685
00:34:07,720 --> 00:34:10,239
Speaker 1: and a half from retirement. But I also love what

686
00:34:10,280 --> 00:34:12,040
Speaker 1: you said there too, And most people are thinking of

687
00:34:12,200 --> 00:34:15,560
Speaker 1: debt as like that. People are taking it on purposefully

688
00:34:16,000 --> 00:34:19,520
Speaker 1: to buy things that they can't necessarily afford. But you're saying, no, no, no,

689
00:34:19,680 --> 00:34:22,080
Speaker 1: that's not what debt should be used for. Debt should

690
00:34:22,080 --> 00:34:25,279
Speaker 1: be used to allow you to funnel that money into

691
00:34:25,360 --> 00:34:28,719
Speaker 1: more productive ways, right, It should allow you to by

692
00:34:28,880 --> 00:34:31,239
Speaker 1: keeping that debt in place, the money you would have

693
00:34:31,320 --> 00:34:34,480
Speaker 1: put towards the debt you should save. And people are

694
00:34:34,560 --> 00:34:37,080
Speaker 1: not saving enough money, and that is the problem, and

695
00:34:37,080 --> 00:34:39,319
Speaker 1: that is why we have all this stress. That money

696
00:34:39,400 --> 00:34:42,200
Speaker 1: is the number one cause of stress. People don't have liquidity,

697
00:34:42,239 --> 00:34:44,759
Speaker 1: they don't have enough savings, and that's why so many

698
00:34:44,760 --> 00:34:47,600
Speaker 1: people are in the personal finance realm saying it's a

699
00:34:47,600 --> 00:34:49,440
Speaker 1: one size fits all approach and that debt should just

700
00:34:49,480 --> 00:34:53,040
Speaker 1: be avoided like the plague, because they know that the

701
00:34:53,080 --> 00:34:55,360
Speaker 1: reality for most Americans is that if they take on

702
00:34:55,440 --> 00:34:59,759
Speaker 1: more debt, they're they're not going to use their extra

703
00:35:00,000 --> 00:35:02,600
Speaker 1: ash to save or invest, They're going to use it

704
00:35:02,680 --> 00:35:07,080
Speaker 1: to consume. So's that you're right, and that's just terrible.

705
00:35:07,160 --> 00:35:09,319
Speaker 1: So how why is it the top one percent of

706
00:35:09,320 --> 00:35:12,319
Speaker 1: America has a bunch of bankers and advisors that are

707
00:35:12,360 --> 00:35:14,680
Speaker 1: saying to them, here's how you can use debt strategically,

708
00:35:15,080 --> 00:35:17,520
Speaker 1: and then the rest of of America we say, well,

709
00:35:17,520 --> 00:35:20,000
Speaker 1: you're not responsible enough to handle any of these ideas,

710
00:35:20,400 --> 00:35:22,399
Speaker 1: and so therefore we're just going to tell you one

711
00:35:22,440 --> 00:35:24,680
Speaker 1: size fits all all debt is bad, get rid of

712
00:35:24,719 --> 00:35:26,920
Speaker 1: it as fast as you can, and mathematically, we know

713
00:35:27,000 --> 00:35:29,319
Speaker 1: you'll be stuck. It doesn't seem to make sense either.

714
00:35:29,920 --> 00:35:32,759
Speaker 1: I mean the difficulty lies in the fact that, like

715
00:35:32,800 --> 00:35:34,239
Speaker 1: it makes me think of the charts that you see

716
00:35:34,280 --> 00:35:38,240
Speaker 1: where the vast majority of Americans have the vast majority

717
00:35:38,280 --> 00:35:41,319
Speaker 1: of their wealth tied up in their primary residence. I

718
00:35:41,360 --> 00:35:43,600
Speaker 1: guess the advantage there is that when folks know that

719
00:35:43,600 --> 00:35:46,719
Speaker 1: they're paying that they're paying their mortgage or in most

720
00:35:46,719 --> 00:35:49,279
Speaker 1: cases just paying their mortgage, like it's a it's a

721
00:35:49,320 --> 00:35:53,920
Speaker 1: forced form of saving and investing their money in a sense.

722
00:35:54,200 --> 00:35:56,960
Speaker 1: I guess I just can't get past that psychological side

723
00:35:56,960 --> 00:36:00,399
Speaker 1: of the equation because like, mathematically, like I told, agree

724
00:36:00,440 --> 00:36:03,080
Speaker 1: with you, and so maybe I don't know. Maybe this

725
00:36:03,200 --> 00:36:05,960
Speaker 1: is where this message isn't necessarily for everyone out there,

726
00:36:06,000 --> 00:36:08,399
Speaker 1: because if everybody did exactly with you, know what you're

727
00:36:08,400 --> 00:36:11,799
Speaker 1: saying here, like everybody would be smarter and richer. This

728
00:36:11,840 --> 00:36:15,120
Speaker 1: is a message for folks who are either a little

729
00:36:15,120 --> 00:36:17,120
Speaker 1: more disciplined or who can maybe be a little more

730
00:36:17,200 --> 00:36:19,759
Speaker 1: rational in how it is that they approach money. But

731
00:36:19,760 --> 00:36:22,680
Speaker 1: I think what we've what we've seen is that the

732
00:36:22,719 --> 00:36:24,920
Speaker 1: majority of folks aren't very rational when it comes to

733
00:36:24,960 --> 00:36:27,879
Speaker 1: their money. Like they make knee jerk reactions, they make

734
00:36:27,920 --> 00:36:30,839
Speaker 1: purchases that they're not necessarily prepared for. They bring on

735
00:36:30,960 --> 00:36:34,600
Speaker 1: debt into their life that wasn't necessarily designed or planning for.

736
00:36:35,640 --> 00:36:38,319
Speaker 1: It was more of a, like again, something that they

737
00:36:38,320 --> 00:36:40,040
Speaker 1: fell into and it's not something that they're able to

738
00:36:40,520 --> 00:36:43,359
Speaker 1: continue servicing. So I don't know, do you have any

739
00:36:43,400 --> 00:36:48,040
Speaker 1: thoughts or any advice for folks as to what approach

740
00:36:48,120 --> 00:36:50,640
Speaker 1: maybe they should take, because on one hand, I totally

741
00:36:50,640 --> 00:36:52,319
Speaker 1: hear what it is that you're saying here, But then

742
00:36:52,320 --> 00:36:55,600
Speaker 1: on the other hand, just the statistics show that it

743
00:36:55,640 --> 00:36:58,520
Speaker 1: seems that a lot of folks aren't actually able to

744
00:36:58,520 --> 00:37:00,960
Speaker 1: take a more strategic approach when it comes to the

745
00:37:01,000 --> 00:37:04,360
Speaker 1: debt that we have. Yeah, there's quite a bit to

746
00:37:04,440 --> 00:37:06,920
Speaker 1: unpack there, so let's take it in our section. No,

747
00:37:07,080 --> 00:37:11,319
Speaker 1: it's it's great. I think that the most important thing

748
00:37:11,320 --> 00:37:14,840
Speaker 1: that we can accomplish in this interview is if somebody

749
00:37:15,080 --> 00:37:18,080
Speaker 1: becomes more thoughtful that maybe some debt is good and

750
00:37:18,200 --> 00:37:22,080
Speaker 1: some debt is bad, then that's a mission accomplished. And

751
00:37:22,080 --> 00:37:25,120
Speaker 1: if they think, hey, I need to value liquidity, then

752
00:37:25,160 --> 00:37:28,880
Speaker 1: that's part of the mission accomplished. Because it's hard to

753
00:37:28,920 --> 00:37:32,040
Speaker 1: get into specifics for people. But then the next part

754
00:37:32,080 --> 00:37:33,880
Speaker 1: of this is to exactly what you were saying. So

755
00:37:33,920 --> 00:37:36,960
Speaker 1: let's say my mortgage is twenty five hundred dollars a

756
00:37:37,000 --> 00:37:40,879
Speaker 1: month and I have three thousand dollars, and I'm thinking, well,

757
00:37:40,880 --> 00:37:43,560
Speaker 1: I'm going to pay down more on my mortgage so

758
00:37:43,600 --> 00:37:47,240
Speaker 1: that my mortgage is paid off earlier as I get

759
00:37:47,239 --> 00:37:51,799
Speaker 1: closer to retirement. You can imagine somebody thinking something down

760
00:37:51,840 --> 00:37:55,920
Speaker 1: that thought path, right, Yeah, so I'm going to be

761
00:37:56,080 --> 00:37:58,879
Speaker 1: a good steward of my money by paying more down

762
00:37:58,880 --> 00:38:03,040
Speaker 1: on my mortgage. My mortgage is paid off earlier. That's

763
00:38:03,040 --> 00:38:05,840
Speaker 1: a hypothesis that someone has that that's a good and

764
00:38:05,880 --> 00:38:10,120
Speaker 1: responsible decision. Anyone who is able to make that type

765
00:38:10,120 --> 00:38:12,640
Speaker 1: of a hypothesis or that type of a thought process

766
00:38:13,040 --> 00:38:15,480
Speaker 1: should equally be able to do the math on what

767
00:38:15,600 --> 00:38:18,479
Speaker 1: if they invested the five hundred dollars instead of paid

768
00:38:18,480 --> 00:38:22,680
Speaker 1: it down on their mortgage. And my simple thing that

769
00:38:22,719 --> 00:38:24,840
Speaker 1: I would want people to do the analysis on is

770
00:38:24,880 --> 00:38:27,600
Speaker 1: if you took that money and saved it and invested

771
00:38:27,640 --> 00:38:30,800
Speaker 1: it responsibly over that same thirty year period of time,

772
00:38:31,360 --> 00:38:34,400
Speaker 1: you'll have more money. You don't have to believe in

773
00:38:34,520 --> 00:38:36,239
Speaker 1: much for that to be a better outcome for you.

774
00:38:36,640 --> 00:38:39,200
Speaker 1: All right, So I'm curious kind of from a personal level.

775
00:38:39,280 --> 00:38:42,680
Speaker 1: Two time, my parents there on the cusp of retirement

776
00:38:42,880 --> 00:38:45,320
Speaker 1: supposed to happen next month, which I'm excited for them about,

777
00:38:45,760 --> 00:38:51,279
Speaker 1: and they have still a mortgage that's at like three percent.

778
00:38:51,360 --> 00:38:53,120
Speaker 1: I think they got about six years left on it.

779
00:38:53,480 --> 00:38:55,919
Speaker 1: I have told them to keep that mortgage around because

780
00:38:55,920 --> 00:38:59,640
Speaker 1: the added flexibility that it gives them milk that six years. Yeah, exactly,

781
00:38:59,719 --> 00:39:02,240
Speaker 1: Like I know. It may be in like the ideal

782
00:39:02,280 --> 00:39:05,520
Speaker 1: of ideal worlds. You want more money in your retirement accounts,

783
00:39:05,560 --> 00:39:07,920
Speaker 1: and you want a bigger Social Security check, and well

784
00:39:08,000 --> 00:39:10,000
Speaker 1: wouldn't it be nice if you didn't have a mortgage either?

785
00:39:10,320 --> 00:39:13,120
Speaker 1: But do you agree or disagree? Is it better to

786
00:39:13,160 --> 00:39:17,840
Speaker 1: have the mortgage on hand and to prioritize keeping their

787
00:39:18,000 --> 00:39:21,200
Speaker 1: assets growing for them and just kind of paying it

788
00:39:21,200 --> 00:39:24,040
Speaker 1: off as agreed? Or how should retirees think about having

789
00:39:24,080 --> 00:39:27,120
Speaker 1: paid off home? Well, first of all, congratulations to them.

790
00:39:27,160 --> 00:39:30,160
Speaker 1: They're in the great shape and it's a neat conversation

791
00:39:30,200 --> 00:39:33,600
Speaker 1: to be having. The best thing is if they've built

792
00:39:33,640 --> 00:39:35,799
Speaker 1: up savings and they could choose to pay it off

793
00:39:35,920 --> 00:39:37,839
Speaker 1: or they could choose to keep it, then you can

794
00:39:37,920 --> 00:39:39,799
Speaker 1: kind of like ring a bell and say, you know,

795
00:39:40,000 --> 00:39:42,439
Speaker 1: ding ding ding, right, I one, Now we are having

796
00:39:42,480 --> 00:39:45,239
Speaker 1: a fun conversation. Should I pay off my house or not?

797
00:39:45,719 --> 00:39:50,239
Speaker 1: And that's a need exercise. Look at the tail end

798
00:39:50,239 --> 00:39:53,520
Speaker 1: of the mortgage. If it's at three percent, the math

799
00:39:53,600 --> 00:39:57,000
Speaker 1: answer is sure, hopefully they should be able to earn

800
00:39:57,000 --> 00:39:59,840
Speaker 1: a little bit more in other investments, and so keeping

801
00:39:59,840 --> 00:40:03,640
Speaker 1: it would be the logic answer there. When the mortgage

802
00:40:03,640 --> 00:40:06,080
Speaker 1: balance gets pretty small, though, if you do just pay

803
00:40:06,080 --> 00:40:08,160
Speaker 1: it off, you have a huge cash flow savings where

804
00:40:08,200 --> 00:40:10,600
Speaker 1: you no longer have to make that payment, and that,

805
00:40:11,200 --> 00:40:13,359
Speaker 1: back to what you guys were talking about before from

806
00:40:13,360 --> 00:40:16,879
Speaker 1: the psychological is just awesome. So once the mortgage gets

807
00:40:16,880 --> 00:40:19,239
Speaker 1: pretty small, then I kind of lean towards, you know,

808
00:40:19,320 --> 00:40:23,520
Speaker 1: paying it off. It's so at this point in time,

809
00:40:23,960 --> 00:40:25,920
Speaker 1: I could vote either way on their kitchen table. I

810
00:40:25,960 --> 00:40:28,040
Speaker 1: would just love the conversation and as long as we

811
00:40:28,120 --> 00:40:30,880
Speaker 1: talked about it, I'd feel great with the decision that

812
00:40:30,920 --> 00:40:33,360
Speaker 1: they made. And I would love for everybody to have

813
00:40:33,440 --> 00:40:36,759
Speaker 1: the same opportunity to have the same conversation that they

814
00:40:36,800 --> 00:40:39,719
Speaker 1: would have when they are sixty, sixty five or seven

815
00:40:39,840 --> 00:40:41,560
Speaker 1: years old. What a neat thing to be able to

816
00:40:41,560 --> 00:40:44,000
Speaker 1: do do I want to pay off my mortgage or note? Yeah,

817
00:40:44,080 --> 00:40:46,880
Speaker 1: well okay, So on that note, you've talked about the

818
00:40:46,880 --> 00:40:49,360
Speaker 1: difference between somebody who's maybe looking at a like a

819
00:40:49,400 --> 00:40:52,560
Speaker 1: thirty year fixed mortgage at a little bit higher rate

820
00:40:52,640 --> 00:40:55,520
Speaker 1: as opposed to like a five year arm where they

821
00:40:55,560 --> 00:40:58,120
Speaker 1: might be able to get a killer rate. But the

822
00:40:58,160 --> 00:41:01,759
Speaker 1: conventionalism goes, no, no no, no, no, you don't want a

823
00:41:01,880 --> 00:41:04,319
Speaker 1: rate that's going to end up, you know, blowing up

824
00:41:04,320 --> 00:41:07,719
Speaker 1: in five years. You want to go with the sure thing.

825
00:41:07,760 --> 00:41:10,319
Speaker 1: You want to get the higher rate, but to know

826
00:41:10,440 --> 00:41:13,480
Speaker 1: that it's fixed. But you kind of point out how

827
00:41:13,480 --> 00:41:16,360
Speaker 1: there are multiple things that we need to consider, and

828
00:41:16,600 --> 00:41:18,759
Speaker 1: I mean the likelihood of somebody actually staying in that

829
00:41:18,840 --> 00:41:24,560
Speaker 1: home for thirty years. It's not super hot. It's so yeah, yeah, talk,

830
00:41:24,880 --> 00:41:26,719
Speaker 1: I guess I'd like to hear your thoughts, just talk

831
00:41:26,760 --> 00:41:29,840
Speaker 1: a little bit about maybe being realistic with some of

832
00:41:29,840 --> 00:41:34,640
Speaker 1: the time frames that we are oftentimes facing. Yeah. So

833
00:41:34,840 --> 00:41:38,000
Speaker 1: the first mortgage that I had was a thirty year fixed,

834
00:41:38,040 --> 00:41:40,360
Speaker 1: and I feel like that should have been that was

835
00:41:40,440 --> 00:41:45,000
Speaker 1: financial malpractice. I don't know, no one's in their first

836
00:41:45,040 --> 00:41:47,960
Speaker 1: home for thirty years, and I was in mine for

837
00:41:48,000 --> 00:41:50,279
Speaker 1: three or four, which is relatively common, and the right

838
00:41:50,360 --> 00:41:53,719
Speaker 1: product for me would have been, you know, a five year,

839
00:41:54,000 --> 00:41:56,799
Speaker 1: and there's no chance that I was going to be

840
00:41:57,480 --> 00:41:59,120
Speaker 1: in where it was for that long of a period.

841
00:41:59,160 --> 00:42:01,919
Speaker 1: So you are absolutely right. When you're in a thirty

842
00:42:01,960 --> 00:42:04,920
Speaker 1: year fixed loan, you're not locking in interest rates for

843
00:42:04,960 --> 00:42:08,439
Speaker 1: thirty years. It's only if you're in that property, which

844
00:42:08,480 --> 00:42:11,120
Speaker 1: is what, as you both said, is very unusual, and

845
00:42:11,120 --> 00:42:14,640
Speaker 1: so I agree completely. So I like things that are

846
00:42:14,640 --> 00:42:17,799
Speaker 1: in the five, seven and ten year range. I'm not

847
00:42:17,880 --> 00:42:21,480
Speaker 1: opposed to interest only mortgages as long as you're saving

848
00:42:21,520 --> 00:42:24,160
Speaker 1: the difference and you're not doing that for payment, which

849
00:42:24,200 --> 00:42:26,919
Speaker 1: I hope people in California or anywhere close to water

850
00:42:27,040 --> 00:42:29,680
Speaker 1: or listening to, because a lot of people use those

851
00:42:29,760 --> 00:42:33,120
Speaker 1: to get more house and that's not what you should

852
00:42:33,120 --> 00:42:36,600
Speaker 1: be doing. I don't like a fifteen year fixed because

853
00:42:36,600 --> 00:42:38,919
Speaker 1: I don't like the amortization and tying up the extra

854
00:42:39,000 --> 00:42:40,880
Speaker 1: money in the home. I'd rather be building that up

855
00:42:40,880 --> 00:42:44,399
Speaker 1: in a liquid portfolio. And I have been a pretty

856
00:42:44,440 --> 00:42:47,080
Speaker 1: big advocate of the thirty year fixed when rates have

857
00:42:47,160 --> 00:42:50,600
Speaker 1: been low. That has changed a little bit here recently, obviously,

858
00:42:50,960 --> 00:42:53,640
Speaker 1: but for the past number of years if what a

859
00:42:53,680 --> 00:42:55,640
Speaker 1: need opportunity if you're a little bit later in life

860
00:42:55,680 --> 00:42:56,920
Speaker 1: and there's a chance that you'll be in the home

861
00:42:56,960 --> 00:42:58,720
Speaker 1: for a while, to lock in the thirty year fixed.

862
00:42:58,719 --> 00:43:01,920
Speaker 1: And I'm still not in any way opposed to it,

863
00:43:02,000 --> 00:43:04,160
Speaker 1: because if you think you'll be in the home for

864
00:43:04,160 --> 00:43:06,000
Speaker 1: a while, I think a thirty year fix could still

865
00:43:06,040 --> 00:43:09,840
Speaker 1: be attractive. Okay, Tom, this has been a great conversation,

866
00:43:10,000 --> 00:43:13,720
Speaker 1: and I mean hopefully it's at least wedded our listeners

867
00:43:13,760 --> 00:43:16,560
Speaker 1: appetite to learn a little bit more about what it

868
00:43:16,600 --> 00:43:19,759
Speaker 1: looks like to use debt effectively. Where can they go

869
00:43:20,040 --> 00:43:22,040
Speaker 1: to find out more about you? And kind of the

870
00:43:22,040 --> 00:43:25,560
Speaker 1: books you've written to check me out on Amazon you

871
00:43:25,600 --> 00:43:28,279
Speaker 1: can find each of the four different books there. It's

872
00:43:28,320 --> 00:43:30,239
Speaker 1: a Value of Debt and Building Wealth, the Value of

873
00:43:30,239 --> 00:43:32,439
Speaker 1: Debt and Retirements, and the original one is the Value

874
00:43:32,480 --> 00:43:35,719
Speaker 1: of Debt, another one out there on blockchain in the

875
00:43:35,719 --> 00:43:38,080
Speaker 1: Future of Money, and would be honored for anyone to

876
00:43:38,160 --> 00:43:40,840
Speaker 1: check them out. Very cool. We'll make sure to link

877
00:43:40,880 --> 00:43:43,359
Speaker 1: to those books. Tom, Again, thank you so much for

878
00:43:43,600 --> 00:43:46,080
Speaker 1: spending some time with us, and we really appreciate you.

879
00:43:46,680 --> 00:43:49,799
Speaker 1: I appreciate you as a fun conversation. Thanks guys. All right, Matt,

880
00:43:49,880 --> 00:43:53,200
Speaker 1: good conversation there with Tom Anderson about and I'm sure

881
00:43:53,280 --> 00:43:55,120
Speaker 1: some of our listeners saw the title of this episode

882
00:43:55,120 --> 00:43:56,680
Speaker 1: and they were like, Matt, jel just go off the

883
00:43:56,719 --> 00:43:59,920
Speaker 1: deep end. But no, we've been talking about the strategic

884
00:44:00,080 --> 00:44:02,920
Speaker 1: use of debt for years and that might make us

885
00:44:02,960 --> 00:44:05,759
Speaker 1: outliers in the personal finance community. I don't know, but

886
00:44:05,800 --> 00:44:07,719
Speaker 1: again I think it'll be a conversation we continue to

887
00:44:07,719 --> 00:44:10,279
Speaker 1: have completely right, because, like like you said, on one

888
00:44:10,360 --> 00:44:12,759
Speaker 1: end of the spectrum are folks who are avoiding it

889
00:44:12,840 --> 00:44:16,480
Speaker 1: like the plague. But then on the other, obviously the

890
00:44:16,480 --> 00:44:18,279
Speaker 1: other end of the spectrum, you want to completely avoid, right,

891
00:44:18,320 --> 00:44:21,440
Speaker 1: folks who are taking on massive amounts of consumer debt.

892
00:44:21,560 --> 00:44:23,840
Speaker 1: You don't want to do that. But this episode is

893
00:44:23,880 --> 00:44:26,280
Speaker 1: mistically end by the way he talked about buying that mortgage,

894
00:44:26,280 --> 00:44:27,440
Speaker 1: and he's like, if you're doing it just to be

895
00:44:27,480 --> 00:44:29,440
Speaker 1: able to afford the property, no, no, no, no no like that.

896
00:44:29,640 --> 00:44:31,120
Speaker 1: And if you're taking it on debt just so that

897
00:44:31,160 --> 00:44:32,880
Speaker 1: you can afford the thing that you otherwise wouldn't be

898
00:44:32,920 --> 00:44:36,000
Speaker 1: able to, that's a no no but lame product a mortgage,

899
00:44:36,000 --> 00:44:39,719
Speaker 1: but a completely different heart yes, as to different way

900
00:44:39,760 --> 00:44:41,279
Speaker 1: of using it might be, but yeah, this, I mean,

901
00:44:41,320 --> 00:44:43,399
Speaker 1: this episode totally is for folks who are on that

902
00:44:43,719 --> 00:44:46,600
Speaker 1: end of the spectrum of like, now, man, I'm paying

903
00:44:46,680 --> 00:44:49,840
Speaker 1: down that mortgage because I'm getting after my finances. I

904
00:44:49,880 --> 00:44:52,080
Speaker 1: like to optimize, which I'll go ahead and get to

905
00:44:52,120 --> 00:44:54,080
Speaker 1: my big takeaway. And we kind of got to it

906
00:44:54,239 --> 00:44:56,000
Speaker 1: towards the end of the episode there because I was

907
00:44:56,239 --> 00:44:57,880
Speaker 1: kind of torn because I'm trying to figure out, how

908
00:44:57,920 --> 00:44:59,640
Speaker 1: do you figure out I heard it, I heard it

909
00:44:59,640 --> 00:45:01,479
Speaker 1: in your spe Yeah, like, like, how do you figure

910
00:45:01,520 --> 00:45:04,319
Speaker 1: out if you are the kind of person who just

911
00:45:04,360 --> 00:45:07,200
Speaker 1: wants to simplify and tackle it, you know, skin the

912
00:45:07,239 --> 00:45:09,239
Speaker 1: cat that way, or if you're the type of person

913
00:45:09,239 --> 00:45:12,520
Speaker 1: who can handle maybe some more complexity and optimizing it.

914
00:45:12,800 --> 00:45:16,279
Speaker 1: And what he eventually said, I don't know his exact words,

915
00:45:16,280 --> 00:45:18,080
Speaker 1: but what he was saying was that, like, if you

916
00:45:18,120 --> 00:45:22,160
Speaker 1: were asking the question, can I use debt more strategically

917
00:45:22,160 --> 00:45:23,960
Speaker 1: in my life? Just the very act of asking that

918
00:45:24,040 --> 00:45:26,680
Speaker 1: question put you in the camp of, oh, maybe you

919
00:45:26,719 --> 00:45:30,040
Speaker 1: actually can handle it strategically because you are, by the

920
00:45:30,040 --> 00:45:33,359
Speaker 1: fact that you're asking that question, you're thinking strategically, right,

921
00:45:33,400 --> 00:45:35,400
Speaker 1: And so I think if you if you're listening to

922
00:45:35,480 --> 00:45:36,960
Speaker 1: this and you're like, no, no no, no, no, I can't

923
00:45:37,040 --> 00:45:40,080
Speaker 1: do that. But if you are finding yourself drawn to

924
00:45:40,120 --> 00:45:42,600
Speaker 1: some of the other ways that you might optimize your finances,

925
00:45:42,600 --> 00:45:45,919
Speaker 1: optimize your money, well I think that you possibly could

926
00:45:46,040 --> 00:45:48,040
Speaker 1: be the type of person to think about your debt

927
00:45:48,040 --> 00:45:50,040
Speaker 1: more strategically. You could be the person who might be

928
00:45:50,080 --> 00:45:53,360
Speaker 1: more disciplined where instead of paying down that debt, you

929
00:45:53,520 --> 00:45:56,640
Speaker 1: you're setting that money aside and you actually are actively

930
00:45:56,680 --> 00:45:59,279
Speaker 1: investing that money as opposed to burning a hole in

931
00:45:59,280 --> 00:46:01,560
Speaker 1: your pocket and you get sucked into just spending it. Yeah,

932
00:46:01,760 --> 00:46:03,560
Speaker 1: So I think that can be just a good, real

933
00:46:03,600 --> 00:46:05,520
Speaker 1: fun a good takeaway for folks if you feel like

934
00:46:05,520 --> 00:46:07,160
Speaker 1: you might be on the fence. Well, he talked about

935
00:46:07,160 --> 00:46:09,239
Speaker 1: the optimal debt ratio, which I think was good. I

936
00:46:09,280 --> 00:46:11,359
Speaker 1: think my big takeaway too, though, was when he said,

937
00:46:11,920 --> 00:46:13,920
Speaker 1: you're you want to look at the holistic big picture,

938
00:46:14,239 --> 00:46:16,919
Speaker 1: and so you're right. If you had had the cash,

939
00:46:17,040 --> 00:46:19,120
Speaker 1: the money to buy a home in cash five years

940
00:46:19,120 --> 00:46:21,600
Speaker 1: ago when mortgage rates were at three percent or I

941
00:46:21,640 --> 00:46:23,680
Speaker 1: guess probably like two and a half years ago, like yeah,

942
00:46:23,800 --> 00:46:27,239
Speaker 1: there were really good rates on mortgages, then still you

943
00:46:27,280 --> 00:46:29,640
Speaker 1: would want to have taken out the mortgage because it's

944
00:46:29,680 --> 00:46:31,239
Speaker 1: in your long term best interest. And when you're looking

945
00:46:31,280 --> 00:46:34,920
Speaker 1: at the big picture, now, boy, you feel super happy

946
00:46:35,000 --> 00:46:37,520
Speaker 1: if you have a three percent sure mortgage rates. So

947
00:46:37,600 --> 00:46:39,759
Speaker 1: look at the big picture and be careful about your

948
00:46:39,800 --> 00:46:42,920
Speaker 1: debt ratio. At the same time, I think there was

949
00:46:43,000 --> 00:46:46,959
Speaker 1: a lot to kind of digest in this episode, and

950
00:46:47,000 --> 00:46:49,240
Speaker 1: it's our goal to have folks of all different stripes

951
00:46:49,280 --> 00:46:51,720
Speaker 1: on you. We had ye jesse Me come on recently,

952
00:46:51,719 --> 00:46:54,320
Speaker 1: and you know, he's pretty dead diverse. We've had Michelle

953
00:46:54,320 --> 00:46:56,080
Speaker 1: Singletary and she was like, I don't think there is

954
00:46:56,120 --> 00:46:58,000
Speaker 1: such a thing as good debt, And then you know,

955
00:46:58,040 --> 00:47:00,239
Speaker 1: we want to interview Tom here, who says, I don't

956
00:47:00,239 --> 00:47:02,279
Speaker 1: know there's ways to use debt to build wealth, And

957
00:47:02,360 --> 00:47:05,080
Speaker 1: I think I fall somewhere in between, probably more along

958
00:47:05,120 --> 00:47:07,520
Speaker 1: the lines of where Tom is. But I think it

959
00:47:07,600 --> 00:47:10,800
Speaker 1: also needs to be said that it's different strokes or

960
00:47:10,840 --> 00:47:13,359
Speaker 1: different folks. And there's folks like our friend Andy Hill,

961
00:47:13,360 --> 00:47:15,319
Speaker 1: who paid off his mortgage even though it was super

962
00:47:15,360 --> 00:47:17,400
Speaker 1: low interest, right because that was what was best for

963
00:47:17,480 --> 00:47:20,080
Speaker 1: him mentally, And you kept referring back to that matter.

964
00:47:20,080 --> 00:47:22,120
Speaker 1: I think that's just a really important part of the

965
00:47:22,120 --> 00:47:24,680
Speaker 1: conversation and we can talk numbers all day long. But

966
00:47:24,760 --> 00:47:28,400
Speaker 1: if it doesn't work for us from a psychological behavioral aspect,

967
00:47:28,760 --> 00:47:30,560
Speaker 1: what are you actually going to do with your life?

968
00:47:30,560 --> 00:47:32,520
Speaker 1: Because on paper you could say that it'll work in

969
00:47:32,520 --> 00:47:35,400
Speaker 1: this way. And I'm sorry to interrupt, but from a

970
00:47:35,400 --> 00:47:38,160
Speaker 1: business like, as businesses are processing this, you have multiple

971
00:47:38,160 --> 00:47:40,760
Speaker 1: people who are sitting down together and asking these questions

972
00:47:40,800 --> 00:47:43,880
Speaker 1: of the business. You have a board of directors, you know,

973
00:47:43,960 --> 00:47:45,759
Speaker 1: like you've got the c suite. You have all these

974
00:47:45,760 --> 00:47:49,760
Speaker 1: individuals who are trying and testing and they're all working together.

975
00:47:49,800 --> 00:47:52,640
Speaker 1: Whereas as individuals man, it can be really easy just

976
00:47:52,680 --> 00:47:54,759
Speaker 1: to be like, yeah, I'm not going to spend my

977
00:47:54,800 --> 00:47:56,680
Speaker 1: money over there anymore, Like I'm not going to invest

978
00:47:56,680 --> 00:47:58,439
Speaker 1: that instead, I'm going to spend it over here. It's easy,

979
00:47:58,520 --> 00:48:00,560
Speaker 1: and it's easy to lie to yourself. Yeah. Yeah, it's

980
00:48:00,560 --> 00:48:03,080
Speaker 1: a slippery slope. You're bouncing off the crew of other people.

981
00:48:03,280 --> 00:48:06,400
Speaker 1: Isn't accountability? Yeah, when you are looking at yourself as

982
00:48:06,400 --> 00:48:09,680
Speaker 1: an individual business right, like, when you're thinking about yourself

983
00:48:09,719 --> 00:48:12,480
Speaker 1: as the CEO of your own finances. And there's a

984
00:48:12,480 --> 00:48:14,880
Speaker 1: reason that our listeners, let's say they have student loans

985
00:48:14,880 --> 00:48:17,719
Speaker 1: and the payment continues to be on pause, that most

986
00:48:17,760 --> 00:48:20,000
Speaker 1: people aren't paying that those student loans off right now

987
00:48:20,120 --> 00:48:23,240
Speaker 1: right because it's not necessarily debt that is the evil.

988
00:48:23,320 --> 00:48:26,080
Speaker 1: It is the interest that goes along with it. And

989
00:48:26,200 --> 00:48:27,840
Speaker 1: it's the interest that goes along with it. If you

990
00:48:27,880 --> 00:48:30,720
Speaker 1: can't find something better to do with that money, it's

991
00:48:30,800 --> 00:48:34,000
Speaker 1: and again, it's just a difficult conundrum, like there's not

992
00:48:34,480 --> 00:48:36,400
Speaker 1: some sort of easy solution. Tom. I think gave a

993
00:48:36,400 --> 00:48:38,640
Speaker 1: lot of good kind of ways to think through it though,

994
00:48:38,680 --> 00:48:41,880
Speaker 1: so hopefull people can make smart decisions in their lives. Absolutely. Yeah,

995
00:48:41,920 --> 00:48:43,880
Speaker 1: let's get back to the beer. You and I enjoyed

996
00:48:44,000 --> 00:48:48,160
Speaker 1: this episode. A Hell's Lagger. This is by New Park

997
00:48:48,280 --> 00:48:52,040
Speaker 1: Brewing out of West Hartford, Connecticut. This one was donated

998
00:48:52,080 --> 00:48:55,839
Speaker 1: to the show by Matthew. Matthew, we appreciate you as

999
00:48:55,920 --> 00:48:57,839
Speaker 1: well as these beers that you sent us. But Joel, Yeah,

1000
00:48:57,880 --> 00:49:01,280
Speaker 1: were your thoughts on this tasty beverage? Man one was clean, crisp,

1001
00:49:01,400 --> 00:49:04,480
Speaker 1: and delicious as refreshing. It really was light, not light

1002
00:49:04,520 --> 00:49:06,640
Speaker 1: in like a bud light kind of way, but just

1003
00:49:06,719 --> 00:49:08,880
Speaker 1: in uh yeah, like you said, it had all of

1004
00:49:08,880 --> 00:49:12,160
Speaker 1: those lagger like flavors going on. But yeah, refreshing and

1005
00:49:12,400 --> 00:49:14,960
Speaker 1: not overheavy. I enjoyed it. I really enjoyed the artwork.

1006
00:49:15,000 --> 00:49:17,880
Speaker 1: The artwork really reminded me of like my aunt, my

1007
00:49:17,920 --> 00:49:20,120
Speaker 1: great aunt, she used to do like this technique, this

1008
00:49:20,520 --> 00:49:24,040
Speaker 1: Scandinavian artistic technique called rosemalling, and it really so this

1009
00:49:24,040 --> 00:49:26,680
Speaker 1: looks like Scandinavian art to me. This is is that

1010
00:49:26,760 --> 00:49:29,880
Speaker 1: like sewing, like it's like painting, but it's like kind

1011
00:49:29,920 --> 00:49:32,759
Speaker 1: of God, it's like geometric flower kind of stuff going on,

1012
00:49:32,800 --> 00:49:35,359
Speaker 1: so or not maybe not geometric. Maybe that's it looks

1013
00:49:35,360 --> 00:49:37,960
Speaker 1: like this. We'll post and by the way, if you're

1014
00:49:37,960 --> 00:49:39,799
Speaker 1: curious what the can looks like, you can follow us

1015
00:49:39,840 --> 00:49:41,560
Speaker 1: on Instagram and how to Money pod, and Matt posts

1016
00:49:41,560 --> 00:49:43,760
Speaker 1: all the pictures of the beers we drink there. Well

1017
00:49:43,600 --> 00:49:46,040
Speaker 1: I do my best too, at the very least. You

1018
00:49:46,120 --> 00:49:47,920
Speaker 1: can find our show notes up on the website as

1019
00:49:47,920 --> 00:49:50,400
Speaker 1: well at how to Money dot com. And we'll make

1020
00:49:50,400 --> 00:49:52,000
Speaker 1: sure to link to to Tom's books as well, so

1021
00:49:52,040 --> 00:49:53,400
Speaker 1: you can look into that for sure. And we have

1022
00:49:53,480 --> 00:49:55,600
Speaker 1: done a couple of episodes, Matt where you and I

1023
00:49:55,640 --> 00:49:58,080
Speaker 1: we just talked about debt and how to pursue like

1024
00:49:58,120 --> 00:50:01,000
Speaker 1: a strategic debt plan in your life. Where you're not

1025
00:50:01,040 --> 00:50:03,799
Speaker 1: overdoing it, but where you're not also buying into that

1026
00:50:03,840 --> 00:50:05,920
Speaker 1: debt is dumb philosophy. We'll link to those in the

1027
00:50:05,920 --> 00:50:07,400
Speaker 1: show notes too, so people can go back and here

1028
00:50:07,440 --> 00:50:10,040
Speaker 1: maybe our unabridged thoughts on it too. So absolutely, yeah,

1029
00:50:10,040 --> 00:50:13,480
Speaker 1: if you find yourself wrestling with the idea and you want, like, yeah,

1030
00:50:13,560 --> 00:50:15,680
Speaker 1: from a principal standpoint, I want to get rid of

1031
00:50:15,680 --> 00:50:17,840
Speaker 1: this in my life. But I guess, truly what the

1032
00:50:17,920 --> 00:50:20,759
Speaker 1: question is at this point is can I handle that

1033
00:50:21,239 --> 00:50:23,960
Speaker 1: additional complexity? Will I do the right thing if I do,

1034
00:50:24,200 --> 00:50:26,879
Speaker 1: keep this debt around? For sure? Yeah, So that's gonna

1035
00:50:26,880 --> 00:50:29,040
Speaker 1: do it for this episode though, until next time. Best

1036
00:50:29,080 --> 00:50:30,719
Speaker 1: Friends Out, Best Friends Out.