WEBVTT - Ask HTM - Requesting a Credit Limit Increase, Path to Homeownership Considerations, and Biking with Kids #220 0:00:00.080 --> 0:00:02.480 Welcome to How the Money. I'm Joel and I and 0:00:02.600 --> 0:00:25.040 Matt's and today we are answering your listener questions. Joel, 0:00:25.079 --> 0:00:28.240 it is a listener question Monday, and we've got five 0:00:28.320 --> 0:00:31.360 excellent questions, including one about asking for a credit limit 0:00:31.400 --> 0:00:34.159 increase how that affects your credit score. On another one, 0:00:34.159 --> 0:00:36.240 we're gonna talk about the things to consider when you're 0:00:36.280 --> 0:00:39.320 on the path to home ownership. And we have a 0:00:39.400 --> 0:00:41.279 question as well that has to do with bikes. We're 0:00:41.280 --> 0:00:44.520 gonna make a bike recommendation to somebody because he knows 0:00:44.920 --> 0:00:48.120 our love, our passion of all sorts of bikes out there. 0:00:48.159 --> 0:00:50.280 So excited to get to that last question as well. Yeah, 0:00:50.320 --> 0:00:51.760 we don't want them to spend too much, but you 0:00:51.800 --> 0:00:53.800 know what, a bike is one thing that's worth spending 0:00:53.880 --> 0:00:55.200 a little bit more on, I think, and I would 0:00:55.200 --> 0:00:57.520 be willing to say that a bike is an investment 0:00:57.520 --> 0:01:00.200 as well. There's not many things that we spend money 0:01:00.280 --> 0:01:02.680 on that go down in value that I would consider 0:01:02.720 --> 0:01:05.200 an investment, but bikes totally are because think about all 0:01:05.200 --> 0:01:07.400 the money that it's saving you by not driving around. 0:01:07.480 --> 0:01:10.360 It's a good point. Yeah, bikes are definitely a worthwhile purchase. 0:01:10.400 --> 0:01:11.840 I don't know if I'm willing to call a bike 0:01:11.880 --> 0:01:15.360 in investment, but I think it's a worthwhile purchase because 0:01:15.360 --> 0:01:18.360 it can say while purchase for sure. Yeah all right, okay, 0:01:18.440 --> 0:01:20.600 question for you frugal or cheap. Let's do this. We 0:01:20.600 --> 0:01:22.520 haven't done it in a minute, Let's do it. Uh. 0:01:22.560 --> 0:01:26.360 So recently I heard about this this company. I think 0:01:26.360 --> 0:01:29.760 they're an Instagram ad called Propane Taxi. And wait, how 0:01:29.760 --> 0:01:33.320 do you say propane? You say propane, propane, propane, propane, propane, 0:01:33.319 --> 0:01:36.959 all right, the emphasist is on the first the wrong sellable. 0:01:37.440 --> 0:01:40.520 So okay. So I saw this ad, I decided, wow, 0:01:40.640 --> 0:01:44.000 ten dollar propane tank delivered to my porch. Why not, 0:01:44.040 --> 0:01:46.920 I'll give it a shot. And so so I signed up, 0:01:46.920 --> 0:01:48.600 and they delivered it when they said they were going 0:01:48.640 --> 0:01:50.360 to and literally it was I want to say it 0:01:50.400 --> 0:01:52.760 was eight dollars and fifty cents. Because I chose a 0:01:52.840 --> 0:01:54.600 date like two weeks off in the future would save 0:01:54.640 --> 0:01:57.559 me even more money. And it's like Amazon slow ship 0:01:58.280 --> 0:02:00.440 the five dollars of random credit that you'll never be 0:02:00.440 --> 0:02:04.040 able to find exactly exactly. And so yeah, the propane 0:02:04.040 --> 0:02:07.880 tank showed up and man, it was super seamless, but 0:02:08.000 --> 0:02:10.880 you know, my initial thought when I first placed the order, 0:02:10.880 --> 0:02:13.640 when I first ordered that tank, was I'm never going 0:02:13.680 --> 0:02:15.880 to use these guys again, because I saw their regular 0:02:15.960 --> 0:02:19.000 rates that we were like twenty three to a tank, 0:02:19.040 --> 0:02:20.880 and I know I can go just down to the 0:02:20.960 --> 0:02:23.399 whole hardware store and I can get the same tank 0:02:23.440 --> 0:02:26.240 for fourteen bucks. But yeah, what's your take on that? 0:02:26.320 --> 0:02:27.920 Is it frugal or cheap to sign up for a 0:02:27.960 --> 0:02:31.160 service because of the initial deal knowing in all likelihood 0:02:31.400 --> 0:02:33.799 you're never going to use that service again. Man, this 0:02:33.840 --> 0:02:36.800 is such a tough question, and I could constantly struggle 0:02:36.840 --> 0:02:39.240 with questions like this as well, because in an instance 0:02:39.240 --> 0:02:41.120 like this here, here's why I struggle. It is because 0:02:41.120 --> 0:02:43.720 I feel pretty confident in my ability to say no, 0:02:44.160 --> 0:02:45.959 Like I'm pretty sure I'm never going to use the 0:02:46.000 --> 0:02:47.840 company like that again. It's funny that you mentioned them, 0:02:47.840 --> 0:02:50.040 because I'm looking at swapping out one of my things 0:02:50.040 --> 0:02:51.320 with him as well. I think I got the same 0:02:51.360 --> 0:02:54.960 Instagram ad that you did. Uh, Because now that a summer, 0:02:55.000 --> 0:02:57.079 we're doing a lot more grilling, you know, But obviously 0:02:57.240 --> 0:02:59.880 that the company is banking on the fact that you'll 0:03:00.080 --> 0:03:02.720 use them, you will realize how great they are, you know, 0:03:02.800 --> 0:03:05.280 the convenience that they're able to provide that you won't 0:03:05.280 --> 0:03:08.160 have to lug your you know, the heavy, nasty propane 0:03:08.200 --> 0:03:10.040 tank around, you know, it's got like grease drippings on 0:03:10.080 --> 0:03:13.360 it to completely avoid that. They'll think that you'll kind 0:03:13.360 --> 0:03:14.679 of fall in love with their service and that you 0:03:14.680 --> 0:03:16.600 will just kind of stick with it, But I struggle 0:03:16.600 --> 0:03:19.480 with it knowing that I'm I'm going to cancel it, 0:03:19.560 --> 0:03:21.240 right if if I sign up for that service, I'm 0:03:21.240 --> 0:03:23.360 pretty sure I'm going to cancel. I'm pretty confident in 0:03:23.360 --> 0:03:25.640 my ability to say no, and that that's not going 0:03:25.680 --> 0:03:28.160 to be something that I just kind of slowly, you know, 0:03:28.240 --> 0:03:30.720 upgrade my quality of life by you know, taking part 0:03:30.800 --> 0:03:34.160 in this delivery service. But even still that being said, 0:03:34.880 --> 0:03:37.040 they they're taking that into accounts. They know that they 0:03:37.040 --> 0:03:39.000 are going to be some people who try their service, 0:03:39.120 --> 0:03:42.840 like you exactly, who are gonna take advantage of that 0:03:42.920 --> 0:03:46.000 discounted first pro pain tank and then they're gonna walk away. 0:03:46.320 --> 0:03:48.280 And so I think they know that, right, and so 0:03:48.320 --> 0:03:51.320 it's built into their business model, and so therefore I 0:03:51.480 --> 0:03:53.880 label it frugal. I think it's a y is you 0:03:54.000 --> 0:03:55.800 some money? I think I'm with you on this because 0:03:55.920 --> 0:03:59.320 I think the their goal, their effort is to try 0:03:59.360 --> 0:04:02.120 to provide a great service and show you how wonderful 0:04:02.160 --> 0:04:04.760 it can be. And you know what, I'm leaving room 0:04:04.760 --> 0:04:05.960 in the back of my mind that I could be 0:04:06.000 --> 0:04:08.760 persuaded that I'm just gonna start having propane tanks delivered 0:04:08.760 --> 0:04:10.680 to my porch, but in a likelihood that's that's not 0:04:10.720 --> 0:04:12.680 gonna happen. I'm not willing to pay ten dollars extra 0:04:12.720 --> 0:04:14.720 every time I need to refill, but I was willing 0:04:14.720 --> 0:04:17.200 to give it a shot, knowing full well there was 0:04:17.400 --> 0:04:20.000 a really good chance I never used them again. So 0:04:20.440 --> 0:04:23.440 I'm gonna go frugal, even though you know, maybe maybe 0:04:23.440 --> 0:04:25.800 some of our audience would say say it's cheap, but 0:04:26.000 --> 0:04:27.840 I think it's worth it to take advantage of an 0:04:27.839 --> 0:04:30.000 initial offer, and that It's happened to me before where 0:04:30.000 --> 0:04:32.119 I took advantage of an initial offer and I didn't 0:04:32.160 --> 0:04:33.719 think I was going to be a sticky customer, and 0:04:33.720 --> 0:04:35.840 then I ended up being one. For instance, one time 0:04:35.839 --> 0:04:37.280 when I switched banks and that there was, you know, 0:04:37.320 --> 0:04:40.520 an initial bonus to sign up and transfer your money over, 0:04:40.680 --> 0:04:43.000 and I was like, cool, Yeah, I'm totally gonna ditch 0:04:43.120 --> 0:04:44.640 and go back to my bank after I get that 0:04:44.680 --> 0:04:47.279 free money, and I didn't. I ended up liking what 0:04:47.320 --> 0:04:49.560 that bank had to offer and it felt worthwhile. It 0:04:49.640 --> 0:04:51.320 kept him around in my life. So yeah, I'm gonna 0:04:51.320 --> 0:04:52.840 say frugal when you take advantage of one of those 0:04:52.839 --> 0:04:55.760 offers that is readily available, it's frugal, it's not cheap. 0:04:55.920 --> 0:04:59.360 And plus, we're talking about propane taxi a lot right now. 0:05:00.800 --> 0:05:03.000 We have no affiliation with them at all, but it's 0:05:03.040 --> 0:05:05.400 something you and I just felt like discussing. I'm willing 0:05:05.400 --> 0:05:06.960 to bet that they think that this is probably a 0:05:07.040 --> 0:05:11.240 huge win, uh, and that we're actually losing out. All right, man, 0:05:11.279 --> 0:05:13.000 let's go ahead. Take it to the beer. This episode, 0:05:13.040 --> 0:05:16.160 we are drinking a beer by Wild Leap. This one 0:05:16.240 --> 0:05:19.039 is called Time, Love and Tenderness and this is a 0:05:19.160 --> 0:05:21.159 double I p A. I'm looking forward to sharing this 0:05:21.160 --> 0:05:23.400 one with you, buddy, and we'll give our tasing notes 0:05:23.480 --> 0:05:25.240 what we think about this beer at the end of 0:05:25.240 --> 0:05:27.920 the episode. You know it, all right, Matt, onto the 0:05:27.960 --> 0:05:30.279 list of questions that we're gonna answer on today's episode 0:05:30.480 --> 0:05:32.440 for folks that have a question that they want to 0:05:32.480 --> 0:05:34.919 submit for the show. Matt and I would love to 0:05:34.920 --> 0:05:37.560 take your question on a future episode. Just go to 0:05:37.640 --> 0:05:40.479 our website how to money dot com slash ask. You'll 0:05:40.480 --> 0:05:42.600 find the simple directions there for how to submit a 0:05:42.720 --> 0:05:44.800 voice question so we can feature it on the show 0:05:44.800 --> 0:05:46.760 and then answer it. So, Matt, let's get to the 0:05:46.800 --> 0:05:50.640 first one. This one's about asking for a credit limit increase. Hi, 0:05:50.800 --> 0:05:54.320 this is Lisa from Baton Rouge. I recently paid off 0:05:54.400 --> 0:05:57.839 to credit cards and a friend advised that I asked 0:05:57.960 --> 0:06:02.120 for a credit limit in reas on either or both 0:06:02.120 --> 0:06:06.080 of them because she said it would increase my credit score. Now, 0:06:06.240 --> 0:06:11.400 I was planning on leaving the accounts open, not using them, 0:06:11.440 --> 0:06:16.600 and letting the account closing process happen naturally, so to speak. 0:06:17.120 --> 0:06:21.000 So I'm wondering if what she said is accurate and 0:06:21.040 --> 0:06:24.400 if y'all had any advice on that. Thank you, Lisa, 0:06:24.400 --> 0:06:27.200 thanks so much for that question, and congrats on paying 0:06:27.200 --> 0:06:30.040 off your credit card debt. That is awesome. Paying off 0:06:30.080 --> 0:06:32.679 consumer debt, especially spread out over a couple of cards 0:06:32.680 --> 0:06:35.360 like that, that is no easy feat, you know, especially 0:06:35.440 --> 0:06:38.479 during this recession as well, So good job. There takes 0:06:38.520 --> 0:06:41.640 a lot of dedication to make that happen, absolutely so so, Lisa, 0:06:41.880 --> 0:06:44.880 credit limit increases. They are traditionally a great thing to 0:06:44.960 --> 0:06:47.520 ask of your credit card company. They can lift your 0:06:47.560 --> 0:06:50.080 credit score nicely because so much of your score is 0:06:50.080 --> 0:06:53.440 a reflection of how much of your available credit you 0:06:53.480 --> 0:06:55.920 are actually using. So as a reminder, you don't want 0:06:55.960 --> 0:06:58.159 to be using much of your available credit, but you 0:06:58.200 --> 0:07:00.400 do want a lot of it available to you. Yeah, 0:07:00.400 --> 0:07:02.279 it's such an odd system, Matt, that it's set up 0:07:02.320 --> 0:07:04.359 that way, where you look better the more credit you 0:07:04.360 --> 0:07:06.520 have access to, but where you're not using much of it. 0:07:06.520 --> 0:07:08.400 It's very confusing to a lot of people. Yeah, sort 0:07:08.400 --> 0:07:10.520 of like if you have a ferrari, but the credit 0:07:10.640 --> 0:07:12.160 bureaus only when to see you take that up to 0:07:12.160 --> 0:07:15.640 like twenty hour. But that being said, Lisa, you are 0:07:15.760 --> 0:07:19.320 unlikely to get a limit increase in today's environment, credit 0:07:19.320 --> 0:07:22.760 card companies are actually slashing limits because they're worried about 0:07:22.840 --> 0:07:25.000 people relying too much on the credit cards right now. 0:07:25.360 --> 0:07:29.280 So traditionally this is great advice, but it's actually unlikely 0:07:29.440 --> 0:07:31.559 to to work for you right now. Yeah, you probably 0:07:31.600 --> 0:07:33.920 don't want to call your credit card company asking for 0:07:34.040 --> 0:07:37.160 a credit limit increase just because they're likely to say now, 0:07:37.280 --> 0:07:39.560 So probably best to avoid that conversation for the time being. 0:07:39.960 --> 0:07:42.280 And Lisa, you are right to leave those cards open, 0:07:42.560 --> 0:07:45.360 but we would prefer that you actually use them on occasion, right, 0:07:45.400 --> 0:07:47.400 maybe two to four times a year, maybe once a 0:07:47.440 --> 0:07:50.840 month on a recurring monthly subscription something like that, because 0:07:50.880 --> 0:07:53.360 you actually don't want those cards to close. And if 0:07:53.360 --> 0:07:55.720 you leave them open but then stop using them all together, 0:07:55.920 --> 0:07:58.080 eventually that credit card company is going to close it 0:07:58.360 --> 0:08:00.760 for you. Uh, And that's not what you want. Using 0:08:00.760 --> 0:08:03.200 that credit card in a limited fashion and then having 0:08:03.240 --> 0:08:06.080 it paid automatically every single month is going to keep 0:08:06.120 --> 0:08:08.480 that credit score alive in your credit mix, and it's 0:08:08.480 --> 0:08:10.640 going to help out your credit score over time. And 0:08:10.720 --> 0:08:12.200 the great thing is then you don't even really have 0:08:12.240 --> 0:08:14.520 to think about it. That card is helping your score 0:08:14.720 --> 0:08:17.560 in a big way just by using it sparingly and 0:08:17.600 --> 0:08:19.720 then paying off the balance in full every month. Yeah. 0:08:19.720 --> 0:08:22.520 And there are a couple instances though, when we would 0:08:22.520 --> 0:08:25.560 recommend closing a credit card, Lisa. One is you know, 0:08:25.600 --> 0:08:27.800 if you're likely to run up more credit card debt 0:08:27.840 --> 0:08:31.280 by using those cards, because just because that credit is available, right, 0:08:31.760 --> 0:08:33.920 If that's the case, If that's you, then go ahead 0:08:33.920 --> 0:08:36.720 and close those cards. Now, this is an instance where 0:08:36.880 --> 0:08:40.679 knowing yourself and being honest with yourself is really important, honestly, Joe, 0:08:40.760 --> 0:08:42.280 this kind of makes me think of like if someone has, 0:08:42.559 --> 0:08:44.840 you know, say, a drinking problem, right uh, and they 0:08:44.880 --> 0:08:47.800 are quitting alcohol, it's probably not a good idea just 0:08:47.800 --> 0:08:50.079 to keep alcohol just around the house just in case 0:08:50.360 --> 0:08:52.720 you're gonna be more likely to lapse. And you know, 0:08:52.760 --> 0:08:55.600 if someone knows that that's a temptation for them, well 0:08:55.600 --> 0:08:57.960 that's just not a wise move. Having a drink now 0:08:58.000 --> 0:08:59.680 and then it's a good thing, it's something that you 0:08:59.720 --> 0:09:01.400 and I enjoy. But if you know it's going to 0:09:01.440 --> 0:09:03.520 be a problem, just remove it from your life completely. 0:09:03.640 --> 0:09:06.560 I think credit cards are very similar. If you have 0:09:06.640 --> 0:09:08.640 a spending problem, well it's not a good idea just 0:09:08.679 --> 0:09:11.120 to keep these cards with high credit limits available to 0:09:11.160 --> 0:09:13.920 you just sitting around. And then another instance where you'd 0:09:13.920 --> 0:09:15.840 want to close the cards is if it has an 0:09:15.840 --> 0:09:19.480 annual fee and you aren't taking advantage of those extra benefits. 0:09:19.880 --> 0:09:21.680 There are a lot of great cards out there that 0:09:21.720 --> 0:09:25.240 have no annual fee with great benefits, especially cash back. Juel, 0:09:25.280 --> 0:09:27.240 I know that you're a big fan of the City 0:09:27.360 --> 0:09:29.840 Double Cash card, where you are two percent on every 0:09:29.840 --> 0:09:32.800 single purchase. Yeah, keeps it simple on everything. Yeah. I 0:09:32.920 --> 0:09:34.680 love that. Uh, and so we'll link to that card 0:09:34.720 --> 0:09:36.720 in our show notes. But there are a lot of 0:09:36.720 --> 0:09:39.120 cards like that one that have no annual fee every 0:09:39.120 --> 0:09:41.000 single year, and you can take advantage of some of 0:09:41.000 --> 0:09:43.839 those benefits without having to pay extra. Yeah. All right, Matt, 0:09:43.840 --> 0:09:45.880 We're gonna get to you some more questions, including the 0:09:45.880 --> 0:09:48.080 one about the path to homeownership. How you start to 0:09:48.080 --> 0:09:49.920 even think about buying a house, what that looks like. 0:09:49.960 --> 0:10:01.960 We'll get to that and more questions right after the break. Alright, Joel, 0:10:02.000 --> 0:10:04.400 back from the break. He's still hanging in there. I'm here, buddy, 0:10:04.559 --> 0:10:06.400 I'm ready. All right, Before we get to that question 0:10:06.440 --> 0:10:08.719 about home ownership, let's get to a question about how 0:10:08.760 --> 0:10:11.480 to you go about paying off a loan. Hey, Matt 0:10:11.520 --> 0:10:15.839 and Joel, this is Cassie from Liberty, Missouri. I love 0:10:15.880 --> 0:10:18.800 your show. I love that you drink beer. Makes my 0:10:18.880 --> 0:10:23.079 day anyway. Um, we have an installment loan that we 0:10:23.200 --> 0:10:25.760 got a couple of years ago for some sighting and 0:10:25.840 --> 0:10:32.600 windows on a property. It's six with a maturity date 0:10:32.720 --> 0:10:38.760 of This is the only debt we have besides our home. 0:10:39.760 --> 0:10:42.280 We want to get this paid off as soon as possible. 0:10:42.559 --> 0:10:45.560 I don't want to pay this interest rate forever. What 0:10:45.640 --> 0:10:49.400 are my options? We want to pay it off very quickly, 0:10:50.200 --> 0:10:52.320 especially with the economy like it is in the interest 0:10:52.400 --> 0:10:56.440 rates being low, but we're just looking for options. I 0:10:56.440 --> 0:10:59.720 don't really know what to do with it. Any advice 0:11:00.240 --> 0:11:04.520 or help would be much appreciated. Thank you, Cassie. Thanks 0:11:04.520 --> 0:11:06.520 for your question. By the way, drinking a good beer 0:11:06.720 --> 0:11:08.760 makes our days too, doesn't Matt. Yeah, I'm glad to 0:11:08.800 --> 0:11:13.160 hear that she enjoys us enjoying a beer. That makes 0:11:13.160 --> 0:11:15.480 me happy. All right, Cassie, let's get onto your question 0:11:15.480 --> 0:11:18.480 about paying off an installment loan, and we we so 0:11:18.760 --> 0:11:21.439 love your motivation to pay off that debt quickly. Seven 0:11:21.480 --> 0:11:24.600 percent is an expensive interest rate, especially in today's environment, 0:11:24.840 --> 0:11:26.959 and you definitely don't want to be paying on that 0:11:27.000 --> 0:11:30.000 loan for the next nine years. But you also don't 0:11:30.000 --> 0:11:32.680 want to pay off that installment loan by any means necessary. 0:11:32.760 --> 0:11:34.480 Right there. There are certain things you need to take 0:11:34.520 --> 0:11:37.720 into consideration before you aim all of your money arsenal 0:11:37.800 --> 0:11:40.160 at this at this debt, and in particular, given the 0:11:40.200 --> 0:11:42.240 trying times we find ourselves in, you don't want to 0:11:42.240 --> 0:11:44.320 wipe out all of your emergency fund that you have 0:11:44.400 --> 0:11:46.880 saved up. You you want to be able to maintain 0:11:46.920 --> 0:11:49.880 at least some financial margin right now, even while you're 0:11:49.880 --> 0:11:52.960 making paying off this debt a big priority in your life. Yeah, exactly, 0:11:52.960 --> 0:11:54.559 you don't want to completely wipe out all of your 0:11:54.600 --> 0:11:57.839 cash reserves to just pay down this installment loan and 0:11:57.960 --> 0:12:00.640 Cassie Let's mention credit cards as well. You know, since 0:12:00.679 --> 0:12:03.439 this installment alone was used for home improvement, it sounds 0:12:03.480 --> 0:12:05.280 like you might have a larger balance, and so you 0:12:05.320 --> 0:12:08.000 may not be able to do a balanced transfer and 0:12:08.040 --> 0:12:10.280 pay off that installment alone with a zero percent balance 0:12:10.360 --> 0:12:13.200 transfer credit card. And even if you could, you probably 0:12:13.400 --> 0:12:15.560 wouldn't want to because if you were to do that, 0:12:15.600 --> 0:12:18.040 the clock would then be ticking on that credit card 0:12:18.320 --> 0:12:20.959 and you might only have fifteen months or or maybe 0:12:21.000 --> 0:12:23.720 at most twenty one months to pay off that card. 0:12:23.960 --> 0:12:25.600 And you don't want to put yourself in a position 0:12:25.720 --> 0:12:28.120 where you're gonna see the interest rate really go sky 0:12:28.200 --> 0:12:31.840 high after that zero percent window has expired. Yeah. So, ultimately, 0:12:31.880 --> 0:12:34.240 for Cassie, Matt, you and I think that a helock 0:12:34.640 --> 0:12:37.480 is is ideal for her. Rates on those are roughly 0:12:37.600 --> 0:12:40.560 half of what Cassie is currently paying, and there are 0:12:40.600 --> 0:12:43.760 typically no closing costs associated with with getting a helock. 0:12:44.120 --> 0:12:46.760 Rates are so low they're very competitive, and so yeah, 0:12:46.800 --> 0:12:48.960 that's the direction that Cassie, we would suggest you go 0:12:49.000 --> 0:12:51.760 in in order to make sure more of your money, 0:12:51.760 --> 0:12:53.960 more of your payments are going towards eliminating the debt, 0:12:54.000 --> 0:12:56.360 not just going towards interest. One other thing that makes 0:12:56.360 --> 0:12:58.720 the helock even a better idea right now is that 0:12:58.880 --> 0:13:02.080 the Federal Reserve has indicated that they're gonna keep rates 0:13:02.080 --> 0:13:05.200 low for a while in all likelihood through two. A 0:13:05.200 --> 0:13:07.000 home equity line of credit does not come with a 0:13:07.000 --> 0:13:09.960 fixed rate, and that is one downside of the helock, 0:13:10.080 --> 0:13:11.840 right that your rate can increase over the life of 0:13:11.840 --> 0:13:13.959 the loan, But because of the likelihood that that rates 0:13:14.000 --> 0:13:15.640 are not going to go up in the next few years, 0:13:15.800 --> 0:13:17.840 that makes the helock a whole lot less risky. So 0:13:17.880 --> 0:13:20.640 while current borrowers have seen their rates decline, which is 0:13:20.640 --> 0:13:23.040 awesome if you currently have a helock, if you take 0:13:23.040 --> 0:13:25.080 out a loan right now, you will likely see your 0:13:25.160 --> 0:13:28.400 rate rise at some point during the payoff period. But 0:13:28.480 --> 0:13:31.040 with how low rates are currently, with how low we 0:13:31.080 --> 0:13:33.199 expect them to be over the next few years. I 0:13:33.240 --> 0:13:35.840 think it's not a terribly risky position to put yourself in. 0:13:35.960 --> 0:13:38.319 You're gonna be able to pay off so much in 0:13:38.320 --> 0:13:40.360 in the next three or four years that by the 0:13:40.400 --> 0:13:43.240 time rates do potentially start to rise, I think your 0:13:43.280 --> 0:13:45.360 your balance is just gonna be so much lower that 0:13:45.520 --> 0:13:47.920 a helock still makes the most sense. Yeah, it is 0:13:47.960 --> 0:13:50.480 a perfect time to get a helock, that is, if 0:13:50.559 --> 0:13:53.160 you can secure one. One other thing to keep in 0:13:53.280 --> 0:13:55.640 mind is that a lot of the bigger banks aren't 0:13:55.640 --> 0:13:59.360 currently offering helocks. But that's actually fine, because we'd want 0:13:59.360 --> 0:14:02.000 you to look round to some local small banks or 0:14:02.120 --> 0:14:05.920 local credit unions where many are still offering helocks. So 0:14:06.040 --> 0:14:08.360 you know, in the end, helock will likely be the 0:14:08.400 --> 0:14:10.960 best option for you because you're going to be drastically 0:14:10.960 --> 0:14:13.720 cutting your right now, making it easier to pay down 0:14:13.720 --> 0:14:17.000 the loan more quickly. So Cassie, do some shopping locally 0:14:17.240 --> 0:14:19.000 for a helock, and yeah, see what kind of rate 0:14:19.040 --> 0:14:21.080 you can get, no doubt, all right, and helocks matt 0:14:21.160 --> 0:14:23.600 or associated with home ownership, and that is what our 0:14:23.640 --> 0:14:26.320 next question is about. Hey Man and Joel, I hope 0:14:26.360 --> 0:14:28.680 you guys are doing Well, my name is John. I'm 0:14:28.680 --> 0:14:31.080 from Los Angeles, California. I just want to start off 0:14:31.120 --> 0:14:33.000 by saying how much of a fan I am. I 0:14:33.120 --> 0:14:35.280 listened every episode and I even write down notes in 0:14:35.320 --> 0:14:38.040 a journal. Because of your advice, I was able to 0:14:38.040 --> 0:14:39.800 pay off all of my credit card debt in school, 0:14:39.800 --> 0:14:41.800 a loan, and even starting h s A, a RATH 0:14:41.840 --> 0:14:44.480 and a high interest savings account. I have a quick 0:14:44.560 --> 0:14:47.800 question for you guys about home ownership. My next financial 0:14:47.800 --> 0:14:49.240 goal was to be able to own a house, but 0:14:49.320 --> 0:14:51.880 given the renting culture and high rent coss in California, 0:14:52.000 --> 0:14:54.080 I'm not really sure how to start or even where 0:14:54.120 --> 0:14:57.560 to look. For context, I previously live in San Francisco. 0:14:57.880 --> 0:15:00.880 We're renting an apartment, usually at a high cost, seems 0:15:00.920 --> 0:15:03.000 to be the norm, so the idea of actually owning 0:15:03.080 --> 0:15:06.360 a house seems a little foreign to me. Any guidance 0:15:06.400 --> 0:15:10.400 on starting name path towards homeownership would be amazing. Thanks guys, Joel. 0:15:10.400 --> 0:15:12.480 I don't know if you heard that question, but John 0:15:12.560 --> 0:15:15.320 is getting after it man. That is amazing, paying down 0:15:15.440 --> 0:15:18.680 all those debts and killing student loans. Uh. And he 0:15:18.760 --> 0:15:21.600 started investing in hs A and a ROTH. That's amazing. Yeah, 0:15:21.680 --> 0:15:25.440 And he's taking notes during the podcast. That's super impressive 0:15:25.480 --> 0:15:27.880 that maybe our show, notut should be a little more detailed, John, 0:15:28.080 --> 0:15:29.240 So you don't have to do that. I don't know, 0:15:29.400 --> 0:15:31.640 But let's talk about John's question in the path to 0:15:31.720 --> 0:15:34.760 home ownership, John, first, you need to decide if that's 0:15:34.800 --> 0:15:37.040 the path you actually want to be on when you 0:15:37.040 --> 0:15:40.200 start looking at numbers. Homeownership is definitely not a slam 0:15:40.280 --> 0:15:43.280 dunk for everyone. There are a lot of additional expenses 0:15:43.600 --> 0:15:46.800 that hopeful homeowners overlook. It's so easy to get starry 0:15:46.800 --> 0:15:49.640 eyes when you're looking at homes on red fin or 0:15:49.680 --> 0:15:52.800 zillo dot com and to imagine yourself living in this 0:15:52.840 --> 0:15:55.080 new place and crunching the numbers can fall by the 0:15:55.080 --> 0:15:57.520 wayside because we fall in love with the idea of 0:15:57.560 --> 0:16:00.400 owning our own place. And John, in particular, because you 0:16:00.400 --> 0:16:03.640 live in an expensive city, that means it's even less 0:16:03.680 --> 0:16:05.640 likely to make sense for you to buy a home, 0:16:06.080 --> 0:16:09.480 and in particular, in expensive cities, primary residents can often 0:16:09.520 --> 0:16:12.880 be terrible investments. And Matt, we've talked overall about how 0:16:13.000 --> 0:16:16.280 home ownership, Buying a home is not necessarily a good 0:16:16.280 --> 0:16:19.360 financial move, and in many cases it's a terrible financial move. 0:16:19.520 --> 0:16:22.320 We talked about that in detail John on episode thirty, 0:16:22.560 --> 0:16:24.200 if you want to check that one out. So, if 0:16:24.200 --> 0:16:26.920 you're just crunching the numbers, renting might continue to make 0:16:26.960 --> 0:16:29.360 the most sense, although it doesn't necessarily mean that you 0:16:29.360 --> 0:16:31.240 shouldn't buy home. It just means that it might not 0:16:31.280 --> 0:16:33.400 make the most financial sense for you. Yeah, And another 0:16:33.440 --> 0:16:35.640 thing to consider too is that home ownership it's about 0:16:35.680 --> 0:16:38.360 more than just the dollars. It's more than just about 0:16:38.360 --> 0:16:41.720 the money, right, There's a sense of place and permanence 0:16:42.000 --> 0:16:44.240 that you can get from owning a home, uh and 0:16:44.240 --> 0:16:46.800 feeling rooted to a spot. But it's a good thing 0:16:46.880 --> 0:16:49.200 to think through whether or not this is something that 0:16:49.280 --> 0:16:51.360 is really important to you. You know, maybe a good 0:16:51.440 --> 0:16:54.000 question to ask yourself is, you know, have I even 0:16:54.080 --> 0:16:56.520 enjoyed being at home during you know, sheltering in place, 0:16:56.960 --> 0:16:59.120 if house projects, and in gardening. If that sounds like 0:16:59.160 --> 0:17:01.800 fun to you, then buying a home sounds like it 0:17:01.840 --> 0:17:04.359 could be a good fit. But if you've been issuing 0:17:04.440 --> 0:17:06.200 to get back to traveling and you know, maybe seeing 0:17:06.200 --> 0:17:09.080 friends in other cities, then maybe owning your own home, 0:17:09.080 --> 0:17:10.879 owning your own house, maybe that's not going to be 0:17:10.960 --> 0:17:12.840 a good idea for you. Yeah, and in a place 0:17:12.840 --> 0:17:14.840 like San Francisco, you might not even have access to 0:17:14.840 --> 0:17:17.000 any sort of place to to grow a garden. I 0:17:17.040 --> 0:17:19.000 don't know, I don't know, but yeah, and that's all 0:17:19.119 --> 0:17:21.679 square foot gardening. You grow, you go verticals. Okay, all right, 0:17:22.280 --> 0:17:25.320 so yeah, John. Another lifestyle consideration is knowing and and 0:17:25.359 --> 0:17:27.480 even committing to being able to live in that house 0:17:27.480 --> 0:17:30.560 for a certain amount of time. Five years is often recommended, 0:17:30.600 --> 0:17:31.960 but but we like to air on the side of 0:17:31.960 --> 0:17:33.760 caution and say that if you're gonna buy a house, 0:17:33.840 --> 0:17:35.640 you should really plan to live there for at least 0:17:35.640 --> 0:17:39.199 seven years. That's because of the massive transaction costs associated 0:17:39.200 --> 0:17:41.159 with buying or selling a home. The great thing is, 0:17:41.200 --> 0:17:43.080 if you're buying a home right now, you can lock 0:17:43.119 --> 0:17:45.720 in a fixed rate for a long period of time 0:17:45.960 --> 0:17:49.560 that is incredibly low, making it potentially a better decision 0:17:49.600 --> 0:17:51.640 to buy right now. Yeah. Rates are close to two 0:17:51.680 --> 0:17:54.080 ten year lows right now, Yeah, which which could lower 0:17:54.280 --> 0:17:57.240 your monthly costs right on on your mortgage, which helps 0:17:57.280 --> 0:17:59.800 put a positive check mark in that column of wanting 0:17:59.800 --> 0:18:02.240 to buy a home. But don't forget that if you 0:18:02.280 --> 0:18:04.720 decide to sell your home within just a few years. 0:18:04.960 --> 0:18:07.959 Even if phone prices haven't gone down, because of just 0:18:08.040 --> 0:18:11.439 those transaction costs of real estate agents and closing costs, 0:18:11.680 --> 0:18:13.400 you you could be taking a loss on that home. 0:18:13.560 --> 0:18:14.960