Speaker 1: Welcome to Head of Money. I'm Joel and I am Matt,
Speaker 1: and today we're talking chasing returns, free refise and ridiculous
Speaker 1: Ramsey rants.
Speaker 2: Yeah, dude, In fact, we.
Speaker 3: Are going to talk about the Dave during our episode today.
Speaker 1: I almost went with wretched instead of ridiculous. Way wretched.
Speaker 2: Yeah, ridiculous feels feels a little more accurate. Ratchet.
Speaker 3: Well, we do have a bunch of different personal finance
Speaker 3: news to get to. These are stories that we think
Speaker 3: are going to be most important when when it comes
Speaker 3: to your personal finances. But dude, before we dive into
Speaker 3: the stories, have we talked about the Companion Pass, the
Speaker 3: Southwest Companion Pass recently?
Speaker 2: It's definitely been featured on the show.
Speaker 3: Well, okay, so I don't think we've talked about though,
Speaker 3: how I have gotten it, or specifically, Kate's the one.
Speaker 3: She's actually the one who has the control over who
Speaker 3: gets the campaign.
Speaker 2: She named one, and am I up for grabs?
Speaker 3: Maybe she is a You are able to change who
Speaker 3: your companion is multiple times a year.
Speaker 1: But can I just say the campaign Pass Southwest Campaigon Pass,
Speaker 1: if you live in a Southwest city, it's the best.
Speaker 2: Is one of the coolest.
Speaker 1: Possible travel perks because you're able to, like you said,
Speaker 1: choose your companion and you can change it on occasion.
Speaker 3: Well, unlike other airlines, it is a free pass to fly,
Speaker 3: not just one time. That's an unlimited member. It's one
Speaker 3: of the sickest deals in travel that few people know about. It. Literally,
Speaker 3: you're flying for free. You just have to pay taxes
Speaker 3: and like aeronovital fees or something. September eleven security fee
Speaker 3: is like five dollars and sixty or something.
Speaker 2: Yeah. Okay.
Speaker 3: So the reason we are bringing this up, aside from
Speaker 3: the fact, I guess we haven't talked about it or
Speaker 3: talked about the fact that I was able to snag it,
Speaker 3: is the fact that now is the best time to
Speaker 3: apply for a Rapids reward card, because the idea is
Speaker 3: that you get that card now, but you start racking
Speaker 3: up those charges at the beginning of the year. You
Speaker 3: want those to hit in the next year, twenty twenty four,
Speaker 3: because once you get that companion passes good for the
Speaker 3: remainder of that year, but then also the entire subsequent
Speaker 3: year as well. So you're looking at close to two
Speaker 3: years of being able to fly anywhere with a companion
Speaker 3: for free.
Speaker 1: Just timing it right, it is huge, an extra like
Speaker 1: eleven months of having that free travel with for your companion.
Speaker 2: Exactly just now is the time. And if you're.
Speaker 1: Interested to know how to get it, how to do
Speaker 1: exactly what Matt did well, you can go to howd
Speaker 1: tomoney dot com and check out our recent article on that.
Speaker 1: We'll also link to it in the show notes for
Speaker 1: this episode. But it is one of the most underrated
Speaker 1: travel benefits that few people talk about. We talked about
Speaker 1: it with Lyn Metler a little bit back when we've
Speaker 1: talked about how to fly your family around for free
Speaker 1: the best way that this is truly the best way
Speaker 1: to get free travel. And at the same time, you're
Speaker 1: able to also get that free travel even when you
Speaker 1: spend points for your ticket, so he says, you're racking
Speaker 1: up a lot of points by getting those credit card.
Speaker 2: Sign up bonuses.
Speaker 1: You can both kind of essentially travel free for a
Speaker 1: lot of the next couple of years, in all likelihood for.
Speaker 3: A long time, and those points do not expire. And
Speaker 3: one of the key catches is the fact that you
Speaker 3: are able to get that one hundred and thirty five
Speaker 3: thousand points because you're also able to open a business
Speaker 3: rapid rewards card, and way more folks qualify for that
Speaker 3: then you actually would think details.
Speaker 2: In that article. But yeah, you're right, a lot of
Speaker 2: people think, oh business card, Oh most.
Speaker 3: People may get to qualify, and we explain it all
Speaker 3: in that article.
Speaker 2: Yeah, so yeah, we'll make sure to link to that.
Speaker 2: All right, but let's move on, Matt.
Speaker 1: Let's give it the Friday Flight quick sampling of stories
Speaker 1: we found to do it interesting this week. Let's start
Speaker 1: off talking about investing and the S and P five hundred,
Speaker 1: the stock market as a whole, the S and P
Speaker 1: five hundred and the Nasdaq in particular as well. They
Speaker 1: went into correction toward territory for a hot minute, but
Speaker 1: very quickly things changed on a dime in the market
Speaker 1: charge back up something like seven plus percent over the
Speaker 1: course of just two weeks, might have been more like
Speaker 1: eight or nine percents, and including a great week this
Speaker 1: week thanks to better than expected inflation numbers, we saw
Speaker 1: that kind of the CPI I never go down to
Speaker 1: three point two percent year over a year. We're actually
Speaker 1: seeing prices in some categories going down, which is welcome
Speaker 1: news for consumers. But the Wall Street Journal Publishing article
Speaker 1: about how this recent surge is getting investors excited. They're like, ooh,
Speaker 1: market go up. I went in on this, and so
Speaker 1: it prompted them to funnel more money into stocks. Basically,
Speaker 1: they don't want to be sitting on the sidelines while
Speaker 1: the market experiences a surge. And I totally get that.
Speaker 1: But the problem with this sort of mentality, Matt, we
Speaker 1: talk about it all the time, is attempting to chase
Speaker 1: returns is that you tend to be behind the curve
Speaker 1: when you take this tactic, you're often missing out on
Speaker 1: the bulk of the games. Hey, I missed out on
Speaker 1: that eight percent surge. I don't want to miss out
Speaker 1: on the next surge. But you got in, maybe sadly,
Speaker 1: at not the best time. And it makes you think
Speaker 1: of investors in the Arc Fund, Kathy Woods Arc Fund,
Speaker 1: this innovation fund, and guess what, almost all the money
Speaker 1: went in near the top. Same thing with bitcoin and cryptocurrency, right,
Speaker 1: a lot of the money getting went in right at
Speaker 1: the top before things kind of took a tumble. And
Speaker 1: we're all all for investing in the market, right, the
Speaker 1: more the merrior if you have a long enough time horizon.
Speaker 1: But the correction and the subsequent upward push, both of
Speaker 1: those things are just noise, right, And so investing regularly
Speaker 1: and dollar cost averaging are ways to head yourself from
Speaker 1: trying to time your entrance, which is going to lead
Speaker 1: to worse results overall. So, I don't know, it's this
Speaker 1: trend following sort of approach that people tend to take,
Speaker 1: and the best thing to do is to kind of
Speaker 1: like put on your blinders and just keep doing the
Speaker 1: same thing you're supposed to be doing, no matter what's
Speaker 1: happening with the market.
Speaker 3: Sure, that's right, but maybe use this excitement to go
Speaker 3: ahead and invest like you would have otherwise. Yeah, there
Speaker 3: is a lot more attention on investing, and if you
Speaker 3: haven't done that yet, go ahead and get started. So,
Speaker 3: speaking of investing, if you've got an HSA a health
Speaker 3: savings account, actually investing those dollars for your future, not
Speaker 3: saving those dollars, investing those dollars, basically using it as
Speaker 3: a third retirement account of sorts, well that's going to
Speaker 3: have a massive impact on your financial future. But the
Speaker 3: problem is most folks are still using their HSA like
Speaker 3: a savings account because maybe it's name that so they're
Speaker 3: just they're just following the directions on the.
Speaker 2: Label, yea, Joel.
Speaker 1: But I mean you can't blame them for it because
Speaker 1: the marketing's terrible exactly. But they're using it like a
Speaker 1: saving account to pay for those healthcare expenses in the
Speaker 1: current year. And sure that is going to provide a
Speaker 1: decent tax break, but it won't come even close to
Speaker 1: what it is that you can.
Speaker 3: Pull off if you put HSA dollars to work for
Speaker 3: you in the actual stock market. There's a new study
Speaker 3: and they found that only nineteen percent of folks use
Speaker 3: their HSA in this manner. It's sort of like putting
Speaker 3: a governor on a Ferrari, or like only using your
Speaker 3: Ferrari to like run to Aldi. Yeah yeah, yeah, And
Speaker 3: it's like it's capable of so much more.
Speaker 1: It's like one solid use, I guess, but if I
Speaker 1: had a Ferrari, I'd be doing so much more with it, exactly.
Speaker 2: Yeah.
Speaker 3: So we get that not everyone out there can afford
Speaker 3: to actually invest those dollars that you are needing to
Speaker 3: use those for some healthcare expenses, but we do eventually
Speaker 3: want you to invest those dollars. That should be the goal.
Speaker 3: And if you have plenty of cash on hand to
Speaker 3: pay for medical expenses out of pocket, we want you
Speaker 3: to think about investing your HSA dollars.
Speaker 2: It reminds me.
Speaker 3: I was talking to a buddy recently, and as we
Speaker 3: were talking, I remembered that this time last year, he
Speaker 3: reached out and was like, Hey, between these two health
Speaker 3: insurance plans and my employer is offering, which one do
Speaker 3: you think I should get? And I noticed one of
Speaker 3: them had HDHP up.
Speaker 2: At the top.
Speaker 3: It's a high deductible health care plan. And with that
Speaker 3: included the employer contributing fifteen hundred dollars to his family's HSA.
Speaker 2: Did you know that? Pretty sick?
Speaker 1: That's an amazing I mean that's a linking perk. A
Speaker 1: lot of employers to say five hundred bucks or one thousand.
Speaker 3: But fifteen I could not believe it. And here's the kicker.
Speaker 3: I asked him about that. I was like, oh, by
Speaker 3: the way, I remember we were talking about this. Did
Speaker 3: you ever go ahead and join and choose that? And
Speaker 3: he said, well, actually I thought I did, but I
Speaker 3: selected the wrong one. Oh no, So yeah, I'm hoping
Speaker 3: he's going to remedy his ways. Let's hope so this year.
Speaker 3: But basically you're giving that is it's a sweet, sweet perk,
Speaker 3: and you're giving up free money when your employer, free
Speaker 3: money for future you, which means it's going to be
Speaker 3: even larger than fifteen hundred dollars right now. Again, were
Speaker 3: you to invest those dollars.
Speaker 1: And again I get that huge percentage of people aren't
Speaker 1: doing it because most people don't know how powerful an
Speaker 1: HSA can be. That's why we're here to remind you
Speaker 1: it can be massively powerful now you know. Yeah, And
Speaker 1: we've got an article we'll link to in the show
Speaker 1: notes if you want to know exactly how to use
Speaker 1: and maximize your HSA if you have access to one,
Speaker 1: or let's talk about eighty us for a second. At
Speaker 1: Accessory dwelling units, we talk about them regularly. They're just like, hey,
Speaker 1: you want to build a mother in law suite in
Speaker 1: your backyard. That that's basically what an ADU is. And
Speaker 1: we've been fans for a while. I almost built one
Speaker 1: back at our in townhouse. It's like this close, but
Speaker 1: they were just like some minor zoning issues where I
Speaker 1: couldn't get past them.
Speaker 2: But the setbacks and whatnot. That's right, Yeah, it was.
Speaker 1: So I was like, oh, it's gonna have to be
Speaker 1: in the center of the yard. Now, I'm sorry, I'm
Speaker 1: not going to do that. But often people are like interested,
Speaker 1: but it's too expensive, right, and they've been hard to
Speaker 1: finance and then saving up something like one hundred and
Speaker 1: fifty K to build this thing. Even if it's going
Speaker 1: to generate income, it's like it's a bridge too far.
Speaker 1: Most people aren't going to be able to make it happen.
Speaker 1: But it's actually now getting easier to get a loan
Speaker 1: if you want to build an ADU because before lend
Speaker 1: were not able to consider the potential rental income that
Speaker 1: could you that could come from building that ADU, and
Speaker 1: now they can. So basically, if you're buying a house
Speaker 1: that currently has an ADU, the lender can factor in
Speaker 1: seventy five percent of the likely rent amounts into what
Speaker 1: they're willing to lend you to buy that house, which
Speaker 1: is cool because it might allow you to buy the
Speaker 1: house that's slightly more expensive with the ADU that's actually
Speaker 1: going to be better for your bottom line. And if
Speaker 1: you're trying to build a new ADU from scratch in
Speaker 1: your yard where you currently live, you can get a
Speaker 1: two h three K construction loan and a lender can
Speaker 1: consider fifty percent of the likely rental income of that
Speaker 1: ADU what it's likely to bring in. So just good
Speaker 1: news for folks who have listened to us and they're like,
Speaker 1: I love the ADU thing, but I don't have one
Speaker 1: hundred and fifty K on hand to build that thing
Speaker 1: from scratch. And yes, lending costs or hire, it's still
Speaker 1: not cheap to finance that ADU. But if you have
Speaker 1: enough cash to put towards that, and at the same
Speaker 1: time you're able to borrow some in order to get
Speaker 1: it to get it going, I think a lot of
Speaker 1: people are going to be more willing to go in
Speaker 1: the ADU direction totally.
Speaker 3: It's good to know that that's an option. And this
Speaker 3: is great news because more states and municipalities out there
Speaker 3: are allowing ADU construction. They've kind of gained steam, they've
Speaker 3: gotten more popular, but the borrowing guidelines hadn't kept up
Speaker 3: with that demand, with that desire for folks to build
Speaker 3: those in their yards. ADUs are great for increasing housing supply,
Speaker 3: that's another benefit, but they can also be perfect for
Speaker 3: folks who are wanting to get into the real estate
Speaker 3: investing game.
Speaker 2: It's just like a good way to test the waters. Yea.
Speaker 1: Like they're great for individuals, they're great for society as
Speaker 1: a whole, like eighty US.
Speaker 2: Great for cities. Yeah, they're not still increased density.
Speaker 1: Silver bullet or anything to produce kind of the lack
Speaker 1: of housing supply we have, but they're part of the
Speaker 1: solution at least exactly.
Speaker 2: Okay.
Speaker 3: So on the note of financing, lenders are now offering
Speaker 3: home buyers a free refinance perk, and so this is
Speaker 3: a story in the Times. Basically, if rates go down
Speaker 3: within the near future, what you can do is you
Speaker 3: go back to that same lender and you can refine
Speaker 3: without paying the massive closing costs that are typically associated
Speaker 3: with doing a refinance. These programs are all different, So
Speaker 3: what we would recommend is to read the fine print
Speaker 3: because some of these come with higher initial fees. And
Speaker 3: so if you are able to compare apples to apples
Speaker 3: and you see that there are not higher fees than sweet,
Speaker 3: obviously go with the one that has the free option.
Speaker 2: It's like a free meal down the road.
Speaker 3: It's like a free night's stay were you to come
Speaker 3: on back as long as you're not paying more for
Speaker 3: that initial night's day. But we think a better idea
Speaker 3: is just to do some more shopping and just find
Speaker 3: the lowest rates that are currently available. Certainly, it'll suck
Speaker 3: to pay to refine the future if rates do drop,
Speaker 3: which they might. We've seen rates took down over the
Speaker 3: past couple of weeks. But hoping that one of these
Speaker 3: kind of gimmicky maybe free refine mortgages will work out
Speaker 3: will likely cost you more if, in particular, if you're
Speaker 3: paying more on the front end.
Speaker 1: Yeah, or let's say it's like, oh, free REFI and
Speaker 1: potentially at some point in the future, but it comes
Speaker 1: with an initial quarter point higher rate or something like that,
Speaker 1: well's probably not worth that trade off.
Speaker 3: Right, you end up moving and never actually refinancing right
Speaker 3: before you end up selling that produs, that's right, And
Speaker 3: so we talk about this all the time.
Speaker 1: But there are stats out there about how if you
Speaker 1: just shop with at least three lenders, that's going to
Speaker 1: save you potentially thousands and thousands or maybe even five
Speaker 1: digits plus over the life of your loan if you
Speaker 1: just shop around. Most people, a lot of folks go
Speaker 1: to just one lender, they just get one quote, they
Speaker 1: go with that, and that is when you lose out.
Speaker 2: The most though exactly.
Speaker 3: And another thing, I was talking to a friend local
Speaker 3: lender and some thanks for offering a free recast of
Speaker 3: the mortgage, which is nice if you're not able to
Speaker 3: come to the table with a bunch of money. But again,
Speaker 3: if they're charging you more for that ability to do
Speaker 3: a recast, then that's not something I should say. A
Speaker 3: recast is it's sort of like a refi, but they
Speaker 3: don't change the interest rate of your mortgage. They basically
Speaker 3: reamateurize it. So if you come to the table with
Speaker 3: some more money after the fact, it just reduces your
Speaker 3: monthly payment, which is nice for like an extra one
Speaker 3: hundred k or something like after the exactly, like after
Speaker 3: the sale of a house in a year that you
Speaker 3: decide to hang on to. It's like, okay, now let's
Speaker 3: take those funds that we were planning originally the funnel
Speaker 3: towards the new place.
Speaker 2: Now we have the ability to do that.
Speaker 1: Yeah, and recasts don't get talked about much. Not many
Speaker 1: people use those, but it can be a great tool,
Speaker 1: I think, especially if you've got one of those higher
Speaker 1: trade mortgages. Right now, and you do come into some cash.
Speaker 1: Recasting is not a bad idea for some folks. And
Speaker 1: speaking of debt, Matt, let's talk about credit card balances.
Speaker 1: We've talked about how those balances have talked. A trillion
Speaker 1: dollars is kind of a headline number, and we talked
Speaker 1: about how it's kind of not as bad as it seems,
Speaker 1: right because given inflation, given the amount of money and
Speaker 1: people's bank accounts, that net worths have gone up across
Speaker 1: the board. Is it a crummy stat Do we hate
Speaker 1: to see it? Of course, But is it as bad
Speaker 1: as some people have made it seem?
Speaker 2: Not quite.
Speaker 1: And of course we want to see everyone pay off
Speaker 1: their credit card debt on time and in full. That
Speaker 1: is one of our golden rules of plastic that we
Speaker 1: talk about all the time. But just because the headline
Speaker 1: number isn't as bad as it seems, it doesn't mean
Speaker 1: that we're not seeing problems on the credit card front,
Speaker 1: because it turns out that delinquency rates are up significantly.
Speaker 1: The average credit card balance is now more than six
Speaker 1: thousand dollars, which is fifteen percent higher than.
Speaker 2: Was he a year ago.
Speaker 1: I think people are relying on their credit cards more
Speaker 1: than they were, and some of that stimmy money, like
Speaker 1: we talked talked about mad that's drying up. And so
Speaker 1: I think we're seeing an over reliance on credit cards
Speaker 1: from a lot of folks. And you know, as everybody knows,
Speaker 1: credit card debt comes with a variable interest rate, and
Speaker 1: those rates have been increasing like clockwork. So you know,
Speaker 1: we're not We're still fans of credit cards if you
Speaker 1: use them the right way.
Speaker 3: Like in order to score with the companion pass. Yeah,
Speaker 3: Southwest exactly.
Speaker 1: It's like, man, the perks can be massive, they can
Speaker 1: be significant, but credit card debt is bad through and through.
Speaker 2: That's right.
Speaker 1: It's gonna derail your personal finance.
Speaker 2: Goals for sure.
Speaker 3: I think it can just be a slippery, slippery slope.
Speaker 3: Like folks think, well, I'm just gonna go into debt
Speaker 3: a little bit, what's it. I'm not delinquent, I'm not
Speaker 3: behind on my payments, but way, what if I just
Speaker 3: make the minimum payment?
Speaker 2: What's the big deal?
Speaker 3: But it truly is a slippery slope, and once you
Speaker 3: start going down that path a little bit, it's going
Speaker 3: to keep you from achieving your different financial goals. Like
Speaker 3: it makes me think about like snacking on candy like
Speaker 3: it's been after Halloween now, and we've got these tubs
Speaker 3: because we did the buy back, which we never circled
Speaker 3: back around, and we ended up paying ten cents per
Speaker 3: piece of candy, and then twenty five cents a quarter
Speaker 3: for the full size or the king size bars, and
Speaker 3: so I'm going to pay thirty five next year. Our
Speaker 3: kids walk away with you with anywhere from three or
Speaker 3: four bucks for those that chose to keep us selects
Speaker 3: stash on hand to One of our daughters ended up
Speaker 3: selling all of her, like, literally every single piece back
Speaker 3: and walked away with I think closer to close to
Speaker 3: ten bucks.
Speaker 2: She does not have a sweet tooth. She well, she
Speaker 2: understood that.
Speaker 3: It doesn't mean that you weren't not that you weren't
Speaker 3: going to be able to have some candy at some point.
Speaker 3: It's just that it was more on our terms, and
Speaker 3: the selection was going to be a little more limited, huh,
Speaker 3: because of course mommy and daddy are going to get snacked,
Speaker 3: and she was all the good ones. And that's kind
Speaker 3: of what I'm getting at here, is that when that
Speaker 3: stash of candy is there, I think maybe I'll just
Speaker 3: snag one of those almond joys. What's the big deal?
Speaker 3: Maybe I'll take a butterfinger to work. In fact, maybe
Speaker 3: I should take a bunch of them to work, because
Speaker 3: it's nice to have somebody that work as well. But
Speaker 3: there's a mindset, mindset that takes place, and all of
Speaker 3: a sudden, subconsciously, I'm a snacker and like I'm like,
Speaker 3: I'm eating candy left and right.
Speaker 2: When had I.
Speaker 3: Looked at in this case, I guess my diet ahead
Speaker 3: of time, I would have said, well, no, I don't
Speaker 3: want to eat all of that candy. But there's like
Speaker 3: a shift that takes place when you start going down
Speaker 3: that path. And I think the same thing can be
Speaker 3: true when it comes to credit card use. You think, well,
Speaker 3: what's the big deal? But then after a couple months
Speaker 3: of maintaining a balance, you start thinking, well, I've already
Speaker 3: got the balance going, you know, li if we just
Speaker 3: add a few more hundred to it, And I think,
Speaker 3: in my mind, like, that's where it starts getting.
Speaker 2: A little dangerous. I mean, I think that's where your
Speaker 2: finances is get derailed.
Speaker 1: We kind of have the ability to rationalize almost anything,
Speaker 1: and I think it's true in the case of something
Speaker 1: that's a great example, something as simple as Halloween candy.
Speaker 1: And if you're saying, like how much candy do I
Speaker 1: think I want to eat in the month of October
Speaker 1: or I guess really November the answer if the answer
Speaker 1: was probably for a lot of people like relatively little,
Speaker 1: you know, and it can get out of control really easily.
Speaker 1: So if you don't have hard and fast rules, hard
Speaker 1: lines in the sand about how you're going to use
Speaker 1: those credits cards, if you don't follow some of those
Speaker 1: rules that we lay out, then I think you're bound
Speaker 1: to find yourself in trouble down the road.
Speaker 2: That's right, bound to find.
Speaker 1: Yourself tied up in these like crummy statistics that are
Speaker 1: really what's lying behind those statistics is people who have
Speaker 1: harmed themselves financially significantly.
Speaker 2: It's harder to dig yourself out of that hole. They've
Speaker 2: shut themselves on the foot.
Speaker 3: And not only are the those statistics crummy, but you
Speaker 3: end up feeling crummy as well when when you can't
Speaker 3: control yourself. And I think that's one of the takeaways,
Speaker 3: is just knowing yourself. Because I think there's some folks
Speaker 3: who can use credit cards wisely, but in the same
Speaker 3: way I think there are some folks who also know
Speaker 3: that I'm gonna be too tempted to spend. And for
Speaker 3: those folks, we would say, don't mess with the rewards,
Speaker 3: don't don't even think about the companion pass. We don't
Speaker 3: want to highlight that too much. The same thing intrument,
Speaker 3: same thing with booze, right, I mean, like that is true.
Speaker 3: Like some people are like I can enjoy a glass
Speaker 3: of wine and moderation. You and I we can enjoy
Speaker 3: a crappier moderation. But I know not everybody can do that.
Speaker 3: We've we have listeners who are like, hey, that's actually
Speaker 3: the toughest part of the show for me.
Speaker 1: It's a struggle for yeah, which I totally get. Like
Speaker 1: I realized that certain people are tempted differently towards different things.
Speaker 3: Yeah, yeah, So keep that in mind. But Joe, we've
Speaker 3: got more stories to get to. We're gonna talk of.
Speaker 3: We will get to Dave Ramsey, but we have also
Speaker 3: got some updated numbers from the IRS on tax brackets
Speaker 3: and the standard deduction.
Speaker 2: We'll get to all of that right after this. All right, Matt,
Speaker 2: we're back.
Speaker 1: Let's keep this Friday flight rolling along.
Speaker 2: And I'm probably gonna say flying.
Speaker 1: We can keep it, say that, keep the Friday flight flying,
Speaker 1: but buying we are going to get to our ludicrous
Speaker 1: headline of the week. That's the first thing up in
Speaker 1: the second half of the Friday Flight every week. This
Speaker 1: one comes from Think Advisor and the title of the
Speaker 1: article is super Nerds Unite against Dave Ramsey's eight percent
Speaker 1: sake patrawl rate Guidance.
Speaker 2: And I'm not sure if this is kind of actually
Speaker 2: a good headline.
Speaker 3: Yeah, you know, like like a lot of times we
Speaker 3: would disagree with the headline, but the actual headline, we're
Speaker 3: kind of like, all right, yeah, well we'll count us
Speaker 3: a part of those supernerds.
Speaker 1: Well, we're kind of attempting to smack around. Here is
Speaker 1: the underlying advice that led to the creation of this article.
Speaker 1: And if you're not on Twitter, I don't know. In
Speaker 1: my mind, Matt, this made all the rounds on Twitter,
Speaker 1: So I'm not sure if you saw it an X yeah,
Speaker 1: X yeah, we'll start calling it X. I don't know
Speaker 1: when he gets a better name. I guess right, Twitter
Speaker 1: was such a good name, it's such a good branding.
Speaker 2: X not so much.
Speaker 1: But basically you and I will say this too, We're
Speaker 1: not usually all about bashing other personal finance creators here,
Speaker 1: even if we don't agree with their information or their tactics,
Speaker 1: but in this case we're going to make an exception.
Speaker 1: That's because you know, Ramsey, in some hubristic rant last week,
Speaker 1: told a caller that they can draw down eight percent
Speaker 1: of their portfolio each and every year in retirement without
Speaker 1: running out of money, which is double double with the
Speaker 1: super nerds in this article who refute what Dave's claims
Speaker 1: what they claim and really the studies have been around
Speaker 1: Matt that have done a lot of in depth digging
Speaker 1: on this for decades, and so these super nerds say, oh,
Speaker 1: the eight percent thing that Dave Ramsey's claiming, it's imprudent
Speaker 1: and it's reckless. Basically, Dave's math isn't mathing here, and
Speaker 1: his tactic it fails more than fifty percent of the
Speaker 1: time when you run the numbers, and if folks are
Speaker 1: trying to plan out their retirement spending right, if they
Speaker 1: were to listen to him, they can end up destitute.
Speaker 1: Just I see this as reckless, and I feel like
Speaker 1: Dave's done a lot of good work on the personal
Speaker 1: finance front for a lot of years he's helped so
Speaker 1: many people, but man, a.
Speaker 3: Lot of people get out of debt. Yeah, but it
Speaker 3: does not seem like he's helping a lot of people
Speaker 3: invest their dollars. So some of that investing advice just
Speaker 3: is thinks it's no good, it's crazy.
Speaker 2: Yeah.
Speaker 3: So the authors of that article, they found this is
Speaker 3: a quote here a retiree who listened to Ramsey and
Speaker 3: followed an eight percent withdrawal rule while holding a four
Speaker 3: fund stock portfolio in the two thousands, they would have
Speaker 3: run out of.
Speaker 2: Money in as little as thirteen years.
Speaker 3: And that's because Dave Ramsey isn't taken into account what's
Speaker 3: known as a sequence of returns risk. And so even
Speaker 3: though the market goes up most years, well, if you
Speaker 3: retire into a bear market and you continue to pull
Speaker 3: out eight percent each and every year, you were eating
Speaker 3: into the capital significantly more so than on years that
Speaker 3: are green, which means that you've got fewer dollars left
Speaker 3: to compound for your future. The authors of this article noted,
Speaker 3: when you get a bad sequence of returns early in retirement,
Speaker 3: even good returns and subsequent years can't.
Speaker 2: Bail you out.
Speaker 1: If you retired, let's say, at the very beginning of
Speaker 1: last year, when the market had a rough, rough, rough year,
Speaker 1: that'sactly been a perfect example of how even a great
Speaker 1: year like this year can't make up.
Speaker 2: For how harmful that first year was.
Speaker 3: Exactly, so we feel that the super nerds in this case,
Speaker 3: they've got data on their side, data that Dave's prideful
Speaker 3: rants based on inaccurate information can't even overcome. So having
Speaker 3: entered into the personal finance space via the Dave Ramsey gate,
Speaker 3: I will maybe I'll go to bat for him a
Speaker 3: little bit because further on in the article or maybe
Speaker 3: it was the actual post of him when he was
Speaker 3: providing this advice, but he was talking about the fact
Speaker 3: that he says this is because he feels that he
Speaker 3: can be demoralizing for folks who are basically playing it
Speaker 3: too conservative. They feel that they need to actually have
Speaker 3: saved and invested much much more money than what they
Speaker 3: currently do, and that there's a chance that they end
Speaker 3: up throwing in the towel they even stop before they've
Speaker 3: even started, which I can completely sympathize with.
Speaker 2: Right.
Speaker 1: That's what we talked about recently when Earner Leisure Guys
Speaker 1: said he exactly million dollars financially independent last.
Speaker 2: Week, but so so.
Speaker 1: I guess we do sometimes talk trash about person. It's
Speaker 1: not our goal to do that.
Speaker 3: But the problem, though, is when you are faced with
Speaker 3: an audience or somebody that you're trying to help with
Speaker 3: some hard information, you don't soften that by dangling or
Speaker 3: putting out some false hope out there. And I feel
Speaker 3: like that that's what Dave is doing here. He's he's
Speaker 3: not being honest. He's not like, you need to be
Speaker 3: honest and provide folks with the data in a kind
Speaker 3: way as opposed to being like, oh, it's gonna be
Speaker 3: all right. That's what's so weird about this is because
Speaker 3: when it comes to debt payoff, Dave is so hardline
Speaker 3: and crazy. He's incredibly disciplined about that and that's kind.
Speaker 2: Of his stick. But when it comes to investing, he's like, ah,
Speaker 2: it'll be fine. It is. It's like this super ambigu
Speaker 2: gray area, which.
Speaker 3: Seems counter to how he is when he when he
Speaker 3: normally talks when it comes to talking about the thing
Speaker 3: at least he's most known for, which is debt payoff,
Speaker 3: Like it makes me yeah, Like when it comes to
Speaker 3: debt he's the dude that's willing to say, hey, you
Speaker 3: got some food in your teeth. Actually he yells at you.
Speaker 3: He's like, hey, you got some food in your teeth.
Speaker 3: But when it comes to investing, he's afraid of being mean,
Speaker 3: Like he's thinking, oh, let's just be nice of the
Speaker 3: folks because we don't want to hurt their feelings. That's
Speaker 3: the paradox here, and that's the part that I don't understand.
Speaker 1: You and I we've talked about how the four percent rules.
Speaker 1: It's a rule of thumb, and actually for a lot
Speaker 1: of retirees, like I think you can withdraw more than that,
Speaker 1: a little bit closer to five percent, right, But again,
Speaker 1: you have to also be willing to pivot and be
Speaker 1: flexible in those retirement years and in a down year,
Speaker 1: maybe say have enough flexibility to say, listen, I'm gonna
Speaker 1: withdraw a little bit less and in a great year
Speaker 1: you might be able to take out a little bit more.
Speaker 2: But just to say patently, you.
Speaker 1: Can take out eight percent from your retirement account no
Speaker 1: matter what, every single year, like clockwork in retirement, well,
Speaker 1: you might be setting some people up for a cat
Speaker 1: food existence.
Speaker 3: And that yes, which is yeah, that's like what of
Speaker 3: his or not? What if it's not cat food? I
Speaker 3: think he says like alpo like bogfood, because that's what's
Speaker 3: going to happen with these with these folks, not the
Speaker 3: folks that don't get out of debt, but the folks
Speaker 3: who actually listen to nobody investing.
Speaker 2: I've seen we have cats at home.
Speaker 3: Okay, while we're talking about retirement, let's talk about social security,
Speaker 3: because another way retirees are shooting themselves.
Speaker 2: In the foot is to tap those social.
Speaker 3: Security funds to early. There's a new retirement survey and
Speaker 3: they found that fear over the future of social security.
Speaker 3: Basically they think that it's running out of money is
Speaker 3: causing boomers to sign up for that Social Security check
Speaker 3: now instead of waiting, even though waiting would mean a
Speaker 3: much bigger monthly check guarantee down the road.
Speaker 2: And so that that.
Speaker 3: Raises the question, I guess, first of all, is social
Speaker 3: Security running out of money?
Speaker 2: What kind of is?
Speaker 3: But it is extremely complicated, Like basically, changes are going
Speaker 3: to need to be made in order to.
Speaker 2: Protect social security.
Speaker 3: For future generations, and if they aren't made, well, benefit
Speaker 3: amounts will have to be cut to a certain extent.
Speaker 3: And even though politicians they see this problem lurking like
Speaker 3: it's on the horizon, they just haven't done anything to
Speaker 3: address it. Meaning more drastic action is going to be
Speaker 3: necessary at some point. But bottom line is not going
Speaker 3: to go away, because like I think, we can even
Speaker 3: look to our personal lives, right, Like, think about sometime
Speaker 3: when you allowed a luxury to enter into your life,
Speaker 3: and before long you start convincing yourself that luxury is
Speaker 3: now a necessity, huh. And it's hard to claw back
Speaker 3: the money that is now going towards certain expenses. It's
Speaker 3: hard to put the toothpaste back in the tube, especially
Speaker 3: in the same way social Security man, nobody's going to
Speaker 3: be willing to go out on the limb to be
Speaker 3: the bad guy and say, okay, no, we're not going
Speaker 3: to fund this entitlement anymore.
Speaker 1: Right, you know, those tweaks are gonna have to be made.
Speaker 1: But people who are in their forties who say I've
Speaker 1: been helping fund this to this scheme for twenty years,
Speaker 1: you're gonna cut me out now, not gonna happen like
Speaker 1: that would. Nobody's gonna get elected on that platform exactly.
Speaker 1: And so we're confident that something's gonna get done, and
Speaker 1: waiting longer if you're in good health makes the most sense,
Speaker 1: by the way, from a retirement income perspective. Right, you
Speaker 1: don't necessarily want to bank on the fact that you
Speaker 1: can work longer, because like injuries or other hurdles, lots
Speaker 1: of folks aren't able to work as long as they
Speaker 1: had hoped.
Speaker 2: Stuff happens.
Speaker 1: Yeah, but still waiting to take Social Security, even just
Speaker 1: a couple of years longer, can make a massive difference
Speaker 1: in your retirement lifestyle by adding income those extra couple
Speaker 1: of years that you worked and ensuring a bigger monthly
Speaker 1: Social Security check because you held off on actually claiming it.
Speaker 1: It's this double whammy that works in your favor. Right,
Speaker 1: And so age seventy is where you reach that maximum payout.
Speaker 1: It's the ideal age for a whole lot of folks
Speaker 1: to claim that Social Security benefit. But a lot of
Speaker 1: these social security fears matter overblown too. And so yeah,
Speaker 1: I think you and I were both concerned about political
Speaker 1: gridlock in DC. I think anybody who cares about this
Speaker 1: country looks and sees just I mean, gosh, think about
Speaker 1: the almost fistfight that went down in Congress this week.
Speaker 1: It's hard not to think that it's just a circus.
Speaker 1: A clown show up there lots of times. But in
Speaker 1: those things, the fact that we're focused on fistfighting people
Speaker 1: as opposed to actually getting legislation done, it prolongs the
Speaker 1: reforms that soci security desperately needs. But I would still say,
Speaker 1: even while that's true, don't let the fear of Social
Speaker 1: Security going away cause you to claim early and harm
Speaker 1: your financial future, like for decades to come, diminishing your
Speaker 1: ability to retire on a healthy with a healthy social
Speaker 1: Security check.
Speaker 2: That's right, man.
Speaker 3: Okay, we had a really great conversation with Zeke Fox
Speaker 3: last week. We talked about the crazy world of crypto
Speaker 3: in light of the SBF ruling.
Speaker 2: We got some more crypto news for you.
Speaker 3: This came out this week from our favorite low cost
Speaker 3: broke or one of our favorite low cost brokerages, I
Speaker 3: should say, but Vanguard. They won't be creating a crypto ETF.
Speaker 3: That's unlike their competitors over at Fidelity. Over at Blackrock
Speaker 3: CEO Tim Buckley, he said that did you ever listen
Speaker 3: to Jeff Buckley back in the day oli Jah? Yeah,
Speaker 3: Well that's what he's known for right now, I don't
Speaker 3: know that. Just popp him up brain, Sorry, CEO Tim Buckley,
Speaker 3: not Jeff. He said that bitcoin is not one of
Speaker 3: the asset classes that Vanguard focuses on because it is
Speaker 3: not part of a long term portfolio. He actually said
Speaker 3: that he feels the same way about gold, which is
Speaker 3: actually interesting because we feel the same way. So maybe
Speaker 3: we've got more more spiritual alignment with Fidelity. But bitcoin,
Speaker 3: it's still one of the most interesting digital currencies out there,
Speaker 3: even though we see it more as like a like
Speaker 3: a speculative play rather than like a solid investment. But
Speaker 3: as always, if you want dabble a little bit, make
Speaker 3: sure that you keep your exposure to a minimum. We're
Speaker 3: not going to hate.
Speaker 2: Agreed.
Speaker 1: Let's talk about last subject of this Friday flight. Malice
Speaker 1: am I giving. It's more on people's minds right now,
Speaker 1: this part of the season that we're entering, right we're
Speaker 1: getting close to the end of the year. People are
Speaker 1: thinking about taxes, but they're also kind of thinking about
Speaker 1: generosity as we approach Thanksgiving and Christmas. Sure, and well,
Speaker 1: a quick update from the irs. By the way, they
Speaker 1: just released the updated standard deduction for next year. It's
Speaker 1: going to be twenty nine two hundred dollars if you're
Speaker 1: married filing jointly in fourteen six hundred dollars if you're single.
Speaker 1: The tax bracket income thresholds will increased as well. Not
Speaker 1: going to share all those numbers much, and numbers doesn't
Speaker 1: go great on audio, but across the board there are
Speaker 1: increased by just over five percent. And I know that
Speaker 1: most people don't decide what to give based purely around
Speaker 1: tax breaks and tax incentives, but it is important to
Speaker 1: note that a whole lot of people we encourage you
Speaker 1: to give. We think it's a great thing. We're going
Speaker 1: to talk more about giving actually next week with one
Speaker 1: of the most interesting dudes in that space, Ellie Hasenfeld
Speaker 1: from Give Well. But it's important to note that you're
Speaker 1: not going to get any sort of added tax benefit
Speaker 1: for giving, if you're claiming that higher standard deduction.
Speaker 3: Yeah, that's good news that the tax brackets have basically
Speaker 3: the percentages haven't increased, but the income limits have increased.
Speaker 3: So bottom line, that means more of your income is
Speaker 3: protected from those higher rates of taxation. That's what we
Speaker 3: all want is to pay less taxes for the most part. Yeah,
Speaker 3: all right, that's gonna be it for this Friday flight.
Speaker 3: You can find the different articles and some of the
Speaker 3: resources that we mentioned during this episode up in the
Speaker 3: show notes at howtomoney dot com, specifically the Southwest Companion
Speaker 3: Pass article.
Speaker 2: Check it out. We want folks to understand how that works.
Speaker 1: Yeah, and don't forget to sign up for the how
Speaker 1: of Money News if you haven't already. It's a joyous
Speaker 1: thing to get in your inbox every Tuesday. You can
Speaker 1: sign up at hownamoney dot com slash newsletter. But Matt,
Speaker 1: that's gonna do it for this episode. Until next time.
Speaker 1: Best Friends Out, Best Friends Out.