Speaker 1: Welcome to Had the Money. I'm Joel and I am Matt.
Speaker 2: Today we're talking passive income plans, paying points and rewards
Speaker 2: RUG polls.
Speaker 1: That's right. And when you say reward rug pole, what
Speaker 1: we're referring to here are credit card rewards and so
Speaker 1: on that note, I think we'll get to talking about
Speaker 1: Robin hood Golds. That's actually one I'm excited about personally.
Speaker 2: Am I getting too extreme with the alliteration on Friday Flights?
Speaker 1: Man? No, okay, it's something for them to lash onto.
Speaker 2: J want another P followed by followed by P, Like
Speaker 2: I just I don't know why I'm obsessed with that
Speaker 2: sort of way of naming our Friday flight episode.
Speaker 1: It just flows, man. Before we get to the actual story, Zoe,
Speaker 1: let's pull one out for behavioral economist Daniel Connoman.
Speaker 2: Yeah, so yeah, he passed at the age of ninety,
Speaker 2: which is.
Speaker 1: That was yesterday? Long life? Was it Thursday? Wednesday? Say yeah?
Speaker 2: And I think it's just yeah, pour one out because
Speaker 2: we talk about this regularly on the show, how personal
Speaker 2: finance is.
Speaker 1: It's not all about math.
Speaker 2: We know that we're just irrational creatures as human beings,
Speaker 2: and nobody highlighted that better than Daniel Conomy, and he
Speaker 2: basically kicked off a whole new field of research.
Speaker 1: Well you say, like you enter into that conversation with
Speaker 1: the assumption that we all know that, and the reason
Speaker 1: we know that is because of Daniel Conomy, right, Like,
Speaker 1: I feel like that that was one of his biggest
Speaker 1: contributions was the fact that, like, we think we're rational,
Speaker 1: we think we can be objective and look at all
Speaker 1: of the different facts, but no, in fact, we are subjective.
Speaker 1: It depends on our life experiences as to our behavior, right,
Speaker 1: Like we're not.
Speaker 2: In our emotions and all sorts of things.
Speaker 1: Yes, we take shortcuts, we take cues from other people,
Speaker 1: Like we just go with our gut sometimes as opposed
Speaker 1: to receiving all of the information that's available to us
Speaker 1: and making a perfectly rational decision.
Speaker 2: Gains aren't don't feel as powerful as losses do. And
Speaker 2: and all of these different.
Speaker 1: Things in sand dollar amounts, right, and all.
Speaker 2: These things that he was able to highlight that really
Speaker 2: inform I think at least some of what we talk
Speaker 2: about on the show, because there are some things where
Speaker 2: it's like, hey, this is math, or hey this is policy,
Speaker 2: this is how this works. Maybe you should consider taking
Speaker 2: advantage of this, or hey, the economic tide has swung
Speaker 2: a little bit, and actually there's things to consider over here.
Speaker 2: But there's also a lot to talk about on the
Speaker 2: behavior spectrum, and that truly, so much of that goes
Speaker 2: back to the discipline essentially that he founded.
Speaker 1: That's right. So, Daniel Conneman, thank you for all of
Speaker 1: your work. SBF, no, thank you for all that you've done.
Speaker 1: Did you see that his sentencing sentencing came through?
Speaker 2: I did, Yeah, twenty five years that. I can't tell
Speaker 2: if that's fair or not enough, but I think it's fair.
Speaker 2: He's one of the two. He did seem he had
Speaker 2: like a slap on the wrist, like five years in
Speaker 2: some community service.
Speaker 1: That wouldn't have been wrong. Yeah.
Speaker 2: Well, he was apologetic, and I think it seems like finally,
Speaker 2: finally true. It's for a long time he was like,
Speaker 2: what do you mean, I didn't do anything.
Speaker 1: It seems like he recognizes the harm that he caused
Speaker 1: to lots of people, and so I don't know any
Speaker 1: lesson that same at least he says he's acknowledging it.
Speaker 1: That's true. Does he feel that way? He's not locked
Speaker 1: away for seventy years, essentially for life.
Speaker 2: It's kind of like when I, you know, apologized to
Speaker 2: my parents growing up when I did something and really
Speaker 2: I just wanted to not be in trouble. May I
Speaker 2: have a feeling that might be what he's doing. But
Speaker 2: I'm glad to see white color crime doesn't get enough
Speaker 2: punishment in this country. And so and so what SBF
Speaker 2: did was terrible. It really impacted his thievery, essentially impacted
Speaker 2: the lives of millions of people, and he deserves to
Speaker 2: go away for a long time.
Speaker 1: That's true. Yeah, it wrecks the crypto markets. And on
Speaker 1: that note, actually, next Wednesday, we're going to be speaking
Speaker 1: with Marco from Whiteboard Finance about bitcoin. Yeah, so you
Speaker 1: can look forward to that one. That'll be a fun combo.
Speaker 2: All right, but let's move on, mat, Let's get to
Speaker 2: the Friday flight as sampling of stories we found interesting
Speaker 2: this week.
Speaker 1: And inflation continues to.
Speaker 2: Kind of be a water cooler talk even though it's
Speaker 2: died down a lot and we're not experiencing like, oh
Speaker 2: crazy egg price is doubled in just two months, Nothing
Speaker 2: like that's happening.
Speaker 1: But although egg prices are up because well it's Easter weekend.
Speaker 1: That's true. Yeah, there's just all the demain hardy easter
Speaker 1: egg hunts.
Speaker 2: I know, my mom dropped off fifteen for us, which
Speaker 2: is really sweet of her, So we could.
Speaker 1: That four one k lo exactly.
Speaker 2: Well, I think especially for people in California, but really
Speaker 2: anywhere there's a Trader Joe's, people are saying, uh, oh,
Speaker 2: banana price has just went up. Trader Joe's they sell
Speaker 2: they're like one of the only stores that sells bananas
Speaker 2: and singles, and they're pricing went up the register, right, Yeah,
Speaker 2: well I think it's actually like, right as you're walking
Speaker 2: into the fruit fer style, yeah, and it's a great, great store,
Speaker 2: but now you want your banana, there's twenty three cents
Speaker 2: instead of nineteen cents. It was kind of like, in
Speaker 2: my mind, kind of like the Costco hot dog exactly
Speaker 2: that has remained at a dollar fifty and the bananas
Speaker 2: were nineteen cents for twenty years, and so people are like,
Speaker 2: you know, uh, I don't think they're revolting, but they're
Speaker 2: a little concerned at least, and I understand that. But
Speaker 2: obviously bananas are still incredibly cheap, just like eggs, even
Speaker 2: if they go up in price twenty percent. It's one
Speaker 2: of those things where it's still fast and more affordable
Speaker 2: than a lot of other foods you could buy.
Speaker 1: Yeah, hopefully I can continue to enjoy my daily We
Speaker 1: both have a daily banana with our coffee and a
Speaker 1: bedtime banana lately. Now what are you talking about. It's
Speaker 1: probably like the last thing you want, right, it's like
Speaker 1: floadd with sugar.
Speaker 2: Well, now I need to tell them, sorry, too expensive.
Speaker 1: Well, so, you know, one of the reasons why historically
Speaker 1: they've been cheap is because of the fact that bananas
Speaker 1: are all clones of the same banana, one variety, right, yeah, yeah,
Speaker 1: so the Cavendish I think is the name of it.
Speaker 1: It's like, literally they're like stormtroopers. They're all it's like
Speaker 1: the exact same banana, unlike apples that's just been replicated
Speaker 1: over like decades, I guess. Which not to be an alarmist,
Speaker 1: but that's why some folks are saying that there could
Speaker 1: be like all of our bananas as we know it
Speaker 1: could get wiped out because they are literally all the
Speaker 1: same banana. And if there's a disease that hits Central
Speaker 1: South America where there's like hundreds thousands of acres of bananas.
Speaker 1: Then we basically would have to rebuild our bananas as
Speaker 1: we know it from scratch new banana infrastructure.
Speaker 2: But yeah, like literally, which is frightening, which is kind
Speaker 2: of crazy to think. So, and your bananas instead of
Speaker 2: being twenty three cents, they're like eighty two cent piece.
Speaker 1: Yeah, So just saying that so that you that we
Speaker 1: all appreciate our bananas while we still have them.
Speaker 2: And I understand Trader Joe's needs is a company that
Speaker 2: needs to remain profitable.
Speaker 1: Yeah, all right, let's talk about passive income because your
Speaker 1: next side hustle choice it might be running a vending machine.
Speaker 1: The reason is because it's trendy passive income. It's the
Speaker 1: quest and vending machines seem to be the current answer
Speaker 1: for many hustlers out there, and there's been a rise
Speaker 1: and interest. This is according to the Wall Street Journal.
Speaker 1: There's a chance that it could be a profitable endeavor. Sure,
Speaker 1: but before you go out there and drop a bunch
Speaker 1: of money on whatever vending machine that you want to purchase,
Speaker 1: I guess.
Speaker 2: Those fancy robotic ones where they get get the soda
Speaker 2: and then they like tilt it sideway.
Speaker 1: Out that way, it doesn't get all carbonated and shook up.
Speaker 1: I think those things are like seven grand? Are they really? Yeah?
Speaker 1: Oh my gosh, no those It takes a lot of
Speaker 1: front cost or even just like a bubble gum machine
Speaker 1: before you do that. So much depends on the specifics
Speaker 1: because when you dig a little bit deeper, the average
Speaker 1: machine earns just over five hundred dollars a month. And
Speaker 1: I'm not going to say that that's not nothing, but
Speaker 1: it may not be this endless fountain of money like
Speaker 1: you were imagining it to be. Yeah, but then on
Speaker 1: top of that, that machine it needs to be restocked,
Speaker 1: it needs to be repaired. If it gets tagged, you
Speaker 1: got to show up and clean nothing clean, nothing off
Speaker 1: though it would be the worst. But again, five hundred
Speaker 1: dollars a month like that is just the average. It
Speaker 1: makes me think of with real estate investing, there is
Speaker 1: a wide spectrum of what it is that individuals are making,
Speaker 1: and like real estate, location is key. And so when
Speaker 1: you're talking about veny machines, the best machines they make
Speaker 1: the bulk of their returns the machines that are well placed.
Speaker 1: And if you are just getting into the game, it's
Speaker 1: going to take you a while to be able to
Speaker 1: snag contracts with the different business owners that would allow
Speaker 1: you to have that prime real estate. Agreed.
Speaker 2: Yeah, No, you have to think about location in the
Speaker 2: It's not just like boom. I got a vending machine
Speaker 2: and it's just printing money. That's not how it works.
Speaker 2: I had a friend, It's not like a crypto farm.
Speaker 1: Right.
Speaker 2: I had a friend who had a photo photo booth
Speaker 2: and that was actually much better decision than a vending
Speaker 2: machine because she had it in a record store and
Speaker 2: it was one It was easier to maintain. There wasn't
Speaker 2: as much to go wrong with it. You didn't have
Speaker 2: to come by and restock every week or something like that.
Speaker 2: It was more like once a month putting in new film.
Speaker 1: Non perishables. Right. I like that.
Speaker 2: It was a much easier business to run. So I
Speaker 2: don't know, maybe for it, but it was in a
Speaker 2: high traffic area in a really cool part of town.
Speaker 1: That's another.
Speaker 2: It was a selling point. And so I think if
Speaker 2: you want to go to the vending machine route, I
Speaker 2: don't know, maybe a photo booth route is better. People
Speaker 2: are interested in that. They tap their credit card, pay
Speaker 2: five bucks and get a film strip, and maybe that's
Speaker 2: a more profitable way to go. I think this also
Speaker 2: isn't for everyone. Right, And interestingly enough, in this article,
Speaker 2: like the folks who have done well, they tend to
Speaker 2: pivot from just having vending machines and they want to
Speaker 2: become vending machine influenced.
Speaker 1: Where you see the footage of them and they got
Speaker 1: this bucket, this giant bucket of quarters and it's just like,
Speaker 1: oh my gosh, that so much money. Yeah, it's like
Speaker 1: that scene from the Goonies where he goes and he's
Speaker 1: like stealing all the money from the well. Still haven't
Speaker 1: seen it? What I know, you've never seen the Goonies. Now, dude,
Speaker 1: I need to Oh my gosh, it holds up. You
Speaker 1: need to go back and see that. I will, I will,
Speaker 1: so Okay.
Speaker 2: One of the guys they highlighted in this story, he
Speaker 2: has over five hundred thousand YouTube subscribers and he's basically
Speaker 2: teaching folks how to make money with vending machines. He's
Speaker 2: making a lot more creating content than he is selling urias, soda,
Speaker 2: empower rate and stuff like that. Right, And we talked
Speaker 2: back in episode three fifty three, which I think of
Speaker 2: as kind of one of our Cornerstone episodes, how passive
Speaker 2: income is a myth, and we love the idea of
Speaker 2: people having multiple sources of income and to be pursuing
Speaker 2: what we called in that episode leveraged income, where upfront
Speaker 2: effort pays off in more passive gains down the road.
Speaker 2: But the truth is it takes time and work to
Speaker 2: see those endeavors succeed. Just because vending machine investing is
Speaker 2: hot right now, it's making the headlines, or you're seeing
Speaker 2: more influencers on TikTok or Instagram or something pushing it,
Speaker 2: that doesn't mean it's a smart move for you. Makes
Speaker 2: me think mad of writing a book. And we have
Speaker 2: friends who have written books and they say they make
Speaker 2: between two thousand and five thousand dollars a month from
Speaker 2: perpetual sales of that book. But they have to keep
Speaker 2: pushing it, they have to keep marketing it, and it
Speaker 2: took a heck of a lot of work up front
Speaker 2: to write that book. So I think if you were
Speaker 2: to pick their brain and say how's that passive income
Speaker 2: coming along, they'd say, well, it's great that I put
Speaker 2: in a lot of hard work at the beginning and
Speaker 2: I'm reaping the rewards, but passive income.
Speaker 1: I don't know if that's what I call it. That's true. Okay,
Speaker 1: So another investing trend that's tacking up is house flipping.
Speaker 1: So basically, obviously we've seen rising home prices. Well, that
Speaker 1: has led to an increased interest in flipping homes. And
Speaker 1: it's not that you can't make money flipping a home, Folks, clearly,
Speaker 1: clearly do this. I actually did this back in the
Speaker 1: day when photography was a little bit slower. What year
Speaker 1: was that that you twenty fifteen?
Speaker 2: Okay, yeah, and you did decently well with that house
Speaker 2: flipping it.
Speaker 1: Ever, Yeah, Like, we entered into that thinking there's a
Speaker 1: chance we might move into it ourselves. And honestly, that's
Speaker 1: a strike against us because what that means is we
Speaker 1: were making some decisions based on us personally as opposed
Speaker 1: to thinking about it from a purely business standpoint. But
Speaker 1: even still, it was a deal and we were able
Speaker 1: to pounce on it, make it happen, knock it out
Speaker 1: within a short period of time. That being said, please
Speaker 1: be forewarned because the risks are much bigger when your
Speaker 1: timeline shrinks. If you are looking to flip a home,
Speaker 1: you got to know what you're doing, you got or
Speaker 1: maybe you've got to have a really good relationship with
Speaker 1: a contractor because you can lose money fairly easily. Transaction
Speaker 1: costs are certainly a big reason why not to mention
Speaker 1: the tax consequences of a shorter time period where you're
Speaker 1: hanging onto that. And honestly, timing is a big part
Speaker 1: of this as well, because I feel like, what do
Speaker 1: they say time, Time heals all wounds. Yeah, well, time
Speaker 1: can heal financial wounds, because the longer you're able to
Speaker 1: hold onto that property, you're gonna see appreciation if it's
Speaker 1: a long term investment. Probably where you're property where you're
Speaker 1: renting it out, you're gonna see rents typically increase.
Speaker 2: But just if you make a mistake, time lessens the
Speaker 2: severity that mistake.
Speaker 1: And so I think, whether it be vending machines or
Speaker 1: real estate, you still have to think through what is
Speaker 1: your unique advantage, Like there needs to be something, some
Speaker 1: sort of almost unfair advantage that you have that allows
Speaker 1: you to make a profit as opposed to you just
Speaker 1: having an interest in doing that. And so when it
Speaker 1: comes to.
Speaker 2: Or if you're a candy specialist, you're like, I know,
Speaker 2: mister goodbar and kat like the back of my hand.
Speaker 1: Yeah, I mean like literally, like or connection with somebody
Speaker 1: within the snack industry, or like I'm thinking about real estate,
Speaker 1: Like maybe you are quite handy and you are incredibly patient,
Speaker 1: and you don't mind living in a construction zone. Guess
Speaker 1: what you are prime for an in house flip. Basically
Speaker 1: where you live in the property, renovate it, live there
Speaker 1: for at least two years, sell that thing without having
Speaker 1: to pay any capital gains on that. That's key.
Speaker 2: That's key because that's one of the best things with
Speaker 2: high transaction costs. If you're also paying tax on the profit,
Speaker 2: it's hard to make it work unless you really really
Speaker 2: know what you're doing and doing some of the work yourself.
Speaker 2: But if you do the live in flip route, you've
Speaker 2: got a little extra time on your side, and you're
Speaker 2: reducing or eliminating essentially the tax burden.
Speaker 1: Yea, even if you're like, well, no, I don't want
Speaker 1: to do that, Guys, I'm not very handy. Okay, Well,
Speaker 1: you need to be really good at project management, and
Speaker 1: you need to have a good network. You need to
Speaker 1: have a bunch of great contractors who you can call
Speaker 1: on and to manage that thing. All I'm saying is
Speaker 1: that they're need or reasonably priced. Yeah, you need to
Speaker 1: have some sort of unique advantage. And because if it
Speaker 1: was as easy as all the influencers are making it seem,
Speaker 1: whether we're talking about vending machines or real estate, everybody
Speaker 1: would be doing it. And guess what, more and more
Speaker 1: folks might be doing it, which means what it's harder
Speaker 1: to make a profit, which is going back to my premise.
Speaker 1: You still have to find some sort of unique proposition,
Speaker 1: like something unique that sets your services or your products apart.
Speaker 1: Everything's harder in redevrent then it seems on YouTube or
Speaker 1: TikTok yep. That's also I guess a lesson here. All right,
Speaker 1: let's continue talk about real estate for just a second. Matt.
Speaker 2: On that note, it's becoming more common for folks to
Speaker 2: pay discount points in order to reduce the mortgage rate
Speaker 2: that they're taking on when they're buying a home. Almost
Speaker 2: two thirds of buyers paid more upfront to reduce their
Speaker 2: interest rate, compared to only thirty percent of buyers in
Speaker 2: twenty twenty one, when we were in a climate of
Speaker 2: low rates. People are like, oh three percent, great, I
Speaker 2: don't feel the need to buy that ratedown anymore. That's
Speaker 2: pretty good. Yeah, and so that's a core in historic clothes.
Speaker 2: Why would I do that?
Speaker 1: Right?
Speaker 2: Exactly that these are This is data from Freddy Matt.
Speaker 2: But we would say paying for discount points is typically
Speaker 2: a bad use of your money for multiple reasons. First,
Speaker 2: often you don't lower the rate enough to produce a
Speaker 2: great enough effect. So, oh cool, I'm saving forty dollars
Speaker 2: a month, but it costs me five thousand dollars to
Speaker 2: do that. Well, the math doesn't really add up on
Speaker 2: that front, right. And then second, most buyers don't stay
Speaker 2: at the home long enough to make the numbers work.
Speaker 2: So you buy the home, you pay down the rate,
Speaker 2: and then you move three or four years later. Well,
Speaker 2: there's a really good chance that was money that was
Speaker 2: ill spent, because it takes time for that discount for
Speaker 2: the you know, when you buy those points down, for
Speaker 2: that to actually pay off. Then third, even if you
Speaker 2: do stay in the home long enough, you might not
Speaker 2: hold onto the mortgage.
Speaker 1: Long enough to make it worth it.
Speaker 2: So even if you stay in the home for twenty years,
Speaker 2: but you were finance refinance when rates go down after
Speaker 2: something like four or five years. Well, and the projections
Speaker 2: are the rates are going to go down?
Speaker 1: Who knows.
Speaker 2: We've always said be careful of basing your choices on
Speaker 2: future hopes and dreams about what happens with the interest rates.
Speaker 2: But still, if interest rates do go down and you
Speaker 2: end up briefinancing, you're gonna wish you had saved that
Speaker 2: four or five six thousand dollars whatever it is that
Speaker 2: you used to pay down points because you didn't hold
Speaker 2: onto that mortgage long enough to make it worth it.
Speaker 1: That's true. I think the biggest key is always is
Speaker 1: to shop around with multiple lenders, right, and so what
Speaker 1: that means is to not just go with a mortgage
Speaker 1: lender that your agent recommends. So far, your agent even
Speaker 1: super helpful, and they're they're lining everything up for you.
Speaker 1: They're like, hey, I know a guy. Oh this is
Speaker 1: how this works. Oh I've got a lender for you
Speaker 1: to check out. Can you digitally sign these forms for me?
Speaker 1: Not so easy? Yeah, you don't have to do what
Speaker 1: they say. Keep that in mind. They could be the best,
Speaker 1: but they might not be. You might be able to
Speaker 1: get a rate that's lower even by like a quarter
Speaker 1: or a half a point, perhaps by shopping around, and
Speaker 1: then of course what you would want to do in
Speaker 1: that case, you just pocket what you would have paid
Speaker 1: in points instead. Because I think this is especially true
Speaker 1: man as folks are more transient, As folks are living
Speaker 1: in their homes for fewer and fewer years, it makes
Speaker 1: it seems like a holdover, like the paying down of points.
Speaker 1: It makes sense that this was something that folks did
Speaker 1: back in like like the eighty in the nineties, even
Speaker 1: when rates were sky high. Back then, rates were even
Speaker 1: higher than they are now. And again, there just seems
Speaker 1: to be this cultural shift that's taken place as folks
Speaker 1: are I think moving to where the opportunity oftentimes is yeah,
Speaker 1: not stay input. I think you're right.
Speaker 2: If you're going to do one of those two things,
Speaker 2: shopping around with multiple lenders is going to be far
Speaker 2: more powerful than paying points to reduce the mortgage amount,
Speaker 2: and I think it's well more than worthwhile. I would
Speaker 2: reach out to a credit union. I would also talk
Speaker 2: to like a local mortgage broker who can shop with
Speaker 2: a bunch of different banks on your behalf as well.
Speaker 2: I think those are better ways to save money instead
Speaker 2: of forking over more cash in order to reduce your
Speaker 2: payment amount by a little bit, and again it might
Speaker 2: be it might be worthwhile. It depends on the numbers
Speaker 2: and how long you plan on being that home. So
Speaker 2: I crunch the numbers, you're like, oh cool, if this
Speaker 2: five thousand dollars, if I'm going to make it back
Speaker 2: in lower payments over the course of eighteen months, twenty
Speaker 2: two months, then it might make sense. But for a
Speaker 2: lot of people, it's going to take a whole lot
Speaker 2: longer to make that money worth it. Last, but not least, Matt,
Speaker 2: there's I feel like there's been a lot more conversation
Speaker 2: about whether or not retire you should pay off their mortgage.
Speaker 2: The answer from a financial planning perspective has typically been yes,
Speaker 2: But I feel like on that common wisdom has been
Speaker 2: shifting to and keeping the mortgage around is offering more
Speaker 2: financial flexibility and even higher returns without even having to
Speaker 2: take on any additional risk. So when you don't even
Speaker 2: have to look at the market. That's been the thing
Speaker 2: I think over time, is like, well, can you earn
Speaker 2: more money in the market than by paying off your mortgage, Well,
Speaker 2: then invest instead. Well, if you can just save and
Speaker 2: beat the rate of your mortgage. That makes it even
Speaker 2: a much easier decision because.
Speaker 1: About a guaranteed return your money.
Speaker 2: Because when you're in your twilight years investing in the
Speaker 2: S and P five hundred, well, that comes with a
Speaker 2: whole lot of risk that you might not be willing
Speaker 2: to take on either. You might want the sure thing
Speaker 2: of mortgage payoff, But I would say keeping the mortgage
Speaker 2: around is actually the more conservative approach these days, and
Speaker 2: they're just downsides to being house rich and cash poor. Plus,
Speaker 2: you can always pay that mortgage off when or if
Speaker 2: savings rates decline. So, hey, savings rates go back to
Speaker 2: two percent, and you had kind of money bank in
Speaker 2: a high heeled savings account and your interest rates four percent, Well, okay,
Speaker 2: maybe now it makes make sense to start to pay
Speaker 2: off that mortgage more quickly. But for the time being,
Speaker 2: if you're making five percent and your mortgage is three
Speaker 2: and a half or four percent, I would just kind
Speaker 2: of hold steady and pay it off as agreed.
Speaker 1: Totally. Yeah. This this also seems like a holdover from yesteryear,
Speaker 1: where when we had mortgage rates that were crazy high.
Speaker 1: Like that was a part of the financial plan for
Speaker 1: retirees was to eliminate that house payment. But for all
Speaker 1: the folks out there who were retiring that have thirty
Speaker 1: year rates that they perhaps refinanced five years ago, things
Speaker 1: were crazy low. Yeah. Uh, that's something that if I
Speaker 1: were you, I'd be hanging on to for the rest
Speaker 1: of my life, maybe even longer. In degree. To have
Speaker 1: a mortgage that potentially outlive you while you're earning more
Speaker 1: in savings and certainly in the market, it sounds crazy.
Speaker 1: It's a no brainer. Yeah, But I think I think
Speaker 1: you're right.
Speaker 2: As long as that money that's sitting there in savings,
Speaker 2: you're not tempted to go and do other stuff with it.
Speaker 2: If you hold it in reserve as liquidity and as
Speaker 2: a financial backstop, I think that makes sense. All Right,
Speaker 2: We've got more to get to on this episode, including
Speaker 2: we gotta talk about credit card rewards.
Speaker 1: Matt.
Speaker 2: We really like credit card rewards, but some of the
Speaker 2: richest credit cards might be losing their luster. We'll talk
Speaker 2: about that and more right after this.
Speaker 1: All right, we're back. We will talk about credit cards,
Speaker 1: and again I'm excited to talk about Robin hood gold. Baby.
Speaker 1: I'm bullish if that is your You've got all your
Speaker 1: investments under one Robin hood roof. Now, don't you No, No,
Speaker 1: we're jumping the gun a little bit. We're jump with
Speaker 1: the gun. But let's get to our ludicrous headline of
Speaker 1: the week. This is from go Banking Rates. Headline reads
Speaker 1: rich Dad Robert Kiyosaki reveals why the four one K
Speaker 1: is a horrible retirement plan. Yeah, let's go ahead and
Speaker 1: talk some more smack about Kiyosaki again, because in this
Speaker 1: article he gives a lot of ridiculous information like it
Speaker 1: it was such a straw man argument against the four
Speaker 1: win K. For instance, he says that most funds in
Speaker 1: a four to win K come with a two percent fee.
Speaker 1: What kind of fees or what kind of funds are
Speaker 1: you invested in? Because fees have come down precipitously. Some
Speaker 1: of our fearits out there they have zero or close
Speaker 1: to zero fees attached, like point zero three. Yeah, that's
Speaker 1: a far cry from two percent. My friend, I don't
Speaker 1: know what funds he's looking at. They must be incredibly exotic.
Speaker 1: It's so freaking expensive. He calls the employer match an
Speaker 1: illusion of additional income. And sure, he's right to point
Speaker 1: out investing timelines right, like there are certain amounts of
Speaker 1: time that you need to stick with an employer to
Speaker 1: maintain the ability to keep that match. But clearly the
Speaker 1: employer match enhances your ability to save for your future.
Speaker 1: One hundred percent return on your money if you have
Speaker 1: that perk, or at least fifty percent. Sometimes it's fifty
Speaker 1: per sure, but he's discounting it completely fidelity their research,
Speaker 1: their stats show that four to one K millionaires have
Speaker 1: increased by forty one percent year over year, and so
Speaker 1: in our opinion, we think the four one K, especially
Speaker 1: with an employer match, is still the number one retirement
Speaker 1: account that you should be considering.
Speaker 2: Mister Kiyosaki has I'm just going to use a reverential
Speaker 2: term there. Even we've he's been predicting, you know, the
Speaker 2: stock market crasher. He's basically said, oh, look it's things
Speaker 2: are about to hit the fan, and you should you
Speaker 2: should get out of the stock market and invest in
Speaker 2: in I think he would say real estate, maybe even
Speaker 2: precious metals. I'm not I'm not know hoose philosophy is.
Speaker 2: But every time he predicts a market crash, the market
Speaker 2: continues to rock it upwards. He has been consistently wrong
Speaker 2: on that front. And then to say that you know,
Speaker 2: all four four one k's are a bad investment when
Speaker 2: the vast majority of Americans the way they achieve millionaire
Speaker 2: status is through traditional retirement accounts is also just absurd.
Speaker 2: And uh, maybe he has preferred ways of investing and
Speaker 2: he's done just fine for himself, but to make it
Speaker 2: sound like four all one k's are bad for you
Speaker 2: and should be avoided completely is total nonsense.
Speaker 1: Yeah, and every point that he gave to refute four
Speaker 1: one k's there was like the tiniest kernel of truth. Right,
Speaker 1: It's so inaccurate, And what I hate is that it
Speaker 1: can lead folks astray who don't know that. Oh no,
Speaker 1: that literally should be the very first thing that you
Speaker 1: do well.
Speaker 2: And they're like, oh, this dude sold five million books. Yeah,
Speaker 2: I should probably listen to him. He knows what he
Speaker 2: was talking to.
Speaker 1: Kyosaki is the original influencer. Yeah, think about it. He's
Speaker 1: making more money, more of his fortune being rich to
Speaker 1: poor dad as opposed to a renowned investor.
Speaker 2: Yeah, yeah, yeah, So I guess this just goes to
Speaker 2: show be careful who you follow, who you listen to,
Speaker 2: And is he writing about some things I've never even
Speaker 2: read the book? Matt I know a lot of people
Speaker 2: have listeners who I swear by that book.
Speaker 1: I used to recommend it. I don't really do that anymore.
Speaker 2: Seriously, Yeah, I believe it, and I'm sure that book,
Speaker 2: especially that was written in a different time, and I'm
Speaker 2: sure there's some good information in there for people, but
Speaker 2: I don't It's not on my bookshelf. I don't plan on
Speaker 2: reading any came soon, especially when he keeps giving just
Speaker 2: ridiculous advice like this. On that note, though, the Labor
Speaker 2: Department is attempting again to require financial advisors to be fiduciaries,
Speaker 2: which basically means that they're legally required to make decisions
Speaker 2: that are in your best interest. And you, as just
Speaker 2: an individual living in this society, going to seek financial
Speaker 2: help from someone, you might say, aren't they supposed to
Speaker 2: do that to help me make good decisions with my money, Like,
Speaker 2: don't they have to do what's in my best interest?
Speaker 2: And the answer is no, they don't. And for some reason, Matt,
Speaker 2: this one's become a political football.
Speaker 1: I don't get it.
Speaker 2: Why you have to be on a blue or red
Speaker 2: team when it comes to wanting advisors to have to
Speaker 2: offer advice that is in the individual's best interest. You
Speaker 2: think we can all agree on that that the advisors
Speaker 2: shouldn't be able to steer you towards products and investments
Speaker 2: that enrich them at your expense. And it remains me
Speaker 2: seen if this next attempt at creating a fiduciary rule
Speaker 2: is going to be successful, but for the time being,
Speaker 2: if you decide to hire a financial advisor, make sure
Speaker 2: they hold themselves to the fiduciary standard themselves. So even
Speaker 2: though they're not required to make sure that this is
Speaker 2: an extra step they're taking. Xy Planning Network and Hello
Speaker 2: Nectarine are two of our favorite sites, and the only
Speaker 2: people listed on those sites are fiduciary sworn fiduciary. So
Speaker 2: make sure you're looking out for yourself when you enter
Speaker 2: into a relationship with an advisor. And maybe at some
Speaker 2: point it will be the law of the land that
Speaker 2: all advisors have to, you know, meet standard.
Speaker 1: All right, let's get to the rewards rug poll, because
Speaker 1: the best credit cards out there might become less rewarding
Speaker 1: really soon, so Visa and MasterCard and specifically the payment
Speaker 1: networks that they oversee they're swipe fees. They have been
Speaker 1: a significant expense for businesses for a long time. Well,
Speaker 1: an agreement was struck this week allowing retailers to charge
Speaker 1: more for accepting the different fancy credit cards out there
Speaker 1: that have the higher fees.
Speaker 2: By the way, I think this was or a legal
Speaker 2: fight that was around, had been around for twenty years.
Speaker 2: Imagine that kind of legal flog. Well, yeah, and that's
Speaker 2: the thing. There is an agreement, but it still has
Speaker 2: yet to be it's not like finalized. Yeah, there hasn't
Speaker 2: been like a resolution yet.
Speaker 1: So this is all. It seems like it's likely, but
Speaker 1: we'll see. But we're just wanting to highlight the fact
Speaker 1: that some of these upper crust credit cards that come
Speaker 1: with the best perks that they are, it looks like
Speaker 1: they're the ones that are being targeted essentially, any card
Speaker 1: with the Visa Infinites or the MasterCard World Elite branding
Speaker 1: on there, because every swipe of those top notch cards
Speaker 1: can cost a retailer fifty cents more with every transaction,
Speaker 1: which again let's take it back to the oh, yeah
Speaker 1: it is I was going to say, the vending machines
Speaker 1: sounds like nothing. You're like, oh, how are you gonna
Speaker 1: get rich just fifty cents at a time. Guess what
Speaker 1: It adds up really quick when you consider all the
Speaker 1: different transactions that are taking place via credit.
Speaker 2: Cards throughout the world, and the retailer just takes it
Speaker 2: on the chin. They don't know when you're making the swipe, well,
Speaker 2: which card are you using? And how much more is
Speaker 2: it costing me? They just feel it on the back hand.
Speaker 1: That's right. But now retailers do have the ability to
Speaker 1: charge you more if you want to use that card.
Speaker 1: They also have the ability to negotiate some of those
Speaker 1: some of those whipe fees. But we'll see how it
Speaker 1: all shakes out.
Speaker 2: Yeah, retailers, are they going to pass on the higher fees.
Speaker 2: I feel like retailers probably won't want to change the
Speaker 2: status quo because it feels like an aggressive sort of
Speaker 2: thing to do to say, wait, what kind of card
Speaker 2: are you using? Well, I'm gonna to charge you extra
Speaker 2: for that. As a small business owner, you might you
Speaker 2: run the risk of alienating your customers by taking that approach,
Speaker 2: even if that credit card costs you more.
Speaker 1: You run the risk of bait and switch. Yeah, and
Speaker 1: where you think is going to cost one and they're like, oh,
Speaker 1: actually it's gonna you know, it's gonna cost you this
Speaker 1: much more right?
Speaker 2: Even then, like, well, are customers going to accept the
Speaker 2: new regime of paying more to use their preferred card?
Speaker 2: I don't know that this, Like, even though this in
Speaker 2: principle is something that's agreement that's been hashed out, in reality,
Speaker 2: I don't know that businesses can actually enforce this without
Speaker 2: doing harm for themselves. So we'll keep an eye on
Speaker 2: this one. But I guess one takeaway is to make
Speaker 2: sure you have more than one card, Like if you
Speaker 2: have a Chase Sapphire Reserve, which is one of those
Speaker 2: Visa Infinite cards, combine that with a more basic card
Speaker 2: like the City Double Cash. I think that's a good
Speaker 2: way to proceed, because then you end up going to
Speaker 2: a retailer who does to ask which card you're using
Speaker 2: before you before you swipe or tap. Sure, and if
Speaker 2: it's gonna cost you more to use one over the other,
Speaker 2: well then you can decide whether it's worth it or not.
Speaker 2: But at least you have the option to use a
Speaker 2: card and to keep the price.
Speaker 1: Down Sure, or you can just dump that Double Cash
Speaker 1: card because you switch over to robin Hood Gold because
Speaker 1: they're offering three percent unlimited on all transactions. True, So
Speaker 1: this is a new fancy card that they're rolling out,
Speaker 1: the Gold Card. They're actually offering a literal ten caret
Speaker 1: Gold credit card to like the first I don't know how.
Speaker 1: It's a limited quantity of folks, five thousand, I think people.
Speaker 1: But if you if you get ten of your friends
Speaker 1: to sign up, you get one of these and it's
Speaker 1: legit gold and it's a working credit card, which is
Speaker 1: kind of sounds terrible because like, if your wallet wasn't
Speaker 1: already targeted, it's like, no, no, literally, I would just
Speaker 1: melt the credit card. You can't do much with a
Speaker 1: stolen wallet full of credit cards. But literally, there's one
Speaker 1: in there that's made out of freaking gold. I think
Speaker 1: I saw. You could even opt for the eleven hundred
Speaker 1: dollars bonus rather than the actual gold card, because that's
Speaker 1: what the card's worth. Oh my gosh, eleven hundred dollars.
Speaker 1: Like literally, it's made of gold. But so let's let's
Speaker 1: kind of talk. I want to provide a quick recap
Speaker 1: because in the past we used to not be too
Speaker 1: keen on robin Hood because they didn't offer retirement accounts.
Speaker 1: All they had were brokerage accounts. Once they started offering iras,
Speaker 1: both traditional and roths. My tune changed a little bit.
Speaker 1: It's like, oh cool. Then they started offering a match.
Speaker 1: No other brokerage out there has ever offered a match
Speaker 1: unless most your employed by them, right, unless it was
Speaker 1: your employer. Then they rolled out Robinhood Gold, where you
Speaker 1: pay a little bit every month, or you pay annually
Speaker 1: and they're gonna match you three percent on your IRA.
Speaker 1: So that's when I started to think, oh, all right,
Speaker 1: this is pretty interesting. Then earlier this year or into
Speaker 1: last year, they rolled out the hey, any money that
Speaker 1: you transfer over from a previous IRA, we will also
Speaker 1: match three percent on that entire amount. Basically, at that point,
Speaker 1: I was like, all right, this is almost too good
Speaker 1: to be true, Like what's going on here? Was in
Speaker 1: the mouth? I yeah, And now they reeled you in. No,
Speaker 1: they just they set the hook with this three percent
Speaker 1: cash back card. Because all of that, all of those
Speaker 1: more premium three percent offerings that they were offering. You
Speaker 1: have to be a Gold member, You got to pay
Speaker 1: the subscription. You got to pay either five dollars a month,
Speaker 1: which equals sixty bucks, which isn't terrible, or if you
Speaker 1: pay annually it's only fifty dollars and so the fact
Speaker 1: that there is literally no limit on the cash back
Speaker 1: that you can earn with this credit card. Dude, I've
Speaker 1: got to report back because you've got You've applied for it. Yeah,
Speaker 1: I applied, and I wanted to highlight too that three
Speaker 1: percent on the IRA match you have until the end
Speaker 1: of April, so you've got about thirty days left in
Speaker 1: order to make that happen. But uh, yeah, I haven't
Speaker 1: pulled the trigger yet and done all that, but yeah,
Speaker 1: I would ahead and officially joined Gold and I'll let
Speaker 1: you know how it goes. Man, Yeah, please do it,
Speaker 1: cause I'm all in. I'm like, holy, I truly see
Speaker 1: it just like credit card rewards, where it's like, Okay,
Speaker 1: this is a debt product. Why would you use this? Well,
Speaker 1: it's like, well, if you use it responsibly, there are
Speaker 1: benefits to be gained. And that's how I see the
Speaker 1: Robin Hood app It's like, oh, yeah, you might be
Speaker 1: tempted to trade individual stocks, but like we always say
Speaker 1: on the show, if you are for the other ninety
Speaker 1: five percent of your money fully invested within an IRA,
Speaker 1: within a total stock market index fund or an SP
Speaker 1: five hundred index fund, even up to five percent of
Speaker 1: messing with some single stocks. That's not something we hate.
Speaker 2: Yeah, three percent cash back. No annual fee on this
Speaker 2: card either, by the way, I mean grained you have
Speaker 2: to pay the fifty dollars.
Speaker 1: Yeah, there's there's effectively an annual fee, but again there
Speaker 1: are other benefits, the other benefits you get with it,
Speaker 1: including like a five I think it's like five and
Speaker 1: a quarter that they're paying on something like that within
Speaker 1: their sayings as well. So so yeah, I feel like
Speaker 1: you're right.
Speaker 2: I'm don't have my retirement accounts with Robin Hood, but
Speaker 2: it's starting to look more appealing. It's definitely crossed my mind,
Speaker 2: and I was kind of, I guess, waiting for you
Speaker 2: to be the guinea pig test the waters.
Speaker 1: Let me know how it goes. Once all my money
Speaker 1: gets siphoned off, I'll come back. What's Vlad in my
Speaker 1: care with my hat in my hand.
Speaker 2: I's a fancy airplane with all of your money.
Speaker 1: No, that's not gonna happen.
Speaker 2: But yeah, the first card that we know of to
Speaker 2: be especially no annual fee and offer three percent cash back,
Speaker 2: it's pretty sick.
Speaker 1: Yeah, double cash that's been around forever and same thing
Speaker 1: with the Fidelic Fidelity, so it's like again which also
Speaker 1: has an investing tie in as well. But the fact
Speaker 1: that they're they're up in at to three percent, baby,
Speaker 1: that's yeah, it's attractive.
Speaker 2: This is going to create even more competition in the
Speaker 2: credit card space. I think of that is a good thing. Yeah,
Speaker 2: all right, let's get to our last story. Matt the
Speaker 2: CEO of the world's largest investment firm, Black Rock. His
Speaker 2: name is Larry Think. He has been going around this
Speaker 2: week expressing concern over what he calls a growing retirement crisis.
Speaker 2: Everything's got to be a crisis these days, right, Nothing
Speaker 2: is just a problem or an issue to be resolved.
Speaker 2: It's a crisis because if you don't call it a crisis,
Speaker 2: it doesn't get the eyeballs, doesn't get the attention. Well,
Speaker 2: with pensions being a thing of the past, with people
Speaker 2: living longer, plus changes that obviously need to happen to
Speaker 2: the Social Security program to secure its future, He's not wrong, Like,
Speaker 2: there is a growing problem. I'm not going to call
Speaker 2: a crisis. There is a growing retirement problem in the
Speaker 2: United States. But he's also using his rhetoric to launch
Speaker 2: a new product. Of course, of course, he's got something
Speaker 2: to right. So it's a target date fund product, no
Speaker 2: problem there, but with one marked difference, it shifts some
Speaker 2: of your retirement funds into an annuity as you approach
Speaker 2: retirement age. That provides then a more stable and predictable
Speaker 2: stream of income in retirement. But but it's not without cost.
Speaker 1: These the and.
Speaker 2: There the details are somewhat unknown. Matn I was kind
Speaker 2: of scouring Black Rocks site on this to figure out, well,
Speaker 2: how exactly does this look like? And the specifics are
Speaker 2: paltry right now, but it sure looks like from what
Speaker 2: we can tell, this probably isn't the best thing for
Speaker 2: most people.
Speaker 1: Yeah, And the key product here, or the key problem
Speaker 1: to this product that they're launching, is the fact that
Speaker 1: it is annuity based. They've got their pros and cons predictability.
Speaker 1: That's certainly a pro right, that predictability is nice, But
Speaker 1: the big problem is typically how expensive annuities are. The
Speaker 1: high annual fees the sales charges because it's an insurance product,
Speaker 1: those fees can be egregious. And then depending on how
Speaker 1: early that transition happens, how quickly or how soon you
Speaker 1: transition to annuities, your asset allocation Basically, it can have
Speaker 1: a real impact on your overall level of wealth because
Speaker 1: you're going to see less growth.
Speaker 2: And I think black Rock says that transition starts at
Speaker 2: age fifty five, which sounds a little early.
Speaker 1: I think they said too, like you can you can
Speaker 1: make that call whenever you want. So I think there
Speaker 1: might be some folks who are thinking, oh, well, I
Speaker 1: kind of want to retire early, so maybe I should
Speaker 1: pull the trigger and make that happen even sooner, which
Speaker 1: is actually kind of the opposite of what you need
Speaker 1: to be doing if you're looking at an early retirement.
Speaker 1: But our take is that he certainly diagnosed the problem correctly, right,
Speaker 1: Like we even agree with mister Fink that the US
Speaker 1: retirement age that it should rise certainly as life expectancy has.
Speaker 1: That's something we've talked. We've talked about a few weeks ago, and.
Speaker 2: I think he points out the Netherlands as being an
Speaker 2: example of doing this, that when the average lifespan goes
Speaker 2: up in that country, well so does the retirement age.
Speaker 1: And we may kind of track each and we have
Speaker 1: not touched our retirement age, like we talked about, why
Speaker 1: do you think so security is a mess? My gosh,
Speaker 1: that is why it makes sense to make these changes.
Speaker 1: But expensive annuities de risking your portfolio too early, we
Speaker 1: think that those are going to have harmful consequences as well.
Speaker 1: And I think that one of the things that they're
Speaker 1: going to be able to sell if assuming they launched
Speaker 1: this product, they're going to be able to sell a
Speaker 1: lot of it because there is an illusion of control.
Speaker 1: You've got this false sense of security thinking that everything
Speaker 1: is going to be all right, but nothing is perfectly
Speaker 1: predictable because maybe you've.
Speaker 2: Got you're gonna say, nothing's gonna be all right, it'll
Speaker 2: be off, It'll be fine, guys, it'll be fine.
Speaker 1: But like, let's just assume like you're assuming a certain
Speaker 1: cost of living and who knows what prices and things
Speaker 1: are going to be in the future. So even as
Speaker 1: retirees are clinging to this as this I don't know
Speaker 1: source of stability, like they're even that in and of
Speaker 1: itself is moving within the tides of what we're facing
Speaker 1: in our economy.
Speaker 2: Well, and that is kind of what social security is
Speaker 2: supposed to be for us, right, is that known quantity,
Speaker 2: that annuity Essentially that if especially the longer you wait,
Speaker 2: the more money you're gonna get every single month, and
Speaker 2: it's a known quantity that doesn't shift except for to
Speaker 2: go up as the cost of living with those cost
Speaker 2: of living adjustments. But in this case, you're who knows
Speaker 2: exactly what you're paying. I would be curious to know
Speaker 2: the details, and I'm waiting to see those released. How
Speaker 2: much are you paying for that added security? And is
Speaker 2: the price you pay too much for.
Speaker 1: What you're getting? Yeah, I'm I guarantee it this Not
Speaker 1: only are the price is gonna be too high, but
Speaker 1: the return is gonna be too low, So you're getting
Speaker 1: hit on both ends. And I feel like we can
Speaker 1: confidently not recommend it already. But honestly, I even have
Speaker 1: an issue with like target date funds because like, in
Speaker 1: my mind, that's sort of like the DII approach, because of, hey, okay,
Speaker 1: this will moderately d risk over time. But even though
Speaker 1: like I have a hard time swallowing the like, I
Speaker 1: think the average expense ratio on our target date fund
Speaker 1: is still half a percent. That's crazy, that's still that's
Speaker 1: still really thinking out.
Speaker 2: With Vanguard or and Fidelity has two different target date funds,
Speaker 2: by the way, one's expensive ones not if you're if
Speaker 2: you're with our low cost firms, we're talking about essentially
Speaker 2: point one percent. It's it's almost negligible.
Speaker 1: It's a lot smaller, but still point one is more
Speaker 1: than three times more than point zero three, which is
Speaker 1: infinitely more than completely free. And so I think there's
Speaker 1: there's just there are ways of doing that, even manually.
Speaker 1: And I know handling your finances and de risking over
Speaker 1: time and buying more into bonds as you age isn't
Speaker 1: for everyone, but I don't know. I would like to
Speaker 1: think by the time that we get to that point,
Speaker 1: after a lifetime of talking about this, and this is
Speaker 1: part of why we have the show to talk about it,
Speaker 1: by the time you are making some of these more
Speaker 1: nerve racking decisions, that you have the confidence to do
Speaker 1: something like that. Yeah, within your retirement years. But all right,
Speaker 1: that's gonna be it for this episode. Buddy. We hope everyone. Hey,
Speaker 1: happy Easter. We didn't even mention it's good Friday today,
Speaker 1: so yeah, we hope everyone out there has a good Easter.
Speaker 1: And we'll see you back here on Monday with a
Speaker 1: fresh set of listener questions for you, no doubt.
Speaker 2: All right, that's going to do it for this one
Speaker 2: until next time. Best friends are best friends out