Let’s dive into the week with some fresh listener questions we have lined up for you! And don't just stand on the sidelines- if you have a question you’d like us to answer, toss your voice memo our way. It only takes about 90 seconds to record and you can find a step by step guide over at HowToMoney.com/ask . Regardless of how random or bizarre you might think it is, we want to hear it!
1 - How do I increase my 401k contributions by the same percentage of the raise I just received?
2 - Where should I open a brokerage account for my single stocks that I trade fo the dopamine hit?
3 - My CD is about to mature – what should I do with that $75,000?
4 - Will paying down my mortgage or making home improvements give me a bigger ROI?
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During this episode we enjoyed a Super Megabite by Hop Butcher for the World! And please help us to spread the word by letting friends and family know about How to Money! Hit the share button, subscribe if you’re not already a regular listener, and give us a quick review in Apple Podcasts or wherever you get your podcasts. Help us to change the conversation around personal finance and get more people doing smart things with their money!
Best friends out!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Hout of Money. I'm Joel and I am Matt.
Today we're answering your listener questions.
Speaker 2 (00:24):
That's right, buddy, it is Monday, which means we have
some specific pieces of advice to give to certain individuals
who have sent us their voice memo to not only
play here on the podcast, Joel, but to also answer.
We've got a listener who has a pretty good argument
for single stock investings.
Speaker 1 (00:41):
We'll address that. Give our thoughts. Can that's brittle mind be?
Speaker 2 (00:45):
Can I handle this?
Speaker 1 (00:47):
Yes?
Speaker 2 (00:47):
We can, And in fact you and I getting ahead
of ourselves a little bit, but we do a little
bit of single stock investing. We'll get to that here
in a second. Another listener is asking about what she
should be doing about her CD that has come up
for renewal.
Speaker 1 (00:58):
It has reached maturation.
Speaker 2 (01:00):
When I talking compact discs here even though, which is
when I thought a young Wei lad and another listener
he's got this psychological trick for boosting his four O
one K.
Speaker 1 (01:10):
I don't.
Speaker 2 (01:10):
I'm not sure if he sees it as a psychological trick,
but we do. We'll get to that plus more on
today's episode. Yeah, real quick, though I wanted to plug.
Last week we had Our Wives on. Hopefully you listen
to that episode. We had a just an awesome conversation
with the ladies about lifestyle creep the phenomena. But at
the end of the episode, hopefully you also stayed until
(01:31):
the very end because we had a little cameo with
your daughter Joel as well as my daughter. We kind
of we had a little They were kind of wanting
to get on. Really, yeah, we'll ask you a quick question.
Speaker 1 (01:40):
I know we were. I don't know. I didn't know
how I felt about it, but they were like, no,
for real, we want to jump on for just a
few minutes. All right, cool, if that's what you want
to do, let's do. It's a little easter egg there.
I have to hear their voices and after the music
talk to them about money first.
Speaker 2 (01:51):
But Eddie specifically, you may have folks may have picked
up on the fact that she mentioned the fact that
we might be getting a swimming pool, and this is
something that Ky and I that we've been considering.
Speaker 1 (02:01):
Better now than two years ago. I guess that is true.
Speaker 2 (02:03):
That is true, but we just made the unfortunate error
of mentioning this out loud to where the kids can hear.
So now, no matter what, well, we're gonna have disappointed
kids if we don't pull the trigger butt And now
they're like, when's it happen? I know, but we might
not do it because of how expensive it is.
Speaker 1 (02:18):
Because of that.
Speaker 2 (02:19):
It's not a slam dunk decision in our book, It's
still something that is that's a debate. It's a conversation
that Kate and I are having. But possible solution to
that would be these stock tank pools.
Speaker 1 (02:30):
I just saw something of the at these. I feel
like they're kind of becoming in vogue. I've seen more
and more people like sticking them in their backyard, building
a deck around them, kind of making them look like
a built in future. They're obviously not as deep as
one of those like dug in the ground final liner
pools or concrete pools, but I could see them like
making sense for a lot of people. What do you think, Yeah, well,
so just to give folks to be so disappointed, exactly,
(02:53):
it's a stock tank.
Speaker 2 (02:54):
Well, it's like it's like a livestock water. It's like
the kind of thing you put on a ranch to
water your horses.
Speaker 1 (02:59):
Which my kids have literally swim in one of those
in Mississippi. Oh really yeah yeah, with like dragonflies on
their back and stuff like that. So this it's truly
something people do. This wasn't like a pile of dirt
in Mississippi. No, this was not a hipster one.
Speaker 2 (03:11):
Yeah. Yeah, so this is like an original. This used
to actually water the livestock, but now we swim in
exactly whereas the ones I've seen, like on social media,
it's like younger folks who are like, actually, we can't
afford a pool, but we can drop a thousand bucks,
eight hundred bucks, buy one of these tanks filled up
with water, maintain it.
Speaker 1 (03:27):
But yeah, what you said.
Speaker 2 (03:28):
For our lifestyle, Like, the whole reason to get a
pool when you have kids is so that they can
invite friends over chase each other around the deck. There's
a whole lot of energy that's expended just in playing
around the pool and then diving in and swimming across
and all that kind of stuff. Right, And so it's
not just about can I get my whole body wet, which,
by the way, because you hop in the bathtub, yeah,
(03:50):
well yeah, even still it would be different, like I
would honestly, I am one hundred percent for this. If
it was just Kate and I, like, if we didn't
have any kids, and we're thinking, you know, would be cool.
What if we got like a little plunge pool. You
can stick it in the garden. I can totally see
Kate like, oh, I want to play, let's surround it
by sunflowers and to meta plants and fig trees. It's like,
you're in this garden, you have this garden oasis. Almost.
Speaker 1 (04:11):
I could one hundred percent totally see us doing that.
Speaker 2 (04:15):
That's a very different vibe though, than having a swimming
pool with kids.
Speaker 1 (04:18):
Okay, so what we did this year, and granted everyone's
got their own thing, but you're you're coming to the
realization that swimming pools, your own swimming pool in your
yard is crazy expensive. Yeah, we joined, but we're considering it. Yeah,
you're considering. We both you and I. We don't live
in HOA neighborhoods, and a lot of ho neighborhoods have
a pool. That's one of the things that your money
goes top. Not all of them, obviously, but we joined
(04:40):
a neighborhood that has a pool, and we paid five
hundred bucks or something like that, which not cheap, but
cheaper than button in your own pool. That's for sure,
five hundred bucks for a year access to this pool.
And we've used the heck out of that thing, man,
And I will say that the nice thing about having
a pool that's not your own, well not having to
tend to it, right, just the sure.
Speaker 2 (04:59):
That's the other part of yeah, upkeep And like we
haven't talked about the fact that if and when you
sell a home, like some folks see that as a downside. Yeah,
Like there's a lot of folks who are thinking, oh,
that's a liability. I don't want a house with a pool.
I literally know somebody when they purchased their home, they
actually drained the pool filled it with dirt because the
kids they wanted to be able to, like the kids
are really into sports like dry land sports, swimming sports,
(05:22):
and they wanted to be able to like hit baseball's
and stuff in their backyard. Yeah, they couldn't do that
until they filled in the pool. And that's crazy.
Speaker 1 (05:27):
Yeah, it's crazy. I was gonna say. The other nice thing,
by the way, about being a member of somebody else's pool,
besides the maintenance factor, is lots of times there's like
a lot of other people there for your kids to
play with, for you to hang out with. It's been
one of the nice things. I would love to have
a best friend with the pool, just saying if I
have to get any sort of input here, I'm gonna say,
go for it, Matt. It's your money. I'll come over anytime.
Speaker 2 (05:48):
Fantastic idea.
Speaker 1 (05:49):
I'll bring the beer. It's gonna be it's gonna be
good times.
Speaker 2 (05:51):
But if every time you came over you bring a
six pack of something decent, that would go towards just
what chlorine tablishers like, whatever chemicals you have to maintain.
Speaker 1 (06:00):
Although, but I will vow now that I will do that. Okay,
you heard it here, folks.
Speaker 2 (06:04):
That's the thing that all a lot of pool manufacturers,
so we have started to research it. It's it's all
salt water, which I don't know if those systems are
more expensive than the old school full on chlorine systems,
but it seems that like they don't make.
Speaker 1 (06:17):
Pools as cheap as they used to.
Speaker 2 (06:18):
Like everything has done. It's almost like homes right, like
back table.
Speaker 1 (06:21):
Stakes is six figures now.
Speaker 2 (06:22):
For pool It's like crazy back in the early nineties
to put a decent kind of vinyl liner pool in
I don't think it was nearly as much as it
is now. But everything now is just super nice. Oh
it's got this tile in lay, and oh you need
a nice fancy coping around the edge to where it
looks like it needs to be in some some kind
of magazine.
Speaker 1 (06:40):
I'll tell Okay.
Speaker 2 (06:41):
I was just like, who's putting in like the vinyl
pools with a nice concrete slab around it, you know,
because that'd.
Speaker 1 (06:47):
Be a lot cheaper, You would think, Yes, well, so
that's what I grew up. It's making the stock pool.
And also that's true. The above ground pool look a
little bit s exert too.
Speaker 2 (06:55):
That's true.
Speaker 1 (06:55):
I had a friend that had one of those. Dude,
he loved it. They built a built some decking around it.
They thoroughly enjoyed that. It's not quite as forever or awesome,
but not quite as cool looking and can get things done.
Speaker 2 (07:06):
That's fancy.
Speaker 1 (07:07):
All right, Let's move on matt Let's mention. Beer we're
having on this episode. This one is called super Megabytes.
It is by the good people over at Hot Butcher
for the World. We'll give our thoughts on this dank
IPA at the end of the episode.
Speaker 2 (07:20):
Yeah, not just dank.
Speaker 1 (07:20):
I just took a sip of it.
Speaker 2 (07:22):
This is I didn't realize this was a triple. You
can taste the triple is beast up in this beer,
and I'm glad you and I are just splitting a
singular bit for sure.
Speaker 1 (07:29):
All Right, If you have a money question, by the way,
we'd love to tackle it on an upcoming episode. We'd
love to hear from you. Just go to how Tomoney
dot com, slash ask, or basically record your question on
the voice memo app of your phone. Send it our
way over how Tomoneypod at gmail dot com. Hope to
hear from you soon. By the way, the funk you
the question, the better we like them. Weird, Matt. Let's
get to the first question for this episode. This one
(07:50):
is about increasing retirement account contributions. Hey there, man, Joe.
Speaker 3 (07:54):
First off, I want to start by saying how grateful
I am to discover your podcast. I listen to every
new EPISO sold as I came across it. My name
is Heavier, I'm from Gainesville, Florida. My question is about
my four to one k. Let's say I get a
race at work and I want to put it into
my four to one K, but I want to make
sure I keep my same net income that I take home.
I figured the four to one K already will automatically
(08:16):
take out more once the race is applied, because it's
a percentage of my gross amount. So let's say the
race is five percent. How much should I increase my
four oh one K by so that my net income
is relatively the same after the deduction? Thank you in advance,
and keep up the good work. Best friends out Javier.
Speaker 2 (08:34):
Okay, so I'm gonna go ahead and make you an
honorary bestie.
Speaker 1 (08:38):
That's like getting nighted back in the day in England.
Speaker 2 (08:40):
Javier's question here I love because, first off, the fact
that he isn't just content to leave his investment amount
static his percentage right, he is increasing what he's putting away,
which is awesome, like the actual percentage amount, which means
he is prioritizing future him, which is not as easy
as it sounds. And I think the best time to
(09:00):
do that is when you, in fact get a raise heavier. Right,
You're gonna feel that pinch the strain a whole lot
less because you might still be able to come away
with a slightly fatter paycheck. There's a psychological win that's
happening here, because if you're able to kind of get
ahead of it a little bit, you haven't even seen
that fatter paycheck. Let's let's just assume that you're able to,
(09:21):
like like Javier is trying to do right time perfectly.
It's not only time it perfectly, but increase the percentage
in such a way that he truly doesn't see an
increase in what it is that he's bringing home. You're
none the wiser, Like you haven't saturdooling yourself. Yes, you're full,
but in a good way.
Speaker 1 (09:35):
It's like sitting on your hand and then like being like,
I think I don't have the second hand because it's
got pins and needles, and eventually it falls all the
way asleep.
Speaker 2 (09:41):
Right, it's not something I've ever done. I've read a
regular activity.
Speaker 1 (09:46):
If I sleep on my arm and I wake up,
it feels like I don't have an arm, you know,
I feel like I.
Speaker 2 (09:50):
Yeah, my limbs fall asleep less than the used to
I remember as a kid waking up and just be like,
because it's kind of painful.
Speaker 1 (09:56):
Yeah, all that being said, just giving a silly way
of about tricks.
Speaker 2 (10:01):
Javier has not started dreaming about what he's going to
do with this additional money, which is just a perfect
time to be able to sock more of it away
for his future.
Speaker 1 (10:09):
I love that. And by the way, if you have
a hard time, I think the younger you are, the
harder it is to identify with future you. Right Like
in my when I was twenty three, twenty four, Yeah,
I had started investing in my four O and K,
but I also like was doing it because I was
told I was I was supposed to do it, and
I didn't really have an understanding of like sixty five
year old Joel, seventy year old Joel using that money.
(10:30):
That was like the furthest thing from my mind. And
I do think that that was before the face app
and you can visualize eighty five year old Joel. And
that's what I was going to say, is I think
that can be a helpful tactic, a helpful tool for
people to do. Take your pictures sticking in the face app.
Get a visual representation of what you're going to look like,
or at least this app's representation of what you might
as the best guest at the very yeah. Yeah, and
(10:52):
you'll say, oh, that is me with some gray hairs
and I don't know, some wrinkles and stuff like that.
I am going to be old. I do think it
sounds silly, but I do think that that can help
and actually kind of create maybe that identification, some empathy
for future you, totally allowing you to actually follow through
and increase your contribution percentage, and doing that little by
(11:12):
little over the decades adds up in a big way. Right.
It can keep your retirement savings headed in the right direction.
It can help keep lifestyle creep in check. Two, And
Javier is so right right because he's going to be
investing more even if he doesn't increase his contribution amount,
just by the fact that his paycheck's going up right
the same percentage, but of a higher amount, he's de
facto investing more. Well, ten percent of one hundred thousand
(11:34):
dollars is less than ten percent of one hundred and
five one hundred and ten thousand dollars. We all know that.
But again, when that raise hits, it is the perfect
time to invest more. And let's you know, stick with
the five percent raise scenario that Javier mentioned. The answer
to this question is going to be more like horseshoes
and hand grendadsmount. We're going to be in the proximity
instead of getting it spot on.
Speaker 2 (11:54):
It's probably gonna take some trial and error to kind
of find that perfect amount exactly.
Speaker 1 (11:58):
It's it's highly unlikely the Javier is going to be
able to keep the exact same paycheck amount as his
income and contributions both increase. But I wouldn't think that
that's a bad thing. I'm just saying you're gonna able
to get close.
Speaker 2 (12:10):
Yeah, you can't just increase your contribution amount by five
percent given that five percent raise.
Speaker 1 (12:14):
The numbers are they're just not going to work.
Speaker 2 (12:16):
So for instance, let's say your bi weekly check is
currently two thousand dollars and you contribute thirteen percent. Well,
you do the math. That's two hundred and sixty dollars
that is going into your four to zeroe k every
two weeks.
Speaker 1 (12:29):
That's totally awesome.
Speaker 2 (12:30):
Then you get that five percent raise, and now your
biweekly check is up to twenty one hundred dollars. Well,
now you've got to figure out how to basically get
back to the seventeen to forty post contribution check amount
that you were seeing before, and.
Speaker 1 (12:43):
So raising you're getting nerdy with it.
Speaker 2 (12:45):
Do a little bit of math here, Raising your contribution
percentage up to seventeen percent, well that will net you
seven hundred and forty three dollars, which is pretty day closed.
But again it's still not it's not like exactly on
the dot. But I don't think he's gonna be upset
about bringing home three additional dollars every two weeks.
Speaker 1 (13:01):
Yes, So basically you're saying, if there was a four
five percent raise, but a four percent increase in four
or one k contribution amount, that's what gets you essentially
the closest, right, And so if you'd invested the full
five percent of the rays that you're getting, your paycheck
would of course be smaller. You'd only only have, I think,
if we ran the numbers, right, oney, seven hundred and
twenty two dollars every other week. So if you invest
(13:22):
the full thing, you are going to have less take
home pay. And that's just a really basic example, right,
This specific amount is going to vary based on your
tax rate, your deduction amount, et cetera. But you get
the gist.
Speaker 2 (13:33):
If he changes his benefits, if he let's say he
bumps up to a health care plan that includes.
Speaker 1 (13:39):
A higher deductible.
Speaker 2 (13:39):
Okay, well, get it's gonna save them money there, and
check's gonna then be fatterism.
Speaker 1 (13:43):
Much, Right, But then he's gonna be investing in the HSA,
and then his paychecks can go down again.
Speaker 2 (13:47):
Right.
Speaker 1 (13:47):
So there's all these variable all these factors you have
to think about when it comes to your take home
pay and what's going on with your investments before you
even see your paycheck. And so I would say this,
if you're okay with not experiencing much or any of
your increase in home pay, upping your contribution amount by
four percent with a five percent raise would be a
good way to go. That's probably a good rule of
(14:07):
thumb for other people too, Matt, who want to take
a similar approach investing eighty percent of e raise. Right,
our typical advice is to invest fifty percent of you raise.
We've got no problem with you enjoying a little bit
of that extra pay, right, especially because guess what, prices
obviously aren't staying the same. You might want to add
a little bit of padding to your paycheck to be
able to continue toward guide services as they cost me absolutely.
Speaker 2 (14:28):
I would highly recommend that because I think there could
be a temptation. I think for a lot of folks
out there when they first learn about compounding returns, they
learn about fire the fire community, and they're like, oh, man,
someday I'm going to be financially independent, and there is
a temptation to go full bore and say, oh my god, Okay,
I'm going to do every ounce of my being. Every
additional penny I make and or save is going to
go towards my retirement so that I can retire early.
(14:50):
But a lot of times those plans aren't really they
can be not.
Speaker 1 (14:55):
Very realistic, hard to stick to.
Speaker 2 (14:56):
Yeah, and I think there's a chance a if you
are pushing yoursel off on the earning side of things,
you could burn yourself out with the amount of hours
that you're working. But then on the spending side of
the side of the equation, there might be sacrifices and
cuts that you're making that could harm your overall person
in other ways. Like I'm thinking about friendships or community
literal health. I think about in college, I man, the
(15:19):
kind of food that I ate, Like I didn't eat.
Speaker 1 (15:20):
Much food, Like you've got some horror stories.
Speaker 2 (15:23):
I remember my parents coming to visit me, and literally
Mom would show up with meals that were frozen that
I could stick in the freezer so that I would
I could pull them out and stick them in the microwave
and heat them up to eat like a nice, well
balanced meal because I was eating junk. You thought it
was just a nice gesture, but she was really worried
about it. You know. Well, at the time, I thought, oh, Mom,
I'm fine, it's you know that.
Speaker 1 (15:41):
Thank you so much.
Speaker 2 (15:42):
I love this that you brought me a bunch of
bunch of meals.
Speaker 1 (15:44):
This is great.
Speaker 2 (15:45):
But I remember thinking at the time like kind of
dismissing her. But in retrospect, oh my gosh, dude, I
guess I'm thinking about the full potential that I could
have been in college and I made decent grades, like
I graduated, I have, like I graduated cum lad I had.
You know, I made decent grades and stuff.
Speaker 1 (15:59):
But I believe that's Latin.
Speaker 2 (16:00):
Yes, indeed, sir, literally, But I'm just thinking about how
this could impact hot and Javier when it comes to
his earning potential and not just his career, but also
just other aspects of his life. You don't want to
cut back too much to the point to where it's
hurting his overall well being. It's like an instance of
(16:21):
winning a small battle but losing the overall war.
Speaker 1 (16:23):
One other thing I think we should mention, though, Matt.
Something else worth considering for Javier is to contribute potentially
to the ROTH version of his four one K instead
of contributing to the traditional version. So maybe not even
increasing your contribution amount this year, but rerouting those contributions
into the post tax version of your four oh one k,
because you've already got pre tax money in the four
(16:45):
one k right now. You would be diversifying your future
tax exposure, and so the withdrawals are going to be
more flexible come retirement. And your employer might match your
ROTH contributions with ROTH dollars two thanks to the Secure
Act two point so basically they used to match your
post tax dollars with pre tax ones. You would yes
(17:05):
be taking on a larger tax burden in the given year.
Hence the suggestion of not raising your contribution percentage much,
if any at all in twenty twenty four. But I
don't know. I think just making this change is worth considering.
It's going to feel like you're contributing more money because
you're not getting the same tax breakup front, but ultimately
it's going to feel like you have more money down
the road. That's right. Yeah, so haabiya.
Speaker 2 (17:26):
We hope that gets you pointed in the right direction. Joel,
we got more to get to. We're going to take
a question from a younger investor who is interested in
single stock investing, and you might be surprised at the
answer that we give.
Speaker 1 (17:37):
We'll get to that more right after this. All right, Matt,
we'll back. We've got more listener questions to get to.
And yeah, usually we sign the alarm bell when people
talk about investing in single stocks at least be on
a certain point. But this listener, she's been listening to
(17:58):
the show for a while, but she's still wants to
go down this road.
Speaker 4 (18:01):
Hey, Matt and Joel. This is Anna from out here
in Oregon. I've really been enjoying listening to your podcast
for a few months now and I appreciate all the
great content. So I have a question. I'll start by
saying that I'm twenty two years old. I have a
roth Ira, a taxable brokerage account, and an emergency fund
with almost a year's worth of expenses. I know that
(18:21):
in the FI community the emphasis towards index funds and
so on, which is great. I'm wholeheartedly behind that. That's
what my investments are all in. However, I've also been
thinking about dabbling in single stocks, not for the money,
but more just for the thrill. I suppose you could
say so literally just for the dopamine hit, which is
really bad. But anyway, if I were to do so
with small amounts of money, what would you recommend as
(18:44):
the best way to go about that? Do you think
should I open a separate broker's account at Vanguard, which
is where the rest of my investments are. Or I've
heard good things about m onefinance since they let you
separate your investments into pieces. I'm just curious what your
take is on this.
Speaker 1 (18:59):
Thanks Joel.
Speaker 2 (19:01):
You know, my alarm bells went off when I heard
a twenty two year old investor and she's talking about
having a wrath, she's talking about having a brokerids the
good alarm bells, Well not actually, because given how young
she is. So she's twenty two, that was the exact
same age when I actually had to draw down on
some of my retirement accounts because I did not have
enough money set aside for some life events that I
(19:22):
had coming out.
Speaker 1 (19:23):
And I'm like you, Anna has prepared even on that front, sir.
Speaker 2 (19:26):
She's got close to a year's worth of living expenses
and set aside. Holy cow, that is amazing. The fact, like,
what that tells me is that she is incredibly disciplined.
Speaker 1 (19:35):
I'm wondering when Anna's gonna launch her own personal finance
podcast because she's got it together.
Speaker 2 (19:39):
Sure you surp us quickly, way more than myself at
that age, and I'm guessing more than what you had
going on, more than me like last year at that age.
It's just so impressive. I'm like, I want to harp
on this for a minute longer here because of the
fact that it's sitting there as cash in her savings account.
It's one thing if you have a large amount of
money set aside in a retirement account because maybe you
(19:59):
have uh an employer and it was automatically deducted from
your paycheck every month. That's not the case here. This
is money that she has socked aside, which means she
didn't assuming she went to college, she didn't blow it
on partying or going out, so she didn't blow it
on a sweet ride or you know, she didn't spend
it on a worldwide vacation with her friends to celebrate
(20:22):
graduating or something like that. Right, Like, this is money
that she has left in there, and she's just like, Nope,
this is money I'm not gonna touch that. That's gonna
allow me to have some financial breathing room. That's just
incredibly impressive, especially for someone at this age.
Speaker 1 (20:34):
Yeah, setting herself up for massive future success as potentially
that coast fire plan. Right, it just get going going
hard for a decade and a half, maybe two, and
then not really having to be super thoughtful about your
investments from that point be foward because you've done so
much of the heavy lifting up front.
Speaker 2 (20:51):
Yeah, Well, and specifically having the liquid cash on hand, Like,
it's just it's gonna make her in the next ten
years incredibly resilient to not have to deviate from any
sort of finance she'll plan because she will continue to
invest with like clockwork. Because she's not going to have
to interrupt anything, She's going to be able to pot
most likely achieve a lot of the different financial goals
that she's got what it is.
Speaker 1 (21:09):
Set aside. First, as you and I know, the more
cash you have stacked up in an account, a liquid account.
Not that like, not that you're avoiding investing for your future,
because she's obviously not, but it gives you more options
in the here and now. So let's say Anna says,
this job not so great, man, I really want to
pivot into this career. Well, she set herself up for
that opportunity. And the toughest stories we hear oftentimes from
(21:32):
people who lost a job, didn't have much cash rely on.
They ended up in a job they didn't want to do.
They wasn't their pick of the litter, and so much
of the reason for that was because they didn't have
almost any savings on hand. They couldn't withstand a couple
months of unemployment.
Speaker 2 (21:46):
Yep.
Speaker 1 (21:46):
And that is the story of the average American. Anna
is not going to be living that story, which is
awesome exactly. Let's talk about single stock investing, because as
long as it's contained right and you're doing the boring
stuff with the bulk of your investment dollars, I don't
don't really see any issue here. This is something we've
kind of talked about on the show before. How sole
like that Anna knows the reason she wants to do this.
(22:09):
I'm doing it for the dopamine hit. I appreciate the honesty,
a little bit of a rush, and I get that.
I get that. I think there are lessons that we
can learn from single stock investing, as long as it is,
like I said, kind of contained in Firewalled. Makes me
think of gambling, right, because it can, of course become
a real problem. There's more of an ability for gambling
to get out of control when it's set your fingertips
on the smartphone. I feel like that is very much
(22:30):
the case in our society right now. You can gamble
on almost everything at any time of the day. Right,
you can wake up with night sweats and bet on
your favorite sports team. Or SAME's true with trading single stocks. Right,
you can have a nightmare, wake up, start trading and
Vidia until your heart's content. The trade might not settle
to the morning, but it might settle before then, depending
on which app you're using.
Speaker 2 (22:49):
You could have a dream about microchip processing.
Speaker 4 (22:51):
Right.
Speaker 2 (22:52):
You might say that like, oh, it was a sign,
But you know what, I'm fine with that as long
as long as you keep it contained within this like
fire little box of a broken to account that you're
gonna set up.
Speaker 1 (23:02):
Emily was talking to me the other day about the
difference between dreams and visions. I still don't know if
I know the difference after that conversation. But maybe you
think it's a vision, right that you saw in the middle,
or it was just like indigestion based on something you ate,
And it's hard to interpret the difference in the middle
of that act, I guess, But like with twenty four
to seven trading catching on, you might find yourself in
that position, right, So constraints are key. Also, make sure
(23:24):
you aren't putting money on the line that would cause
you to lose sleep at night. So the same is
true with gambling. Right, If losing more than four hundred
bucks the craps table in a weekend Vegas trip is
your number, stick to that number. There's nothing wrong with
that if you consider that part of your entertainment budget.
So the same is true with individual stock investing that
you're planning on doing. We suggest a maximum of five
percent of your overall investment portfolio. That's the most you
(23:46):
want to put into single stocks. But the truth is
maybe that threshold is smaller for you because if you
were to see a massive decline in a single stock,
think about something like CrowdStrike Matt that was that was
a stock a lot of people were talking about, and
then crowd Strike experiences that significant outage that hamstrung a
bunch of really prominent businesses. Their stock goes plummeting. If
(24:07):
that was the stock you were interested in and you
sunk a lot of money into, is it going to
freak you out when that happens. I would just run
through a few scenarios like that before I actually started
making those specific investment.
Speaker 2 (24:16):
That's right. Let's get to the heart of Anna's question,
which is where do I actually open this account? I
will say I like the idea of keeping it separate,
although it's not crucial or completely necessary, especially given Anna's
discipline I think, and her ability ability to mentally sort
of silo and partition off her own money. But that
being said, having it in an entirely different brokerage account,
(24:40):
I think can act as a firewall of sorts. And
if the majority of her long haul investments, let's say
they're you know, with one of the major low cost
brokerages in Vanguard in this case, Well, you could certainly
do your single stock investing there as well, but I
think it just makes sense to have a separate account
so that you aren't tempted to co mingle this funds.
And what's really interesting is the fact that she said
(25:01):
at the beginning, like in her question, that she already
she has a brokerage account, which tells me she's already
she's doing like some medium term investing, because if she
already has a brokege account, I think what she's trying
to figure out how to do is to keep some
of her dopamine single stock trading that she reads about
a company and thinks, oh, that company is going to
go to the moon from bleeding over from that mixing
(25:22):
in with let's say where she's investing money that she's
planning on saving up and putting down for a down
payment for a house in seven years or something like
that after she's out of grad school and is in
a new city for the next decade or something like that.
And she specifically mentioned m one, which I think might
be a decent option, but personally I use Robinhood, and
it's specifically because of how easy that they have made
(25:44):
it and that is where I do five percent or
this much less of my overall portfolio is in single
stocks and or that's what you say, is the max,
not like the goal, right exactly. Yeah, nobody out there
should hear five percent and think, oh no, I need
to diversify and get more single stocks and crypto that
kind of thing.
Speaker 1 (26:01):
But like that's just why asking Most people don't need
to do it unless they feel the urge.
Speaker 2 (26:04):
Yeah, unless you find it interesting. But like, for instance,
like that's where I was gonna mention. I looked up
the manufacture of these different bags that you lock your
phone into, because there's more and more schools that are
implementing cell phone banks basically right, And I started thinking.
I was like, man, the demand for these bags. I
think there's that many manufacturers, And so I looked it
up because I'm thinking, Okay, you got one school. That's
(26:27):
a ton of bags that one school is going to need.
But typically you're looking at entire school districts that are
implementing this, or counties, which means you multiply that across
multiple schools and then across cities and states. I'm like, holy,
there's a really big opportunity.
Speaker 1 (26:40):
Here, especially in the city of la that's a big
leading in the case.
Speaker 2 (26:43):
Yeah, the unified school district over there, and so the
one that they're talking about in this new story was
privately owned. So that was an instance where and that's
what I would have done, is I probably would have
gone there and purchased like one stock, like if it
was sixty bucks or something like that, which is not
a dollar amount that I'm going to lose sleepover if
that completely goes as belly up.
Speaker 1 (27:01):
You're also not going to get rich if it goes
to the moon because you bought one share, right, sure,
but I don't think you can go wrong with either
one in one or robin Hood. You mentioned being interacted
to in one, so it makes sense to start there.
They seem to put less focus on the pomp and circumstance,
which we generally see is a good thing. The pie
set up also makes a lot of sense for me.
In in one it.
Speaker 2 (27:21):
Makes sense I think for like an overall portfolio, but
I think if you're looking at single stock investing.
Speaker 1 (27:25):
Robinhood makes it.
Speaker 2 (27:27):
It has a better interface, Yeah, yeah, because it's like
you're not necessarily looking for that like well balanced, you know,
overall allocated portfolio, that nice pie. It's more about just
kind of getting in there, getting that single stock. Who's
making it easy for you to kind of make your tiny,
very small, low dollar gambles.
Speaker 1 (27:44):
And that Robinhood interface is fantastic. We've talked about the
downsides of that interface, specifically for people who don't want
to be and shouldn't be trading.
Speaker 2 (27:52):
Hey are less discipline yea, And who are.
Speaker 1 (27:54):
Supposed to be wanting to invest in index funds, in
a roth Ira or something like that, Well, that could
be detrimental. But if this is just the relief account
where you're sticking money that's only going into single stocks,
I think that's probably a good choice. Something else worth mentioning.
Don't forget it about the tax bill and the paperwork
that's associated with some of this extra trading you might
be doing. If you're day trading, like if you're making
(28:16):
trades often, yeah, at most days, like a lot of
days a week.
Speaker 2 (28:20):
Learns back in twenty twenty, Yes, when all the meme
stocks are blown.
Speaker 1 (28:24):
Up, there's nothing else to do but sit on your
computer and trade stocks. I guess you could find that
your attraction to single stocks makes for a miserable March
in April, So go ahead and dabble, but making fewer
trades and having a longer timeline is still a superior approach,
even if you're investing in individual stocks. So if you
invest in a company that you believe in, buying one
week selling the next doesn't necessarily make a lot of sense,
(28:47):
then you're trading based on like CNBC talking heads and
less on fundamentals of what a company's got going on.
But some folks believe, and I can totally see how
that's true that having this separate account can act as
this pressure release valve. It allows you to stay the
course in your other accounts over the long haul. And
I do think it's going to be the case for
somebody like Anna who wants some of the actions, some
of the fun. I think it's a learning experience too.
(29:08):
It really can be investing in single stocks and then saying,
wait a second, my next ones are going up, my
single stock portfolio is going out poorly, my Robinhood account
is doing It can reinforce I think for most people
it does. I guess for the I would call them
unfortunate people who end up performing better over those first
six months of single stock investing. It could lead to
the opposite, and that's right reinforcement. But I love this
(29:30):
idea of giving it a try with a small portion,
especially when you're so buttoned up in every other area
of your personal finances.
Speaker 2 (29:36):
Totally agree, and then not to mention too. If you
like the interface and you are disciplined, Robin has got
the match as well, and so you might find yourself
now migrating your roth Ira over there as well. Again,
if you can stay incredibly disciplined and keep that money partitioned. Jill,
let's get to our next question. This is from a
listener who based on her question, it sounds like she
might be with one of the big banks. Let's hear
(29:57):
a question about CDs.
Speaker 5 (29:59):
This is in the from California. Last year, I put
seventy five thousand dollars into a CD for eleven months.
The maturity date is coming up, and I don't know
what to do. I usually let it roll over. The
bank letter says the current interest rates are zero point
(30:20):
zero five percent and zero point two five percent, not
very good. If you could tell me what to do,
I'd appreciate it.
Speaker 2 (30:30):
Oh, Joel, So she mentioned receiving mail from her bank.
I think that's one of the big giveaways that she
might be with one of the big banks, aside from
the fact that the rate seems fairly crummy.
Speaker 1 (30:39):
I think that's probably true.
Speaker 2 (30:40):
It was the last time you received something in the
mail from your online bank.
Speaker 1 (30:43):
Yeah, I don't really, but I get mail from the
big banks more than I do from banks. I actually do.
Speaker 2 (30:48):
Businesses as they're trying to win you.
Speaker 1 (30:50):
Yes, yeah, like Wells Fargo and Chase, like Box all
the time. Evidently works.
Speaker 2 (30:54):
I mean, they wouldn't continue to send you mailers if
there's not a certain percentage of folks who are saying, oh, yeah,
maybe I will open an account with them.
Speaker 1 (31:01):
Hasn't worked for me, and it won't work. Keep trying,
keep wasting your money. And you think you're so disappointed
at least on that front. Well, Linda, we love that
you took advantage of those high rates when they were available,
and CD rates have been epic After something like ten
plus years of utter worthlessness amount we did not talk
about CD rates at all in the first few years
(31:21):
of this podcast. There was no reason too. There was
no reason to talk about CDs, like what benefit did
they offer to people? In twenty eighteen, twenty nineteen, nothing
very little bit. They were essentially a failed savings account.
Speaker 2 (31:36):
But as you imagine, if you worked in the ceded
department back in like twenty fifteen, you.
Speaker 1 (31:41):
Just like toil in your thumb. So folks to be like, wait,
what you had nothing going on? You're playing wordle except
for it didn't even exist. That neither mine sweeper perhaps right,
But as the Fed raised rates, savers have benefited, and
as the potential for rate cuts looms larger, locking in
higher rates could be a smart strategy. So it's one
of those things where CD rates, Yeah, they vaulted up
(32:02):
alongside the rates of high yield savings accounts, and they
were exceeding the rates that a lot of high yeld
savings accounts were offering. That doesn't seem to be the
case right now, but the play is to be able
to lock in the rate for longer with the at
least belief the rates are going down from here on out.
Speaker 2 (32:18):
Yeah, but step one, you definitely don't want to keep
sticking around with the bank that you're currently with because
I'm not sure what sort of rate that you were
getting before. It sounds like it was fairly decent, and
you're not really impressed with what they're saying that it's
going to renew at But bottom line, these rates just
are not competitive at all. Wow, what does she say
she was being offered point like point zero four or
(32:39):
something like.
Speaker 1 (32:39):
That, point two. It was awful, It was awful. Whatever
she said in the question, it was awful, was terrible.
And that's another sign that this is probably a big
bank because the rates are not competitive in the least.
Speaker 2 (32:48):
Yeah, they're just pretending that they're. Yeah, they're basically stuck
in twenty eighteen. And so we would suggest checking out
a site like doctor of Credit dot com, and they
are they're going to have a current list of the
best rates that are being offered on c out there
by all the different banks. They've got nice little tables
and these are articles that they update monthly. Ally bank.
They are a great place to turn, although you might
(33:10):
be able to eat out higher rates elsewhere.
Speaker 1 (33:12):
Ally's in the top of the pack, but they're not
usually at the very forefront exactly like I mean, I
personally use ally and it's just because like everything that
they offer, like the site is great, the app works
really well.
Speaker 2 (33:22):
They're always offering some of the most competitive rates, but
they're not at the cutting edge of the best rates
that are out there. They're like top five percent, not
top one percent. Yeah yeah, but that being said, they're
no penalty. CD is a really cool product just in
case you decide that you do need the money before
the CD term ends. It's basically like locking in a
high yield savings rate that, although that being said, I
(33:44):
think at the moment is not quite as high as
what the different high yield savings accounts are offering. Basically,
the banks don't want to get caught holding the bag.
Speaker 1 (33:53):
After IRET drop. But in what you're doing is saying,
I'm willing to take a slightly lower rate right now
because I'm protecting against downside future risk of rates going
a whole lot lower and savings accounts rates dropping. So yeah,
maybe I've got a lower rate for the first three
months of the CD, but I'm hoping that my rate
is actually higher than the savings account rate for the
last nine or twelve or fifteen months of the CD,
(34:15):
however long of a term you're taking out And basically
that product that Ally offers and they're the only bank
we know of that offers that it's like a mix
between a highield savings account and a CD. It's kind
of trying to blend the post book World's fybrid product
exactly like the toy Deeprius of saving sure vehicles instantly. Enough,
though the premium for CDs seems to have gone away,
(34:37):
kind of like I said, you used to be able
to make an extra half a percentage or so if
you opted to lock your money away inside of a
CD instead of a savings account. But the truth of
the matter is you're going to snag a higher interest rate.
You're going to see superior returns, at least in the moment.
In one of our favorite high old savings accounts these days,
Betterment is paying five percent with an initial half percent bump,
(34:58):
So five and a half percent an ANYCD i've seen.
But of course, like I'm saying, the downside of that
going that route is if rate cuts become fast and frequent,
the rate isn't going to stay there, and you might
be wishing you'd lock that rate in even if it
was slightly inferior and not lifted up to chance. But
of course, predicting what the FED is going to do, Matt,
that has people have been disappointed time and time again
(35:20):
by that making predictions, the FED ends up not doing
what the crowd thought they were going to do. And
so if your whole reason for choosing a CD over
a high oled savings account is banking on rate cuts,
that might not be the best route to go either.
Speaker 2 (35:34):
Yeah, And one other consideration is your personal timeline and
what it is that you want to do with that money,
because is it even a good idea, let's say, to
have as much money within a CD where it is
locked up, because these might be dollars that you'll need
for a down payment, or maybe they're dollars that you
want to live on in a year or two. And
if so, I think savings products are more than likely
(35:54):
going to be your best bet, which.
Speaker 1 (35:55):
Could be a CD or a savings account.
Speaker 2 (35:57):
True, but depending on your timeline, if some of these
dollars are let's say for five plus years down the road, well,
investing a portion of these dollars could make a whole
lot of sense. Just wanting to put that on your
radar because of the fact that I think there's this
a psychological shift that happens when you've got money within
a hygy old savings because at the end of the
month you get that sweet little dividend payout, and it's
(36:20):
not an inconsequential amount of money. Let's say, if you
have a year's worth of living expenses set aside, the
way we talk about investing, you don't often realize or
perceive that the value of that is going up because typically,
and again the way we talk about investing again, ninety
five plus percent of your net worth, it's something that
(36:41):
you're basically ignoring. It's not something that you're looking at frequently.
But when you're there in your savings account, that's something
that I look at much more frequently, Joel than I
look at my brokerage accounts, and then I look at
my roth IRA, then I look at my four one K.
And so when you get that end of the month
interest payout, you might be tempted to think, oh, this
feels nice, is fun, this is good when and that
(37:02):
might distract you from the fact that you need to
take that chunk of money and instead stick that in
the market.
Speaker 1 (37:07):
And I think just because it's been in the CD
often makes people think, well, clearly, the next place to
put it is in another CD. But it's important to
reassess your goals and say, is that the best place
for the money? Maybe I had an earmarked for this
one thing, but if you're planning on locking it up
again for another portion of time, is the CD the
best vehicle for this money? Maybe it is for half
(37:28):
the money, and then maybe the other half should go
towards something. And that's another thing. You could divide it
up half between CD, half between a CD and highyield
savings account. You co do half a CD half into
your investments. I mean, there are a bunch of different
choices you can make, but I would just question whether
or not all the money belongs in a CD or not.
And you know, this is a big chunk of money, Matt.
The stakes are high rate shopping. When you've got five
(37:50):
thousand bucks in the bank, that's one thing. But Linda
can realistically see a four plus percentage bump in earnings
on seventy five thousand bucks a.
Speaker 2 (37:59):
Lot of money.
Speaker 1 (37:59):
We're talking thousands of dollars over the course of the year.
So there's a lot of people who make a mountain
out of a molehill. I got a couple grands, should
I go from this bank that's paying four percent to
the one that's paying five. That's a small potatoes question.
Ye potatoes question. Yea is one thing.
Speaker 2 (38:12):
But if we're talking two or three percent, but then
on top of that, we're looking at a number that's
closer to six figures, that's why we're having this conversation.
Speaker 1 (38:18):
It's well worth her time and energy, exactly.
Speaker 2 (38:20):
And that's the that's truly the bigger sort of view,
the larger point of view, the what ten thousand foot
view that we want you to take when it comes
to your finances, because again, rate hopping for a half
a percent, eh, probably not just stick with the bank
that you have always liked or one that serves your needs.
But when you've got a fatter chunk of change on hand,
that's yeah, you want to be a little bit smarter
(38:41):
with that money. All right, Joel, we've got.
Speaker 1 (38:42):
More to get to.
Speaker 2 (38:43):
We're going to take our Facebook question of the week,
and speaking of returns on your money, this one has
to do with receiving a negative return on your money,
and we'll get to that one right after this.
Speaker 1 (39:01):
All right, man, we've got more money saving information we
got to deliver on this episode. Of course, it's time
for the Facebook question of the Week. This one comes
from Kira and she wrote, is it better to pay
down the principle of your mortgage or put that money
into home improvements? Which one would get a better ROI
return on investment. By the way, the interest rate I've
got on my home is six point eight seven five percent.
(39:23):
It's not what we're used to hearing from people, Matt
six point eights. That's normal now for people taking out
of mortgage. That was not the norm for a long
period of time.
Speaker 2 (39:31):
Yeah, well, this is a great question, and from where
we're sitting, the answer is pretty clear. Paying off the
mortgage is going to provide the best return on your investment.
And that's because most home projects have a negative return
on investments.
Speaker 1 (39:45):
They're not really an investment.
Speaker 2 (39:46):
No, no, there are you know, we've talked about this recently.
I feel like we've talked about garage doors. There are
a select few projects that will net what it is
that you paid for that like installing a new garage
door if you're if you get an old, crummy one,
or painting.
Speaker 1 (39:58):
It like we talked about. And actually a lot of
people in the Facebook group how the money Faceboo group
are saying, oh, that's something I'm interested in eighty bucks
to like refresh that door and improve the value of
my home. That's that's a no brainer.
Speaker 2 (40:08):
And in fact, I literally have paint swatches on my
garage door right now, Joe, because that's a conversation I
had with my wife. So we're not doing We talked
about a listener who he talked about doing the faux
wood treatment.
Speaker 1 (40:18):
Hu.
Speaker 2 (40:19):
I didn't even realize this until I looked at my
garage door up close. You don't, really, I guess stay
next to your garage door when it's closed, typically if
you're home. I don't know. If I'm home, the grash
door is open and then I hit the button when
I leave and then it closes. But very much I don't.
But I'm like, your neighbors look at it more than
you do. There's a wood grain texture already on there,
so I'm like, oh, shoot, maybe we should do the
wood grain grain thing. But that being said, we're looking
(40:39):
at painting it, but we are planning to do the
magnetic door hinge and door handle kits. Did we talk
about that when we talked about the we did, and
they even sell like these garage door window kits. There
and they're all magnets and they just stick on to
the door, and they're surprisingly incredibly realistic looking cool, which
it kind of sounds like you're just putting lipstick on
(41:00):
a pig. It's just like, here's a giant, ugly metal
garage door. Let's find a way to make it look
more custom But I'm telling you it's surprisingly convincing. Ni
Kay and I will walk around the neighborhood and I'm like,
I'm pretty sure that's one of those kids right there,
and we would never have noticed that before. But because
it's something we're considering, it's on our radar. You're gonna
take them before and after picks to share with us. Yeah,
I'll do that either way. I miss them on the Instagram.
(41:21):
I'm sure if we're gonna do the door hinge kit,
but if we do, I definitely want make sure to
capture that. But all that being said, most folks don't
get excited about garage doors, right like they get the
most jazzed about new cabinets, new countertops, a bathroom renovation.
Speaker 4 (41:34):
Right.
Speaker 2 (41:35):
Those certainly make a big visual impact, but they might
only get like two thirds or like half of the
money that you spent back in your hands if you
do end up selling it, because guess what, you don't
have universal taste, And there is no such thing as
universal taste, because you know, you take the average of everybody.
Is there actually somebody who likes builder like the standard
(41:56):
finishes that a builder might choose. No, people have their
own opinions as to what it is that they want
to surround themselves with.
Speaker 1 (42:01):
YEA, well, I think HGTP has given people at least
an idea of what they should be everybody as a professional.
But even still like that, that tastes very wildly, and
I think some people might might say, oh, well, clearly
paying money down on the mortgage because the interest rate
is so much higher than what most people have where
oh hey, if this was a two and a half
percent rate, Matt and Joe would have different advice. Not
(42:22):
really actually, because you would think, oh yeah, a low rate.
Speaker 2 (42:26):
It does sway the decision a little bit, a little
It makes it easier to say that, yes, yes, but
the same information kind of that you were just talking about, Matt,
about the return on investment of home improvements, that remains true,
Like the numbers don't change.
Speaker 1 (42:39):
It's not actually an investment. It's just sinking money into
a home. It's still a negative return, and the goal
is to do it for your own pleasure if you
have the cash, not because you think it's going to
make you money. Right does that does? So we're not
really against home improvements, Like you're gonna do some home
round projects yourself, some big ones. You know, we've both
taken on projects of various sizes around the house from
(43:01):
time to time. Most time owners do. That's like part
of the joy and privilege of being a homeowners. You
get the mess of that thing onlike being a renter.
Had a renter the other day asked me if they
could paint the bathroom walls salmon, and I was like,
I don't know. Like I got a mock up of
it. It didn't look awesome. I was like, if you want
to paint them back at the end of the day,
I guess, but I don't know if I want to
like it to be left sam ex, I don't think
(43:22):
I'll be as appealing to people in the future.
Speaker 2 (43:23):
Well, and then you're potentially left with the sloppy paint shots.
Right if they're the ones doing it as well, because
they're in a rush to get out of there because
they're excited about their new place.
Speaker 1 (43:30):
I've been moving on too, So these are the kind
of things though that is a renter, you have to
ask that question. As an owner, Yeah, you don't, but
you know, home equity debt, it's not one of the
worst forms of debt. But it's ideal to take on
those projects because you have the money saved up, you're
excited about your bathroom, your porch, whatever it is. It's
likely to increase the value of your home some but
don't do it for that express purpose. That's that's just
(43:51):
shouldn't be the motivation behind it totally.
Speaker 2 (43:53):
And by the way, let's go back to the like
the theoretical two and a half percent mortgage. We're not
saying that if you have a two and a half
percent mortgage out there, that you should be paying that
off because that's a better return on your money than
actually renovating the home.
Speaker 1 (44:03):
You should be doing something completely outside of those Yes, exactly,
Like if you had a two.
Speaker 2 (44:07):
And a half percent mortgage, role even though paying that
off gives you a guaranteed too and a half percent
return on your money, is that what you're gonna do
with extra money on hand, No, I'm going to take
that money and instead invest it. And even in Kiro's case,
she's got a six point eight seventy five percent, honestly
does get a little bit trickier because it's like, Okay,
are you willing to turn down a guaranteed seven percent
(44:28):
basically on your money.
Speaker 1 (44:30):
I think I would say yes.
Speaker 2 (44:31):
I think I would say no, I'm going to keep
that around. And because of the stock market, historically you're
looking at ten percent, and that's like looking back over
the past one hundred years, and if you look at
the past two years, you're looking at forty percent returns
in the market. And so what I'm highlighting here is
the potential for outsized returns by investing your money as
opposed to going with the quote unquote safe option of
(44:52):
paying down debt.
Speaker 1 (44:53):
Well, the other problem is you pay off your home quickly.
That's great, that is a wonderful thing. It's nice to
be debt free, to own the home you live in
free and clear. But it's also massively delayed your ability
to build wealth for your future too, because you prioritize
one over the other. The other thing. I think it's
worth pointing out here Matt is that there's all sorts
of things that we call investments. I hear people I'm
(45:13):
going to invest in a nice TV, and I'm always
like no, Or I'm going to invest in this new car. No,
that's not what that is. That's a purchase. Let's just
call the thing what it is. And this is where
it gets confusing with home renovations and owning a home,
because a lot of people talk about your primary home
as an investment too, and it is more of an
investment than those other purchases I just mentioned, because yes,
(45:35):
the value is going to go up over the years
that you own it, and you want to keep it
in good shape, of course, because you want to be
able to make money on it, hopefully at the end
of the ownership time period. But that still doesn't mean
you're going to see value and ROI basically for all
the improvements that you're making. So you have to be
careful about how how you talk about those things. Sometimes
I think the language that we ascribe to the home
(45:57):
that we own, talking about it, thinking about it too
much just an investment allows us to mentally feel comfortable
funneling more dollars into it when we're not going to
see those dollars back at the end of the day.
Speaker 2 (46:06):
Yeah, it's just so hard when you're looking at losing,
like that's what we need to do, Actually, we need
to flip the script and instead of seeing, oh, well
this home improvement, it's gonna you're gonna get back ninety
six percent. Like that sounds like a high percentage amount, right,
And actually if you go to like the different so
you're gonna lose four percent and say yes, exactly, completely
flip the script and do the negative. And so it's like, hey,
would you stick money into an investment when you know
(46:28):
pretty much guaranteed you're gonna lose four percent? Absolutely not.
And I was gonna mention there's different garadual companies out there,
and it's funny because their stats are like, it's one
hundred and three percent one hundred and four percent of
the money that you stick in there. So basically they're
trying they are trying to write the ship and be like, no,
you will, this is going to cause you to make
more money. And I do think there might be some
(46:50):
rare instances where that is the case with like the
worst garage door, and even outside of that, it's different
renovations and improvements that you might make on a home
because it is such an eye sore. Yeah, there are
always going to be outliers, though, there are a lot of.
Speaker 1 (47:04):
Home flippers that truly do well in the space as
because they know how to buy, they know how to renovate,
and they know how to sell.
Speaker 2 (47:13):
They are looking for the outliers. They are looking for
the diamonds in the rough. But that's not what most
people have.
Speaker 1 (47:18):
And there's a lot of other home flippers who lose
their shirt because they don't know how to do those things. Well.
It's precarious endeavor. It's not that it's not possible to
make those improvements if you're an incredibly detail oriented person
and frugal and you kind of know all the ins
and outs of home flipping and and and the like,
but you kind of get all got to get all
those other things right too, That's right.
Speaker 2 (47:36):
Yeah, So kyro We hope that gets you pointed in
the right direction.
Speaker 1 (47:40):
Joel, Let's get back to the beer.
Speaker 2 (47:41):
You and I enjoyed a super Megabyte, which is a
beer by Hot Butcher for the world. What do you think, Bud,
I always like the Hot Butcher branding. This one had
like a metal shark on the front. Yeah, it looks
pretty great and hand illustration.
Speaker 1 (47:54):
Yeah. I love the bear vibe to it. Love the
beer so good. Yeah, and I like they call it
super megabite because it's got this big old hot bite
when it hits your tongue. Yeah, it's abrasive in the
best way.
Speaker 2 (48:04):
It's like, I feel like megabite would have just been
the double, but super mega bite tells you that. Okay,
I see how this is a triple yes, right, yeah, exactly,
And it's got it's bright tropical.
Speaker 1 (48:13):
I think it's like luscious. They're like almost enbellows your tongue.
It's it's a beautiful.
Speaker 2 (48:17):
Beer, massive amounts of flavor. Like I picture, you know,
like the Richter scale, like little needle on the scratch
a piece of paper like or a light detector test
that's also yeah yeah, yeah, so similar thing, Like the
paper was moving along and the you know, the little
pin the needle was right there in the middle kind
of hanging out. And then as soon as I took
a sip of the beer, it like wow, like shut
(48:37):
up and down. There's a whole lot of flavor going
on here. You can definitely taste, how big it is,
and yet you almost get some of those like a
candy sort of presence with it. It's not just the
herbal sort of flavors that you get with some of
the different hazy IPAs, but it has almost like the
I guess you kind of have to have some of
those candied sweetness sweeter sort of notes when you are
dealing with a triple like this. But yeah, really tasty.
(48:59):
Glad I got to share it though.
Speaker 1 (49:01):
Same me too. Really good. All right, that's gonna do
it for this one. We'll put links to some of
the things we mentioned up in the show notes on
our website at howtomoney dot com. Don't forget to sign
up for the how to Money newsletter. You can find
that at how to money dot com. Slash newsletter comes
out every Tuesday morning, free of charge, obviously, and comes
check full of personal finance information that you can use.
If you're listening to this podcast, you're gonna like it.
(49:22):
It's a no brainer. All right, buddy. That's gonna do
it for this one. Until next time, Best Friends Out,
Best Friends Out.
Welcome to Hout of Money. I'm Joel and I am Matt.
Today we're answering your listener questions.
Speaker 2 (00:24):
That's right, buddy, it is Monday, which means we have
some specific pieces of advice to give to certain individuals
who have sent us their voice memo to not only
play here on the podcast, Joel, but to also answer.
We've got a listener who has a pretty good argument
for single stock investings.
Speaker 1 (00:41):
We'll address that. Give our thoughts. Can that's brittle mind be?
Speaker 2 (00:45):
Can I handle this?
Speaker 1 (00:47):
Yes?
Speaker 2 (00:47):
We can, And in fact you and I getting ahead
of ourselves a little bit, but we do a little
bit of single stock investing. We'll get to that here
in a second. Another listener is asking about what she
should be doing about her CD that has come up
for renewal.
Speaker 1 (00:58):
It has reached maturation.
Speaker 2 (01:00):
When I talking compact discs here even though, which is
when I thought a young Wei lad and another listener
he's got this psychological trick for boosting his four O
one K.
Speaker 1 (01:10):
I don't.
Speaker 2 (01:10):
I'm not sure if he sees it as a psychological trick,
but we do. We'll get to that plus more on
today's episode. Yeah, real quick, though I wanted to plug.
Last week we had Our Wives on. Hopefully you listen
to that episode. We had a just an awesome conversation
with the ladies about lifestyle creep the phenomena. But at
the end of the episode, hopefully you also stayed until
(01:31):
the very end because we had a little cameo with
your daughter Joel as well as my daughter. We kind
of we had a little They were kind of wanting
to get on. Really, yeah, we'll ask you a quick question.
Speaker 1 (01:40):
I know we were. I don't know. I didn't know
how I felt about it, but they were like, no,
for real, we want to jump on for just a
few minutes. All right, cool, if that's what you want
to do, let's do. It's a little easter egg there.
I have to hear their voices and after the music
talk to them about money first.
Speaker 2 (01:51):
But Eddie specifically, you may have folks may have picked
up on the fact that she mentioned the fact that
we might be getting a swimming pool, and this is
something that Ky and I that we've been considering.
Speaker 1 (02:01):
Better now than two years ago. I guess that is true.
Speaker 2 (02:03):
That is true, but we just made the unfortunate error
of mentioning this out loud to where the kids can hear.
So now, no matter what, well, we're gonna have disappointed
kids if we don't pull the trigger butt And now
they're like, when's it happen? I know, but we might
not do it because of how expensive it is.
Speaker 1 (02:18):
Because of that.
Speaker 2 (02:19):
It's not a slam dunk decision in our book, It's
still something that is that's a debate. It's a conversation
that Kate and I are having. But possible solution to
that would be these stock tank pools.
Speaker 1 (02:30):
I just saw something of the at these. I feel
like they're kind of becoming in vogue. I've seen more
and more people like sticking them in their backyard, building
a deck around them, kind of making them look like
a built in future. They're obviously not as deep as
one of those like dug in the ground final liner
pools or concrete pools, but I could see them like
making sense for a lot of people. What do you think, Yeah, well,
so just to give folks to be so disappointed, exactly,
(02:53):
it's a stock tank.
Speaker 2 (02:54):
Well, it's like it's like a livestock water. It's like
the kind of thing you put on a ranch to
water your horses.
Speaker 1 (02:59):
Which my kids have literally swim in one of those
in Mississippi. Oh really yeah yeah, with like dragonflies on
their back and stuff like that. So this it's truly
something people do. This wasn't like a pile of dirt
in Mississippi. No, this was not a hipster one.
Speaker 2 (03:11):
Yeah. Yeah, so this is like an original. This used
to actually water the livestock, but now we swim in
exactly whereas the ones I've seen, like on social media,
it's like younger folks who are like, actually, we can't
afford a pool, but we can drop a thousand bucks,
eight hundred bucks, buy one of these tanks filled up
with water, maintain it.
Speaker 1 (03:27):
But yeah, what you said.
Speaker 2 (03:28):
For our lifestyle, Like, the whole reason to get a
pool when you have kids is so that they can
invite friends over chase each other around the deck. There's
a whole lot of energy that's expended just in playing
around the pool and then diving in and swimming across
and all that kind of stuff. Right, And so it's
not just about can I get my whole body wet, which,
by the way, because you hop in the bathtub, yeah,
(03:50):
well yeah, even still it would be different, like I
would honestly, I am one hundred percent for this. If
it was just Kate and I, like, if we didn't
have any kids, and we're thinking, you know, would be cool.
What if we got like a little plunge pool. You
can stick it in the garden. I can totally see
Kate like, oh, I want to play, let's surround it
by sunflowers and to meta plants and fig trees. It's like,
you're in this garden, you have this garden oasis. Almost.
Speaker 1 (04:11):
I could one hundred percent totally see us doing that.
Speaker 2 (04:15):
That's a very different vibe though, than having a swimming
pool with kids.
Speaker 1 (04:18):
Okay, so what we did this year, and granted everyone's
got their own thing, but you're you're coming to the
realization that swimming pools, your own swimming pool in your
yard is crazy expensive. Yeah, we joined, but we're considering it. Yeah,
you're considering. We both you and I. We don't live
in HOA neighborhoods, and a lot of ho neighborhoods have
a pool. That's one of the things that your money
goes top. Not all of them, obviously, but we joined
(04:40):
a neighborhood that has a pool, and we paid five
hundred bucks or something like that, which not cheap, but
cheaper than button in your own pool. That's for sure,
five hundred bucks for a year access to this pool.
And we've used the heck out of that thing, man,
And I will say that the nice thing about having
a pool that's not your own, well not having to
tend to it, right, just the sure.
Speaker 2 (04:59):
That's the other part of yeah, upkeep And like we
haven't talked about the fact that if and when you
sell a home, like some folks see that as a downside. Yeah,
Like there's a lot of folks who are thinking, oh,
that's a liability. I don't want a house with a pool.
I literally know somebody when they purchased their home, they
actually drained the pool filled it with dirt because the
kids they wanted to be able to, like the kids
are really into sports like dry land sports, swimming sports,
(05:22):
and they wanted to be able to like hit baseball's
and stuff in their backyard. Yeah, they couldn't do that
until they filled in the pool. And that's crazy.
Speaker 1 (05:27):
Yeah, it's crazy. I was gonna say. The other nice thing,
by the way, about being a member of somebody else's pool,
besides the maintenance factor, is lots of times there's like
a lot of other people there for your kids to
play with, for you to hang out with. It's been
one of the nice things. I would love to have
a best friend with the pool, just saying if I
have to get any sort of input here, I'm gonna say,
go for it, Matt. It's your money. I'll come over anytime.
Speaker 2 (05:48):
Fantastic idea.
Speaker 1 (05:49):
I'll bring the beer. It's gonna be it's gonna be
good times.
Speaker 2 (05:51):
But if every time you came over you bring a
six pack of something decent, that would go towards just
what chlorine tablishers like, whatever chemicals you have to maintain.
Speaker 1 (06:00):
Although, but I will vow now that I will do that. Okay,
you heard it here, folks.
Speaker 2 (06:04):
That's the thing that all a lot of pool manufacturers,
so we have started to research it. It's it's all
salt water, which I don't know if those systems are
more expensive than the old school full on chlorine systems,
but it seems that like they don't make.
Speaker 1 (06:17):
Pools as cheap as they used to.
Speaker 2 (06:18):
Like everything has done. It's almost like homes right, like
back table.
Speaker 1 (06:21):
Stakes is six figures now.
Speaker 2 (06:22):
For pool It's like crazy back in the early nineties
to put a decent kind of vinyl liner pool in
I don't think it was nearly as much as it
is now. But everything now is just super nice. Oh
it's got this tile in lay, and oh you need
a nice fancy coping around the edge to where it
looks like it needs to be in some some kind
of magazine.
Speaker 1 (06:40):
I'll tell Okay.
Speaker 2 (06:41):
I was just like, who's putting in like the vinyl
pools with a nice concrete slab around it, you know,
because that'd.
Speaker 1 (06:47):
Be a lot cheaper, You would think, Yes, well, so
that's what I grew up. It's making the stock pool.
And also that's true. The above ground pool look a
little bit s exert too.
Speaker 2 (06:55):
That's true.
Speaker 1 (06:55):
I had a friend that had one of those. Dude,
he loved it. They built a built some decking around it.
They thoroughly enjoyed that. It's not quite as forever or awesome,
but not quite as cool looking and can get things done.
Speaker 2 (07:06):
That's fancy.
Speaker 1 (07:07):
All right, Let's move on matt Let's mention. Beer we're
having on this episode. This one is called super Megabytes.
It is by the good people over at Hot Butcher
for the World. We'll give our thoughts on this dank
IPA at the end of the episode.
Speaker 2 (07:20):
Yeah, not just dank.
Speaker 1 (07:20):
I just took a sip of it.
Speaker 2 (07:22):
This is I didn't realize this was a triple. You
can taste the triple is beast up in this beer,
and I'm glad you and I are just splitting a
singular bit for sure.
Speaker 1 (07:29):
All Right, If you have a money question, by the way,
we'd love to tackle it on an upcoming episode. We'd
love to hear from you. Just go to how Tomoney
dot com, slash ask, or basically record your question on
the voice memo app of your phone. Send it our
way over how Tomoneypod at gmail dot com. Hope to
hear from you soon. By the way, the funk you
the question, the better we like them. Weird, Matt. Let's
get to the first question for this episode. This one
(07:50):
is about increasing retirement account contributions. Hey there, man, Joe.
Speaker 3 (07:54):
First off, I want to start by saying how grateful
I am to discover your podcast. I listen to every
new EPISO sold as I came across it. My name
is Heavier, I'm from Gainesville, Florida. My question is about
my four to one k. Let's say I get a
race at work and I want to put it into
my four to one K, but I want to make
sure I keep my same net income that I take home.
I figured the four to one K already will automatically
(08:16):
take out more once the race is applied, because it's
a percentage of my gross amount. So let's say the
race is five percent. How much should I increase my
four oh one K by so that my net income
is relatively the same after the deduction? Thank you in advance,
and keep up the good work. Best friends out Javier.
Speaker 2 (08:34):
Okay, so I'm gonna go ahead and make you an
honorary bestie.
Speaker 1 (08:38):
That's like getting nighted back in the day in England.
Speaker 2 (08:40):
Javier's question here I love because, first off, the fact
that he isn't just content to leave his investment amount
static his percentage right, he is increasing what he's putting away,
which is awesome, like the actual percentage amount, which means
he is prioritizing future him, which is not as easy
as it sounds. And I think the best time to
(09:00):
do that is when you, in fact get a raise heavier. Right,
You're gonna feel that pinch the strain a whole lot
less because you might still be able to come away
with a slightly fatter paycheck. There's a psychological win that's
happening here, because if you're able to kind of get
ahead of it a little bit, you haven't even seen
that fatter paycheck. Let's let's just assume that you're able to,
(09:21):
like like Javier is trying to do right time perfectly.
It's not only time it perfectly, but increase the percentage
in such a way that he truly doesn't see an
increase in what it is that he's bringing home. You're
none the wiser, Like you haven't saturdooling yourself. Yes, you're full,
but in a good way.
Speaker 1 (09:35):
It's like sitting on your hand and then like being like,
I think I don't have the second hand because it's
got pins and needles, and eventually it falls all the
way asleep.
Speaker 2 (09:41):
Right, it's not something I've ever done. I've read a
regular activity.
Speaker 1 (09:46):
If I sleep on my arm and I wake up,
it feels like I don't have an arm, you know,
I feel like I.
Speaker 2 (09:50):
Yeah, my limbs fall asleep less than the used to
I remember as a kid waking up and just be like,
because it's kind of painful.
Speaker 1 (09:56):
Yeah, all that being said, just giving a silly way
of about tricks.
Speaker 2 (10:01):
Javier has not started dreaming about what he's going to
do with this additional money, which is just a perfect
time to be able to sock more of it away
for his future.
Speaker 1 (10:09):
I love that. And by the way, if you have
a hard time, I think the younger you are, the
harder it is to identify with future you. Right Like
in my when I was twenty three, twenty four, Yeah,
I had started investing in my four O and K,
but I also like was doing it because I was
told I was I was supposed to do it, and
I didn't really have an understanding of like sixty five
year old Joel, seventy year old Joel using that money.
(10:30):
That was like the furthest thing from my mind. And
I do think that that was before the face app
and you can visualize eighty five year old Joel. And
that's what I was going to say, is I think
that can be a helpful tactic, a helpful tool for
people to do. Take your pictures sticking in the face app.
Get a visual representation of what you're going to look like,
or at least this app's representation of what you might
as the best guest at the very yeah. Yeah, and
(10:52):
you'll say, oh, that is me with some gray hairs
and I don't know, some wrinkles and stuff like that.
I am going to be old. I do think it
sounds silly, but I do think that that can help
and actually kind of create maybe that identification, some empathy
for future you, totally allowing you to actually follow through
and increase your contribution percentage, and doing that little by
(11:12):
little over the decades adds up in a big way. Right.
It can keep your retirement savings headed in the right direction.
It can help keep lifestyle creep in check. Two, And
Javier is so right right because he's going to be
investing more even if he doesn't increase his contribution amount,
just by the fact that his paycheck's going up right
the same percentage, but of a higher amount, he's de
facto investing more. Well, ten percent of one hundred thousand
(11:34):
dollars is less than ten percent of one hundred and
five one hundred and ten thousand dollars. We all know that.
But again, when that raise hits, it is the perfect
time to invest more. And let's you know, stick with
the five percent raise scenario that Javier mentioned. The answer
to this question is going to be more like horseshoes
and hand grendadsmount. We're going to be in the proximity
instead of getting it spot on.
Speaker 2 (11:54):
It's probably gonna take some trial and error to kind
of find that perfect amount exactly.
Speaker 1 (11:58):
It's it's highly unlikely the Javier is going to be
able to keep the exact same paycheck amount as his
income and contributions both increase. But I wouldn't think that
that's a bad thing. I'm just saying you're gonna able
to get close.
Speaker 2 (12:10):
Yeah, you can't just increase your contribution amount by five
percent given that five percent raise.
Speaker 1 (12:14):
The numbers are they're just not going to work.
Speaker 2 (12:16):
So for instance, let's say your bi weekly check is
currently two thousand dollars and you contribute thirteen percent. Well,
you do the math. That's two hundred and sixty dollars
that is going into your four to zeroe k every
two weeks.
Speaker 1 (12:29):
That's totally awesome.
Speaker 2 (12:30):
Then you get that five percent raise, and now your
biweekly check is up to twenty one hundred dollars. Well,
now you've got to figure out how to basically get
back to the seventeen to forty post contribution check amount
that you were seeing before, and.
Speaker 1 (12:43):
So raising you're getting nerdy with it.
Speaker 2 (12:45):
Do a little bit of math here, Raising your contribution
percentage up to seventeen percent, well that will net you
seven hundred and forty three dollars, which is pretty day closed.
But again it's still not it's not like exactly on
the dot. But I don't think he's gonna be upset
about bringing home three additional dollars every two weeks.
Speaker 1 (13:01):
Yes, So basically you're saying, if there was a four
five percent raise, but a four percent increase in four
or one k contribution amount, that's what gets you essentially
the closest, right, And so if you'd invested the full
five percent of the rays that you're getting, your paycheck
would of course be smaller. You'd only only have, I think,
if we ran the numbers, right, oney, seven hundred and
twenty two dollars every other week. So if you invest
(13:22):
the full thing, you are going to have less take
home pay. And that's just a really basic example, right,
This specific amount is going to vary based on your
tax rate, your deduction amount, et cetera. But you get
the gist.
Speaker 2 (13:33):
If he changes his benefits, if he let's say he
bumps up to a health care plan that includes.
Speaker 1 (13:39):
A higher deductible.
Speaker 2 (13:39):
Okay, well, get it's gonna save them money there, and
check's gonna then be fatterism.
Speaker 1 (13:43):
Much, Right, But then he's gonna be investing in the HSA,
and then his paychecks can go down again.
Speaker 2 (13:47):
Right.
Speaker 1 (13:47):
So there's all these variable all these factors you have
to think about when it comes to your take home
pay and what's going on with your investments before you
even see your paycheck. And so I would say this,
if you're okay with not experiencing much or any of
your increase in home pay, upping your contribution amount by
four percent with a five percent raise would be a
good way to go. That's probably a good rule of
(14:07):
thumb for other people too, Matt, who want to take
a similar approach investing eighty percent of e raise. Right,
our typical advice is to invest fifty percent of you raise.
We've got no problem with you enjoying a little bit
of that extra pay, right, especially because guess what, prices
obviously aren't staying the same. You might want to add
a little bit of padding to your paycheck to be
able to continue toward guide services as they cost me absolutely.
Speaker 2 (14:28):
I would highly recommend that because I think there could
be a temptation. I think for a lot of folks
out there when they first learn about compounding returns, they
learn about fire the fire community, and they're like, oh, man,
someday I'm going to be financially independent, and there is
a temptation to go full bore and say, oh my god, Okay,
I'm going to do every ounce of my being. Every
additional penny I make and or save is going to
go towards my retirement so that I can retire early.
(14:50):
But a lot of times those plans aren't really they
can be not.
Speaker 1 (14:55):
Very realistic, hard to stick to.
Speaker 2 (14:56):
Yeah, and I think there's a chance a if you
are pushing yoursel off on the earning side of things,
you could burn yourself out with the amount of hours
that you're working. But then on the spending side of
the side of the equation, there might be sacrifices and
cuts that you're making that could harm your overall person
in other ways. Like I'm thinking about friendships or community
literal health. I think about in college, I man, the
(15:19):
kind of food that I ate, Like I didn't eat.
Speaker 1 (15:20):
Much food, Like you've got some horror stories.
Speaker 2 (15:23):
I remember my parents coming to visit me, and literally
Mom would show up with meals that were frozen that
I could stick in the freezer so that I would
I could pull them out and stick them in the microwave
and heat them up to eat like a nice, well
balanced meal because I was eating junk. You thought it
was just a nice gesture, but she was really worried
about it. You know. Well, at the time, I thought, oh, Mom,
I'm fine, it's you know that.
Speaker 1 (15:41):
Thank you so much.
Speaker 2 (15:42):
I love this that you brought me a bunch of
bunch of meals.
Speaker 1 (15:44):
This is great.
Speaker 2 (15:45):
But I remember thinking at the time like kind of
dismissing her. But in retrospect, oh my gosh, dude, I
guess I'm thinking about the full potential that I could
have been in college and I made decent grades, like
I graduated, I have, like I graduated cum lad I had.
You know, I made decent grades and stuff.
Speaker 1 (15:59):
But I believe that's Latin.
Speaker 2 (16:00):
Yes, indeed, sir, literally, But I'm just thinking about how
this could impact hot and Javier when it comes to
his earning potential and not just his career, but also
just other aspects of his life. You don't want to
cut back too much to the point to where it's
hurting his overall well being. It's like an instance of
(16:21):
winning a small battle but losing the overall war.
Speaker 1 (16:23):
One other thing I think we should mention, though, Matt.
Something else worth considering for Javier is to contribute potentially
to the ROTH version of his four one K instead
of contributing to the traditional version. So maybe not even
increasing your contribution amount this year, but rerouting those contributions
into the post tax version of your four oh one k,
because you've already got pre tax money in the four
(16:45):
one k right now. You would be diversifying your future
tax exposure, and so the withdrawals are going to be
more flexible come retirement. And your employer might match your
ROTH contributions with ROTH dollars two thanks to the Secure
Act two point so basically they used to match your
post tax dollars with pre tax ones. You would yes
(17:05):
be taking on a larger tax burden in the given year.
Hence the suggestion of not raising your contribution percentage much,
if any at all in twenty twenty four. But I
don't know. I think just making this change is worth considering.
It's going to feel like you're contributing more money because
you're not getting the same tax breakup front, but ultimately
it's going to feel like you have more money down
the road. That's right. Yeah, so haabiya.
Speaker 2 (17:26):
We hope that gets you pointed in the right direction. Joel,
we got more to get to. We're going to take
a question from a younger investor who is interested in
single stock investing, and you might be surprised at the
answer that we give.
Speaker 1 (17:37):
We'll get to that more right after this. All right, Matt,
we'll back. We've got more listener questions to get to.
And yeah, usually we sign the alarm bell when people
talk about investing in single stocks at least be on
a certain point. But this listener, she's been listening to
(17:58):
the show for a while, but she's still wants to
go down this road.
Speaker 4 (18:01):
Hey, Matt and Joel. This is Anna from out here
in Oregon. I've really been enjoying listening to your podcast
for a few months now and I appreciate all the
great content. So I have a question. I'll start by
saying that I'm twenty two years old. I have a
roth Ira, a taxable brokerage account, and an emergency fund
with almost a year's worth of expenses. I know that
(18:21):
in the FI community the emphasis towards index funds and
so on, which is great. I'm wholeheartedly behind that. That's
what my investments are all in. However, I've also been
thinking about dabbling in single stocks, not for the money,
but more just for the thrill. I suppose you could
say so literally just for the dopamine hit, which is
really bad. But anyway, if I were to do so
with small amounts of money, what would you recommend as
(18:44):
the best way to go about that? Do you think
should I open a separate broker's account at Vanguard, which
is where the rest of my investments are. Or I've
heard good things about m onefinance since they let you
separate your investments into pieces. I'm just curious what your
take is on this.
Speaker 1 (18:59):
Thanks Joel.
Speaker 2 (19:01):
You know, my alarm bells went off when I heard
a twenty two year old investor and she's talking about
having a wrath, she's talking about having a brokerids the
good alarm bells, Well not actually, because given how young
she is. So she's twenty two, that was the exact
same age when I actually had to draw down on
some of my retirement accounts because I did not have
enough money set aside for some life events that I
(19:22):
had coming out.
Speaker 1 (19:23):
And I'm like you, Anna has prepared even on that front, sir.
Speaker 2 (19:26):
She's got close to a year's worth of living expenses
and set aside. Holy cow, that is amazing. The fact, like,
what that tells me is that she is incredibly disciplined.
Speaker 1 (19:35):
I'm wondering when Anna's gonna launch her own personal finance
podcast because she's got it together.
Speaker 2 (19:39):
Sure you surp us quickly, way more than myself at
that age, and I'm guessing more than what you had
going on, more than me like last year at that age.
It's just so impressive. I'm like, I want to harp
on this for a minute longer here because of the
fact that it's sitting there as cash in her savings account.
It's one thing if you have a large amount of
money set aside in a retirement account because maybe you
(19:59):
have uh an employer and it was automatically deducted from
your paycheck every month. That's not the case here. This
is money that she has socked aside, which means she
didn't assuming she went to college, she didn't blow it
on partying or going out, so she didn't blow it
on a sweet ride or you know, she didn't spend
it on a worldwide vacation with her friends to celebrate
(20:22):
graduating or something like that. Right, Like, this is money
that she has left in there, and she's just like, Nope,
this is money I'm not gonna touch that. That's gonna
allow me to have some financial breathing room. That's just
incredibly impressive, especially for someone at this age.
Speaker 1 (20:34):
Yeah, setting herself up for massive future success as potentially
that coast fire plan. Right, it just get going going
hard for a decade and a half, maybe two, and
then not really having to be super thoughtful about your
investments from that point be foward because you've done so
much of the heavy lifting up front.
Speaker 2 (20:51):
Yeah, Well, and specifically having the liquid cash on hand, Like,
it's just it's gonna make her in the next ten
years incredibly resilient to not have to deviate from any
sort of finance she'll plan because she will continue to
invest with like clockwork. Because she's not going to have
to interrupt anything, She's going to be able to pot
most likely achieve a lot of the different financial goals
that she's got what it is.
Speaker 1 (21:09):
Set aside. First, as you and I know, the more
cash you have stacked up in an account, a liquid account.
Not that like, not that you're avoiding investing for your future,
because she's obviously not, but it gives you more options
in the here and now. So let's say Anna says,
this job not so great, man, I really want to
pivot into this career. Well, she set herself up for
that opportunity. And the toughest stories we hear oftentimes from
(21:32):
people who lost a job, didn't have much cash rely on.
They ended up in a job they didn't want to do.
They wasn't their pick of the litter, and so much
of the reason for that was because they didn't have
almost any savings on hand. They couldn't withstand a couple
months of unemployment.
Speaker 2 (21:46):
Yep.
Speaker 1 (21:46):
And that is the story of the average American. Anna
is not going to be living that story, which is
awesome exactly. Let's talk about single stock investing, because as
long as it's contained right and you're doing the boring
stuff with the bulk of your investment dollars, I don't
don't really see any issue here. This is something we've
kind of talked about on the show before. How sole
like that Anna knows the reason she wants to do this.
(22:09):
I'm doing it for the dopamine hit. I appreciate the honesty,
a little bit of a rush, and I get that.
I get that. I think there are lessons that we
can learn from single stock investing, as long as it is,
like I said, kind of contained in Firewalled. Makes me
think of gambling, right, because it can, of course become
a real problem. There's more of an ability for gambling
to get out of control when it's set your fingertips
on the smartphone. I feel like that is very much
(22:30):
the case in our society right now. You can gamble
on almost everything at any time of the day. Right,
you can wake up with night sweats and bet on
your favorite sports team. Or SAME's true with trading single stocks. Right,
you can have a nightmare, wake up, start trading and
Vidia until your heart's content. The trade might not settle
to the morning, but it might settle before then, depending
on which app you're using.
Speaker 2 (22:49):
You could have a dream about microchip processing.
Speaker 4 (22:51):
Right.
Speaker 2 (22:52):
You might say that like, oh, it was a sign,
But you know what, I'm fine with that as long
as long as you keep it contained within this like
fire little box of a broken to account that you're
gonna set up.
Speaker 1 (23:02):
Emily was talking to me the other day about the
difference between dreams and visions. I still don't know if
I know the difference after that conversation. But maybe you
think it's a vision, right that you saw in the middle,
or it was just like indigestion based on something you ate,
And it's hard to interpret the difference in the middle
of that act, I guess, But like with twenty four
to seven trading catching on, you might find yourself in
that position, right, So constraints are key. Also, make sure
(23:24):
you aren't putting money on the line that would cause
you to lose sleep at night. So the same is
true with gambling. Right, If losing more than four hundred
bucks the craps table in a weekend Vegas trip is
your number, stick to that number. There's nothing wrong with
that if you consider that part of your entertainment budget.
So the same is true with individual stock investing that
you're planning on doing. We suggest a maximum of five
percent of your overall investment portfolio. That's the most you
(23:46):
want to put into single stocks. But the truth is
maybe that threshold is smaller for you because if you
were to see a massive decline in a single stock,
think about something like CrowdStrike Matt that was that was
a stock a lot of people were talking about, and
then crowd Strike experiences that significant outage that hamstrung a
bunch of really prominent businesses. Their stock goes plummeting. If
(24:07):
that was the stock you were interested in and you
sunk a lot of money into, is it going to
freak you out when that happens. I would just run
through a few scenarios like that before I actually started
making those specific investment.
Speaker 2 (24:16):
That's right. Let's get to the heart of Anna's question,
which is where do I actually open this account? I
will say I like the idea of keeping it separate,
although it's not crucial or completely necessary, especially given Anna's
discipline I think, and her ability ability to mentally sort
of silo and partition off her own money. But that
being said, having it in an entirely different brokerage account,
(24:40):
I think can act as a firewall of sorts. And
if the majority of her long haul investments, let's say
they're you know, with one of the major low cost
brokerages in Vanguard in this case, Well, you could certainly
do your single stock investing there as well, but I
think it just makes sense to have a separate account
so that you aren't tempted to co mingle this funds.
And what's really interesting is the fact that she said
(25:01):
at the beginning, like in her question, that she already
she has a brokerage account, which tells me she's already
she's doing like some medium term investing, because if she
already has a brokege account, I think what she's trying
to figure out how to do is to keep some
of her dopamine single stock trading that she reads about
a company and thinks, oh, that company is going to
go to the moon from bleeding over from that mixing
(25:22):
in with let's say where she's investing money that she's
planning on saving up and putting down for a down
payment for a house in seven years or something like
that after she's out of grad school and is in
a new city for the next decade or something like that.
And she specifically mentioned m one, which I think might
be a decent option, but personally I use Robinhood, and
it's specifically because of how easy that they have made
(25:44):
it and that is where I do five percent or
this much less of my overall portfolio is in single
stocks and or that's what you say, is the max,
not like the goal, right exactly. Yeah, nobody out there
should hear five percent and think, oh no, I need
to diversify and get more single stocks and crypto that
kind of thing.
Speaker 1 (26:01):
But like that's just why asking Most people don't need
to do it unless they feel the urge.
Speaker 2 (26:04):
Yeah, unless you find it interesting. But like, for instance,
like that's where I was gonna mention. I looked up
the manufacture of these different bags that you lock your
phone into, because there's more and more schools that are
implementing cell phone banks basically right, And I started thinking.
I was like, man, the demand for these bags. I
think there's that many manufacturers, And so I looked it
up because I'm thinking, Okay, you got one school. That's
(26:27):
a ton of bags that one school is going to need.
But typically you're looking at entire school districts that are
implementing this, or counties, which means you multiply that across
multiple schools and then across cities and states. I'm like, holy,
there's a really big opportunity.
Speaker 1 (26:40):
Here, especially in the city of la that's a big
leading in the case.
Speaker 2 (26:43):
Yeah, the unified school district over there, and so the
one that they're talking about in this new story was
privately owned. So that was an instance where and that's
what I would have done, is I probably would have
gone there and purchased like one stock, like if it
was sixty bucks or something like that, which is not
a dollar amount that I'm going to lose sleepover if
that completely goes as belly up.
Speaker 1 (27:01):
You're also not going to get rich if it goes
to the moon because you bought one share, right, sure,
but I don't think you can go wrong with either
one in one or robin Hood. You mentioned being interacted
to in one, so it makes sense to start there.
They seem to put less focus on the pomp and circumstance,
which we generally see is a good thing. The pie
set up also makes a lot of sense for me.
In in one it.
Speaker 2 (27:21):
Makes sense I think for like an overall portfolio, but
I think if you're looking at single stock investing.
Speaker 1 (27:25):
Robinhood makes it.
Speaker 2 (27:27):
It has a better interface, Yeah, yeah, because it's like
you're not necessarily looking for that like well balanced, you know,
overall allocated portfolio, that nice pie. It's more about just
kind of getting in there, getting that single stock. Who's
making it easy for you to kind of make your tiny,
very small, low dollar gambles.
Speaker 1 (27:44):
And that Robinhood interface is fantastic. We've talked about the
downsides of that interface, specifically for people who don't want
to be and shouldn't be trading.
Speaker 2 (27:52):
Hey are less discipline yea, And who are.
Speaker 1 (27:54):
Supposed to be wanting to invest in index funds, in
a roth Ira or something like that, Well, that could
be detrimental. But if this is just the relief account
where you're sticking money that's only going into single stocks,
I think that's probably a good choice. Something else worth mentioning.
Don't forget it about the tax bill and the paperwork
that's associated with some of this extra trading you might
be doing. If you're day trading, like if you're making
(28:16):
trades often, yeah, at most days, like a lot of
days a week.
Speaker 2 (28:20):
Learns back in twenty twenty, Yes, when all the meme
stocks are blown.
Speaker 1 (28:24):
Up, there's nothing else to do but sit on your
computer and trade stocks. I guess you could find that
your attraction to single stocks makes for a miserable March
in April, So go ahead and dabble, but making fewer
trades and having a longer timeline is still a superior approach,
even if you're investing in individual stocks. So if you
invest in a company that you believe in, buying one
week selling the next doesn't necessarily make a lot of sense,
(28:47):
then you're trading based on like CNBC talking heads and
less on fundamentals of what a company's got going on.
But some folks believe, and I can totally see how
that's true that having this separate account can act as
this pressure release valve. It allows you to stay the
course in your other accounts over the long haul. And
I do think it's going to be the case for
somebody like Anna who wants some of the actions, some
of the fun. I think it's a learning experience too.
(29:08):
It really can be investing in single stocks and then saying,
wait a second, my next ones are going up, my
single stock portfolio is going out poorly, my Robinhood account
is doing It can reinforce I think for most people
it does. I guess for the I would call them
unfortunate people who end up performing better over those first
six months of single stock investing. It could lead to
the opposite, and that's right reinforcement. But I love this
(29:30):
idea of giving it a try with a small portion,
especially when you're so buttoned up in every other area
of your personal finances.
Speaker 2 (29:36):
Totally agree, and then not to mention too. If you
like the interface and you are disciplined, Robin has got
the match as well, and so you might find yourself
now migrating your roth Ira over there as well. Again,
if you can stay incredibly disciplined and keep that money partitioned. Jill,
let's get to our next question. This is from a
listener who based on her question, it sounds like she
might be with one of the big banks. Let's hear
(29:57):
a question about CDs.
Speaker 5 (29:59):
This is in the from California. Last year, I put
seventy five thousand dollars into a CD for eleven months.
The maturity date is coming up, and I don't know
what to do. I usually let it roll over. The
bank letter says the current interest rates are zero point
(30:20):
zero five percent and zero point two five percent, not
very good. If you could tell me what to do,
I'd appreciate it.
Speaker 2 (30:30):
Oh, Joel, So she mentioned receiving mail from her bank.
I think that's one of the big giveaways that she
might be with one of the big banks, aside from
the fact that the rate seems fairly crummy.
Speaker 1 (30:39):
I think that's probably true.
Speaker 2 (30:40):
It was the last time you received something in the
mail from your online bank.
Speaker 1 (30:43):
Yeah, I don't really, but I get mail from the
big banks more than I do from banks. I actually do.
Speaker 2 (30:48):
Businesses as they're trying to win you.
Speaker 1 (30:50):
Yes, yeah, like Wells Fargo and Chase, like Box all
the time. Evidently works.
Speaker 2 (30:54):
I mean, they wouldn't continue to send you mailers if
there's not a certain percentage of folks who are saying, oh, yeah,
maybe I will open an account with them.
Speaker 1 (31:01):
Hasn't worked for me, and it won't work. Keep trying,
keep wasting your money. And you think you're so disappointed
at least on that front. Well, Linda, we love that
you took advantage of those high rates when they were available,
and CD rates have been epic After something like ten
plus years of utter worthlessness amount we did not talk
about CD rates at all in the first few years
(31:21):
of this podcast. There was no reason too. There was
no reason to talk about CDs, like what benefit did
they offer to people? In twenty eighteen, twenty nineteen, nothing
very little bit. They were essentially a failed savings account.
Speaker 2 (31:36):
But as you imagine, if you worked in the ceded
department back in like twenty fifteen, you.
Speaker 1 (31:41):
Just like toil in your thumb. So folks to be like, wait,
what you had nothing going on? You're playing wordle except
for it didn't even exist. That neither mine sweeper perhaps right,
But as the Fed raised rates, savers have benefited, and
as the potential for rate cuts looms larger, locking in
higher rates could be a smart strategy. So it's one
of those things where CD rates, Yeah, they vaulted up
(32:02):
alongside the rates of high yield savings accounts, and they
were exceeding the rates that a lot of high yeld
savings accounts were offering. That doesn't seem to be the
case right now, but the play is to be able
to lock in the rate for longer with the at
least belief the rates are going down from here on out.
Speaker 2 (32:18):
Yeah, but step one, you definitely don't want to keep
sticking around with the bank that you're currently with because
I'm not sure what sort of rate that you were
getting before. It sounds like it was fairly decent, and
you're not really impressed with what they're saying that it's
going to renew at But bottom line, these rates just
are not competitive at all. Wow, what does she say
she was being offered point like point zero four or
(32:39):
something like.
Speaker 1 (32:39):
That, point two. It was awful, It was awful. Whatever
she said in the question, it was awful, was terrible.
And that's another sign that this is probably a big
bank because the rates are not competitive in the least.
Speaker 2 (32:48):
Yeah, they're just pretending that they're. Yeah, they're basically stuck
in twenty eighteen. And so we would suggest checking out
a site like doctor of Credit dot com, and they
are they're going to have a current list of the
best rates that are being offered on c out there
by all the different banks. They've got nice little tables
and these are articles that they update monthly. Ally bank.
They are a great place to turn, although you might
(33:10):
be able to eat out higher rates elsewhere.
Speaker 1 (33:12):
Ally's in the top of the pack, but they're not
usually at the very forefront exactly like I mean, I
personally use ally and it's just because like everything that
they offer, like the site is great, the app works
really well.
Speaker 2 (33:22):
They're always offering some of the most competitive rates, but
they're not at the cutting edge of the best rates
that are out there. They're like top five percent, not
top one percent. Yeah yeah, but that being said, they're
no penalty. CD is a really cool product just in
case you decide that you do need the money before
the CD term ends. It's basically like locking in a
high yield savings rate that, although that being said, I
(33:44):
think at the moment is not quite as high as
what the different high yield savings accounts are offering. Basically,
the banks don't want to get caught holding the bag.
Speaker 1 (33:53):
After IRET drop. But in what you're doing is saying,
I'm willing to take a slightly lower rate right now
because I'm protecting against downside future risk of rates going
a whole lot lower and savings accounts rates dropping. So yeah,
maybe I've got a lower rate for the first three
months of the CD, but I'm hoping that my rate
is actually higher than the savings account rate for the
last nine or twelve or fifteen months of the CD,
(34:15):
however long of a term you're taking out And basically
that product that Ally offers and they're the only bank
we know of that offers that it's like a mix
between a highield savings account and a CD. It's kind
of trying to blend the post book World's fybrid product
exactly like the toy Deeprius of saving sure vehicles instantly. Enough,
though the premium for CDs seems to have gone away,
(34:37):
kind of like I said, you used to be able
to make an extra half a percentage or so if
you opted to lock your money away inside of a
CD instead of a savings account. But the truth of
the matter is you're going to snag a higher interest rate.
You're going to see superior returns, at least in the moment.
In one of our favorite high old savings accounts these days,
Betterment is paying five percent with an initial half percent bump,
(34:58):
So five and a half percent an ANYCD i've seen.
But of course, like I'm saying, the downside of that
going that route is if rate cuts become fast and frequent,
the rate isn't going to stay there, and you might
be wishing you'd lock that rate in even if it
was slightly inferior and not lifted up to chance. But
of course, predicting what the FED is going to do, Matt,
that has people have been disappointed time and time again
(35:20):
by that making predictions, the FED ends up not doing
what the crowd thought they were going to do. And
so if your whole reason for choosing a CD over
a high oled savings account is banking on rate cuts,
that might not be the best route to go either.
Speaker 2 (35:34):
Yeah, And one other consideration is your personal timeline and
what it is that you want to do with that money,
because is it even a good idea, let's say, to
have as much money within a CD where it is
locked up, because these might be dollars that you'll need
for a down payment, or maybe they're dollars that you
want to live on in a year or two. And
if so, I think savings products are more than likely
(35:54):
going to be your best bet, which.
Speaker 1 (35:55):
Could be a CD or a savings account.
Speaker 2 (35:57):
True, but depending on your timeline, if some of these
dollars are let's say for five plus years down the road, well,
investing a portion of these dollars could make a whole
lot of sense. Just wanting to put that on your
radar because of the fact that I think there's this
a psychological shift that happens when you've got money within
a hygy old savings because at the end of the
month you get that sweet little dividend payout, and it's
(36:20):
not an inconsequential amount of money. Let's say, if you
have a year's worth of living expenses set aside, the
way we talk about investing, you don't often realize or
perceive that the value of that is going up because typically,
and again the way we talk about investing again, ninety
five plus percent of your net worth, it's something that
(36:41):
you're basically ignoring. It's not something that you're looking at frequently.
But when you're there in your savings account, that's something
that I look at much more frequently, Joel than I
look at my brokerage accounts, and then I look at
my roth IRA, then I look at my four one K.
And so when you get that end of the month
interest payout, you might be tempted to think, oh, this
feels nice, is fun, this is good when and that
(37:02):
might distract you from the fact that you need to
take that chunk of money and instead stick that in
the market.
Speaker 1 (37:07):
And I think just because it's been in the CD
often makes people think, well, clearly, the next place to
put it is in another CD. But it's important to
reassess your goals and say, is that the best place
for the money? Maybe I had an earmarked for this
one thing, but if you're planning on locking it up
again for another portion of time, is the CD the
best vehicle for this money? Maybe it is for half
(37:28):
the money, and then maybe the other half should go
towards something. And that's another thing. You could divide it
up half between CD, half between a CD and highyield
savings account. You co do half a CD half into
your investments. I mean, there are a bunch of different
choices you can make, but I would just question whether
or not all the money belongs in a CD or not.
And you know, this is a big chunk of money, Matt.
The stakes are high rate shopping. When you've got five
(37:50):
thousand bucks in the bank, that's one thing. But Linda
can realistically see a four plus percentage bump in earnings
on seventy five thousand bucks a.
Speaker 2 (37:59):
Lot of money.
Speaker 1 (37:59):
We're talking thousands of dollars over the course of the year.
So there's a lot of people who make a mountain
out of a molehill. I got a couple grands, should
I go from this bank that's paying four percent to
the one that's paying five. That's a small potatoes question.
Ye potatoes question. Yea is one thing.
Speaker 2 (38:12):
But if we're talking two or three percent, but then
on top of that, we're looking at a number that's
closer to six figures, that's why we're having this conversation.
Speaker 1 (38:18):
It's well worth her time and energy, exactly.
Speaker 2 (38:20):
And that's the that's truly the bigger sort of view,
the larger point of view, the what ten thousand foot
view that we want you to take when it comes
to your finances, because again, rate hopping for a half
a percent, eh, probably not just stick with the bank
that you have always liked or one that serves your needs.
But when you've got a fatter chunk of change on hand,
that's yeah, you want to be a little bit smarter
(38:41):
with that money. All right, Joel, we've got.
Speaker 1 (38:42):
More to get to.
Speaker 2 (38:43):
We're going to take our Facebook question of the week,
and speaking of returns on your money, this one has
to do with receiving a negative return on your money,
and we'll get to that one right after this.
Speaker 1 (39:01):
All right, man, we've got more money saving information we
got to deliver on this episode. Of course, it's time
for the Facebook question of the Week. This one comes
from Kira and she wrote, is it better to pay
down the principle of your mortgage or put that money
into home improvements? Which one would get a better ROI
return on investment. By the way, the interest rate I've
got on my home is six point eight seven five percent.
(39:23):
It's not what we're used to hearing from people, Matt
six point eights. That's normal now for people taking out
of mortgage. That was not the norm for a long
period of time.
Speaker 2 (39:31):
Yeah, well, this is a great question, and from where
we're sitting, the answer is pretty clear. Paying off the
mortgage is going to provide the best return on your investment.
And that's because most home projects have a negative return
on investments.
Speaker 1 (39:45):
They're not really an investment.
Speaker 2 (39:46):
No, no, there are you know, we've talked about this recently.
I feel like we've talked about garage doors. There are
a select few projects that will net what it is
that you paid for that like installing a new garage
door if you're if you get an old, crummy one,
or painting.
Speaker 1 (39:58):
It like we talked about. And actually a lot of
people in the Facebook group how the money Faceboo group
are saying, oh, that's something I'm interested in eighty bucks
to like refresh that door and improve the value of
my home. That's that's a no brainer.
Speaker 2 (40:08):
And in fact, I literally have paint swatches on my
garage door right now, Joe, because that's a conversation I
had with my wife. So we're not doing We talked
about a listener who he talked about doing the faux
wood treatment.
Speaker 1 (40:18):
Hu.
Speaker 2 (40:19):
I didn't even realize this until I looked at my
garage door up close. You don't, really, I guess stay
next to your garage door when it's closed, typically if
you're home. I don't know. If I'm home, the grash
door is open and then I hit the button when
I leave and then it closes. But very much I don't.
But I'm like, your neighbors look at it more than
you do. There's a wood grain texture already on there,
so I'm like, oh, shoot, maybe we should do the
wood grain grain thing. But that being said, we're looking
(40:39):
at painting it, but we are planning to do the
magnetic door hinge and door handle kits. Did we talk
about that when we talked about the we did, and
they even sell like these garage door window kits. There
and they're all magnets and they just stick on to
the door, and they're surprisingly incredibly realistic looking cool, which
it kind of sounds like you're just putting lipstick on
(41:00):
a pig. It's just like, here's a giant, ugly metal
garage door. Let's find a way to make it look
more custom But I'm telling you it's surprisingly convincing. Ni
Kay and I will walk around the neighborhood and I'm like,
I'm pretty sure that's one of those kids right there,
and we would never have noticed that before. But because
it's something we're considering, it's on our radar. You're gonna
take them before and after picks to share with us. Yeah,
I'll do that either way. I miss them on the Instagram.
(41:21):
I'm sure if we're gonna do the door hinge kit,
but if we do, I definitely want make sure to
capture that. But all that being said, most folks don't
get excited about garage doors, right like they get the
most jazzed about new cabinets, new countertops, a bathroom renovation.
Speaker 4 (41:34):
Right.
Speaker 2 (41:35):
Those certainly make a big visual impact, but they might
only get like two thirds or like half of the
money that you spent back in your hands if you
do end up selling it, because guess what, you don't
have universal taste, And there is no such thing as
universal taste, because you know, you take the average of everybody.
Is there actually somebody who likes builder like the standard
(41:56):
finishes that a builder might choose. No, people have their
own opinions as to what it is that they want
to surround themselves with.
Speaker 1 (42:01):
YEA, well, I think HGTP has given people at least
an idea of what they should be everybody as a professional.
But even still like that, that tastes very wildly, and
I think some people might might say, oh, well, clearly
paying money down on the mortgage because the interest rate
is so much higher than what most people have where
oh hey, if this was a two and a half
percent rate, Matt and Joe would have different advice. Not
(42:22):
really actually, because you would think, oh yeah, a low rate.
Speaker 2 (42:26):
It does sway the decision a little bit, a little
It makes it easier to say that, yes, yes, but
the same information kind of that you were just talking about, Matt,
about the return on investment of home improvements, that remains true,
Like the numbers don't change.
Speaker 1 (42:39):
It's not actually an investment. It's just sinking money into
a home. It's still a negative return, and the goal
is to do it for your own pleasure if you
have the cash, not because you think it's going to
make you money. Right does that does? So we're not
really against home improvements, Like you're gonna do some home
round projects yourself, some big ones. You know, we've both
taken on projects of various sizes around the house from
(43:01):
time to time. Most time owners do. That's like part
of the joy and privilege of being a homeowners. You
get the mess of that thing onlike being a renter.
Had a renter the other day asked me if they
could paint the bathroom walls salmon, and I was like,
I don't know. Like I got a mock up of
it. It didn't look awesome. I was like, if you want
to paint them back at the end of the day,
I guess, but I don't know if I want to
like it to be left sam ex, I don't think
(43:22):
I'll be as appealing to people in the future.
Speaker 2 (43:23):
Well, and then you're potentially left with the sloppy paint shots.
Right if they're the ones doing it as well, because
they're in a rush to get out of there because
they're excited about their new place.
Speaker 1 (43:30):
I've been moving on too, So these are the kind
of things though that is a renter, you have to
ask that question. As an owner, Yeah, you don't, but
you know, home equity debt, it's not one of the
worst forms of debt. But it's ideal to take on
those projects because you have the money saved up, you're
excited about your bathroom, your porch, whatever it is. It's
likely to increase the value of your home some but
don't do it for that express purpose. That's that's just
(43:51):
shouldn't be the motivation behind it totally.
Speaker 2 (43:53):
And by the way, let's go back to the like
the theoretical two and a half percent mortgage. We're not
saying that if you have a two and a half
percent mortgage out there, that you should be paying that
off because that's a better return on your money than
actually renovating the home.
Speaker 1 (44:03):
You should be doing something completely outside of those Yes, exactly,
Like if you had a two.
Speaker 2 (44:07):
And a half percent mortgage, role even though paying that
off gives you a guaranteed too and a half percent
return on your money, is that what you're gonna do
with extra money on hand, No, I'm going to take
that money and instead invest it. And even in Kiro's case,
she's got a six point eight seventy five percent, honestly
does get a little bit trickier because it's like, Okay,
are you willing to turn down a guaranteed seven percent
(44:28):
basically on your money.
Speaker 1 (44:30):
I think I would say yes.
Speaker 2 (44:31):
I think I would say no, I'm going to keep
that around. And because of the stock market, historically you're
looking at ten percent, and that's like looking back over
the past one hundred years, and if you look at
the past two years, you're looking at forty percent returns
in the market. And so what I'm highlighting here is
the potential for outsized returns by investing your money as
opposed to going with the quote unquote safe option of
(44:52):
paying down debt.
Speaker 1 (44:53):
Well, the other problem is you pay off your home quickly.
That's great, that is a wonderful thing. It's nice to
be debt free, to own the home you live in
free and clear. But it's also massively delayed your ability
to build wealth for your future too, because you prioritize
one over the other. The other thing. I think it's
worth pointing out here Matt is that there's all sorts
of things that we call investments. I hear people I'm
(45:13):
going to invest in a nice TV, and I'm always
like no, Or I'm going to invest in this new car. No,
that's not what that is. That's a purchase. Let's just
call the thing what it is. And this is where
it gets confusing with home renovations and owning a home,
because a lot of people talk about your primary home
as an investment too, and it is more of an
investment than those other purchases I just mentioned, because yes,
(45:35):
the value is going to go up over the years
that you own it, and you want to keep it
in good shape, of course, because you want to be
able to make money on it, hopefully at the end
of the ownership time period. But that still doesn't mean
you're going to see value and ROI basically for all
the improvements that you're making. So you have to be
careful about how how you talk about those things. Sometimes
I think the language that we ascribe to the home
(45:57):
that we own, talking about it, thinking about it too
much just an investment allows us to mentally feel comfortable
funneling more dollars into it when we're not going to
see those dollars back at the end of the day.
Speaker 2 (46:06):
Yeah, it's just so hard when you're looking at losing,
like that's what we need to do, Actually, we need
to flip the script and instead of seeing, oh, well
this home improvement, it's gonna you're gonna get back ninety
six percent. Like that sounds like a high percentage amount, right,
And actually if you go to like the different so
you're gonna lose four percent and say yes, exactly, completely
flip the script and do the negative. And so it's like, hey,
would you stick money into an investment when you know
(46:28):
pretty much guaranteed you're gonna lose four percent? Absolutely not.
And I was gonna mention there's different garadual companies out there,
and it's funny because their stats are like, it's one
hundred and three percent one hundred and four percent of
the money that you stick in there. So basically they're
trying they are trying to write the ship and be like, no,
you will, this is going to cause you to make
more money. And I do think there might be some
(46:50):
rare instances where that is the case with like the
worst garage door, and even outside of that, it's different
renovations and improvements that you might make on a home
because it is such an eye sore. Yeah, there are
always going to be outliers, though, there are a lot of.
Speaker 1 (47:04):
Home flippers that truly do well in the space as
because they know how to buy, they know how to renovate,
and they know how to sell.
Speaker 2 (47:13):
They are looking for the outliers. They are looking for
the diamonds in the rough. But that's not what most
people have.
Speaker 1 (47:18):
And there's a lot of other home flippers who lose
their shirt because they don't know how to do those things. Well.
It's precarious endeavor. It's not that it's not possible to
make those improvements if you're an incredibly detail oriented person
and frugal and you kind of know all the ins
and outs of home flipping and and and the like,
but you kind of get all got to get all
those other things right too, That's right.
Speaker 2 (47:36):
Yeah, So kyro We hope that gets you pointed in
the right direction.
Speaker 1 (47:40):
Joel, Let's get back to the beer.
Speaker 2 (47:41):
You and I enjoyed a super Megabyte, which is a
beer by Hot Butcher for the world. What do you think, Bud,
I always like the Hot Butcher branding. This one had
like a metal shark on the front. Yeah, it looks
pretty great and hand illustration.
Speaker 1 (47:54):
Yeah. I love the bear vibe to it. Love the
beer so good. Yeah, and I like they call it
super megabite because it's got this big old hot bite
when it hits your tongue. Yeah, it's abrasive in the
best way.
Speaker 2 (48:04):
It's like, I feel like megabite would have just been
the double, but super mega bite tells you that. Okay,
I see how this is a triple yes, right, yeah, exactly,
And it's got it's bright tropical.
Speaker 1 (48:13):
I think it's like luscious. They're like almost enbellows your tongue.
It's it's a beautiful.
Speaker 2 (48:17):
Beer, massive amounts of flavor. Like I picture, you know,
like the Richter scale, like little needle on the scratch
a piece of paper like or a light detector test
that's also yeah yeah, yeah, so similar thing, Like the
paper was moving along and the you know, the little
pin the needle was right there in the middle kind
of hanging out. And then as soon as I took
a sip of the beer, it like wow, like shut
(48:37):
up and down. There's a whole lot of flavor going
on here. You can definitely taste, how big it is,
and yet you almost get some of those like a
candy sort of presence with it. It's not just the
herbal sort of flavors that you get with some of
the different hazy IPAs, but it has almost like the
I guess you kind of have to have some of
those candied sweetness sweeter sort of notes when you are
dealing with a triple like this. But yeah, really tasty.
(48:59):
Glad I got to share it though.
Speaker 1 (49:01):
Same me too. Really good. All right, that's gonna do
it for this one. We'll put links to some of
the things we mentioned up in the show notes on
our website at howtomoney dot com. Don't forget to sign
up for the how to Money newsletter. You can find
that at how to money dot com. Slash newsletter comes
out every Tuesday morning, free of charge, obviously, and comes
check full of personal finance information that you can use.
If you're listening to this podcast, you're gonna like it.
(49:22):
It's a no brainer. All right, buddy. That's gonna do
it for this one. Until next time, Best Friends Out,
Best Friends Out.
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