Ask HTM - Birth Now Pay Later, Forcing Home Equity with a Basement Build, & Saving vs Paying Credit Cards #946

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 - Should we take advantage of interest free payments offered by our hospital after a baby delivery?

2 - What’s the best way to finance a basement buildout?

3 - After we move out of state, what should we do with my wife’s pension that she will no longer qualify for?

4 - Is it smarter to focus on building up my savings or paying off high interest rate credit card debt?

5 - Can you recommend a guaranteed rate of return over 4% with a term of 12 months?

 

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During this episode we enjoyed a Dark Arts Tequila Barrel Aged Stout by Wicked Weed! 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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Episode Transcript

Speaker 1 (00:00):
Welcome to Head of Money. I'm Joel, I'm Matt.

Speaker 2 (00:03):
Today we're answering your listener questions.

Speaker 1 (00:24):
That's right, buddy, so let's get to it. We're gonna
hear from a listener who's asking about BNPL and we're
not talking about buy now, pay later. We're talking about
baby now, pay later. He snap new acronym. What could
go wrong? Why not? If that's something that they're offering.
That's what this listener is asking. We'll get to another
listener who's thinking about forcing some equity into his home

(00:46):
via a basement build out. We'll give our thoughts there.
And another listener she's in a tough spot. She's trying
to choose between saving some money versus paying off some
high interest rate credit cards. We'll share our thoughts there.
Plus we've got plenty more to get to today as well, buddy. Yeah,
all right, quick frugal or cheap for you? Though, before
we dive in, you know I love frugler cheap.

Speaker 2 (01:07):
I know you do so, and I think I know
where you stand on this actually, because I was trying
to convince my wife that she wants some new tennis
shoes at but uh, the tin isshues are expensive, and
occasionally I'll wait for a sale to pop up, but
she was like, I need them soon.

Speaker 1 (01:19):
Can you help me find a good deal. We're any
good deals to be had on the new version? Yeah?
Is that what she was saying?

Speaker 2 (01:25):
Whereas me typically I load up when there's a sale.
I literally have like three boxes in my closet really
for the next pair of shoes to come down the pike.
When they're on sale. I get them and they're fresh,
and they've you've never worn, ever worn? Oh my god, yes,
just ready. You're like a borderline tissue order. So are
you talking about this? When I get a pair of
running shoes for like twenty five bucks that it's pretty

(01:45):
solid that they're.

Speaker 1 (01:47):
Normally one hundred bucks or wh whatever. I'm going to
load up and twenty five dollars really yeah? Cheap? Yeah?
We kind of like I can log into my what
kind of heads are you running around it? I can
log into the back end of the site and show
you mighty cow recent orders. That's the affordable shoes. Are
you referring to the conversation we had at pizza movie night? Yeah?
Last week?

Speaker 2 (02:04):
Okay, So okay, so you actually think helps convince Emily
that used pair of shoes I gently use pair of
shoes on eBay was the cause?

Speaker 1 (02:13):
Did she say yes, yeah, oh that's great. So what
do you think, Well, she was so she was pushing
back against the idea of getting a pair of used shoes.
And this is something I've done multiple times. Kate's done
it as well. And I wonder if it was more
Kate being able to sort of sway her opinion, because
as opposed she looks at me and she sees you
to a certain extent when it comes to cheapness, but

(02:33):
like far less attractive version of me, a little bit shorter,
half Asian as opposed to half Norwegian. But no, I
think it's a fair question worth asking, you know, like
why is it that we feel so comfortable with buying
used homes or use cars. Of course, we're all about
buying used cars, but when it comes to clothing or
you know, let alone shoes, there's a little bit of
a negative connotation there. Folks are less willing to go

(02:56):
to the thrift store. Personally, I love you love used underwear,
definitely wouldn't do that. Of course. Well, I think that's
on the line somewhere this might be a helpful framework,
and so maybe that's it. I think there, let's introduce
an intimate scale, like there's this gradient, and the less
intimate an item is, I think, the more willing we
are to buy used for it to have been something

(03:18):
that someone else, because like you go into your home,
lots of people come through your house, you have guests over,
you have friends over. There's no part of your house
that's like up against your body, right, They're not like
coming into my bed right exactly. But when it comes
to clothing, and especially something like shoes or you know,
the more extreme case that's literally called intimates is underwear.

(03:40):
So I understand the pushback on that, but man the
ability to snag a deal.

Speaker 2 (03:44):
I think the one question that's really important to ask
is how much usable life is left in this product,
Because if it is incredibly gently used and you're getting
a fifty percent discount essentially because someone worred a few
times and didn't love it or didn't fit quite right
and that's why they're selling it, then you're getting a
great deal. But if it has been let's say, through
half of its usable life, and you're getting a sixty

(04:05):
five percent discount, I'm probably not willing to make that
trade off. I would rather get the new thing and
get most of the us or all the usable life
myself out of it.

Speaker 1 (04:13):
Totally agree there. Yeah, Like I'm not buying shoes that
look like they've been used, Like these are quote unquote
use shoes and maybe they were worn for like a
week or something like that, or maybe they're I don't
like a department store that unloads a whole lot of
open box shoes and so they've been worn around the
store as people have tried them on or something like that,
so they can't sell them. I'm totally fine with those
kind of shoes. I'm not looking for a pair of
shoes that look like they've been through the ringer already

(04:35):
and like the color is starting to fade, or there's
like a lot of tread missing. Nah, that's like it
was it last week. That's that's more along the lines
of like you buying your used tires where it's just
like where did you get these time? Yeah, that was
a bad idea as opposed to like a mismatched set
of tires that are brand new perhaps okay that feels
a little bit different, or a pair that was out
on the showroom maybe because of that has got like

(04:57):
kid fingerprints all over it or I don't know, I'd
be totally fine with but those tires on my car.
In a similar way, when it comes to shoes, I'm
not looking for a pair of shoes that are completely
worn out or Yeah.

Speaker 2 (05:09):
This conversation is making me think that I need to
go to the thirst store again soon. It's been it's
been too long.

Speaker 1 (05:14):
The three was great. Yeah, especially with kids. Kay was
just there, And especially when it comes to shoes for kids,
Oh my gosh.

Speaker 2 (05:20):
They're not usually getting all the usable life out of
it because there's so much.

Speaker 1 (05:24):
I mean, like, we buy almost what looks like brand
new shoes, and in a lot of cases and a
lot of instances, they are pretty much brand new, and
they're just shoes that the kids never wore. That's how
my five year old got a pair of Adidas Sambas,
like the indoor soccer shoe that was super dope. Yeah,
I'm not gonna go out and buy those, but I'll
certainly pick up a pair for three bucks. Sure.

Speaker 2 (05:42):
Yeah, you know, that's a good point. I think all
for it, in particular for kids, stuff used is gonna
save you a lot of money. Those guys they grow
like weeds, you know, when they're when you're young. It's true,
all right, Matt, let's mention. The beer we're having on
this episode. This a tequila barrel aged stout from Wicked
Weed Brewing. It's a part of their Dark Art series.
We'll give our thoughts on this at the end of
the episode. And if you have a money question we'd
love to hear from you, just go to how to

(06:03):
money dot com slash ask for the instructions for how
to submit it. But really it's just recorda voice memo
emailing it over to us. Now, let's get to a question,
and this one is specifically about optimizing debt payoff.

Speaker 3 (06:15):
I met in Jewel. I have two somewhat related questions.
The first is a medical bill related question. My wife
and I recently had our first baby and have about
a twenty seven hundred dollars bill that we owe. We
have the cash to pay it right away. However, the
hospital gives us ten months of interest free payments, so

(06:35):
at the end of those ten months or ten payments,
the bill would be totally paid for without any interest,
or I could pay it all on a lump sum
right now. But my thought is, since I have a
high yield savings account, I could just leave the emergency
or leave my emergency fund there and make the payments
and continue to gain interest on that money. Curious to

(06:57):
hear your thoughts about that. The second question is somewhat
related and has to do with HSA accounts. I have
a pretty full HSA account, money is still going into it.
I know you guys have explained the process of keeping
track of those records of medical bills and getting the
cash out later, but I was wondering if you could
maybe explain that again or direct me to an episode

(07:20):
that explains that in full details. Thanks love what you
guys do. Thanks for all your help.

Speaker 1 (07:25):
That's yeah, this question actually was from Phil. He didn't
say his name, but of course he emailed his voice
memo over that's money faux pas, one fair Phil. And
he didn't say where he lives, so let's just pretend
this is Phil from Chicago. I don't know if that's
actually think say Maui, but Mali? Yeah, all right, why not?
I don't think we've ever heard from someone in Mali.
But congrats on the new baby, Phil, It's great. News

(07:47):
for you and your family. And I will say, twenty
seven hundred dollars. This is almost exactly what the average
cost of having a baby is today with insurance, which
isn't jump change, I'll say, but it definitely it certainly
could be worse because not being insured for that it
makes it a lot more expensive. This is something I've
had personal experience with having four kids. We have we

(08:10):
explored all the variety.

Speaker 2 (08:11):
Of ways to pay for a baby because you have
traditional insurance for zero of the birth one we did
have traditional insurance for I think it was funny because
it was actually our second we got Kate on healthcare
dot gov plan, but the first one we're like, we're.

Speaker 1 (08:25):
Going to do this cash pay up front. We're going
to get all the discounts. See how low we can
get this bad boy. And it wasn't that low. It
was around ten thousand dollars. Yeah, but it's.

Speaker 2 (08:34):
Actually still significantly better than what most people who don't
have insurance pay for birth of a baby. But that's
still a lot of money, even still much more than Yeah,
exactly listenary that you just mentioned. But there are other ways,
I will say, because we tried different pat like so
we had health sharing.

Speaker 1 (08:48):
We thought that would help with the cost. That didn't.
It doesn't. It does not. They don't cover that, and
we knew that as well. But we're hoping that that
with a different discounts that they offered, that we would
have been able to chip it down. I will say
our most affordable baby was the last one because we
got better and better at it. And it's also because
we didn't give birth in a hospital. We were at
a birthing center. And so for us, at least where

(09:11):
we live, there's a quote unquote, you know, a birthing
center that's not technically a hospital. They're associated with a hospital.
So if you are looking if there isn't an emergency,
for instance, and you're looking for that peace of mind,
it's they have the ability to get the birthing mother
over there super fast. But by avoiding the facility charge
of giving birth in a hospital our last kiddo, our son,

(09:31):
we were able to I think we were out the
door with like the prenatal care and everything. Total. Man,
we're somewhere around like seven to eight thousand dollars, which
is good a lot better than the other three, for sure.
I think it's a good tip for maybe some folks
out there, for everyone else out there who don't.

Speaker 2 (09:46):
Have insurance center looking appropriate. Well, let's talk about Phil's question,
and let's first talk about the interest free payment question
that he presented. You know, it's similar to one that
we get about paying off a mortgage when you can
make more in a savings account.

Speaker 1 (09:59):
Right, It's like kind of that ARB trash.

Speaker 2 (10:00):
Can I keep the money in savings because I'm going to,
you know, necessarily exceed the return that I would get
otherwise paying down that debt more quickly, and I'll we're
talking about vastly bigger sums of money right when we're
talking about the mortgage question. But we do indeed prefer
folks to keep their savings intact along with their mortgage
pay it down as agreed, all else being equal. But

(10:22):
this question I think adds a little bit of nuance, right,
And there might be more similarities maybe with the interest
free loans that some furniture chains offer.

Speaker 1 (10:30):
Matt. You've seen those commercials.

Speaker 2 (10:31):
It's like no payment's no interest till twenty twenty nine,
and people are like, all right, let me go get
that couch, and why not I don't have to pay
a dime on it for a long time, but the
fine print will screw you over in a massive way
if you don't jump through the proper hoops. The penalties
are insanely steep. It's you know, essentially all the back
interest that needs to be paid ballooning the cost of

(10:54):
the couch you bot. And it's similar with some of
these hospital loans. Right if you don't pay off your
loan while promotional interest rate is in effect, you're gonna
also owe a lot of backloaded interest, which just makes
this much more of a risky maneuver. Whereas, like with
the mortgage, less risky you can always say I'm not
gonna pay it off now. Oh, but you know what,
six months later, the facts on the ground change. I'm
gonna choose to pay it off at this point in time.

(11:15):
But with this loan, if you from the hospital, there
is a chance that you screw it up and you
end up paying a lot more than you thought, and
it doesn't end up being kind of the zero percent
interest loan that sounded so appetizing at the beginning, that's true.

Speaker 1 (11:27):
Yeah, So with that in mind, I'm not sure that
all that effort is worth the squeeze I'm probably not
gonna recommend for folks out there to do this. Because
you've got the cash, just go ahead, pay the bill,
be done with it. By doing that, you'll be able
to declutter your mental space. And it's not like you're
giving up much from a financial standpoint. If you so
crunching the numbers, I think you'll be giving up around

(11:49):
one hundred dollars in interest, which would have been taxable,
by the way, So keep that in mind. It's not
that I wouldn't reach down and pick up of eighty
bucks off the ground. It's just that I wouldn't attempt
to over optimize in this way. This decision that comes
with just the downside risks that Joel just spelled out.
If you find yourself not paying attention, and that might
happen right like right now you're thinking, I'm a pretty

(12:11):
buttoned up guy. Well like you might be having more
sleepless nights, you might have more brain fog setting in
than what you're typically used to.

Speaker 2 (12:19):
I'm pretty sure my a qu drop by about eighteen
to twenty two points. Matt, Yeah, in those early days
of having a baby.

Speaker 1 (12:25):
So I mean, and it comes down to the individual
comes back. I will say that, oh sure, yeah, yeah,
you're not as dumb as you used to do your babies.
But I guess I'm saying like, I don't know if
I would recommend this to most people if you are
like a robot, because I'm trying to picture myself in
this situation, and personally I think I would go through
with it. But it's because I know that, like I
set reminders on the calendar, I carve that money out

(12:46):
of accounts I ear market. I am incredibly disciplined when
it comes to maneuvers like this to ensure that I
don't end up completely forgetting and then having it go
into some sort of penalty interest territory. Yeah, certainly, if
we were talking talking about a large amount of money, right,
like let's say, if we were talking about eight hundred
dollars an interest as opposed to like eighty dollars an interest,
I think I would more widely recommend Hey, yeah, let's

(13:09):
jump through some hoops here.

Speaker 2 (13:10):
The more hoops I'm willing. It makes me think of
getting like a bank account bonus with an online bank
versus one of kind of the big big banks.

Speaker 1 (13:19):
And I did this like probably ten years ago, signed
up for a bank account with Chase, and man, you
had to go into the branch and it just took
a lot of time and old and I probably made,
you know, three hundred bucks for signing up for the
account for moving money around, but you have to make
like five to ten minutes of small talk with them, yeah,
to let them tell you on the other products, just
the hoops I had to jump through the rigmarole of

(13:40):
like eradicating that account.

Speaker 2 (13:42):
When I was done, just wasn't worth it. Like it
was just such a frustrating experience. I was like, I'll
never do this again. And my eyes would like, especially
back in the day, Matt, like three hundred bucks when
you're twenty six years old or something like that. I mean,
that's a lot of money. And so I was I
was more than willing to do it. And then I
realized even if the end of it, it just wasn't
worth the effort. So I would, you know, take that

(14:04):
into account, maybe count the cost ahead of time. Phil
This sounds like maybe it would be easier to pull
off and you're not going to run into a giant
bank bureaucracy, but still there are potential pitfalls that you
have to be aware of onto his HSA question. Matt,
I think that this is a two for question. Two
questions to one. I think that actually the birth bill

(14:27):
offers the perfect case study. Because you now have a
medical bill of twenty seven hundred dollars that you mentioned.
You could of course tap your HSA for those funds now.
But because the HSA, the health Savings account is so
dang flexible, and we'll link to some of the articles
we've written about HSA's on howdomoney dot com in the
show notes. You know, Phil, you could continue to leave

(14:48):
that money invested so it grows for your future. You
could use cash that you have in savings to cover
this twenty seven hundred dollars an expense that you have.
And when you think about it, logically, just randomly picked
a number, okay, sixteen years, how much would twenty seven
hundred dollars grow to in a sixteen year timeframe. On average,
that money would quadruple. So, you know, a decade and

(15:11):
a half from now, Phil could take the cash out
based on his twenty twenty five expense. You could essentially
leave the remaining eighty one hundred dollars for future healthcare
expenses that would be the growth on the money you
invested inside of your HSA. So you pull the twenty
seven hundred bucks out then for whatever you needed for,
and yet you've still got a big bundle of cash

(15:31):
that's working for you, working for your future. And you
could do the same with other prior healthcare expenses, right
that you haven't tapped yet. I love the idea of
leaving that money put if you have enough cash on
hand to essentially foot the bill now, so that you
can grow your investments tax free for the future, yes.

Speaker 1 (15:47):
Right, and that those remaining dollars you can tap for
any reason because money is fungible of course, as long
as you have the documentation proving you have other qualified
medical expenses. So what that means is that you do
need to keep up with your documentation, and so when
it comes to record keeping, like you don't have to
get fancy with it. This isn't some sort of super
sophisticated thing like I would just take a picture of

(16:09):
the bill to have a record, save it to like
a Google drive file for maybe that year, and then
just keep a running total in a Google sheet. You
can make an HSA receipt sort of a spreadsheet like
That's what I would do. But there are options using
different budgeting software out there, like personal capital or why
mapp where you can label healthcare transactions specifically and then

(16:30):
you can go back to it look it up. But
then within those proprietary sort of systems, there's still a
risk because are those sites going to be around forever?
Is this are these options or is this what do
you call it, usability that they're no longer going to
keep up with? Perhaps, So it's just something to keep
in mind. If it was me, I would do exactly
what I said, keeping up having that Google Drive folder

(16:51):
with for your HSA receipts and keeping a running total
of those of the date that expense was made, a
little description of it, the total dollar amount, and the
amount of that dollar amount that you have reimbursed to yourself,
and hopefully for a long period of time it'll be
none because you're allowing those dollars to continue to earn
and compound.

Speaker 2 (17:12):
Yeah, Matt, even though you and I have never had
access to an HSA, Sadly, it is something we talk
about frequently on the show because it is this underrated
investment account that people can take part in if they
have a high deductible health care plan and they can
grow money for their future tax free. Like it's not
tax deferred, it's not a tax break in the here

(17:33):
and now. It's no tax on that money. Ever, if
you jump through the documentation hoops right, and if you're
spending that money on qualified healthcare expenses. But again, what
makes it so great is that you can incur the
healthcare expense now and not take the disbursement until decades
down the road. And this brings up another question like
do you even need to keep receipts And some people

(17:54):
would say, I don't even bother. And part of this
depends on when you want to tap those funds. So
if you don't need any HSA money, if you're like,
I'm not going to use it until I'm in my
mid sixties, well, if you don't need it until after
age sixty five, you might not even need to go
through the hassle of keeping receipts. But I think it's
a minor hassle and I think you still should if
you want to use your.

Speaker 1 (18:13):
Yeah, it just gives you options to be able to
pull some of the money out before right full retirement.

Speaker 2 (18:18):
And that's what by the HSA can be so powerful,
in particular for early retirees because you can start to
draw down on that fund when maybe other dollars that
you have investor for your future are just too hard
to get or they're going to cause too much financial headache. Right,
You're going to have penalties for accessing that money early.
And so, yeah, let's say you wanted to use your
HSA to pay for Medicare premiums, though later on in life, well,

(18:41):
you don't need receipts for that. Still, I guess I
just like the idea of tracking for flexibility purposes. The
HSA is just one of the best accounts because it
is so darn flexible. And also, don't forget that an
HSA can effectively turn into a traditional IRA later in life,
but then it loses one aspect of that triple tax advantage.
And the ideal at least is to get the triple

(19:04):
tax advantage on the majority of the dollars that you're
sticking in that account. Yeah, but what you're highlighting is
that you don't have to worry about overfunding that because
eventually you'll be able to draw down on that and
pay taxes all that income just.

Speaker 1 (19:15):
Like you would with the traditional I ring. Yep, But Joe,
we got more to get to. We're gonna hear from
a listener who's expecting to make bank and the near future.
We'll hear from him plus others right after this. All right, Matt,
we're back now.

Speaker 2 (19:33):
We got a question about making an investment in your home.

Speaker 1 (19:36):
What's the best way to go about it?

Speaker 4 (19:37):
Hey, guys, this is Shane from Madison, Wisconsin, somewhat new
listener and a first time caller, and I have a
question about finishing a basement and doing a home renovation.
My wife and I are expecting our first child in
a few months, so we're looking at ways to add
space to our current home. We did buy our home
in twenty twenty when rates were low, and therefore it

(19:58):
doesn't really make sense for us to and move or
do a cash out refinance. Rather, we're going to try
to finish the unfinished basements in this utilize the space
that's already there. We have about seven hundred square feet
looking to add a living space, bedroom, and a bathroom.
My question, then, is what are some of the best
ways to fund this? From my research, I feel like
a helock is a good option. However, rates are still

(20:20):
somewhat high on that. Do you anticipate rates continue to fall?
Any insight into a helock might be helpful. We do
have some money saved up, but not enough to fund
the entire project. It's probably about sixty thousand, maybe a
little bit more. Any advice on this would be appreciated.
And my beer recommendation is a Spotted Cow from Nuclaris
Brewing Company, very fitting for Wisconsin. Thank you, really enjoy

(20:42):
the show, have a good beginning start to twenty twenty five.

Speaker 1 (20:46):
Oh right, how does Shane fund that basement? Before we
get nerdy with the money, let's talk about beer because
he mentioned new Glaris. Why does Spot Cow have such
a cult following? That's a good question. It is a
great beer, and Newclares makes them really good, solid beer.
But it's not like I feel like it carries to
blow your mind. It carries more cultural clout than the
beer itself. Does you know what I'm saying?

Speaker 2 (21:08):
I think my favorite beers that Nuclarius makes are actually
some of the fruited beers. Yeah, really delicious, But yeah,
Spotted Cow. I guess it's just we had like a.

Speaker 1 (21:16):
Blue like a wild blueberry something about a lake that
was that was a Nuclearius one maybebe that one maybe
new Uh, I don't I can't remember specifically. We haven't
had Spotted Cow. We have had it on the show,
but it was back in twenty twenty, back when Shane
was buying his house. We actually enjoyed it on the show.
I think you were up there for some reason and
you came back with some maybe. Well it's I feel
like you're the Michelle you're oh, could have been your

(21:38):
tenant at the time. She's she's from wiscond that's right,
that's right. I think her dad brought them down or
she brought some back for me. Yeah, yeah, that was fun.

Speaker 5 (21:44):
Well.

Speaker 2 (21:44):
I think Nuclarius too is one of the original independent
breweries from that region of the US and in Wisconsin.
And I've never made it out to the Bruphub, but
apparently like the their actual brewing system I believe came
over from Germany. It's super legit and it's like a
beautiful grouphub. So loved visits some day. Yeah, I thought
to the list of places the visit while in Wisconsin
for real, right, But let's get to Shane's question. Congrats

(22:07):
on the baby coming soon, by the way, and Matt
Shane asked about rates are headed. Where where rates going
in the near future.

Speaker 1 (22:15):
Might make you feel better about taking out that he
lot because you're like, yeah, yeah, rates are going to
go down.

Speaker 2 (22:19):
If rates are going to go down, then hey, the
he like does look less less bad, right, like a
solid option. But really it's anyone's guess. I mean, a
lot of folks were pretty certain that we were in
for dramatic rate declines in twenty twenty four and in
twenty twenty five. But all signs at least the Tea
leaves I'm reading Matt a point to rates remaining a
lot more sticky for the time being, which is great

(22:40):
news for savers, not so great for folks who want
to borrow big chunks of money. Though still I don't
think it means that Shane should not borrow any money
for this renovation. But I guess just know that kind
of predicting rate patterns where they're going, what's going to happen, Like,
I can tell you what I think, and it certainly
looks less likely rates are going to go down in

(23:01):
the near term. But it's been really fascinating to watch
people be so wrong in their predictions on rates and
what it would do at housing prices, and people have
been wrong on those economic predictions a lot in recent years.

Speaker 1 (23:13):
Yeah, Man, the last four years, there's been a whole
lot of unprecedented territory that we've entered into. And I
feel like, if there's anything that we've learned or should
have learned, is that it's really tough to predict anything
after a pandemic, After the world shuts down, little humility
goes a long way totally. But the basement. I love basements, man,
I'm so jelly of Shane. I feel like out in
the Midwest, basements are They're a little more dim a

(23:34):
dozen like I think, like, I've got family in Missouri,
in Illinois, they've all got basements. They're amazing. They do
all sorts of awesome stuff down there, start businesses, extra
space for kids. And by doing that, Shane, you're talking
about increasing the value of your home and potentially being
able to use that space to increase your cash flow.
How think you didn't see that specifically all without having
to add any additional square footage. It doesn't sound like

(23:56):
you're planning on on running it out. You're likely going
to need it for the baby, but that is often
a part of the appeal for a lot of folks.
Because you got the walls, the roof, they already exist.
You might have to do a little waterproofing. I'm not
exactly sure how it works. Yeah, but it's just a
much more affordable endeavor than to, let's say, build an
adu from scratch, if that's even something that your city,

(24:17):
that your community allows. Basements are or where it's at. Man,
I love them.

Speaker 2 (24:21):
I mean, think about Matt, you're actually adding square footage
to your house right now. How much cheaper is it
if the square footage exists? But you just have to
finish it, right.

Speaker 1 (24:28):
I so wish that there was an unfinished basement that
we would have had. This is Yes, it's painful, this
is why Jelly.

Speaker 2 (24:34):
Yes, yeah, so, I mean I think it makes sense
if you have the unfinished space. It's just so much
cheaper than the alternatives that Shane mentioned in particular that
he's got the locked in low rate, Like why go
and find another way to get the space you need?
This is going to be easily the most fiscally responsible
way of doing that.

Speaker 1 (24:51):
Shean's probably got a thirty year locked in at three percent. Right,
he's not going anywhere exactly. So what about borrowing to
fund this renovation? Well, ideally, you know, always we'd like
to see folks save up and pay cash, but that's
a tall order. When we're talking about a sixty thousand
dollars renovation, you are likely going to have to borrow
at least for the renovation at rates that are nowhere
near what you saw in twenty twenty.

Speaker 2 (25:13):
You might be a little shocked when you start looking
around at local borrowing options. You might be looking at
paying in the neighborhood of like, I don't know, eight
to nine percent, probably on a helock right now. Yeah,
part of it depends on your credit score. Hopefully you
got a high credit score. And that's particularly I would say,
from a local credit union. That is, from all the
data Matt and I have seen over the years, the

(25:34):
best place shop at a couple of local credit unions
because they have better borrowing terms than you're going to
get at most banks. That is just a majority of
the time sort of thing. And I don't think though
eight to nine percent rate should scare you off completely,
should cause you to avoid borrowing for this renovation, but
I do think it should cause you to keep expenses
as low as possible and then also make sure you

(25:56):
have a reasonable payoff timeframe that so you're going to
eradicate it and not keep it around for like, you know, eight, nine,
ten years to come.

Speaker 1 (26:04):
More like three years or less. I think. I mean,
I just want you to be super careful about this.
I will say that the nice thing about going with
a helock is that if rates do end up dropping, well,
you're going to pay less on that debt moving forward,
which is great. Helocks they oftentimes, especially from local credit unions,
come with no closing costs, so that's nice. So just
shop around and see if you can find yourself the

(26:26):
best deal, and hopefully you don't even have to take
out a full sixty thousand dollars helock, since it sounds
like you do have some cash on hand, like I
wouldn't completely obliterate your emergency fund to pull us off,
but also don't be afraid to use some of that
cash to help minimize what it is that you're going
to borrow in order to pull this project off, and
maybe spend some time playing with a helock calculator as well,

(26:48):
because I think that might be able to open your
eyes as to what it is that you are signing
up for. Cause, like, let's say you are because I
played with the numbers a little bit before we hit
record and on a sixty thousand dollars loan at like
let's say eight and a half percent, you're looking at
it's like, okay, five hundred dollars minimum payment. That doesn't
seem too bad, but that's for the minimum payment. If
you were looking to eliminate this thing in like three years,

(27:10):
you're looking at putting somewhere close to an extra two
thousand dollars towards that thing every single month, which that's
a lot of money hard to scrounge up. Yeah, yeah, yeah,
I mean, I just I want I'm not saying this
to scare you, but this is a part of your
due diligence and making sure that you know what it
is that you're getting into. By going like, I don't
just want you to think about, well, no, this is
important to us, and this is what we're gonna do.

(27:31):
We'll find a way to make it work. And while
that might be true, if you do it, you will
find a way to make this work. I want you
to be able to know what you're getting into, to
be able to boldly make that decision. Your eyes are
wide open, and then man, go for it, go after it.
As long as you have taken those steps and you've
crunched the numbers.

Speaker 2 (27:48):
It makes me think too that I don't know if
this basement or in no should cost sixty grand. I mean,
I guess it depends on what's going into it, but.

Speaker 1 (27:55):
Say like a living a bed, and a bath. Yeah
as well, So I mean that sounds reasonable. Yeah, scens reasons.

Speaker 2 (28:00):
But also think about, well, I don't know if I'm
going to get some some of the materials at like
the Habitat for Humanity restore.

Speaker 1 (28:08):
Think about all the basement. No one sees this, it's
just the extra bedroom.

Speaker 2 (28:12):
Think about the ways that you can cut a couple
grand off the cost here and there, and heck, maybe
you get the sixty thousand dollars reno down to forty
eight thousand dollars and you've saved up ten grands, so
all you're borrowing is thirty eight. Then I don't know
anything you can do to reduce the amount of money
that you're paying nine percent interest rate for for years
to come the better, So just maybe leave no stone

(28:33):
unturned on that so in order to just reduce the cost.
And you're right, Matt, the basement, it's like, it's not
like you're renovating the half bath on the main floor
that every guest uses and you're like, yeah, I want
the finest tile something like that, or a really nice sink.

Speaker 1 (28:48):
It probably is can be a little more utilitarian down
in the basement. Yeah, and even this is good. I
don't know, I'm afraid this is going to sound a
little ratchet, but like, get what it is that you
need completed, completed, but then after that maybe you can
even start to click cash flow more of it. Right,
So let's say you put twenty into it. You're able
to use a space for what it is that you
want to use it for. But then maybe maybe over

(29:08):
the next couple of years you're able to cash flow
that thing. You've got that home equity available to you,
but you're not tapping that, and then you're gonna be
able to avoid paying an additional five or ten thousand
dollars in interest payments because it's something that you've been
able to avoid.

Speaker 2 (29:24):
And don't sleep on Facebook Marketplace. I had a buddy
who just did a massive innovation, and he kept barking
at me about all the deals he was getting on
Facebook marketplace. Do you remember what's the best deal that's
still to you? I mean a range is one of
the things that he highlighted. He got like a really really.

Speaker 1 (29:38):
Nice one and miking or a bluestar. It was something
I don't know what it was called wolf maybe is
what it was. I want to say, say it with
a V. I forget how much it was both supposed
to cost.

Speaker 2 (29:47):
I want to say it was like a twenty thousand
dollars range, some crazy something like that, and he got
it for like less than half the price.

Speaker 1 (29:52):
So even still, I know it's still expensive. Oh my gosh,
but I mean rich friends, he's got high intaste. It's
so expensive.

Speaker 2 (30:01):
He's really storing like this beautiful old house and so
it's it fits in nicely.

Speaker 1 (30:06):
But yes, you've had kids cooking touris for my blood.
You know what kind of stove we're cooking on over
It's one of them, like six hundred ones. So like
they got the electric although I will say with you
already the fancy stuff to make good tasting food and
that's what you need to keep in mind, Like, this
doesn't need to be a fancy space in order to
be able to grow your family. There's ways you can
do it, do it on the cheap. I'll quickly share
that adding a gas range to our project. We just

(30:27):
realized that might be something that we're in that we're
doing because our current electric range. We need the space
on the electrical panel because that it takes a whole
lot of amps to power the electric stove. And we're
talking it through and she's like, all right, we're like
right on the edge as to the amount of space
we need from an electrical standpoint, and our GC pointed
out that, hey, actually, if you don't have an electric range,

(30:50):
if instead it was gas, we could it wouldn't need
to be on that dedicated whatever breaker. When the HVAT
guy shows up to run natural gas to the new furnace,
maybe you run a line up there. And all this
time Kate's like her eyes got big, and she's like, oh, yes, yes, please,
this is going to save this money, babe. Don't you
understand you gotta spend some money to save some money.
I guess sometimes sometimes. All right, now, let's get to

(31:12):
another question. This one comes from a listener who's got
a retirement trade off question as he and his family
are set to move.

Speaker 5 (31:20):
Hi Matt Angel, I'm kid from North Carolina and I
have a question regarding my wife's pension payout and an
IRA conversion. For some background, I'm in a PhD program
in chemistry and my wife is a school teacher. By default,
six percent of her salary goes toward our state's pension plan,
but in order to become fully vested in that plan,
she needs five years of service. I'm currently on track

(31:43):
to graduate later this year, which comes with a decent
probability of moving out of state, which means that once
we move, she will only have four years of service
contributed to the pension. She will she will be paid
out all of her contributions and growth that has happened
since she was hired, which will total around ten to
fifteen thousand dollars. I'm currently trying to look at two

(32:06):
options of where to put this money. One to put
this money into a traditional IRA through fidelity where we
both currently have our roths, or two to put this
money into her roth IRA and eat the tax bill
during the first year of my new higher paying job.
I'm leaning towards option two, as it is pretty likely
that because of the field I'm going into, our household

(32:28):
income may one day be over the limit to qualify
for ROTH contributions, and I would like to have the
backdoor WRATH as an option for her down the road.
I'm not sure though, if it makes sense to do
the conversion and pay the taxes or to go with
option one and wait to see if she's able to
roll those funds over into a new employer's four oh
one K or four fifty seven B plan after we move.

(32:51):
I am twenty eight and she is twenty six, so
we still have a lot of years before we plan
to retire. And I appreciate whatever advice you may have
on this topic. Thank you, and I love the podcast.

Speaker 1 (33:02):
All right. Sounds like Kaide sitting in the catbird's heat.
Joel sounds like he's got a few options here laid
out before him. He's got a wife with a solid job.
He's got a pension, which is totally awesome. That's actually
that was a prerequisite for me marrying my wife. You've
got to like you got to come to the table's
dowry slash pension. It was all part of that pre
marriage negotiation, Matt, I will say, so his wife's pension

(33:24):
story is not uncommon. The days of staying in one
place for like decades, for like thirty years and getting
the max eligible pension. That's incredibly rare these days. It's
just not how folks are living their life. And for
folks or how businesses are living their lives, or exactly me,
they're like getting yanked left and right. But even for

(33:44):
folks who do have access to a pension for a while,
like they just may not be there long enough to
receive any benefit that's going to kind of move the
needle for them off in the future. We've actually had
some questions from some New Yorkers working in public service
who have a choice between a pension and four K
like product that we almost always well recommend the latter,

(34:04):
not the pension.

Speaker 2 (34:05):
All right, So in this case, in Kaid's particular situation,
your wife is still going to be due some money
for her years of service, which is great, I mean,
that's the.

Speaker 1 (34:14):
Way it should be. But what should you guys do
with those funds? Should you go wroth traditional should you
hold off? And this is in some ways, Matt kind
of a classic personal finance question. And it's interesting. We've
had different guests on the show who have said different things,
and I think you think there's some nuance to this argument.
It depends on some of the details. Some previous guests

(34:35):
would say roth, no matter what, always in forever. If
you have access to contribute money to a roth, that'd
be the ed slots of the world. That's right.

Speaker 2 (34:42):
But then on the other side of the coin, some
of our former guests would say, always traditional. You can
plan better because you can essentially dial in your tax
bracket in future years by going traditional, and you can
always convert to a.

Speaker 1 (34:58):
Roth down the road, as the Sean mulaney are. That's right.

Speaker 2 (35:00):
So I think there's wisdom potentially on both sides of
the aisle, and so yes, there's nuance. There's debating this,
and rightly so, I tend to agree with Kid's analysis
here of putting this money into her wroth IRA and
just paying the fairly known tax bill. Since you've got
the ability to do so, I think why not get
more money into the wroth. I also just don't think

(35:21):
this decision needs to be a complex one, and I
typically just air towards the side of the wroth allah
at slot myself.

Speaker 1 (35:28):
Kind to take the simplicity route. Yeah, And the reason
for that too is because you might not be able
to contribute in the future. And this is something you mentioned,
which this is actually a great problem to have because
it means you're going to be crushing it on the
income side. But if that is where things are headed,
it means funding the wroth to the max while you
can like right now, it's even more important because if
you foresee significant income escalation, taking that bird in the

(35:51):
hand from a tax perspective, that seems super wise. Why
not load up on the wroth in the years where
you can, where it's even available to you, where you
are eligible for it, and then you can take the
traditional route to save on taxes when your income is
sky high At that point.

Speaker 2 (36:07):
Makes me think, man, if I had the offer of
eating as much brisket as I wanted to because I
wouldn't be able to eat it for a whole year
or something like that, I'm going to load up on
as much and I'm going to remember that day, probably
with fondness and a little bit of regret, because I
probably would have overdone it, and don't forget you do
have to be prepared to pay tax come April next year.
You mentioned you mentioned that, and you mentioned that you

(36:28):
had that cash on hand, which is great, So just
make sure to keep that cash on hand. It's probably
going to be I'm guessing a few thousand dollars, which
isn't insane, but you don't want to not have it
when the time comes. And the other reason I think
Matt to go straight to roth despite having to pay
taxes now is the backdoor wroth option that Kid mentioned,
because if you have money sitting in a traditional ira,

(36:48):
it just makes that move more complicated. And I like
the idea of not having money in a traditional ira
having it all in the wroth for simplicity's sake. From
that sort of money maneuver too.

Speaker 1 (36:59):
I think it's highlighting here like he's did he say
he's a chemist, like and he's finishing, like he's getting
his PhD or something like that, he is going to
be making bank. And if you think that at some
point you're not going to be able to contribute to
a roth ira married filing filing jointly, that means I
mean this year at least like your that means your
income is going to be getting close to two hundred
and fifty thousand dollars, which again, great problem to have.

(37:21):
But what I'm pointing out here is that we're talking
about ten to fifteen thousand dollars. It's not a large
amount of money. Right now, it seems like it's a
large amount of money because you're still in school and
you're maybe you've only been living off of one income
and that income has been a teacher salary. But like
ten years from now, kid, that's going to be your
caviar budget. You know, future Caid is going to be

(37:41):
looking back at twenty seven, twenty eight year old Kaid thinking, Man,
I'm glad he made the right decision. But also future
kid is going to say to himself, I'm so glad
he didn't he didn't sweat the details when it came
to this, because yeah, I got that PhD in chemistry
and I'm working for the big chemistry company. I don't
know what chemistry. I don't know anything about kreem or

(38:01):
something like that. I don't know.

Speaker 2 (38:02):
Oh yeah, and it's just a drop in the bucket
for the down payment on his yacht.

Speaker 1 (38:06):
Yeah, I mean when you're making bank smaller amounts like that,
they don't quite matter as much. But I taking the
proper steps, digging into it, doing some research. Now. I
don't want to at all discount the effort that you're
putting into this right now, because you are doing the
smart thing.

Speaker 2 (38:21):
Yeah, and so much of what you're trying to do
in this too is you're trying to potentially project future
tax rates in the United States, and you're also trying
to project your own future earnings, which neither of which
you can do perfectly. Of course, so we're all at
least partially shooting in the dark with a question like this,
But I think with that shot in the dark, there
are like shadows that we can see of future income

(38:42):
of what's going to happen with tax rates, even though
we can't see anywhere close to perfectly. All you can
do is make the best decision with the information you
currently have, and I would take the Roth position. I
actually did take the Wroth position, Matt. We talked about
this on the show, a cash out of a pension
that I had instead of it just seemed after running
the numbers, that was the best decision for me instead
of waiting to take the monthly payment of sixty five boom,

(39:05):
take the ROTH contribution, lump some invest that stuff, and
then watch it grow over decades to come, and never
have to pay tax on it again in the future.
I'm gonna have to pay tax in just a couple
of months at tax time. But I went into that
eyes wide open knowing that was going to be the case,
and I'm glad that I made that decision, even though
I can't say that it's the most optimized move to make,
because I'll only know that in retrospect, I can only

(39:27):
go based on kind of history and the data I
have on hand.

Speaker 1 (39:30):
Although I will say I just thought something else, which
is that he mentioned paying the tax bill within during
his first year of employment after he gets his degree,
because that's what's going to force him to move. And
I have no idea about the pension that your wife has,
but if there's any way for her to cash out
sooner while you are only making a single salary, a
teacher salary, and you have the ability to pay the
taxes at that lower tax rate, I'd be interested in

(39:53):
somehow seeing if I could maneuver that. I don't know
if that may not even be an option. But again,
I just thought of the fact that you talked about
paying taxes with that new, bigger salary after you've moved.
But if there's any way to avoid that, I would
certainly be looking into that. Yeah, but Joel, you've got
more to get to. We are going to hear from
a listener who's looking to invest in a way that's
going to get him some guaranteed returns? Is it even possible?

(40:15):
We'll get to that more right after this.

Speaker 2 (40:25):
We're back from the break, still taking your money questions. Man,
we got to get to the Facebook question of the week.
This comes from the how to Money Facebook group, which
if you're on Facebook and you want like minded folks
to offer money advice and to help help your fellow
listener out, you can just type in how to money
in Facebook and you'll find that how to Money Facebook group.

Speaker 1 (40:45):
It's a check full of awesome folks.

Speaker 2 (40:46):
All right, Matt, This question comes from Melissa. She says,
I'm living paycheck to paycheck and I'm not sure if
I should try to save or pay off high interest
credit card debt. This is a classic personal finance question, too, right.
I gotta say I'm sorry to hear this, Melissa, that
you're living paycheck to paycheck, And I don't know, Matt
how reliable. The stats are about like fifty to sixty

(41:07):
percent of Americans living paycheck to paycheck. That's the stat
we see every single year. I've seen some debunking of
that claim that more Americans actually have more cash on
hand than they let on and in some of those surveys,
or that the surveys that are done just aren't thorough enough.

Speaker 1 (41:21):
It's the hardhearted researchers who are like, oh, they're fine.
I don't think that's what they're attempting to do. I think, okay, yeah, yeah.

Speaker 2 (41:28):
I just think it's the ones who they stand to
benefit from the headlines of making it sound like more
Americans are living on the financial precipice. They just don't
have a detailed enough methodology in the look doing the survey.
But still that doesn't mean there's not too much of
the country who is living paycheck to paycheck, and it's
a real thing. They'd be utterly devastated if they were
to miss a single paycheck, which is something we want

(41:50):
people to avoid. You and I can't fix the tragic reality,
but we are trying to do our part when it
comes to financial literacy, because it does make us sick
realizing that there are a lot of people who are
in that situation. And the truth is there are actually
a lot more individuals in this situation who can do
more than they think about it. You know, the state
of financial literacy in this country is dismal, but a

(42:11):
little bit of financial literacy in your life, I think
can go a long way, especially for people kind of
living on the margins right now.

Speaker 1 (42:18):
Totally, And this question is one of the first ones
we typically hear from anyone out there who we encounter
who is in a similar situation to yours, Melissa. And
the money gears that we created, I think they should
help to inform the answer to this perfectly and basically
to just go ahead and answer your question, should you
save or pay off that high interest credit card debt? Save? First?

(42:38):
We want you to a mass a two thousand, four
or sixty seven dollars emergency fund. And this is based
on old research. Maybe today that's more like three and
sixty something like that. Yeah, I would be curious to
run the numbers, maybe to even und it up to
I don't know, five thousand, but having a base in
your savings will be able to just alleviate some mental stress.

(42:58):
It's gonna sure that you can cover an emergency that
might come along. Because we want you to get rid
of that credit card debt for sure, but not until
you've saved up that bare minimum amount where you to
skip that step in instead and instead start chipping away
at your credit card debt. Like, yeah, you might make
a little bit of more progress, but then boom, you
got that big unexpected expense that comes up. You don't

(43:19):
have any cash on hand. Yeah, where does that charge go?
Goes right back on your credit card. It feels like
you made progress, then you end up sliding back down
to the same spot. It feels like you extended, extended
a whole lot of energy. And that's not the sort
of headspace that we want you in. Like it's like
shoots and ladders, Matt, Yeah, I guess.

Speaker 5 (43:36):
So.

Speaker 1 (43:36):
It's been a while since I've played. I played with
my son. He cheats every time. It's adorable, but because
I just don't think he realizes that cheater. But when
you start tackling your credit card debt, we want like
having that cash cushion on hand is going to allow
for that credit card debt payoff to be permanent, as
opposed to something that you slide back into.

Speaker 2 (43:54):
But it really is like you hit the ladder, you
go up, and then you hit a slide and you
go back down. And that's what it feels like. I
think if your efforts are to pay off the credit
card debt without amassing any sort of savings, so I
do think, yeah, you're right, Matt. That initial emergency fund,
not the three to six months of expenses yet, just
that basic, bare bones y fund, that cash in the bank.
That's the first step. And then the next step is

(44:16):
to pay off the credit card debt. And depending on
how much credit card debt you have, this could be
a multi year process. So I just you know, for
most people, it takes many, many years to get into
a significant amount of credit card debt and then they're like, cool,
can I get rid of it in two months? And
the answer is typically no, Like, it's gonna take a
little bit more of a sustained effort, but we want
you to get beyond paying the minimum amount because that
would keep you in debt for decades. We talked about

(44:37):
this on a recent Friday flight. How you know the
average credit card debt, Let's say it's in the neighborhood
of ten grand. If you pay the minimum amount every
single month, you're talking about multiple decades of being in
credit card debt and a lot of interest that you're
going to fork over in the meantime, and you're likely
going to need to change some habits and reassess your
spending too. A bare bones budget is something we talk

(44:58):
about on the show We Haven article we'll link to
in the show notes about it. It's not for everyone,
and it's not for all time, but it could be
a big help as like a short term maneuver, essentially
to help you grow the gap between what's coming in
and what's going out each month. That'll help you make
progress on both the savings and the debt payoff fronts
more quickly. So maybe a bare bones budget for two

(45:18):
to three months, right saying listen, I'm cutting back to
the bare minimum so that I can make more rapid
progress in this goal. I think that's a good way
to handle things for a lot of folks.

Speaker 1 (45:29):
Totally. And you said that the next step after the
emergency fund was to pay off that credit card debt,
but technically speaking, if when you look at the money
gears and this isn't something that you asked about, Melissa,
but make sure that you aren't skipping a match at
your employee, at your employer, if that's something that's available
to you, because even though you might have some high
rate credit card debt, a match is either a one

(45:50):
hundred percent return on your money or a fifty percent
return on your money. And even with the worst credit
cards out there, I got, like a retail like a
Macy's credit card or something like that thirty four percent, yeah,
or a credit card that has like a penalty interest
rate that you're getting slammed with that's still at least
twenty percent less than what it is that you'd be
making on your money were you to get your match.
So keep that in mind. But we understand your focus

(46:12):
on savings and eliminating that credit card debt because it
feels like the thing that is most urgent. But don't
forget about the four to one K match. Assuming though,
that you are now moving on to that debt payoff phase,
like Joel said, this could take a really long time,
and as you're trying to find ways to maybe optimize
the best way to pay that down. We would recommend

(46:33):
for you to check out a website called undebt dot
it so it's undebted and in order to create a
plan as to whether you should be taking more of
the snowball method, whether it's more of an avalanche method,
maybe a mixture of the two. If you are in
completely overwhelming amounts of credit card debt, we would recommend
to reach out to an organization like Money Management International.

(46:56):
But all that to say, keep listening to the show,
keep asking questions over in the Facebook group, and we
would totally recommend for you to reach out to us
directly if you think we can be of any help
in any way.

Speaker 2 (47:07):
We issue the best of luck, Melissa. You're not alone
in this predicament and you can call your way out.
Many how to money listeners have and hearing those success
stories matter of how people have been able to completely
change their financial future, even with like a difficult past,
it never ceases to amaze and inspire me. All right,
let's get to another question from listener Andre. He says,

(47:30):
does anyone know of a one year investment I can
make that would guarantee more than a three to four
percent return? I know of CDs that offered three to
four percent, But I thought i'd ask if there are
better options. Keyword here being guarantee is what Andre said.

Speaker 1 (47:44):
Nope, doesn't exist. That's the TLDR, at least not in
action like a quote unquote investment. Because if you have,
let's you know, if you've got a high to medium
interest rate debt, well paying that off, I would say
that would generate a quote unquote guaranteed return. But short
term guaranteed investments that like, they just are not a thing.
And so the choices that you have here, they're really

(48:05):
just finding the best rates for storing cash. High old
savings accounts they're great, but they're also not guaranteed. We've
seen we've seen rates going down for savers as the
FED has lowered interest rates slowly. CD rates they are
guaranteed for a period of time, but then the starting
rate of those can be a little bit less than
what the highield savings accounts are currently paying. Bottom line,

(48:29):
you should be able to get like a four ish
percent rate without needing to actually investor or take any
real risk.

Speaker 2 (48:36):
Yeah, and we're talking about a timeline that's that short,
a single year. Sorry, there just isn't any investment that
is worth partaking in because the risk is just too high.
When we're talking about investing money, could the returns be
significantly higher than that? Sure of course they could be.
Think about the stock market in twenty twenty four. If
you had stuck your the money in the stock market

(48:57):
on January first and then taking it out on December
thirty first, you would have.

Speaker 1 (49:01):
Forgive four percent twenty five percent.

Speaker 2 (49:03):
Maybe you would have done much better than sticking in
a savings account, but that's not guaranteed. You could have
experienced to hear like twenty twenty two. And I think
the choice too, between a high yield savings account or
a CD is actually kind of a tough one right now,
because if you want to guarantee you go with a CD.

Speaker 1 (49:17):
You know.

Speaker 2 (49:18):
But here's the thing. You and I we don't expect
yields to fall meaningfully for savers, but they could, and
so much of that depends on the FED. It depends
on the current administration and the best CD rates they're
they're in that nine to thirteen month range right now,
so right out a year timeframe.

Speaker 1 (49:33):
Which is perfect for Andre.

Speaker 2 (49:34):
Right, I would check out a site like Investipedia, bank Rate,
Doctor of Credit. They typically list the best offers, and
the best that I saw Matt as I was preparing
for this question was Marcus and Synchrony. They seem to
be paying top rates. But then you know ciit's high
old savings account rate. It's just as good, if not better,
than what those guys are offering.

Speaker 1 (49:51):
On a CD.

Speaker 2 (49:52):
But that's a savings account, and that rate is subject
to change if the FED lowers rates by half a
point or something like that. Guess what the rate you're
earning on savings is going. So it's not guarantee you'd
see a drop. Yeah, So yeah, I don't know if
you feel comfortable with no guarantee. The high old savings
account I think can make a lot of sense. If
you want the set in stone, the contractually oblicated guarantee

(50:14):
that you get with a certificate of deposit, then I
think that can make a lot of sense. To just
make sure you're not going down to your local financial
institution brick and mortar and opening it up because the
trade off that yeah, you might get there, Oh hey
we got two percent rates on CDs right now, and
that's just not competitive with what you're able to find
if you just do you know a little bit of

(50:35):
a sick.

Speaker 1 (50:35):
Standard, Yeah, a solid one online And all that note,
I will say, don't go chasing returns. Don't go with
like some sort of neobank that's promising a we are
offering a four and three quarter money market account, because
there's no free lunch. And if there's anything that we've
learned about the neo banks, like nobody suspected that there
might be a small regional bank that could collapse, but

(50:56):
ever since Silicon Valley Bank, it's like, oh the I mean,
that was always a risk, but now it feels a
little more tangible, like a little bit more real of
a risk. But then like, yes, you might get a
slightly higher rate with some of these online banks, but
there's other things that you're giving up as well, like
actual customer service if you need to get ahold of them,
or transfers that are happening in any sort of timely manner.

(51:19):
I mean, so all I had to say, if it
was me, I would not be looking to completely juice
my returns by going with some of these new neo
banks that you've never heard us talk about as opposed
to the banks you hear is talking about all the time,
like discover ally c It and even Marcus and Synchronylos
are bunctioned Legit online banks too. Totally.

Speaker 2 (51:38):
All right, Matt, Let's get back to the beer we
had on this episode. This one is a tequila barrel
aged stout by Wicked we Brewing. What were your thoughts
on this beastly stout, my friend?

Speaker 1 (51:48):
Yeah, it was big, wasn't it. So this is very
similar to the one that we had a couple of
weeks ago that was the rum barrel aged. This is
just the tequila barrel. Yes, it's the same based out,
I'm assuming. So it tastes tastes like it, I will say,
I'm not sure if I tasted the tequila like in
the rum barrel. It's there are clear rum notes. I
think I remember saying it tastes like that there are

(52:09):
raisins in here that have been soaked in actual rum
that were like macerated and put back into the bottle,
whereas this, there's no part of this that tastes like
a margerita to me. What about you? Now? I will say,
I got like maybe some of the earthy vibes a
little bit. Yeah, yeah, that's a good way to describe tequila.
It's kind of it's like tastes like soil, Yeah, like
wet earth.

Speaker 2 (52:27):
Yeah, so I thought it had a little bit of that,
but yeah, not nearly as much as the rum. But
this was like big, burly, semi sweet, little earthy, and
just incredibly complex. There were just a lot of different
flavor notes going on, which just goes to shut that
WI could weave. They make, they make great beer, and
then the way they blend the beer. I feel like
there's the blending is kind of like an underrated part

(52:49):
of the process. And I don't know much about it,
but from what I can tell, this is a well
blended style because you're using multiple barrels and you're trying
to create a finished product that's kind of seamless throughout
all the bottles making. Yeah, and I don't know, man,
I like this beer a lot.

Speaker 1 (53:03):
Yeah. I feel like you can take some of those
brown sugar notes maybe, yeah, even a little bit of honey.
It's almost as if it's a dark art to be
able to pull something like this off. We are not
paid by Wicked. We just a little disclaimer out there
for folks, but we're willing to be. But that's gonna
be up for this episode. The listeners can find our
show notes to some of the different resources, some of
the different articles that we mentioned during this episode up
on the website at howtomoney dot com. Hey leave us

(53:26):
a solid review if you've been enjoying the show and
that's not something that you've done truly other than like
telling a friend about the show and like making them
subscribe to the show like that is the second best
way to help the show out. Helps us to spread
the word, helps others to get their money game together. Joel,
that's what we like to see most. That's gonna be
it for this one. Until next time, Best Friends Out,

(53:46):
Best Friends Out.